<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
SCHEDULE 14D-1
TENDER OFFER STATEMENT PURSUANT TO SECTION
14(D)(1) OF THE SECURITIES EXCHANGE ACT OF 1934
----------------
EXECUSTAY CORPORATION
(NAME OF SUBJECT COMPANY)
MARRIOTT INTERNATIONAL, INC.
MI SUBSIDIARY I, INC.
(BIDDERS)
COMMON STOCK, PAR VALUE $0.01 PER SHARE
(TITLE OF CLASS OF SECURITIES)
30150K 10 0
(CUSIP NUMBER OF CLASS OF SECURITIES)
G. COPE STEWART, III, ESQ.
SENIOR VICE PRESIDENT AND ASSOCIATE GENERAL COUNSEL
MARRIOTT INTERNATIONAL, INC.
10400 FERNWOOD ROAD
BETHESDA, MARYLAND 20857
(301) 380-8399
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE NOTICES
AND COMMUNICATIONS ON BEHALF OF BIDDER)
COPIES TO:
JOHN F. OLSON, ESQ.
GIBSON, DUNN & CRUTCHER LLP
1050 CONNECTICUT AVENUE, N.W.
WASHINGTON, D.C. 20036
(202) 955-8522
CALCULATION OF FILING FEE
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<TABLE>
<CAPTION>
TRANSACTION VALUATION AMOUNT OF FILING FEE
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<S> <C>
$56,371,924(1) $11,274.38(2)
</TABLE>
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(1) For purposes of fee calculation only. The total transaction value is based
on (i) 8,235,806 shares of common stock (the "Shares"), outstanding as of
January 6, 1999, (ii) plus 356,650 Shares issuable upon the exercise of
outstanding options, (iii) less 4,565,890 Shares that are subject to
agreements that the holders of such Shares will not tender such Shares
pursuant to the Offer (as defined herein), multiplied by the Offer price of
$14.00 per Share.
(2) The amount of the filing fee calculated in accordance with Regulation
240.0-11 of the Securities Exchange Act of 1934 equals 1/50th of 1% of the
aggregate value of the cash offered by MI Subsidiary I, Inc. for such
number of Shares.
[_]CHECK BOX IF ANY PART OF THE FEE IS OFFSET AS PROVIDED BY RULE 0-11(A)(2)
AND IDENTIFY THE FILING WITH WHICH THE OFFSETTING FEE WAS PREVIOUSLY PAID.
IDENTIFY THE PREVIOUS FILING BY REGISTRATION STATEMENT NUMBER, OR THE FORM
OR SCHEDULE AND THE DATE OF ITS FILING.
Amount previously paid:None Filing party: Not
Form or registration no.: Not Applicable Applicable
Date filed:Not Applicable
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<PAGE>
CUSIP NO. 30150K 10 14D-1
0
1.NAMES OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Marriott International, Inc.
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2.CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [_]
(b) [_]
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3.SEC USE ONLY
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4.SOURCE OF FUNDS:
WC
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5.CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEM 2(e) OR 2(f) [_]
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6.CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
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7.AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
3,765,455 Shares(3)
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8.CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN SHARES
[_]
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9.PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
45.7%(3)
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10.TYPE OF REPORTING PERSON
CO
(3) On January 6, 1999, Marriott International, Inc. ("Marriott") and MI
Subsidiary I, Inc. ("Purchaser") entered into three separate stockholder
agreements (the "Stockholder Agreements") with five stockholders of the
Company (the "Proxy Grantors"). Pursuant to the Stockholder Agreements,
upon the terms and subject to the conditions therein, the Proxy Grantors
have granted to Purchaser, effective only after expiration of the Offer and
the purchase of Shares pursuant thereto, an option, exercisable in limited
circumstances, to purchase all of their Shares and a proxy with respect to
such Shares. The Shares that are subject to the Stockholder Agreements are
reflected in Rows 7 and 9 above. The Reporting Persons disclaim beneficial
ownership of such Shares and this statement shall not constitute an
admission that the Reporting Persons are, for any or all purposes, the
beneficial owners of any securities covered by this statement.
2
<PAGE>
CUSIP NO. 30150K 10 14D-1
0
1.NAMES OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
MI Subsidiary I, Inc.
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2.CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [_]
(b) [_]
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3.SEC USE ONLY
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4.SOURCE OF FUNDS:
AF
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5.CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEM 2(e) OR 2(f) [_]
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6.CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
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7.AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
3,765,455 Shares(4)
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8.CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN SHARES
[_]
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9.PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
45.7%(4)
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10.TYPE OF REPORTING PERSON
CO
(4) See Footnote 3 on page 2.
3
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INTRODUCTION
This Tender Offer Statement on Schedule 14D-1 (this "Statement") relates to
the offer by MI Subsidiary I, Inc., a Delaware corporation ("Purchaser"), and a
wholly owned, direct subsidiary of Marriott International, Inc., a Delaware
corporation ("Marriott"), to purchase all outstanding shares of common stock,
par value $0.01 per share (the "Common Stock" or the "Shares"), of ExecuStay
Corporation, a Maryland corporation (the "Company"), at a price of $14.00 per
Share, net to the tendering stockholder in cash, upon the terms and subject to
the conditions set forth in the Offer to Purchase, dated as of January 12, 1999
(the "Offer to Purchase"), and the related Letter of Transmittal (which
together constitute the "Offer"), copies of which are attached hereto as
Exhibits (a)(1) and (a)(2), respectively. The Offer is being made pursuant to a
Merger Agreement, dated January 6, 1999, by and among Marriott, Purchaser and
the Company, which provides, among other things, that as promptly as
practicable after the satisfaction or, if permissible, waiver of the conditions
set forth therein (including without limitation, the purchase of Shares
pursuant to the Offer), the Company will be merged with and into Purchaser (the
"Merger"), with the Purchaser continuing as the surviving corporation, and each
issued Share that is outstanding immediately prior to the Merger (other than
any Shares held by any of the Company's subsidiaries or any Shares held by
Marriott, Purchaser or any other subsidiary of Marriott, and, in the event that
dissenters' rights are available following the Merger, other than Shares held
by stockholders who shall not have voted in favor of the Merger or consented
thereto in writing and who shall have complied with all of the relevant
provisions of Section 3-202 of the Maryland General Corporation Law (the
"MGCL")), will be converted automatically into the right to receive the amount
paid per Share in the Offer, in cash, without interest, upon surrender of the
certificate representing such Share.
The information contained in this Statement concerning the Company,
including, without limitation, information concerning the deliberations,
approvals and recommendations of the Board of Directors of the Company in
connection with the transaction, the opinion of the financial advisor to such
Board of Directors, and the Company's capital structure and financial
information, was supplied by the Company. Purchaser takes no responsibility for
the accuracy of such information.
ITEM 1. ISSUER AND CLASS OF SECURITY SUBJECT TO THE TRANSACTION
(a) The name of the subject company is ExecuStay Corporation, a Maryland
corporation, which has its principal executive offices at 7595 Rickenbacker
Drive, Gaithersburg, Maryland 20879.
(b) The class of equity securities being sought is the Company's Common
Stock. Information set forth in the Offer to Purchase under the caption
"INTRODUCTION" is incorporated herein by reference.
(c) The information concerning the principal market in which the Shares are
traded and certain high bid and low ask prices for the Shares in such principal
market set forth in the Offer to Purchase under the caption "THE TENDER OFFER--
6. Price Range of the Shares" is incorporated herein by reference.
ITEM 2. IDENTITY AND BACKGROUND
(a)-(d), (g) This Statement is filed by Purchaser and Marriott. The
information concerning the name, state or other place of organization,
principal business and address of the principal office of Purchaser and
Marriott, and the name, business address, present principal occupation or
employment (including the name, principal business and address of any
corporation or other organization in which such employment or occupation is
conducted), material occupations, positions, offices or employment during the
last five years and citizenship of each of the executive officers and directors
of Purchaser and Marriott set forth in the Offer to Purchase under the captions
"INTRODUCTION" and "THE TENDER OFFER--8. Certain Information Concerning
Purchaser and Marriott," and in Schedule I to the Offer to Purchase, is
incorporated herein by reference.
4
<PAGE>
(e) and (f) During the last five years, neither Purchaser, Marriott nor, to
the knowledge of Purchaser or Marriott, any person listed in Schedule I to the
Offer to Purchase has been (i) convicted in a criminal proceeding (excluding
traffic violations or similar misdemeanors) or (ii) a party to a civil
proceeding of a judicial or administrative body of competent jurisdiction and
as a result of such proceeding was or is subject to a judgment, decree or final
order enjoining future violations of, or prohibiting activities subject to,
federal or state securities laws or finding any violations of such laws.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS
(a) Other than the transactions described in Item 3(b) below, neither
Purchaser, Marriott, nor, to the knowledge of Marriott or Purchaser, any person
listed in Schedule I to the Offer to Purchase has entered into any transaction
with (1) the Company, or any of the Company's affiliates which are
corporations, since the commencement of the Company's third full fiscal year
preceding the date of this Statement, the aggregate amount of which was equal
to or greater than one percent of the consolidated revenues of the Company for
(i) the fiscal year in which such transaction occurred or (ii) the portion of
the current fiscal year which has occurred if the transaction occurred in such
year; or (2) the executive officers, directors or affiliates of the Company
which are not corporations where the aggregate amount involved in such
transactions or any series of similar transactions, including all periodic
installments in the case of any lease or other agreement providing for periodic
payments or installments, exceeds $40,000.
(b) The information set forth in the Offer to Purchase under the captions
"INTRODUCTION," "THE TENDER OFFER--8. Certain Information Concerning Purchaser
and Marriott," "THE TENDER OFFER--11. Contacts with the Company; Background of
the Offer and the Merger" and "THE TENDER OFFER--12. Purpose of the Offer; The
Merger Agreement; The Stockholder Agreements" is incorporated herein by
reference.
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
(a) The information set forth in the Offer to Purchase under the caption
"THE TENDER OFFER--9. Source and Amount of Funds" is incorporated herein by
reference.
(b) and (c) Not applicable.
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSAL OF THE BIDDER
(a) - (e) The information set forth in the Offer to Purchase under the
captions "INTRODUCTION," "THE TENDER OFFER--11. Contacts with the Company;
Background of the Offer and the Merger" and "THE TENDER OFFER--12. Purpose of
the Offer; The Merger Agreement; The Stockholder Agreements" is incorporated
herein by reference.
(f) and (g) The information set forth in the Offer to Purchase under the
caption "THE TENDER OFFER--14. Effects of the Offer on the Market for Shares;
Nasdaq Stock Market and Exchange Act Registration" is incorporated herein by
reference.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY
(a) and (b) The information set forth in the Offer to Purchase under the
captions "THE TENDER OFFER--8. Certain Information Concerning Purchaser and
Marriott," "THE TENDER OFFER--10. Certain Transactions between Marriott and the
Company," "THE TENDER OFFER--11. Contacts With the Company; Background of the
Offer and Merger" and "THE TENDER OFFER--12. Purpose of the Offer; The Merger
Agreement; The Stockholder Agreements" is incorporated herein by reference. As
a result of Purchaser's conditional option to purchase the Shares owned by
certain stockholders who are party to the Stockholder Agreements referred to in
"THE TENDER OFFER--12. Purpose of the Offer; The Merger Agreement; The
Stockholder Agreements," the Purchaser and Marriott may be deemed to own
beneficially an aggregate of 3,765,455 Shares, which represent approximately
45.7% of the Shares outstanding on January 6, 1999. Both Marriott and
Purchaser, however, have disclaimed beneficial ownership of such Shares, and
this statement shall not be construed as an admission that either Marriott or
Purchaser is the beneficial owner of any securities covered by this statement.
5
<PAGE>
ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO THE SUBJECT COMPANY'S SECURITIES
The information set forth in the Offer to Purchase under the caption "THE
TENDER OFFER--11. Contacts With the Company; Background of the Offer and
Merger" and "THE TENDER OFFER--12. Purpose of the Offer; The Merger Agreement;
The Stockholder Agreements" is incorporated herein by reference.
ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED
The information set forth in the Offer to Purchase under the caption "THE
TENDER OFFER--17. Fees and Expenses" is incorporated herein by reference.
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS
The information set forth in the Offer to Purchase under the caption "THE
TENDER OFFER--8. Certain Information Concerning Purchaser and Marriott" is
incorporated herein by reference.
ITEM 10. ADDITIONAL INFORMATION
(a) The information set forth in the Offer to Purchase under the caption
"THE TENDER OFFER--12. Purpose of the Offer; The Merger Agreement; The
Stockholder Agreements" is incorporated herein by reference.
(b) and (c) The information set forth in the Offer to Purchase under the
caption "THE TENDER OFFER--16. Certain Legal Matters; Regulatory Approvals" is
incorporated herein by reference.
(d) The information set forth in the Offer to Purchase under the caption
"THE TENDER OFFER--14. Effects of the Offer on the Market for Shares; Nasdaq
Stock Market and Exchange Act Registration" is incorporated herein by
reference.
(e) Not applicable.
(f) The information set forth in the Offer to Purchase and the Letter of
Transmittal, to the extent not otherwise incorporated by reference, is
incorporated herein by reference
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS
(a)(1) Offer to Purchase, dated January 12, 1999
(a)(2) Letter of Transmittal
(a)(3) Notice of Guaranteed Delivery
(a)(4) Letter to Brokers, Dealers, Commercial Banks, Trust Companies and
Other Nominees
(a)(5) Letter to Clients for use by Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees
(a)(6) Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9
(a)(7) Form of Summary Advertisement, dated January 12, 1999
(a)(8) Press Releases, dated January 6, 1999 and January 11, 1999 issued by
Marriott
(b) None
6
<PAGE>
(c)(1) Merger Agreement, dated as of January 6, 1999, among the Company,
Purchaser and Marriott
(c)(2) Stockholder Agreement, dated January 6, 1999, among Purchaser,
Marriott and certain executive officers of the Company
(c)(3) Stockholder Agreement, dated January 6, 1999, among Purchaser,
Marriott and B. Andersen
(c)(4) Stockholder Agreement, dated January 6, 1999, among Purchaser,
Marriott and K. Regan
(c)(5) Stockholder Agreement, dated January 6, 1999, among Purchaser,
Marriott and certain stockholders of the Company
(c)(6) Forms of Employment Agreement (included as part of exhibits (c)(2)
and (c)(3))
(d) None
(e) Not Applicable
(f) None
7
<PAGE>
SIGNATURES
AFTER DUE INQUIRY AND TO THE BEST OF HIS KNOWLEDGE AND BELIEF, THE
UNDERSIGNED CERTIFIES THAT THE INFORMATION SET FORTH IN THIS STATEMENT IS TRUE,
COMPLETE AND CORRECT.
Dated: January 12, 1999
MI SUBSIDIARY I, INC.
/s/ G. Cope Stewart, III
By: _________________________________
NAME: G. COPE STEWART, III
TITLE: VICE PRESIDENT
SIGNATURE
AFTER DUE INQUIRY AND TO THE BEST OF HIS KNOWLEDGE AND BELIEF, THE
UNDERSIGNED CERTIFIES THAT THE INFORMATION SET FORTH IN THIS STATEMENT IS TRUE,
COMPLETE AND CORRECT.
Dated: January 12, 1999
MARRIOTT INTERNATIONAL, INC.
/s/ G. Cope Stewart, III
By: _________________________________
NAME: G. COPE STEWART, III
TITLE: SENIOR VICE PRESIDENT AND
ASSOCIATE GENERAL COUNSEL
8
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
(a)(1) Offer to Purchase, dated January 12, 1999
(a)(2) Letter of Transmittal
(a)(3) Notice of Guaranteed Delivery
(a)(4) Letter to Brokers, Dealers, Commercial Banks, Trust Companies and
Other Nominees
(a)(5) Letter to Clients for use by Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees
(a)(6) Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9
(a)(7) Form of Summary Advertisement, dated January 12, 1999
(a)(8) Press Releases, dated January 6, 1999 and January 11, 1999 issued by
Marriott
(b) None
(c)(1) Merger Agreement, dated as of January 6, 1999, among the Company,
Purchaser and Marriott
(c)(2) Stockholder Agreement, dated January 6, 1999, among Purchaser,
Marriott and certain executive officers of the Company
(c)(3) Stockholder Agreement, dated January 6, 1999, among Purchaser,
Marriott and B. Andersen
(c)(4) Stockholder Agreement, dated January 6, 1999, among Purchaser,
Marriott and K. Regan
(c)(5) Stockholder Agreement, dated January 6, 1999, among Purchaser,
Marriott and certain stockholders of the Company
(c)(6) Forms of Employment Agreement (included in exhibits (c)(2) and (c)(3))
(d) None
(e) Not Applicable
(f) None
</TABLE>
9
<PAGE>
Exhibit (a)(1)
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
EXECUSTAY CORPORATION
AT
$14.00 NET PER SHARE
BY
MI SUBSIDIARY I, INC.
A WHOLLY OWNED SUBSIDIARY OF
MARRIOTT INTERNATIONAL, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT MIDNIGHT, NEW YORK CITY TIME,
ON THURSDAY, FEBRUARY 11, 1999 (THE "EXPIRATION DATE"), UNLESS THE OFFER IS
EXTENDED.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (1) THERE BEING VALIDLY
TENDERED BY THE EXPIRATION DATE AND NOT WITHDRAWN AT LEAST 2,000,000 SHARES AND
(2) THE SATISFACTION OR WAIVER OF CERTAIN CONDITIONS TO THE OBLIGATIONS OF
PURCHASER AND THE COMPANY TO CONSUMMATE THE TRANSACTIONS CONTEMPLATED BY THE
MERGER AGREEMENT, INCLUDING RECEIPT BY PURCHASER AND THE COMPANY OF CERTAIN
GOVERNMENTAL AND REGULATORY APPROVALS.
THE BOARD OF DIRECTORS OF EXECUSTAY CORPORATION (THE "COMPANY") HAS
UNANIMOUSLY DETERMINED THAT THE MERGER AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED THEREBY, INCLUDING THE OFFER AND THE MERGER, TAKEN TOGETHER, ARE
FAIR TO AND IN THE BEST INTERESTS OF THE STOCKHOLDERS OF THE COMPANY, HAS
APPROVED THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY,
INCLUDING THE OFFER AND THE MERGER, AND RECOMMENDS THAT THE STOCKHOLDERS ACCEPT
THE OFFER AND TENDER THEIR SHARES HEREUNDER.
---------------
IMPORTANT
Any stockholder desiring to tender Shares (as defined herein) should either
(1) complete and sign the Letter of Transmittal, or a facsimile copy thereof,
in accordance with the instructions in the Letter of Transmittal, mail or
deliver it and any other required documents to the Depositary and either
deliver the certificates for such Shares to the Depositary along with the
Letter of Transmittal or tender such Shares pursuant to the procedure for book-
entry transfer set forth in this Offer to Purchase under the caption "THE
TENDER OFFER--2. Procedure for Accepting the Offer and Tendering Shares" or (2)
request such stockholder's broker, dealer, commercial bank, trust company or
other nominee to effect the transaction for the stockholder. Stockholders
having Shares registered in the name of a broker, dealer, commercial bank,
trust company or other nominee must contact such broker, dealer, commercial
bank, trust company or other nominee if they desire to tender such Shares.
A stockholder who desires to tender Shares and whose certificates for Shares
are not immediately available, or who cannot comply with the procedures for
book-entry transfer described in this Offer to Purchase on a timely basis, may
tender such Shares by following the procedure for guaranteed delivery set forth
in this Offer to Purchase under the caption "THE TENDER OFFER--2. Procedure for
Accepting the Offer and Tendering Shares."
Questions and requests for assistance, or for additional copies of this
Offer to Purchase, the Letter of Transmittal or other tender offer materials,
may be directed to the Information Agent at its address and telephone numbers
set forth on the back cover of this Offer to Purchase. Holders of Shares may
also contact brokers, dealers, commercial banks or trust companies for
assistance concerning the Offer.
---------------
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
PASSED UPON THE FAIRNESS OR MERITS OF THIS TRANSACTION NOR UPON THE
ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED IN THIS
DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
---------------
The Information Agent for the Offer is:
[LOGO OF MACKENZIE PARTNERS, INC. APPEARS HERE]
156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (call collect)
or
CALL TOLL FREE (800) 322-2885
The date of this Offer to Purchase is January 12, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C>
INTRODUCTION............................................................. 1
THE TENDER OFFER......................................................... 3
1. TERMS OF THE OFFER; EXPIRATION DATE.................................. 3
2. PROCEDURE FOR ACCEPTING THE OFFER AND TENDERING SHARES............... 4
3. WITHDRAWAL RIGHTS.................................................... 7
4. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES........................ 7
5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES.............................. 8
6. PRICE RANGE OF THE SHARES............................................ 9
7. CERTAIN INFORMATION CONCERNING THE COMPANY........................... 10
8. CERTAIN INFORMATION CONCERNING PURCHASER AND MARRIOTT................ 12
9. SOURCE AND AMOUNT OF FUNDS........................................... 14
10. CERTAIN TRANSACTIONS BETWEEN MARRIOTT AND THE COMPANY................ 14
11. CONTACTS WITH THE COMPANY; BACKGROUND OF THE OFFER AND THE MERGER.... 14
12. PURPOSE OF THE OFFER; THE MERGER AGREEMENT; THE STOCKHOLDER
AGREEMENTS............................................................ 19
13. DIVIDENDS AND DISTRIBUTIONS.......................................... 29
14. EFFECTS OF THE OFFER ON THE MARKET FOR SHARES; NASDAQ STOCK MARKET
AND EXCHANGE ACT REGISTRATION......................................... 29
15. CERTAIN CONDITIONS OF THE OFFER...................................... 30
16. CERTAIN LEGAL MATTERS; REGULATORY APPROVALS.......................... 32
17. FEES AND EXPENSES.................................................... 35
18. MISCELLANEOUS........................................................ 35
SCHEDULE I............................................................... I-1
ANNEX A.................................................................. A-1
</TABLE>
<PAGE>
To the Holders of Common Stock of
ExecuStay Corporation:
INTRODUCTION
MI Subsidiary I, Inc., a Delaware corporation ("Purchaser"), which is a
wholly owned, direct subsidiary of Marriott International, Inc., a Delaware
corporation ("Marriott"), hereby offers to purchase all outstanding shares of
common stock, par value $0.01 per share (the "Common Stock" or the "Shares"),
of ExecuStay Corporation, a Maryland corporation (the "Company"), upon the
terms and subject to the conditions set forth in this Offer to Purchase and in
the related Letter of Transmittal (which together constitute the "Offer"), at
the purchase price of $14.00 per Share (the "Offer Price"), net to the
tendering stockholder in cash.
The Offer is being made pursuant to the terms of the Merger Agreement, dated
as of January 6, 1999 (the "Merger Agreement"), by and among the Company,
Purchaser and Marriott. The Merger Agreement provides, among other things, for
the making of the Offer, and further provides that, following the purchase of
Shares pursuant to the Offer and promptly after the satisfaction or waiver of
certain other conditions, the Company will be merged with and into Purchaser
(the "Merger"). Purchaser will continue as the surviving corporation after the
Merger (the "Surviving Corporation"). Prior to the consummation of the Merger,
the Company will provide for the issuance to certain stockholders (the "Non-
Tendering Stockholders") who have entered into Stockholder Agreements with
Purchaser and Marriott (collectively, the "Stockholder Agreements") of shares
of newly-designated non-voting preferred stock (the "Preferred Shares") as
described herein in exchange for the Shares that such Non-Tendering
Stockholders have agreed not to tender. Pursuant to the Stockholder Agreements,
the Non-Tendering Stockholders have agreed not to tender in the Offer the
Shares subject to the Stockholder Agreement in the Offer and to vote such
Shares in favor of the Merger, if necessary. At the effective time of the
Merger (the "Effective Time"), (i)(a) each outstanding Preferred Share held by
the three senior executive officers (the "Senior Executives") of the Company
will be converted into the right to receive shares of common stock, $0.01 par
value per share, of Marriott ("Marriott Shares") at the equivalent of $13.00
per Preferred Share and (b) each outstanding Preferred Share held by two
employees of the Company and by certain other stockholders of the Company will
be converted into the right to receive Marriott Shares at the equivalent of
$14.00 per Preferred Share, and (ii) each outstanding Share (except for Shares
owned by Marriott, Purchaser or any subsidiary of Marriott, Purchaser or the
Company) will be converted into the right to receive the Offer Price, net to
the holder in cash, without interest.
THE BOARD OF DIRECTORS OF THE COMPANY (THE "BOARD") HAS UNANIMOUSLY
DETERMINED THAT THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY,
INCLUDING THE OFFER AND THE MERGER, TAKEN TOGETHER, ARE FAIR TO AND IN THE BEST
INTERESTS OF THE STOCKHOLDERS OF THE COMPANY, HAS UNANIMOUSLY APPROVED THE
MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER
AND THE MERGER, AND RECOMMENDS THAT THE STOCKHOLDERS ACCEPT THE OFFER AND
TENDER THEIR SHARES HEREUNDER.
A.G. EDWARDS & SONS, INC. ("A.G. EDWARDS"), FINANCIAL ADVISOR TO THE
COMPANY, HAS DELIVERED A WRITTEN OPINION TO THE BOARD, DATED JANUARY 5, 1999
(THE "A.G. EDWARDS OPINION"), TO THE EFFECT THAT, AS OF THAT DATE, THE
CONSIDERATION TO BE RECEIVED BY THE STOCKHOLDERS OF THE COMPANY PURSUANT TO THE
MERGER AGREEMENT IS FAIR FROM A FINANCIAL POINT OF VIEW TO SUCH STOCKHOLDERS.
THE FULL TEXT OF THE A.G. EDWARDS OPINION IS ATTACHED TO THE COMPANY'S
SOLICITATION/ RECOMMENDATION STATEMENT ON SCHEDULE 14D-9 WHICH IS BEING MAILED
TO STOCKHOLDERS OF THE COMPANY HEREWITH. STOCKHOLDERS ARE URGED TO READ SUCH
OPINION CAREFULLY AND IN ITS ENTIRETY FOR ASSUMPTIONS MADE, MATTERS CONSIDERED
AND LIMITS OF THE REVIEW OF A.G. EDWARDS.
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THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THE SATISFACTION OR
WAIVER OF CERTAIN CONDITIONS TO THE OBLIGATIONS OF PURCHASER, MARRIOTT AND THE
COMPANY TO CONSUMMATE THE TRANSACTIONS CONTEMPLATED BY THE MERGER AGREEMENT,
INCLUDING (I) THERE BEING VALIDLY TENDERED BY THE EXPIRATION DATE AND NOT
WITHDRAWN AT LEAST 2,000,000 SHARES (THE "MINIMUM CONDITION"), (II) RECEIPT BY
PURCHASER, MARRIOTT AND THE COMPANY OF CERTAIN GOVERNMENTAL AND REGULATORY
APPROVALS AND (III) CERTAIN OTHER CONDITIONS. SEE "THE TENDER OFFER--15.
CERTAIN CONDITIONS OF THE OFFER."
THE OFFER DOES NOT CONSTITUTE A SOLICITATION OF PROXIES FOR ANY MEETING OF
THE COMPANY'S STOCKHOLDERS. ANY SUCH SOLICITATION, IF NECESSARY, WOULD BE MADE
ONLY PURSUANT TO SEPARATE PROXY MATERIALS COMPLYING WITH THE REQUIREMENTS OF
SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED (THE
"EXCHANGE ACT").
The Offer will expire at Midnight, New York City time, on Thursday,
February 11, 1999, unless extended.
Tendering stockholders will not be obligated to pay brokerage commissions,
solicitation fees or, subject to Instruction 6 of the Letter of Transmittal,
stock transfer taxes on the purchase of Shares pursuant to the Offer. However,
any tendering stockholder or other payee who fails to complete and sign the
Substitute Form W-9 that is included in the Letter of Transmittal may be
subject to required backup federal income tax withholding of 31% of the gross
proceeds payable to such stockholder or other payee pursuant to the Offer. See
"THE TENDER OFFER--5. Certain Federal Income Tax Consequences." Purchaser will
pay all charges and expenses of First Chicago Trust Company of New York, as
depositary (in such capacity, the "Depositary"), and MacKenzie Partners, Inc.,
as Information Agent (in such capacity, the "Information Agent"), incurred in
connection with the Offer. For a description of the fees and expenses to be
paid by Purchaser, see "THE TENDER OFFER--17. Fees and Expenses."
Consummation of the Merger is subject to a number of conditions, including
approval by the stockholders of the Company if such approval is required by
applicable law. See "THE TENDER OFFER--16. Certain Legal Matters; Regulatory
Approvals." The Non-Tendering Stockholders, who hold an aggregate of
approximately 55% of the outstanding Shares, have agreed (i) not to tender
their Shares in the Offer unless Marriott consents to their doing so, and (ii)
to vote their Shares in favor of the Merger, if necessary. See "THE TENDER
OFFER--12. Purpose of the Offer; The Merger Agreement; The Stockholder
Agreements." The Company has informed Marriott that as of January 6, 1999,
there were 8,235,806 Shares issued and outstanding and 356,650 Shares reserved
for issuance upon the exercise of outstanding Company stock options. If
Purchaser acquires at least 2,000,000 Shares in the Offer, Purchaser and the
Non-Tendering Stockholders together will have sufficient voting power to
approve and adopt the Merger Agreement and the Merger at a stockholders'
meeting without the vote of any other stockholder of the Company. If Purchaser
acquires at least 3,302,924 of the Shares tendered in the Offer, then
Purchaser, after issuance of the non-voting Preferred Shares to the Non-
Tendering Stockholders, will hold at least 90% of the voting equity of the
Company, Purchaser and the Company will be able to merge using the "short-
form" procedures of the Maryland General Corporation Law (the "MGCL"), and the
Company will not be obligated to hold a stockholders' meeting to approve the
Merger Agreement and the Merger.
The information contained in this Offer to Purchase concerning the Company
was supplied by the Company. Purchaser takes no responsibility for the
completeness or accuracy of such information. The information contained in
this Offer to Purchase concerning the Offer, the Merger, Marriott and
Purchaser was supplied by Purchaser. The Company takes no responsibility for
the completeness or accuracy of such information.
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION WHICH SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS
MADE WITH RESPECT TO THE OFFER. ALSO SEE "THE TENDER OFFER--18. MISCELLANEOUS"
FOR INFORMATION REGARDING CERTAIN ADDITIONAL DOCUMENTS FILED WITH THE
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SECURITIES AND EXCHANGE COMMISSION (THE "COMMISSION") IN CONNECTION WITH THE
OFFER.
References herein to Marriott shall, unless the context indicates otherwise,
include Marriott and all of its subsidiaries including Purchaser.
THE TENDER OFFER
1. TERMS OF THE OFFER; EXPIRATION DATE
Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of any such extension or
amendment), Purchaser will accept for payment and pay for all Shares validly
tendered on or prior to the Expiration Date and not withdrawn in accordance
with the provisions set forth in this Offer to Purchase under the caption
"TENDER OFFER--3. Withdrawal Rights." The term "Expiration Date" shall mean
Midnight, New York City time, on Thursday, February 11, 1999, unless and until
Purchaser, subject to restrictions contained in the Merger Agreement, shall
from time to time have extended the period of time during which the Offer is
open, in which event the term "Expiration Date" shall mean the latest time and
date at which the Offer, as so extended by Purchaser, shall expire.
Pursuant to the Merger Agreement, Purchaser may increase the Offer Price and
may make any other changes in the terms and conditions of the Offer, provided
that, unless previously approved by the Company in writing, Purchaser may not
(i) decrease the Offer Price, (ii) change the form of consideration payable in
the Offer, (iii) add conditions to the Offer in addition to those set forth in
Article 7 of the Merger Agreement or (iv) broaden the scope of those
conditions.
Purchaser may, without the consent of the Company's Board of Directors, from
time to time extend the expiration date of the Offer. Purchaser confirms that
its right to delay payment for Shares that it has accepted for payment is
limited by Rule 14e-1(c) under the Exchange Act, which requires that a tender
offeror pay the consideration offered or return the tendered securities
promptly after the termination or withdrawal of a tender offer.
Subject to the applicable rules and regulations of the Commission, Purchaser
expressly reserves the right, subject to the terms and conditions of the Merger
Agreement, at any time and from time to time, upon the failure to be satisfied
of any of the conditions to the Offer, to (i) terminate or amend the Offer,
(ii) extend the Offer and postpone acceptance for payment of any Shares or
(iii) waive any condition to completion of the Offer. During any such extension
all Shares previously tendered and not properly withdrawn will remain subject
to any such extension and will remain subject to the Offer, subject to the
right of a tendering stockholder to withdraw such stockholder's Shares. In the
event that Purchaser waives any of the conditions set forth in this Offer to
Purchase under the caption "THE TENDER OFFER--15. Certain Conditions of the
Offer," the Commission may, if the waiver is deemed to constitute a material
change to the information previously provided to the stockholders, require that
the Offer remain open for an additional period of time and/or that Purchaser
disseminate information concerning such waiver.
If Purchaser extends the Offer, or if Purchaser (whether before or after its
acceptance for payment of Shares) is delayed in its payment for Shares or is
unable to pay for Shares pursuant to the Offer for any reason, then, without
prejudice to Purchaser's rights under the Offer, the Depositary may retain
tendered Shares on behalf of Purchaser, and such Shares may not be withdrawn
except to the extent tendering stockholders are entitled to withdrawal rights
as described in this Offer to Purchase under the caption "THE TENDER OFFER--3.
Withdrawal Rights." However, as described above, the ability of Purchaser to
delay payment for Shares that Purchaser has accepted for payment is limited by
Rule 14e-1(c) under the Exchange Act.
If Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer or waives a material condition of the Offer,
Purchaser will disseminate additional tender offer materials (including
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by public announcement as set forth above) and extend the Offer to the extent
required by Rules 14d-4(c), 14d-6(d) and 14e-1 under the Exchange Act. Such
rules generally provide that the minimum period during which a tender offer
must remain open following a material change in the terms of the offer or
information concerning the offer, other than a change in price or a change in
percentage of securities sought, will depend upon the facts and circumstances,
including the relative materiality of the changes in the terms or information.
In the Commission's view, an offer should remain open for a minimum of five
business days from the date a material change is first published, sent or given
to security holders, and, if material changes are made with respect to
information that approaches the significance of price and share levels, a
minimum of ten business days may be required to allow for adequate
dissemination and investor response. With respect to a change in price or a
change in percentage of securities sought, a minimum ten-business-day period is
generally required to allow for adequate dissemination to stockholders and for
investor response.
Any extension, amendment or termination of the Offer will be followed as
promptly as practicable by public announcement in accordance with the public
announcement requirements of Rule 14e-1(d) under the Exchange Act. Subject to
applicable law (including Rules 14d-4(c) and 14d-6(d) under the Exchange Act,
which require that any material change in the information published, sent or
given to stockholders in connection with the Offer be promptly disseminated to
stockholders in a manner reasonably designed to inform stockholders of such
change) and without limiting the manner in which Purchaser may choose to make
any public announcement, Purchaser shall have no obligation to publish,
advertise or otherwise communicate any such public announcement other than by
making a release to the Dow Jones News Service.
The Company has provided Purchaser with the Company's stockholder list, a
nonobjecting beneficial owners list, and security position listings for the
purpose of disseminating the Offer to holders of Shares. This Offer to Purchase
and the Letter of Transmittal and other relevant materials will be mailed to
record holders of Shares and furnished to brokers, dealers, commercial banks,
trust companies and similar persons whose names, or the names of whose
nominees, appear on the stockholder list or, if applicable, who are listed as
participants in a clearing agency's security position listing, for subsequent
transmittal to beneficial owners of Shares.
2. PROCEDURE FOR ACCEPTING THE OFFER AND TENDERING SHARES
Valid Tender of Shares
For a stockholder to validly tender Shares pursuant to the Offer, either (i)
a properly completed and duly executed Letter of Transmittal (or facsimile
thereof), together with any required signature guarantees, or an Agent's
Message (as defined herein) in connection with a book-entry delivery of Shares,
and any other required documents, must be received by the Depositary at one of
its addresses set forth on the back cover of this Offer to Purchase, and either
certificates ("Share Certificates") for tendered Shares must be received by the
Depositary at one of such addresses or such tendered Shares must be delivered
pursuant to the procedure for book-entry transfer set forth below (and a Book-
Entry Confirmation (as defined herein) received by the Depositary), in each
case prior to the Expiration Date or (ii) the tendering stockholder must comply
with the guaranteed delivery procedures set forth below.
Book-Entry Transfers
The Depositary will establish an account with respect to the Shares at The
Depository Trust Company (the "Book-Entry Transfer Facility") for purposes of
the Offer within two business days after the date of this Offer to Purchase.
Any financial institution that is a participant in the Book-Entry Transfer
Facility may make book-entry delivery of the Shares by causing the book-entry
transfer system to transfer such Shares into the Depositary's account at a
Book-Entry Transfer Facility in accordance with the Book-Entry Transfer
Facility's procedure for such transfer. Although delivery of Shares may be
effected through book-entry transfer at the Book-Entry Transfer Facility, a
properly completed and duly executed Letter of Transmittal (or facsimile
thereof), with any required signature guarantees, or an Agent's Message in
connection with a book-entry transfer, and any other required documents, must,
in any case, be transmitted to, and received by, the
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Depositary at one of its addresses set forth on the back cover of this Offer to
Purchase prior to the Expiration Date, or the tendering stockholder must comply
with the guaranteed delivery procedures described below. The confirmation of a
book-entry transfer of Shares into the Depositary's account at the Book-Entry
Transfer Facility as described above is referred to herein as a "Book-Entry
Confirmation." DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY IN
ACCORDANCE WITH ITS BOOK-ENTRY PROCEDURES DOES NOT CONSTITUTE VALID DELIVERY TO
THE DEPOSITARY.
The term "Agent's Message" means a message, transmitted by the Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of the
Book-Entry Confirmation, which states that the Book-Entry Transfer Facility has
received an express acknowledgment from the participant in the Book-Entry
Transfer Facility tendering the Shares, that such participant has received the
Letter of Transmittal and agrees to be bound by the terms of the Letter of
Transmittal and that Purchaser may enforce such agreement against such
participant.
THE METHOD OF DELIVERY OF SHARES, THE LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS IS AT THE ELECTION AND SOLE RISK OF THE TENDERING
STOCKHOLDER AND DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED AT THE
DEPOSITARY. IF DELIVERY IS BY MAIL, THEN INSURED OR REGISTERED MAIL WITH RETURN
RECEIPT REQUESTED IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ENSURE TIMELY DELIVERY.
Signature Guarantees
No signature guarantee on the Letter of Transmittal is required if (i) the
Letter of Transmittal is signed by the registered holder of the Shares (which
term, for purposes of this Section, includes any participant in the Book-Entry
Transfer Facility system whose name appears on a security position listing as
the owner of the Shares) tendered therewith and such registered holder has not
completed either the box entitled "Special Delivery Instructions" or the box
entitled "Special Payment Instructions" on such Letter of Transmittal or (ii)
such Shares are tendered for the account of a bank, broker, dealer, credit
union, savings association or other entity that is a member in good standing of
the Securities Transfer Agents Medallion Program, the New York Stock Exchange
Medallion Signature Guarantee Program or the Stock Exchange Medallion Program
(each, an "Eligible Institution"). In all other cases, all signatures on the
Letter of Transmittal must be guaranteed by an Eligible Institution. See
Instructions 1 and 5 to the Letter of Transmittal. If the Share Certificates
are registered in the name of a person other than the signer of the Letter of
Transmittal, or if payment is to be made to, or Share Certificates not validly
tendered, not accepted for payment or not purchased are to be issued or
returned to, a person other than the registered holder of the Share
Certificates, the tendered Share Certificates must be endorsed in blank or
accompanied by appropriate stock powers, signed exactly as the name of the
registered holder appears on the Share Certificates with the signature on such
Share Certificates or stock powers guaranteed by an Eligible Institution. See
Instructions 1 and 5 to the Letter of Transmittal.
Guaranteed Delivery
If a stockholder desires to tender Shares pursuant to the Offer and such
stockholder's Share Certificates are not immediately available or the
procedures for book-entry transfer cannot be completed on a timely basis or
time will not permit all required documents to reach the Depositary prior to
the Expiration Date, such Shares may nevertheless be tendered provided that all
of the following guaranteed delivery procedures are duly complied with:
(a) such tender is made by or through an Eligible Institution;
(b) the Depositary receives (by hand, mail, telegram or facsimile
transmission) on or prior to the Expiration Date, a properly completed and
duly executed Notice of Guaranteed Delivery, substantially in the form
provided by Purchaser; and
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(c) the Share Certificates representing all tendered Shares, in proper
form for transfer (or Book-Entry Confirmation with respect to such Shares),
together with a properly completed and duly executed Letter of Transmittal
(or facsimile thereof) and any other documents required by the Letter of
Transmittal, are received by the Depositary within three Nasdaq trading
days after the date of such Notice of Guaranteed Delivery. A "Nasdaq
trading day" is any day on which securities are traded on the Nasdaq Stock
Market.
The Notice of Guaranteed Delivery may be delivered by hand, or may be
transmitted by telegram, facsimile transmission or mail, to the Depositary and
must include a guarantee by an Eligible Institution in the form set forth in
such Notice of Guaranteed Delivery.
Notwithstanding any other provision hereof, payment for Shares accepted for
payment pursuant to the Offer will in all cases be made only after timely
receipt by the Depositary of (i) Share Certificates for (or a timely Book-Entry
Confirmation with respect to) such Shares, (ii) a properly completed and duly
executed Letter of Transmittal (or facsimile thereof), or, in the case of book-
entry transfer, an Agent's Message, and (iii) any other documents required by
the Letter of Transmittal. Accordingly, tendering stockholders may be paid at
different times depending upon when Share Certificates, Book-Entry
Confirmations and such other documents are actually received by the Depositary.
Under no circumstances will interest be paid by Purchaser on the purchase price
of the Shares to any tendering stockholders, regardless of any extension of the
Offer or any delay in making such payment.
Determination of Validity
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance for payment of any tender of Shares will be determined
by Purchaser in its sole discretion, which determination will be final and
binding. Purchaser reserves the absolute right to reject any or all tenders of
any Shares that it determines are not in proper form or the acceptance for
payment of or payment for which may, in the opinion of Purchaser's counsel, be
unlawful. Purchaser also reserves the absolute right to waive any of the
conditions of the Offer or any defect or irregularity in the tender of any
Shares with respect to any particular stockholder, whether or not similar
defects or irregularities are waived in the case of other stockholders. None of
Purchaser, Marriott, the Depositary, the Information Agent or any other person
will be under any duty to give notice of any defects or irregularities in
tenders or incur any liability for failure to give any such notice. Purchaser's
interpretation of the terms and conditions of the Offer (including the Letter
of Transmittal and the instructions thereto) will be final and binding.
Other Requirements
By executing the Letter of Transmittal as set forth herein, a tendering
stockholder irrevocably appoints designees of Purchaser as such stockholder's
proxies, each with full power of substitution, in the manner set forth in the
Letter of Transmittal, to the full extent of such stockholder's rights with
respect to the Shares tendered by such stockholder and accepted for payment by
Purchaser (and with respect to any and all other Shares or other securities or
rights issued or issuable in respect of such Shares on or after February 12,
1999), effective when, if and to the extent that Purchaser accepts such Shares
for payment pursuant to the Offer. All such proxies shall be considered coupled
with an interest in the tendered Shares. Upon such acceptance for payment, all
prior proxies given by such stockholder with respect to such Shares accepted
for payment or other securities or rights will, without further action, be
revoked, and no subsequent proxies may be given. Such designees of Purchaser
will, with respect to such Shares for which the appointment is effective, be
empowered to exercise all voting and other rights of such stockholder as they
in their sole discretion may deem proper in respect of any annual or special
meeting of the Company's stockholders or any adjournment or postponement
thereof, by written consent in lieu of any such meeting or otherwise. Purchaser
reserves the right to require that, in order for Shares to be deemed validly
tendered, immediately upon Purchaser's payment for such Shares, Purchaser must
be able to exercise full voting rights with respect to such Shares.
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Purchaser's acceptance for payment of Shares tendered pursuant to any of the
procedures described herein will constitute a binding agreement between the
tendering stockholder and Purchaser upon the terms and subject to the
conditions of the Offer.
Backup Federal Income Tax Withholding
To prevent backup federal income tax withholding on payments of cash
pursuant to the Offer, a stockholder tendering Shares in the offer must provide
the Depositary with such stockholder's correct taxpayer identification number
("TIN") on a Substitute Form W-9 and certify under penalties of perjury that
such TIN is correct and that such stockholder is not subject to backup
withholding. If a stockholder does not provide its correct TIN or fails to
provide the certification described herein, under federal income tax laws, the
Depositary will be required to withhold 31% of the amount of any payment made
to such stockholder pursuant to the Offer. All stockholders tendering Shares
pursuant to the Offer should complete and sign the Substitute Form W-9 included
as a part of the Letter of Transmittal to provide the information and
certification necessary to avoid backup withholding. Noncorporate foreign
stockholders should complete and sign a Form W-8, Certificate of Foreign
Status, a copy of which may be obtained from the Depositary, in order to avoid
backup withholding. See Instruction 10 to the Letter of Transmittal.
3. WITHDRAWAL RIGHTS
Tenders of Shares made pursuant to the Offer will be irrevocable, except
that Shares tendered may be withdrawn at any time prior to the Expiration Date
and, unless accepted for payment and paid for as provided herein, may also be
withdrawn at any time on or after March 15, 1999.
For a withdrawal to be effective, a written, telegraphic or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth on the back cover of this Offer to Purchase. Any
notice of withdrawal must specify the name of the person who tendered the
Shares to be withdrawn, the number of Shares to be withdrawn and the name of
the registered holder of the Shares to be withdrawn as set forth on such Share
Certificates if different from the name of the person who tendered such Shares.
If Share Certificates have been delivered or otherwise identified to the
Depositary, then, prior to the physical release of such Share Certificates, the
serial numbers shown on such Share Certificates must be furnished to the
Depositary and, unless such Shares have been tendered by an Eligible
Institution, the signatures on the notice of withdrawal must be guaranteed by
an Eligible Institution. If Shares have been delivered pursuant to the
procedures for book-entry transfer set forth in Section 2 above, any notice of
withdrawal must specify the name and number of the account at the appropriate
Book-Entry Transfer Facility to be credited with such withdrawn Shares and
otherwise comply with the Book-Entry Transfer Facility's procedures for
withdrawal, in which case a notice of withdrawal will be effective if delivered
to the Depositary by any method of delivery described in the first sentence of
this paragraph.
All questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by Purchaser in its sole discretion,
and its determination will be final and binding. None of Purchaser, the
Depositary, the Information Agent or any other person will be obligated to give
notice of any defects or irregularities in any notice of withdrawal, nor shall
any of them incur any liability for failure to give any such notice.
Withdrawals of tenders of Shares may not be rescinded, and any Shares
properly withdrawn will thereafter be deemed not validly tendered for purposes
of the Offer. However, withdrawn Shares may be retendered by following one of
the procedures described in Section 2 above at any time on or prior to the
Expiration Date.
4. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES
Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of any extension or
amendment), Purchaser will accept for payment, and will pay for
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promptly after the Expiration Date, any and all Shares validly tendered on or
prior to the Expiration Date and not properly withdrawn in accordance with
Section 3 above. Subject to applicable rules of the Commission and the terms
and conditions of the Merger Agreement, Purchaser expressly reserves the right,
in its sole discretion, to delay acceptance for payment of, or payment for,
Shares in order to comply in whole or in part with any applicable law.
In all cases, payment for Shares tendered and accepted for payment pursuant
to the Offer will be made only after timely receipt by the Depositary of (i)
the Share Certificates (or timely Book-Entry Confirmation of the book-entry
transfer of such Shares into the Depositary's account at the Book-Entry
Transfer Facility pursuant to the procedures set forth under Section 2 above),
(ii) the Letter of Transmittal (or facsimile thereof), properly completed and
duly executed, together with any required signature guarantees, or an Agent's
Message in connection with a book-entry transfer and (iii) any other documents
required by the Letter of Transmittal.
For purposes of the Offer, Purchaser will be deemed to have accepted for
payment, and thereby purchased, Shares validly tendered to Purchaser and not
properly withdrawn as, if and when Purchaser gives oral or written notice to
the Depositary of Purchaser's acceptance for payment of such Shares pursuant to
the Offer. In all cases, upon the terms and subject to the conditions of the
Offer, payment for Shares so accepted for payment will be made by the deposit
of the purchase price therefor with the Depositary, which will act as agent for
tendering stockholders for the purpose of receiving payment from Purchaser and
transmitting payment to validly tendering stockholders. UNDER NO CIRCUMSTANCES
WILL INTEREST BE PAID BY PURCHASER ON THE PURCHASE PRICE OF THE SHARES TENDERED
PURSUANT TO THE OFFER, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN
MAKING SUCH PAYMENT. Upon the deposit of funds with the Depositary for the
purpose of making payments to tendering stockholders, Purchaser's obligation to
make such payments shall be satisfied and tendering stockholders must
thereafter look solely to the Depositary for payment of amounts owed to them by
reason of the acceptance for payment of Shares pursuant to the Offer. Purchaser
will pay any stock transfer taxes with respect to the transfer and sale to it
or its order pursuant to the Offer, except as otherwise provided in Instruction
6 of the Letter of Transmittal, as well as any charges and expenses of the
Depositary and the Information Agent.
If Purchaser is delayed in its acceptance for payment of, or payment for
tendered Shares or is unable to accept for payment or pay for such Shares
pursuant to the Offer for any reason, then, without prejudice to Purchaser's
rights under the Offer (but subject to Purchaser's obligations under Rule 14e-
1(c) under the Exchange Act to pay for or return the tendered Shares promptly
after the termination or withdrawal of the Offer), the Depositary may,
nevertheless, retain tendered Shares on behalf of Purchaser, and such Shares
may not be withdrawn except to the extent tendering stockholders are entitled
to exercise, and duly exercise, withdrawal rights as described under Section 3
above.
If any tendered Shares are not purchased pursuant to the Offer because of an
invalid tender or for any reason, Share Certificates for any such Shares will
be returned, without expense, to the tendering stockholder (or, in the case of
Shares delivered by book-entry transfer of such Shares into the Depositary's
account at the Book-Entry Transfer Facility pursuant to the procedures set
forth under Section 2 above, such Shares will be credited to an account
maintained at the Book-Entry Transfer Facility) as promptly as practicable
following the expiration or termination of the Offer.
5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The summary of Federal income tax consequences set forth below is for
general information only and is based on Purchaser's understanding of the law
as currently in effect. The tax consequences to each stockholder will depend in
part upon such stockholder's particular situation. Special tax consequences not
described herein may be applicable to particular classes of taxpayers, such as
financial institutions, broker-dealers, persons who are not citizens or
residents of the United States and stockholders who acquired their Shares
through the exercise of an employee stock option or otherwise as compensation.
ALL STOCKHOLDERS SHOULD
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CONSULT WITH THEIR OWN TAX ADVISORS AS TO THE PARTICULAR TAX CONSEQUENCES OF
THE OFFER AND THE MERGER TO THEM, INCLUDING THE APPLICABILITY AND EFFECT OF THE
ALTERNATIVE MINIMUM TAX AND ANY STATE, LOCAL OR FOREIGN INCOME AND OTHER TAX
LAWS AND OF CHANGES IN SUCH TAX LAWS.
The receipt of cash for Shares pursuant to the Offer (or the Merger) will be
a taxable transaction for federal income tax purposes and may also be a taxable
transaction under applicable state, local or foreign tax laws. Generally, for
federal tax purposes, a stockholder who receives cash for Shares pursuant to
the Offer (or the Merger) will recognize gain or loss for federal income tax
purposes equal to the difference between the amount of cash received in
exchange for the Shares sold and such stockholder's adjusted tax basis in such
Shares. Provided that the Shares constitute capital assets in the hands of the
stockholder, such gain or loss will be capital gain or loss, and will be long
term capital gain or loss if the holder has held the Shares for more than one
year at the time of sale. Gain or loss will be calculated separately for each
block of Shares (i.e., a group of Shares with the same tax basis and holding
period) tendered pursuant to the Offer.
A stockholder (other than certain exempt stockholders including, among
others, all corporations and certain foreign individuals and entities) that
tenders Shares may be subject to 31% backup withholding unless the stockholder
provides its TIN and certifies that such number is correct or properly
certifies that it is awaiting a TIN, or unless an exemption applies. A
stockholder who does not furnish its TIN may be subject to a penalty imposed by
the Internal Revenue Service (the "IRS"). See Section 2.
If backup withholding applies to a stockholder, the Depositary is required
to withhold 31% from payments to such stockholder. Backup withholding is not an
additional tax. Rather, the amount of the backup withholding can be credited
against the federal income tax liability of the person subject to the backup
withholding, provided that the required information is given to the IRS. If
backup withholding results in an overpayment of tax, a refund can be obtained
by the stockholder upon filing an appropriate income tax return.
6. PRICE RANGE OF THE SHARES
The Shares are traded on the Nasdaq Stock Market under the symbol "EXEC."
The Shares began trading on the Nasdaq Stock Market on August 27, 1997. The
following table sets forth, for the periods indicated, the high bid and low ask
prices per share as reported on the Nasdaq Stock Market according to published
sources:
<TABLE>
<CAPTION>
TRADING
-------------
HIGH LOW
------ ------
<S> <C> <C>
Fiscal Year Ended December 31, 1997:
Third Quarter (from August 27-September 30).................... $12.00 $10.50
Fourth Quarter................................................. $12.50 $ 8.25
Fiscal Year Ended December 31, 1998:
First Quarter.................................................. $12.75 $ 9.25
Second Quarter................................................. $14.25 $10.88
Third Quarter.................................................. $12.50 $ 8.00
Fourth Quarter................................................. $13.63 $ 7.00
</TABLE>
On January 5, 1999, the last full day of trading prior to the public
announcement of the execution of the Merger Agreement, according to published
sources, the last reported bid price of the Common Stock on the Nasdaq Stock
Market was $13.56 per Share. On January 11, 1999, the last full day of trading
before the commencement of the Offer, according to published sources, the last
reported bid price of the Common Stock on the Nasdaq Stock Market was $13.81
per Share. STOCKHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR THE
COMMON STOCK.
9
<PAGE>
7. CERTAIN INFORMATION CONCERNING THE COMPANY
General
The Company is a Maryland corporation with its principal offices located at
7595 Rickenbacker Drive, Gaithersburg, Maryland 20879.
The Company is a provider of interim housing for corporate clients and
professionals. In addition to providing fully furnished housing, the Company
also rents housewares and furniture to property management companies and
apartment communities. The Company has offices throughout the United States.
Available Information
The Shares are registered under the Exchange Act. Accordingly, the Company
is subject to the informational filing requirements of the Exchange Act and, in
accordance therewith, is required to file periodic reports, proxy statements
and other information with the Commission relating to its business, financial
condition and other matters. Certain information, as of particular dates,
concerning the Company's directors and officers (including their remuneration,
stock options granted to them and shares held by them), the principal holders
of the Company's securities, and any material interest of such persons in
transactions with the Company is required to be disclosed in proxy statements
and annual reports distributed to the Company's stockholders and filed with the
Commission. Such reports, proxy statements and other information are available
for inspection and copying at the public reference facilities of the Commission
located in Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and
at the regional offices of the Commission located in Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661, and Seven World Trade
Center, Suite 1300, New York, New York 10048. Copies of this material may also
be obtained by mail, upon payment of the Commission's customary fees from the
Commission's principal office at 450 Fifth Street, N.W., Washington, D.C.
20549. The Commission also maintains an Internet site on the World Wide Web at
http://www.sec.gov that contains company reports, proxy statements and other
information, all of which may be printed out via computer with no fees charged.
In addition, such material should also be available for inspection at The
Nasdaq Stock Market, Inc., 1735 K Street, N.W., Washington, D.C. 20006.
The Preferred Shares will not be registered under the Exchange Act or traded
on any securities exchange or over-the-counter quotations system.
Summary Financial Information
The following table sets forth certain summary consolidated financial
information with respect to the Company and its consolidated subsidiaries
derived from the audited financial statements contained in the Company's 1997
Annual Report on Form 10-K and the unaudited financial statements contained in
the Company's Quarterly Reports on Form 10-Q for the quarters ended September
30, 1997 and September 30, 1998. The summary below is qualified by reference to
such document (which may be inspected and obtained as described above under
"Available Information"), including the financial statements and related notes
contained therein.
10
<PAGE>
EXECUSTAY CORPORATION AND SUBSIDIARIES
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS ENDED FISCAL YEAR ENDED
--------------------------- -------------------------
SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
1998 1997 1997 1996
------------- ------------- ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenue:
Interim housing
revenue............. $80,935 $27,831 $41,927 $20,905
Furniture and
houseware revenue... 7,645 7,422 9,831 8,740
------- ------- ------- -------
Total revenue...... $88,580 $35,253 $51,758 $29,645
Operating costs and
expenses:
Cost of revenue...... 63,955 23,401 35,306 18,472
Personnel and payroll
costs............... 11,478 5,821 8,246 5,597
Occupancy costs and
nonrental
depreciation and
amortization........ 2,961 1,167 1,600 994
Other operating
costs............... 3,037 1,638 2,209 1,616
Nonrecurring
operating expenses.. 630 -- -- --
------- ------- ------- -------
Total operating
costs and
expenses.......... $82,061 $32,027 $47,361 $26,679
Earnings from
operations............ 6,519 3,226 4,397 2,966
Interest expense....... 359 278 156 308
------- ------- ------- -------
Earnings before income
taxes................. $ 6,160 $ 2,948 $ 4,241 $ 2,658
Income tax expense..... 2,464 156 285 --
------- ------- ------- -------
Net income............. $ 3,696 $ 2,792 $ 3,956 $ 2,658
======= ======= ======= =======
PRO FORMA DATA (1):
Pro forma net income... $ 3,696 $ 1,769 $ 2,545 $ 1,595
======= ======= ======= =======
Pro forma net income
per common share
(diluted)............. $ 0.49 $ 0.41 $ 0.51 $ 0.39
======= ======= ======= =======
Weighted average common
shares outstanding
(diluted)............. 7,619 4,336 4,986 4,074
</TABLE>
<TABLE>
<CAPTION>
AT AT
SEPTEMBER 30, DECEMBER 31,
1998 1997
------------- ------------
(UNAUDITED)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.......................... $ 308 $16,134
Property on or held for lease, net................. 7,644 4,912
Total assets....................................... 79,178 43,830
Bank line of credit................................ 3,041 5,000
Notes payable to bank.............................. 17,000 --
Total stockholders' equity......................... 49,050 31,026
</TABLE>
- --------
(1) Prior to the public offering of the Shares on August 27, 1997, the Company
elected to be treated as an S corporation and was not subject to federal
and certain state income taxes. The Pro Forma Data reflect federal and
state income tax based on applicable tax rates as if the Company had not
elected S corporation status for those periods.
(2) The pro forma weighted average common shares outstanding is based on: (i)
the weighted average shares outstanding during the period; and (ii) the
assumed sale of a sufficient number of common shares necessary to provide
funds to make a distribution of all undistributed S corporation earnings
from June 30, 1997 in excess of earnings for the twelve-month period then
ended and to make the distribution of $1.1 million declared on June 13,
1997.
11
<PAGE>
Except as otherwise noted in this Offer to Purchase, all of the information
with respect to the Company set forth in this Offer to Purchase has been
derived from publicly available information. Although Purchaser has no
knowledge that any such information is untrue, Purchaser takes no
responsibility for the accuracy or completeness of information contained in
this Offer to Purchase with respect to the Company or for any failure by the
Company to disclose events which may have occurred or may affect the
significance or accuracy of any such information.
8. CERTAIN INFORMATION CONCERNING PURCHASER AND MARRIOTT
Purchaser is a Delaware corporation with its principal executive offices
located at 10400 Fernwood Road, Bethesda, Maryland 20857. Purchaser, a wholly-
owned, direct subsidiary of Marriott, was organized to acquire the Company and
has not conducted any unrelated activities since its organization.
Marriott is a Delaware corporation with its principal office located at
10400 Fernwood Road, Bethesda, Maryland 20857. Marriott and its subsidiaries
are worldwide operators and franchisers of hotels and senior living communities
and providers of distribution services. Marriott and its subsidiaries operate
and franchise lodging facilities under eleven separate brand names and develop
and operate vacation timesharing resorts. Marriott Senior Living Services
develops and operates senior living communities involving independent living,
assisted living and skilled nursing care for seniors in the United States.
Marriott Distribution Services supplies food and related products to external
customers and to internal operations throughout the United States.
12
<PAGE>
Set forth below is certain selected consolidated financial information with
respect to Marriott and its subsidiaries excerpted from the information
contained in Marriott's 1997 Annual Report on Form 10-K (the "Marriott 1997
Annual Report") and Marriott's Quarterly Report on Form 10-Q for the quarter
ended September 11, 1998 (the "Marriott 1998 10-Q"). More comprehensive
financial information is included in the Marriott 1997 Annual Report, the
Marriott 1998 10-Q and other documents filed by Marriott with the Commission,
and the following summary is qualified in its entirety by reference to the
Marriott 1997 Annual Report, the Marriott 1998 10-Q and such other documents
and all the financial information (including any related notes) contained
therein. The Marriott 1997 Annual Report, the Marriott 1998 10-Q and such other
documents should be available for inspection and copies thereof should be
obtainable in the manner set forth below under "Available Information."
MARRIOTT INTERNATIONAL, INC. AND SUBSIDIARIES
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
(IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THIRTY-SIX WEEKS ENDED FISCAL YEAR ENDED
--------------------------- ---------------------
SEPTEMBER 11, SEPTEMBER 12, JANUARY 2, JANUARY 3,
1998 1997 1998 1997
------------- ------------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Sales(1)................... $6,994 $6,177 $9,046 $7,267
Operating profit before
corporate expenses and
interest.................. 513 430 609 508
Net Income................. 276 227 324 270
PER SHARE DATA:
Basic earnings per
share(2).................. 1.09 0.89 1.27 1.06
Diluted earnings per
share(2).................. 1.02 0.84 1.19 0.99
Cash dividends
declared(3)............... 0.15
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 11, JANUARY 2,
1998 1998
------------- ----------
(UNAUDITED)
<S> <C> <C>
BALANCE SHEET DATA:
Current assets(1).................................... $1,513 $1,367
Total assets......................................... 6,155 5,557
Long-term and convertible subordinated debt.......... 858 422
Shareholders' equity(3).............................. 2,556
</TABLE>
- --------
(1) Starting with its 1998 Form 10-K, Marriott will change its accounting
policy relating to the recognition of sales and working capital of managed
hotels and retirement communities. This change in policy will have no
impact on operating profit or net income. The data presented above does not
reflect the restatement which will arise following adoption of this change
in accounting policy.
(2) Earnings per share data for periods prior to March 27, 1998 are pro forma
and unaudited since Marriott was not a publicly held company during those
periods.
(3) Shareholders' equity and cash dividends declared for periods prior to March
27, 1998 are not presented since Marriott was a wholly owned subsidiary of
Sodexho Marriott Services, Inc. (formerly Marriott International, Inc.)
during those periods.
Available Information. Marriott is subject to the informational requirements
of the Exchange Act and, in accordance therewith, files reports relating to its
business, financial condition and other matters. Information, as of particular
dates, concerning Marriott's directors and officers, their remuneration, stock
options and other matters, the principal holders of Marriott's securities and
any material interest of such persons in transactions
13
<PAGE>
with Marriott is required to be disclosed in proxy statements distributed to
Marriott's stockholders and filed with the Commission. Such reports, proxy
statements and other information should be available for inspection at the
Commission and copies thereof should be obtainable from the Commission in the
same manner as is set forth with respect to the Company in Section 7.
The name, business address, citizenship, present principal occupation or
employment and five-year employment history of each of the executive officers
of Marriott and Purchaser are set forth in Schedule I hereto.
Except as described in this Offer to Purchase (i) none of Marriott or
Purchaser or, to the best of Marriott's and the Purchaser's knowledge, any of
the persons listed in Schedule I hereto, or any associate or majority-owned
subsidiary of Marriott or any of the persons so listed, beneficially owns or
has any right to acquire directly or indirectly any Shares or has any contract,
arrangement, understanding or relationship with any other person with respect
to any Shares, including, but not limited to, any contract, arrangement,
understanding or relationship concerning the transfer or the voting of any
Shares, joint ventures, loan or option arrangements, puts or calls, guaranties
of loans, guaranties against loss, or the giving or withholding of proxies, and
(ii) none of Marriott or Purchaser or to the knowledge of Marriott and
Purchaser, any of the other persons referred to above, or any of the respective
directors, executive officers or subsidiaries of any of the foregoing, has
effected any transaction in the Shares during the past 60 days.
9. SOURCE AND AMOUNT OF FUNDS
The total amount of funds required by Purchaser to purchase the Shares will
be approximately $51.4 million. Purchaser plans to obtain all funds needed for
the Offer through a capital contribution, which will be made by Marriott to
Purchaser at the time the Shares tendered pursuant to the Offer are accepted
for payment. Marriott intends to use its available cash on hand to make this
capital contribution. Neither the Offer nor the Merger is conditioned on
obtaining financing.
10. CERTAIN TRANSACTIONS BETWEEN MARRIOTT AND THE COMPANY
Except as set forth in this Offer to Purchase, since January 1, 1998, none
of Marriott or Purchaser or, to the best knowledge of Marriott and Purchaser,
any of the persons listed on Schedule I hereto, has had any transaction with
the Company or any of its executive officers, directors or affiliates that is
required to be reported under the rules and regulations of the Commission
applicable to the Offer. Except as set forth in this Offer to Purchase, since
January 1, 1998 there have been no contracts, negotiations or transactions
between Marriott, or any of its subsidiaries or, to the best knowledge of
Marriott and Purchaser, any of the persons listed in Schedule I to this Offer
to Purchase, on the one hand, and the Company or its affiliates, on the other
hand, concerning a merger, consolidation or acquisition; a tender offer for or
other acquisition of securities of any class of the Company; an election of
directors of the Company; or a sale or other transfer of a material amount of
assets of the Company or any of its subsidiaries.
11. CONTACTS WITH THE COMPANY; BACKGROUND OF THE OFFER AND THE MERGER
The Company has supplied Purchaser and Marriott with the following
information.
The decision of the Board to approve and recommend the Merger Agreement was
the result of an extended evaluation process. Management of the Company has
long believed that stockholder value could be maximized by developing a
national presence in the interim housing industry in order to enhance
profitability and make the Company a more attractive acquisition candidate.
Following the Company's initial public offering in August 1997, the Company
implemented an aggressive acquisition strategy, increasing revenues from
$30,000,000 in 1996 to approximately $120,000,000 in 1998. As a result of this
series of acquisitions, the most recent and largest of which was the
Accommodations America acquisition in May 1998, the Company now operates in
nearly all the major metropolitan markets in the United States that management
had targeted. As a
14
<PAGE>
result, management determined that the Company was now in position to maximize
stockholder value through a sale of the Company.
In making its determination to approve the Merger Agreement, the Board also
considered various factors that could adversely affect the market price of the
Shares, including (i) a limited public float and low average daily trading
volumes of the Shares, (ii) a limited number of market makers and investment
banking firms preparing research reports with respect to the Company, (iii) a
limited number of comparable public companies against which investors could
evaluate the Company's performance, (iv) each of the Company's two primary
competitors had a major decline in its stock price following a recent initial
public offering and (v) management's belief that one or more national lodging
companies are likely to enter the interim housing industry. Based on the
foregoing factors, Company management believes that the trading price of the
Shares is subject to volatility and that any recovery following a significant
price decline might be lengthy and difficult.
On January 6, 1999, the Company entered into the Merger Agreement, and the
Non-Tendering Stockholders simultaneously entered into Stockholder Agreements.
A full chronology of events leading to the execution of such agreements is set
forth below.
On June 30, 1998, a representative of a prospective purchaser ("Bidder A")
contacted Gary Abrahams, the Company's Chief Executive Officer, by telephone to
indicate a possible interest in acquiring the Company. Shortly thereafter, Mr.
Abrahams contacted Arne Sorenson, then the Senior Vice President of Development
of Marriott (now its Chief Financial Officer), and also contacted
representatives of another prospective bidder ("Bidder B") for the purpose of
determining whether Marriott or Bidder B had an interest in acquiring the
Company. Mr. Abrahams scheduled a meeting with representatives of Bidder B in
Chicago for July 8, 1998. However, Mr. Abrahams was delayed by bad weather on
the date of the meeting, and the meeting was rescheduled and occurred on July
24, 1998. On July 28, 1998, Mr. Abrahams and another representative of the
Company met with Mr. Sorenson at Marriott's headquarters in Bethesda, Maryland.
Also on July 28, 1998, Mr. Abrahams met with a representative of A.G. Edwards
to discuss generally the strategic direction of the Company, and generally to
review various strategic alternatives, including possible business combination
or sale transactions. Management informed the members of the Board of these
discussions with Marriott, Bidder A and Bidder B at the Company's July 29, 1998
board meeting. At that meeting, the Board determined that management should
continue to investigate possible transactions between the bidders and the
Company. Prior to the July 29 meeting, the price of the Shares had declined
from its all-time high of $14.25 in May 1998 to $10.25 on July 29.
David Santee, one of the Company's independent directors, is a divisional
president of Bidder B. In order to avoid possible conflicts of interest, upon
the advice of counsel, management of the Company determined to exclude Mr.
Santee from any discussions involving the sale of the Company so long as Bidder
B remained a viable candidate.
In response to the Board's directive, the Company asked A.G. Edwards to
prepare an analysis of various potential business combination partners or
purchasers of the Company. A.G. Edwards prepared such an analysis and presented
it to Company management in early August. During August 1998 management
continued discussions with the three prospective bidders and sent preliminary
financial models to each of them. Although Mr. Abrahams also initiated
discussions with another potential purchaser, that party expressed no interest
in acquiring the Company.
On July 30, 1998, a representative of Bidder A met with management at the
Company's executive offices to discuss a possible transaction. Four
representatives of Bidder A again visited the Company's executive offices on
August 27, 1998. As a result of that meeting, Bidder A verbally indicated that
it might be interested in acquiring the Company and suggested a valuation in
the range of $11.00 or $12.00 per share. Bidder A also indicated that it
desired to proceed on an exclusive basis.
15
<PAGE>
Mr. Sorenson of Marriott visited the Company's executive offices on August
13, 1998. At that meeting, Mr. Sorenson informed the Company that Marriott had
been considering an entry into the interim housing business for some time,
believing that such an operation would complement Marriott's other lodging
operations. As a result of that meeting, after the Company and Marriott had
entered into a confidentiality agreement, Company management made a
presentation at Marriott's executive offices on September 2, 1998. On September
22, 1998, Mr. Sorenson orally indicated that Marriott might be interested in
acquiring the Shares and suggested a price of $12.00 per share in cash or
$11.00 per share in a transaction involving an exchange for Marriott Shares.
Mr. Sorenson also indicated that, if the Company were interested in pursuing a
transaction, Marriott desired to proceed on an exclusive basis. On September
28, 1998, Mr. Abrahams informed Mr. Sorenson by telephone that the Company was
interested in continuing to negotiate with Marriott, but was unwilling at that
time to do so on an exclusive basis. Mr. Abrahams further informed Mr. Sorenson
that the Company intended to engage A.G. Edwards to assist in the process.
Although Mr. Abrahams had telephone conversations with representatives of
Bidder B in August and September 1998, Bidder B declined to perform any due
diligence on the Company, but orally indicated on September 17, 1998 that it
might be interested in acquiring the Company in a stock-for-stock exchange that
would value the Shares at approximately $10.00 per share. On September 23, Mr.
Abrahams informed Bidder B that the Company had received other informal offers
in the range of $12.00 per share and invited Bidder B to improve its offer. On
September 29, Bidder B telephoned Mr. Abrahams to indicate that it might be
willing to acquire the Company in an exchange that would value the Company in
the range of $10.25 to $10.50 per share.
On September 29, 1998, the Company engaged A.G. Edwards to assist in the
negotiation process and to prepare a fairness opinion for the Board. In October
1998 A.G. Edwards conducted a due diligence investigation of the Company and
also assisted the Company in the preparation of a detailed financial model that
was delivered to each of Marriott, Bidder A and Bidder B. During August,
September and October, the price of the Shares continued to decline, reaching
its low of $7.00 per share on October 16, 1998.
In November 1998, Marriott commenced a preliminary financial and legal due
diligence investigation of the Company. Although Bidder A did not conduct any
legal due diligence during this time, it did perform a financial analysis of
the Company.
On November 25, 1998, A.G. Edwards sent a letter to Marriott, Bidder A and
Bidder B requesting each of them to submit a written proposal by December 7.
Marriott and Bidder A each submitted a written proposal (described below) by
such date. Bidder B did not submit a proposal, and management asked A.G.
Edwards to contact Bidder B to determine if Bidder B intended to make an offer.
Several days after the December 7, deadline, Bidder B informed A.G. Edwards
that it might consider an acquisition of the Company in a stock for stock
exchange that valued the Company in the range of $10.00 to $11.00 per share.
A.G. Edwards told Bidder B that its offer was not competitive and invited
Bidder B to improve its proposal, but Bidder B indicated it was unwilling to do
so.
The proposals submitted by Marriott and Bidder A are summarized below.
Marriott's initial proposal (i) offered to purchase publicly held Shares for
$13.50 per share in cash and (2) offered to acquire Shares held by Gary
Abrahams, Marc Kaplan, Robert Zaugg and Benny Anderson for the equivalent of
$12.00 per share to be paid in shares of Marriott Shares. The exchange ratio
for the four major stockholders was to be based on the average closing price
for Marriott Shares for the ten trading days prior to the commencement of the
tender offer for the publicly held Shares. The proposal indicated that Marriott
was willing to structure the exchange with management in a manner that would
qualify as a tax-free reorganization. The proposal included a three-year
restriction on the ability of each of the four major stockholders to sell the
Marriott stock to be issued to them in the proposed transaction. The proposal
also was conditioned on certain unspecified key employees signing three-year
employment agreements with Marriott that would include
16
<PAGE>
unspecified incentive compensation based on the future performance of the
Company as well as reasonable agreements not to compete.
The letter submitted by Bidder A included two alternative proposals, either
of which could be selected by the Company. Under one alternative, each public
stockholder would have had a choice of receiving either (i) $14.00 per share in
cash for all Shares held by such stockholder or (ii) one share of a new series
of preferred stock (the "Earnout Preferred") of the surviving company for each
Share for up to 75% of the Shares held by such stockholder and a cash payment
of $14.00 per share for the Shares not exchanged for the Earnout Preferred.
Under the other alternative, each public stockholder would simply be offered
$14.00 per share in cash. Under either alternative, the Company's senior
management would be required to enter into employment agreements and to
exchange 75% of their Shares for the Earnout Preferred. The Earnout Preferred
shares issued to senior management would be nontransferable. As soon as
practicable after December 31, 2000, the surviving company would be required to
redeem all of the shares of the Earnout Preferred, and the holders of such
stock would be required to sell such shares to the surviving company, at a
price per share equal to 11.88 times the amount by which (x) the surviving
company's earnings per share before interest, taxes, depreciation and
amortization for the year 2000 exceeded (y) $1.43. The exchange, as proposed by
Bidder A, would not qualify as a tax-free reorganization. It was also unclear
whether there would be any public market, or practical liquidity, prior to the
year 2001 for the Earnout Preferred shares issued to public stockholders of the
Company if they elected to receive such shares. Bidder A's offer was contingent
on Bidder A arranging financing for the cash payments. There was no such
condition in the Marriott offer. Both offers were conditioned on completion of
due diligence and execution of definitive agreements with usual and customary
provisions and conditions.
After receipt on December 7, 1998 of these written proposals from Marriott
and Bidder A, management asked A.G. Edwards to contact the bidders to clarify
certain terms contained in their respective proposals and to probe for areas
that each bidder might be willing to improve. During these discussions, A.G.
Edwards told Marriott, among other things, that Marriott needed to improve the
Company's valuation levels. Marriott said it would consider improving its offer
and would respond promptly. On December 10, 1998, Marriott submitted a revised
written proposal that increased the price per share and otherwise contained the
terms that, in all material respects, became the terms of the Merger Agreement.
Subsequent to the receipt of the December 7 proposal from Bidder A,
representatives of A.G. Edwards informed Bidder A that management was unwilling
to accept a proposal that required them to receive 75% of their sales price in
Earnout Preferred stock. Bidder A declined to modify its proposal, and instead
asked that the Company make a counter proposal.
On Thursday, December 10, 1998, a representative of A.G. Edwards made a
presentation regarding the bids to the Board.
On Friday, December 11, 1998, Marriott sent a letter to A.G. Edwards
outlining the proposed terms of employment agreements to be entered into with
Messrs. Abrahams, Kaplan and Zaugg. For a description of the terms of these
employment agreements, see "THE TENDER OFFER--12. Purpose of the Offer; The
Merger Agreement; The Stockholder Agreements--Interests of Certain Persons in
the Merger.'
On the afternoon of December 11, 1998, the Board held a telephonic meeting
to consider the proposals. Representatives of A.G. Edwards and Dorsey & Whitney
LLP, counsel to the Company, also participated in the meeting. Marc Kaplan, a
director, was unavailable. Another director, David Santee, initially was not
included in the meeting because of potential conflicts stemming from his status
as an employee of Bidder B. While the meeting was in progress, a representative
of A.G. Edwards contacted Bidder B to solicit an enhanced offer or to confirm
that Bidder B was still unwilling to improve its offer. Bidder B declined to
improve its offer and indicated that it was no longer interested in pursuing an
acquisition of the Company. The Board then determined that Mr. Santee's
employment relationship with Bidder B would no longer pose a conflict, and Mr.
Santee was immediately invited to join the Board meeting by telephone. Upon
joining the meeting, Mr. Santee
17
<PAGE>
was briefed on the status of the proposals and he participated in the
deliberations during the remainder of the telephonic meeting.
At the meeting, representatives of A.G. Edwards indicated, based on
discussions with Marriott and the significant due diligence that Marriott had
already performed, that Marriott was willing to proceed quickly to complete due
diligence and negotiate definitive agreements. After lengthy discussion and
consideration of the proposals from Marriott and Bidder A, the Board decided to
seek improved offers from each of them. The Board instructed A.G. Edwards to
propose to Marriott that it further increase its offer. The Board also
instructed A.G. Edwards to propose to Bidder A that it increase the amount of
its offer and that it eliminate or substantially reduce the requirement that
the major stockholders receive 75% of their consideration in Earnout Preferred.
On Saturday, December 12, 1998, Bidder A made an overall value enhancement
to its previous offer, but did not correct certain structural issues
fundamental to its proposal.
On Sunday, December 13, 1998, the Board held another telephonic meeting. All
five directors participated as well as representatives from A.G. Edwards and a
representative of Dorsey & Whitney LLP. At that meeting, A.G. Edwards reported
that, as a result of its further discussions, Bidder A had orally increased its
offer to $15.00 per share, which amount would be payable in cash to the public
stockholders. However, under Bidder A's revised proposal, senior management
would still be required to receive one-half to two-thirds of their
consideration in Earnout Preferred. The three directors who are executive
officers again expressed their unwillingness to take such a significant
percentage of their consideration in Earnout Preferred, and indicated that they
would only consider an offer from Bidder A if all or substantially all of the
price was paid to them in cash. The Board instructed A.G. Edwards to inform
Bidder A that its offer would only be considered if all or substantially all of
the purchase price for management were payable in cash, and to solicit an offer
from Bidder A on that basis.
On Monday, December 14, 1998, the Board held another telephonic meeting. All
five directors participated as well as representatives of A.G. Edwards and a
representative of Dorsey & Whitney LLP. At that meeting, A.G. Edwards reported
that Bidder A had declined to modify its latest offer. A.G. Edwards further
reported that Marriott had declined to increase the purchase price that it had
proposed in its latest offer. Mr. Abrahams confirmed that in a separate
discussion with Mr. Sorenson of Marriott, Mr. Sorenson had declined to increase
the offer price. Marriott had also indicated to A.G. Edwards that, if its
proposal was acceptable, it wanted to proceed on an exclusive basis with the
negotiation and preparation of definitive documents. After further discussion
and deliberation, the Board unanimously agreed to accept the Marriott bid and
authorized management to proceed to negotiate with Marriott on an exclusive
basis and prepare definitive agreements. The last reported trade of the Shares
on December 14 was $12.00, and the last reported trade for Marriott Shares on
that date was $28.50.
On Friday, December 18, 1998, the Company and Marriott entered into an
exclusivity agreement with the objective of entering into a definitive
acquisition agreement.
On Monday, December 21, 1998, counsel for the Company as well as a
representative of A.G. Edwards met with representatives of Marriott and its
legal counsel at the offices of Gibson, Dunn & Crutcher LLP in Washington, D.C.
for the purpose of preparing definitive documents. At that meeting, the parties
agreed that, for purposes of calculating the exchange ratio, the Marriott
Shares would be valued using the average of the closing prices as reported on
the New York Stock Exchange Composite Transactions reporting system for the ten
full business days prior to the date on which the Merger Agreement would be
signed. The last reported trade of the Shares on December 21, 1998 was $12.00,
and the last reported trade for Marriott Shares on that date was $27.00.
On Thursday, December 31, 1998, copies of definitive agreements in
substantially final form were distributed to each member of the Board. On
Sunday, January 3, 1999, a representative of Dorsey & Whitney
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LLP and a representative from A.G. Edwards had a telephone conference with
David Santee and Stuart Siegel, the Company's two independent directors, to
discuss the terms of the tender offer and merger as well as other matters
related to the transaction. During that discussion, the A.G. Edwards
representative stated that none of the bidders, other than Marriott, had been
in contact with him since the Board's December 14 decision to proceed with a
transaction with Marriott.
The definitive Merger Agreement was approved by the Board at a special
meeting held on January 5, 1999, and was signed by the Company and Marriott on
the morning of January 6, 1999. The Company and Marriott immediately issued
press releases announcing the Merger Agreement before the stock market opened
on January 6, 1999. The last reported trade of the Company's stock on January
5, 1999 was $13.56, and the last reported trade for Marriott Shares on that
date was $30.94.
12. PURPOSE OF THE OFFER; THE MERGER AGREEMENT; THE STOCKHOLDER AGREEMENTS
Purpose and Structure
The purpose of the Offer is for Marriott to acquire the entire equity
interest in the Company not held by the Non-Tendering Stockholders. The purpose
of the Merger is for Marriott to acquire all of the equity interest in the
Company not acquired pursuant to the Offer. Upon consummation of the Merger,
the Company will merge into Purchaser, a direct, wholly owned subsidiary of
Marriott. The acquisition of equity in the Company has been structured as a
cash tender offer followed by a merger in order to provide (a) a prompt
transfer of ownership of the equity interest in the Company held by the
Company's public stockholders from them to Marriott and to provide them with
cash for all of their Shares, and (b) for the issuance of the Marriott Shares
to the Non-Tendering Stockholders in return for the Shares subject to the
Stockholder Agreements. Immediately before consummation of the Merger, the
Company will provide for the issuance to the Non-Tendering Stockholders of the
Preferred Shares. Pursuant to the Stockholder Agreements, the Non-Tendering
Stockholders have agreed not to tender their Shares in the Offer (although
Marriott may consent to their doing so) and to vote their Shares in favor of
the Merger. In the Merger (i)(a) each outstanding Preferred Share held by the
Senior Executives will be converted into the right to receive Marriott Shares
at the equivalent of $13.00 per Preferred Share and (b) each remaining
outstanding Preferred Share (which will be held by an executive officer and
certain stockholders of the Company) will be converted into the right to
receive Marriott Shares at the equivalent of $14.00 per Preferred Share, and
(ii) each outstanding Share (except for Shares owned by Marriott, Purchaser or
any subsidiary of Marriott, Purchaser or the Company) will be converted into
the right to receive the Offer Price, net to the holder in cash, without
interest. The Marriott Shares to be issued in connection with the Merger will
be "restricted securities" subject to restrictions on transfer under securities
laws and pursuant to the Stockholder Agreements.
Under the MGCL, the approval of the Board and, under certain circumstances,
the affirmative vote of the holders of two-thirds of the outstanding Shares is
required to approve and adopt the Merger Agreement and the transactions
contemplated thereby, including the Merger. If Purchaser acquires at least
2,000,000 Shares in the Offer, Purchaser and the Non-Tendering Stockholders
together will have sufficient voting power to approve and adopt the Merger
Agreement and the Merger without the vote of any other stockholder of the
Company. If Purchaser acquires at least 3,302,924 of the Shares tendered in the
Offer, then Purchaser, after issuance of the non-voting Preferred Shares to the
Non-Tendering Stockholders, will hold at least 90% of the voting equity of the
Company, Purchaser and the Company will be able to merge using the "short-form"
procedures of the MGCL, and the Company will not be obligated to hold a
stockholders' meeting to approve the Merger Agreement and the Merger.
In the Merger Agreement, the Company has agreed to take all action necessary
to convene a special meeting of its stockholders as promptly as practicable
after the consummation of the Offer for the purpose of considering and taking
action on the Merger Agreement and the transactions contemplated thereby, if
such action is required under the MGCL.
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The Merger Agreement
The following summary of certain provisions of the Merger Agreement is
presented only as a summary and is qualified in its entirety by reference to
the Merger Agreement, a copy of which is included as an exhibit to the Schedule
14D-1.
The Offer. The Merger Agreement provides for the making of the Offer by
Purchaser. Marriott has agreed to guarantee the performance by Purchaser of its
obligations under the Merger Agreement. Purchaser's obligation to accept for
payment or pay for Shares is subject to the satisfaction of the conditions that
are described in "THE TENDER OFFER--15. Certain Conditions of the Offer."
Pursuant to the Merger Agreement, Purchaser expressly reserves the right to
waive any of the conditions to the Offer, to the extent permitted by applicable
law, and to make any change in the terms or conditions of the Offer; provided,
however, that, without the written consent of the Company, Purchaser may not
decrease the Offer Price, change the form of consideration payable, impose
conditions to the Offer in addition to those set forth in Article 7 of the
Merger Agreement or broaden the scope of such conditions. Notwithstanding the
foregoing, Purchaser may (i) terminate the Offer at any time on or after March
1, 1999, or (ii) decline to accept for payment or pay for tendered Shares
(subject to Purchaser's legal obligations under the Exchange Act), delay the
acceptance for payment, or payment for, tendered Shares (subject to the same
proviso), and may amend the Offer, including extending the deadline of or
terminating the Offer, if any of the events described in Section 15 hereof
occurs.
The Board. The Merger Agreement provides that promptly after the close of
the Offer and the purchase of Shares pursuant thereto, Purchaser will be
entitled to designate a majority of the Board. The Company will, upon request
from Purchaser, use its best efforts to either increase the size of the Board
(subject to the provisions of Article Eleventh of the Company's charter) or
secure the resignation of such number of directors as is necessary to enable
Purchaser's designees to be elected to the Board and to cause such designees to
be so elected and to constitute at all times after the Tender Offer Purchase
Time (as defined below) a majority of the Board. Notwithstanding the foregoing,
the Company shall use its best efforts to ensure that Gary R. Abrahams, Marc B.
Kaplan and Robert W. Zaugg remain members of the Board until the Effective Time
of the Merger. The Company shall promptly take all actions required pursuant to
Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder to
enable Purchaser's designees to be elected to the Board. Purchaser will supply
the Company any information with respect to its nominees, officers, directors
and affiliates required by Section 14(f) of the Exchange Act and Rule 14f-1
thereunder.
Following the appointment of Purchaser's designees to the Board and prior to
the Effective Time of the Merger, any amendment of the Merger Agreement, any
termination of the Merger Agreement by the Company, any extension by the
Company of the time for the performance of any of the obligations or other acts
of Marriott or Purchaser or waiver of the Company's rights under the Merger
Agreement will require the concurrence of a majority of the directors who were
directors of the Company before the appointment of Purchaser's designees.
Issuance of Class A and Class B Preferred Stock. Among the transactions
contemplated by the Merger Agreement, the Company intends to provide for the
Preferred Stock Issuance (as defined below), wherein (a) shares of class A
preferred stock, par value $.01 per share, of the Company (the "Class A
Preferred Stock") will be issued on a share-for-share basis in exchange for the
Shares owned by the three Senior Executives; and (b) shares of class B
preferred stock, par value $.01 per share, of the Company (the "Class B
Preferred Stock") will be issued on a share-for-share basis in exchange for the
Shares owned by two employees and certain other stockholders of the Company
(the foregoing, collectively, the "Preferred Stock Issuance"). The Class A
Preferred Stock and the Class B Preferred Stock will have no voting rights, but
in all other respects will have the same rights to dividends, distributions and
other economic benefits (other than a liquidation preference as to par value)
as the Shares. Following the Preferred Stock Issuance, except as to the Shares
so exchanged for the shares of Class A Preferred Stock and Class B Preferred
Stock, all the Shares of the Company will remain issued and outstanding. Shares
of the Class A Preferred Stock and the Class B Preferred Stock (i) are expected
to be issued if all the conditions to completion of the Merger have been
satisfied, (ii) are
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not expected to be certificated, (iii) are not expected to be registered under
the Exchange Act or listed on any securities exchange or over-the-counter
quotations system and (iv) are expected to be subject to significant
restrictions on transfer.
The timing of the Preferred Stock Issuance will depend on whether, following
consummation of the purchase by Purchaser of Shares after the close of, and
pursuant to, the Offer (the time of such purchase is referred to herein as the
"Tender Offer Purchase Time"), Purchaser owns a number of Shares that, not
including the Shares owned by the Non-Tendering Stockholders, equals more than
90% of the outstanding Shares (the foregoing quantity is referred to herein as
the "Threshold Quantity").
If Purchaser does obtain the Threshold Quantity, then shortly after the
Tender Offer Purchase Time the Company is obligated to effect the Preferred
Stock Issuance. In that case, Purchaser, after giving effect to the Preferred
Stock Issuance, would own more than 90% of the outstanding voting stock of the
Company, and would therefore be eligible to effect the Merger without a
stockholders' meeting in accordance with the short-form merger provisions of
Maryland law. Maryland law requires a 30-day notice to minority stockholders of
a short-form merger. Accordingly, the Merger would take place approximately one
month after the Tender Offer Purchase Time.
On the other hand, if Purchaser does not obtain the Threshold Quantity, then
as soon as possible following the Tender Offer Purchase Time the Company will
mail to its stockholders an information statement, conforming to the
requirements of Schedule 14C under the Exchange Act, regarding a special
meeting of the Company's stockholders to be held to consider approval of the
Merger. (Proxies are not expected to be solicited because, to the extent the
Minimum Condition is fulfilled, the Purchaser, together with the Non-Tendering
Stockholders, will control sufficient voting power to approve the Merger.)
Because of timing requirements under federal and Maryland law, the special
meeting of stockholders will not take place until a number of weeks following
the Tender Offer Purchase Time. If the Merger is approved at the special
meeting, then promptly thereafter, the Company will effect the Preferred Stock
Issuance, and shortly thereafter consummate the Merger.
The Merger. As soon as practicable after the satisfaction or waiver of the
conditions to the Merger, the Company will be merged with and into the
Purchaser, as a result of which the separate corporate existence of the Company
will cease and Purchaser will continue as the "Surviving Corporation." The
Effective Time will occur at (i) the date and time that Articles of Merger and
a Certificate of Merger, in such forms as are required by, and executed in
accordance with, the relevant provisions of Maryland Law and Delaware Law,
respectively (the "Certificates of Merger"), are duly accepted for record (x)
by the State Department of Assessments and Taxation of Maryland pursuant to the
MGCL and (y) by the Secretary of State of the State of Delaware for filing
pursuant to the Delaware General Corporation Law; or (ii) such later time as
Purchaser and the Company may agree upon and set forth in the Certificates of
Merger (but not to exceed 30 days after the Certificates of Merger are
accepted). The Surviving Corporation shall continue its corporate existence
under the laws of the State of Delaware. In the Merger, (A) each outstanding
Share (other than (i) Shares held by Marriott, Purchaser or any other
subsidiary of Marriott or held by any subsidiary of the Company, all of which
Shares will be canceled and retired without any payment with respect thereto,
and, if dissenters' rights are available to Stockholders, Shares with respect
to which a holder properly exercises such holder's dissenters' rights under the
MGCL) will be converted into the right to receive the Offer Price, without
interest thereon (the "Cash Merger Consideration"), (B) each outstanding share
of Class A Preferred Stock will be converted into Marriott Shares at an
exchange ratio of 0.4484 per share, based on $13.00 divided by $28.99375, which
is the average of the closing trading prices of Marriott Shares during the ten
full trading days prior to the date of the Merger Agreement, and (C) each
outstanding share of Class B Preferred Stock will be converted into Marriott
Shares at an exchange ratio of 0.4829 per share, based on $14.00 divided by
$28.99375, which is the average of the closing trading prices of Marriott
Shares during the ten full trading days prior to the date of the Merger
Agreement. The Marriott Shares to be issued in the Merger will be restricted
stock, the transfer of which will be subject to restrictions under federal and
Delaware law, and to the provisions of the Stockholder Agreements. For more
information on the Marriott Shares to be issued in connection with the Merger,
and the restrictions on
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transfer thereof, see the description of "Stockholder Agreements" in this
Section. The Certificate of Incorporation of Purchaser in effect at the
Effective Time will be the Certificate of Incorporation of the Surviving
Corporation until amended in accordance with applicable law. The Bylaws of
Purchaser in effect at the Effective Time shall be the Bylaws of the Surviving
Corporation until amended in accordance with applicable law. The directors of
Purchaser at the Effective Time will be the initial directors of the Surviving
Corporation until their successors are duly elected and qualified, and the
officers of the Company at the Effective Time will be the initial officers of
the Surviving Corporation until replaced in accordance with the Bylaws of the
Surviving Corporation.
Stockholders' Meeting. A special meeting of stockholders of the Company will
be held to consider approval of the Merger if the Purchaser does not obtain the
Threshold Quantity at the Tender Offer Purchase Time. If the Threshold Quantity
is not obtained, the Merger Agreement provides that the Company, acting through
the Board, will call a special meeting of its stockholders to be held as
promptly as practicable after the Tender Offer Purchase Time. As a result of
certain timing requirements under federal and Maryland law, the special meeting
of stockholders would not take place until a number of weeks following the
Tender Offer Purchase Time. Under the Stockholder Agreements, the Non-Tendering
Stockholders have agreed to vote all Shares owned by them in favor of the
Merger. To the extent that the Minimum Condition is fulfilled, the Purchaser,
together with the Non-Tendering Stockholders, will control sufficient voting
power to approve the Merger; accordingly, proxies are not expected to be
solicited. If the Merger is approved at the special meeting, then promptly
thereafter the Company will effect the Preferred Stock Issuance, and shortly
thereafter will consummate the Merger.
If the Purchaser does obtain the Threshold Quantity, the Company will avail
itself of the short-form merger provisions of Maryland law, and the Merger will
be effected as soon as possible under the MGCL, which is expected to be
approximately one month after the Tender Offer Purchase Time, without a special
meeting of the Company's stockholders.
Representations and Warranties. The Merger Agreement contains certain
customary representations and warranties of the parties thereto. These include
representations and warranties of the Company with respect to corporate
existence and power, capitalization, subsidiaries, corporate authorization
relative to the Merger Agreement, governmental consents and approvals,
Commission reports, financial statements, documents relating to the Offer and
the Merger, and other matters. Marriott and Purchaser have also made certain
representations and warranties with respect to corporate existence and power,
corporate authorization relative to the Merger Agreement, governmental consents
and approvals, documents relating to the Offer and the Merger, the availability
of funds to finance the Offer and the Merger, Commission reports and other
matters.
Conduct of Business Pending the Merger. The Company has agreed that, prior
to the consummation of the Merger, unless Marriott shall otherwise agree in
writing, or as otherwise contemplated in the Merger Agreement, each of the
Company and each of its subsidiaries will (i) conduct its business and
operations only in the ordinary course of business consistent with past
practice; (ii) use reasonable efforts to preserve intact the business
organization, goodwill, rights, licenses, permits and franchises of the Company
and its subsidiaries and maintain its existing relationships with customers,
suppliers and other persons having business dealings with them; (iii) use
reasonable efforts to keep in full force and effect adequate insurance coverage
and maintain and keep its properties and assets in good repair, working order
and condition, normal wear and tear excepted; (iv) not amend or modify its
respective charter or certificate of incorporation, by-laws, partnership
agreement or other charter or organization documents; (v) except for the
Preferred Stock Issuance, not authorize for issuance, issue, sell, grant,
deliver, pledge or encumber or agree or commit to issue, sell, grant, deliver,
pledge or encumber any shares of any class or series of capital stock of the
Company or any of its subsidiaries or any other equity or voting security or
equity or voting interest in the Company or any of its subsidiaries, any
securities convertible into or exercisable or exchangeable for any such shares,
securities or interests, or any options, warrants, calls, commitments,
subscriptions or rights to purchase or acquire any such shares, securities or
interests (other than issuances of Shares upon exercise of stock options
granted prior to the date of the Merger Agreement to directors, officers,
employees and consultants of the Company in accordance with the Company option
plan as currently in effect); (vi) not (a) split, combine or reclassify any
shares of its stock or
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issue or authorize or propose the issuance of any other securities in respect
of, in lieu of, or in substitution for, shares of its stock, (b) in solely the
case of the Company, declare, set aside or pay any dividends on, or make other
distributions in respect of, any of the Company's stock, or (c) except as
required in connection with the Preferred Stock Issuance, repurchase, redeem or
otherwise acquire, or agree or commit to repurchase, redeem or otherwise
acquire, any shares of stock or other equity or debt securities or equity
interests of the Company or any of its subsidiaries; (vii) not amend or
otherwise modify the terms of any stock options or the Company option plan, the
effect of which shall be to make such terms more favorable to the holders
thereof or persons eligible for participation therein; (viii) other than
regularly scheduled seniority increases in the ordinary course of business
consistent with past practice, not increase the compensation payable or to
become payable to any directors, officers or employees of the Company or any of
its subsidiaries, or grant any severance or termination pay to, or enter into
any employment or severance agreement with any director or officer of the
Company or any of its subsidiaries, or establish, adopt, enter into or amend in
any material respect or take action to accelerate any material rights or
benefits under any collective bargaining, bonus, profit sharing, thrift,
compensation, stock option, restricted stock, pension, retirement, deferred
compensation, employment, termination, severance or other plan, agreement,
trust, fund, policy or arrangement for the benefit of any director, officer or
employee of the Company of any of its subsidiaries; (ix) not acquire or agree
to acquire (including, without limitation, by merger, consolidation, or
acquisition of stock, equity securities or interests, or assets) any
corporation, partnership, joint venture, association or other business
organization or division thereof or otherwise acquire or agree to acquire any
assets of any other person outside the ordinary course of business consistent
with past practice or any interest in any real properties (whether or not in
the ordinary course of business); (x) not incur, assume or guarantee any
indebtedness for borrowed money (including draw-downs on letters or lines of
credit) or issue or sell any notes, bonds, debentures, debt instruments,
evidences of indebtedness or other debt securities of the Company or any of its
subsidiaries or any options, warrants or rights to purchase or acquire any of
the same, except for (a) renewals of existing bonds and letters of credit in
the ordinary course of business not to exceed $100,000 in the aggregate; and
(b) advances, loans or other indebtedness in the ordinary course of business
consistent with past practice in an aggregate amount not to exceed $100,000;
(xi) not sell, lease, license, encumber or otherwise dispose of, or agree to
sell, lease, license, encumber or otherwise dispose of, any material properties
or assets of the Company or any of its subsidiaries; (xii) not authorize or
make any capital expenditures (including by lease) in excess of $100,000 in the
aggregate for the Company and all of its subsidiaries; (xiii) not make any
material change in any of its accounting or financial reporting (including tax
accounting and reporting) methods, principles or practices, except as may be
required by generally accepted accounting principles; (xiv) not make any
material tax election or settle or compromise any material United States or
foreign tax liability; (xv) except in the ordinary course of business
consistent with past practice, not amend, modify or terminate certain specified
contracts or waive, release or assign any material rights or claims thereunder;
(xvi) not adopt a plan of complete or partial liquidation, dissolution, merger,
consolidation, restructuring, recapitalization or other reorganization of the
Company or any of its subsidiaries; (xvii) not take any action that would, or
would be reasonably likely to, result in any of the representations and
warranties set forth in the Merger Agreement not being true and correct in any
material respect or (except with respect to certain conduct toward other
potential acquirers, as permitted under the Merger Agreement) any of the
conditions to the Offer set forth in Article 7 of the Merger Agreement or any
of the conditions to the Merger set forth in Article 8 of the Merger Agreement
not being satisfied; and (xviii) except as to clauses (i), (ii) and (iii) of
this paragraph, not agree or commit in writing or otherwise to do any of the
foregoing.
Indemnification of Directors and Officers. The Merger Agreement provides
that, from the Effective Time through the third anniversary thereof, the
Surviving Corporation shall cause its Certificate of Incorporation and Bylaws
to continue to provide indemnification provisions for the benefit of persons
who have served as directors or officers of the Company prior to the Effective
Time comparable to such provisions as are currently contained in the Company's
charter and bylaws. In the event that the Surviving Corporation or any of its
successors or assigns (i) consolidates with or merges into any other person and
the Surviving Corporation is not the continuing or surviving entity of such
consolidation or merger or (ii) transfers all or substantially all of its
assets, then, in each case, proper provision shall be made for the continuing
or surviving entity of such consolidation or merger to assume these
indemnification obligations. In addition, the Surviving Corporation, or
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Marriott or one of Marriott's other subsidiaries, shall obtain and maintain in
effect for not less than three years after the Effective Time, insurance or
self-insurance coverage substantially equivalent to the Company's current
directors' and officers' liability insurance policies, with no lapse in
coverage and on similar terms and conditions with respect to all matters,
including the Offer and the Merger, occurring prior to, and including, the
Effective Time.
Conditions to the Merger. The obligation of each of the Company, Marriott
and Purchaser to consummate the Merger is subject to the satisfaction or waiver
of each of the following conditions: (i) the Merger Agreement, the Preferred
Stock Issuance, the Merger and the other transactions contemplated by the
Merger Agreement shall have been approved by all necessary corporate action of
the Company, including, if necessary, adoption by the requisite vote of the
stockholders of the Company; (ii) no court or tribunal, or administrative,
governmental or regulatory body, agency or authority shall have enacted,
issued, enforced or entered any statute, rule, regulation, executive order,
decree, injunction or other order which is in effect and which (x) makes the
issuance of the Marriott Shares in exchange for the Class A Preferred Stock or
the issuance of the Marriott Shares in exchange for the Class B Preferred Stock
or the payment of the Cash Merger Consideration illegal or otherwise prohibits
or restricts consummation of the Merger or any of the other applicable
transactions contemplated by the Merger Agreement, (y) imposes material
limitations on the ability of Marriott to acquire or hold or to exercise any
rights of ownership of the Surviving Corporation, or effectively to manage or
control the Surviving Corporation and its business, assets and properties or
(z) has a material adverse effect on the Company; (iii) any waiting period
applicable to the Merger under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended ("HSR Act"), shall have terminated or expired and any other
governmental or regulatory notices or approvals required with respect to the
transactions contemplated by the Merger Agreement shall have been either filed
or received; (iv) Purchaser shall have purchased Shares pursuant to the Offer
and (v) the Merger Agreement and each of the Stockholder Agreements shall
remain in effect and no Non-Tendering Stockholder shall have defaulted under
any of the provisions of the applicable Stockholder Agreement.
Other Potential Acquirers. Pursuant to the Merger Agreement, the Company has
agreed not to encourage, solicit, participate in or initiate discussions or
negotiations with or provide any non-public information to any person in
connection with any proposal for an acquisition of the Company by any party
other than Marriott, Purchaser or their affiliates (a "Third Party
Acquisition"). After the Tender Offer Purchase Time, the Company will not
consider any potential Third Party Acquisition for any reason. On the other
hand, prior to the Tender Offer Purchase Time, if the Company receives an
unsolicited bona fide proposal (or an unsolicited proposal, offer or indication
that the Company in good faith believes may lead to such a proposal) to acquire
(directly or indirectly, for consideration consisting of cash and/or
securities) more than 50% of the Shares then outstanding or all or
substantially all of the assets of the Company and otherwise on terms which the
Board by a majority vote determines in its good faith judgment to be more
favorable to the Company's stockholders than the Merger and the Offer (a
"Superior Proposal"), following written notice to Marriott and Purchaser, the
Company may provide the person making the Superior Proposal with the same non-
public information that the Company supplied to Marriott. The Company has
agreed to promptly notify Marriott, before furnishing such non-public
information, in the event it receives any proposal or inquiry regarding a Third
Party Acquisition, including the terms and conditions of the proposal therefor
and the identity of the party submitting such proposal, and to advise Marriott
from time to time of the status of any material developments concerning the
same. The Company may only accept a proposal regarding a Third Party
Acquisition if (i) the Board determines in its good faith judgment that it is
required to do so in order to comply with its fiduciary duties, (ii) the
Company has provided reasonable written notice to Marriott specifying the
material terms and conditions of such proposed Third Party Acquisition and
identifying the person making such proposal, (iii) Marriott has not, within
three business days of receiving such notice, made an offer which a majority of
the Board determines in its good faith judgment is as favorable to the
Company's stockholders as such proposal, (iv) either the Company has made a
liquidated damages payment to Marriott of $4 million (the "Break-Up Fee") or
Purchaser has exercised its Options (defined below) and (v) the Merger
Agreement has been terminated by its terms.
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Termination. The Merger Agreement may be terminated at any time prior to the
Effective Time, whether before or after stockholder approval and adoption
thereof (if necessary), by the mutual written consent of Marriott, Purchaser
and the Company. In addition, the Merger Agreement may be terminated by
Marriott or Purchaser, if either Marriott or Purchaser (i) terminates the Offer
due to an occurrence or circumstance resulting in a failure to satisfy the
conditions to the Offer (see "THE TENDER OFFER--15. Certain Conditions to the
Offer"), or (ii) declines to complete the Merger due to an occurrence or
circumstance resulting in a failure to satisfy the conditions to the Merger
(see above). Marriott or Purchaser may also terminate the Merger Agreement if
the Company breaches any obligation under the Merger Agreement (and fails to
cure the breach within ten full business days) and the breach causes a material
adverse effect on the Company or the completion of the Merger, or causes a
material delay in that completion. The Company has the right to terminate the
Merger Agreement only before the Tender Offer Purchase Time, if: (i) without
any breach on the Company's part, Marriott or Purchaser terminates the Offer
without purchasing any Shares; (ii) the Company receives a Superior Proposal,
Marriott fails within three business days to match that Superior Proposal, and
either the Company pays Marriott the Break-Up Fee or Purchaser exercises its
Options; (iii) Marriott or Purchaser makes a material breach of its
representations and warranties in the Merger Agreement, and that breach causes
a material adverse effect on the purchase of Shares pursuant to the Offer, or
causes a material delay in that purchase; or (iv) Marriott or Purchaser
breaches a covenant or other agreement in the Merger Agreement (and fails to
cure the breach by the earlier of (x) ten days from the breach or (y) two
business days prior to the Expiration Date), and that breach causes a material
adverse effect on completion of the Offer or causes a material delay in that
completion. In the event that Marriott or Purchaser terminates the Offer due to
a proposed Third Party Acquisition, and there is either (i) a breach by the
Company of the obligations imposed by the Merger Agreement on the Company's
conduct vis-a-vis the third-party bidder or (ii) acceptance by the Company of a
Superior Proposal, then either the Company must pay the Break-Up Fee or the
Purchaser may exercise its Options. Other than the two circumstances listed
above in which the Break-Up Fee may be payable (in the alternative to
Purchaser's exercise of its Options), the Merger Agreement makes no provision
for liquidated damage payments in the event of termination.
Amendment and Waiver. The Merger Agreement can only be amended by a written
agreement executed by the parties.
Expenses. Except as described in the following sentence, each party will
bear its own expenses in connection with the Offer and the Merger. Upon
termination of the Merger Agreement under certain circumstances, the Company
has agreed to pay Marriott the Break-Up Fee to reimburse Marriott for its costs
and expenses in connection with the Offer and the Merger.
Interests of Certain Persons in the Merger
Except as described below, each outstanding stock option (a "stock option")
granted under the Company's 1997 Incentive and Stock Option Plan (the "Company
Option Plan") will vest in full and Purchaser shall pay to the holder of each
stock option an amount equal to the excess, if any, of the Offer Price over the
exercise price per Share of such stock option (less the amount of any federal,
state or local taxes required to be withheld) multiplied by the number of
Shares subject to such stock option. If and to the extent required by the terms
of the Company Option Plan or the terms of any stock option granted thereunder,
the Company shall cooperate with Purchaser to obtain the consent of each holder
of the stock options, including by causing the Compensation Committee of the
Board to interpret the Company Option Plan, to the extent possible, so as to
effectuate the vesting and payment of the stock options.
The three Senior Executives of the Company have agreed to enter into
employment agreements following the Merger for a term of three years. These
officers will have annual base salaries of $175,000, bonuses of from 25 to 40
percent of base salary depending on performance, and stock option and deferred
stock grants in accordance with Marriott's usual policies for executives of
their level. In addition, each of these officers will receive a special grant
of an option to acquire 50,000 shares of Marriott stock which will vest over
seven years only if specified performance goals are attained but in any event
will vest on the eighth anniversary of the date
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of grant. Also, the three Senior Executives will be entitled to receive
supplemental cash bonuses during the first three years of up to $150,000 per
year if the performance goals are exceeded by specified amounts.
Rights of Stockholders in the Merger
It is the intention of the Company, Marriott and the Purchaser that no
dissenters' rights will be available to stockholders following the Merger.
Under Maryland law, if the record date for a special meeting of stockholders
held to consider approval of the Merger or for the notice required to be sent
to minority stockholders if the Company effects a short-form merger (the
foregoing, collectively, the "Record Date"), falls on a date when the Shares
are listed on the Nasdaq Stock Market, then no dissenters' rights will be
available following the Merger. The Company has agreed that, if possible, it
will set the Record Date so as to preclude the availability of dissenters'
rights.
If, contrary to the parties' intentions, dissenters' rights are available in
connection with the Merger pursuant to Title 3, Subtitle 2 of the MGCL, Shares
that are issued and outstanding immediately prior to the Effective Time and
that are held by stockholders who did not vote in favor of the Merger and who
comply with all of the relevant provisions of Title 3, Subtitle 2 of the MGCL
(the "Dissenting Shares") shall not be converted into or be exchangeable for
the right to receive the Cash Merger Consideration, but instead shall be
converted into the right to receive such consideration as may be determined to
be due to such stockholders pursuant to Title 3, Subtitle 2 of the MGCL, unless
and until such holders shall have failed to perfect or shall have effectively
withdrawn or lost their rights to appraisal under the MGCL. If any such holder
shall have failed to perfect or shall have effectively withdrawn or lost such
right, such holder's Shares shall thereupon be deemed to have been converted
into and to have become exchangeable for the right to receive, as of the
Effective Time, the Cash Merger Consideration without any interest thereon. The
Company shall give Marriott (i) prompt notice of any written demands for
appraisal of Shares received by the Company and (ii) the opportunity to
participate in all negotiations and proceedings with respect to any such
demands. The Company shall not, without the prior written consent of Marriott,
voluntarily make any payment with respect to, or settle or offer to settle, any
such demands.
THE FOREGOING SUMMARY OF THE RIGHTS OF DISSENTING STOCKHOLDERS DOES NOT
PURPORT TO BE A COMPLETE STATEMENT OF THE PROCEDURES TO BE FOLLOWED BY
STOCKHOLDERS DESIRING TO EXERCISE ANY AVAILABLE DISSENTERS' RIGHTS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF TITLE 3, SUBTITLE 2,
INCLUDED HEREWITH IN ANNEX A. THE PRESERVATION AND EXERCISE OF APPRAISAL RIGHTS
ARE CONDITIONED ON STRICT ADHERENCE TO THE APPLICABLE PROVISIONS OF THE MGCL.
Stockholder Agreements
The following summary of the material terms of the Stockholder Agreements is
qualified in its entirety by reference to the copies of the Stockholder
Agreements filed as Exhibits to the Schedule 14D-1 and incorporated herein by
reference.
Grant of Options. In connection with the execution of the Merger Agreement,
the three Senior Executives and two other employees of the Company (the "Option
Grantors"), who beneficially own Shares of the Company (the "Option Shares"),
entered into Stockholder Agreements with Marriott and Purchaser pursuant to
which each Option Grantor has granted to Purchaser an irrevocable option (each,
an "Option") to purchase all Shares held of record by such Option Grantor.
After the Tender Offer Purchase Time, Purchaser may exercise the Options, in
whole or in part, at any time and from time to time, following the occurrence
of any of the following (each, a "Purchase Event"): (i) beneficial ownership of
more than 20% of the outstanding capital stock of the Company (or rights to
acquire such capital stock of the Company) shall have been acquired by any
person or "group" other than Purchaser, any affiliate of Purchaser or one or
more of the Option Grantors; (ii) the Company shall have entered into a
definitive agreement or approved or recommended any
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proposal which provides for the acquisition of 20% or more of the outstanding
capital stock of the Company or substantially all of the assets of the Company
by any person or group other than Purchaser, an affiliate of Purchaser or one
or more of the Option Grantors; (iii)(A) the failure of the Company's
stockholders to approve the Merger Agreement or the transactions contemplated
by the Merger Agreement at a meeting called to consider such Merger Agreement,
if such meeting shall have been preceded by (x) the public announcement by any
person or group (other than Purchaser or an affiliate of Purchaser) of an offer
or proposal to acquire, merge or consolidate with the Company, or (y) the Board
publicly withdrawing or modifying, or publicly announcing its intent to
withdraw or modify, its recommendation that the stockholders of the Company
approve the transactions contemplated by the Merger Agreement, as prohibited by
Section 5.4(b) of the Merger Agreement; or (B) the acceptance by the Board of,
or the public recommendation by the Board that the stockholders of the Company
accept, an offer or proposal from any person or group (other than Purchaser or
an affiliate of Purchaser), to acquire 20% or more of the outstanding capital
stock of the Company or for a merger or consolidation or any similar
transaction involving the Company, as prohibited by Section 5.4(b) of the
Merger Agreement; (iv) a proposal made by a third party to the Company, its
affiliates or their respective officers, directors, employees, representatives
or agents, as described in Section 5.4 of the Merger Agreement, resulting in a
breach by the Company of the covenant and obligation contained in that Section
5.4 and such breach (x) would entitle Purchaser or Marriott to terminate the
Merger Agreement pursuant to Section 9.1(b) thereof and (y) shall not have been
cured prior to the date that Purchaser duly gives notice to the Option Grantor
of its desire to exercise an Option pursuant to the Stockholder Agreement; or
(v) any breach by an Option Grantor of the Stockholder Agreement. Options not
exercised shall expire and be of no further force and effect upon the earliest
to occur of: (i) the Effective Time, (ii) five months after the first
occurrence of a Purchase Event or (iii) termination of the Merger Agreement in
accordance with its terms.
Voting of Shares. Each of the Non-Tendering Stockholders has agreed that
during the period beginning at the Tender Offer Purchase Time and continuing
until the first to occur of the Effective Time or the termination of the Merger
Agreement in accordance with its terms, at any meeting of the holders of the
Shares, however called, or in connection with any written consent of the
holders of the Shares, such Non-Tendering Stockholder will vote (or cause to be
voted) the Shares held of record or beneficially owned by such Non-Tendering
Stockholder, whether owned on the date hereof or hereafter acquired, (i) in
favor of approval of the Merger Agreement, the transactions contemplated by the
Merger Agreement, and any actions required in furtherance thereof and of the
Stockholder Agreements (including the election of designees of Marriott as
directors of the Company); (ii) against any action or agreement that is
intended, or could reasonably be expected, to impede, interfere with, or
prevent the Merger or result in a breach in any respect of any covenant,
representation or warranty or any other obligation or agreement of the Company
or any of its subsidiaries under the Merger Agreement or the Stockholder
Agreements; and (iii) except as specifically requested in writing in advance by
Marriott or Purchaser, against the following actions (other than the Merger and
the transactions contemplated by the Merger Agreement and the Stockholder
Agreements): (A) any extraordinary corporate transaction, such as a merger,
consolidation or other business combination involving the Company or any of its
subsidiaries or affiliates; (B) a sale, lease, transfer or disposition by the
Company or any of its subsidiaries of any assets outside the ordinary course of
business or any assets which in the aggregate are material to the Company and
its subsidiaries taken as a whole, or a reorganization, recapitalization,
dissolution or liquidation of the Company or any of its subsidiaries or
affiliates; (C)(1) any change in the management of the Company or in a majority
of the persons who constitute the board of directors of the Company; (2) any
change in the present capitalization of the Company or any amendment of the
Company's charter or By-Laws; (3) any other material change in the Company's or
any of its subsidiaries' corporate structure or business; or (4) any other
action that, in the case of each of the matters referred to in clauses (C)(1),
(2) or (3), is intended, or could reasonably be expected, to impede, interfere
with, delay, postpone or materially adversely affect the Offer, the Preferred
Stock Issuance, the Merger or the other transactions contemplated by the
Stockholder Agreements and the Merger Agreement. No Non-Tendering Stockholder
is permitted to enter into any agreement or understanding with any person the
effect of which would be inconsistent or violative of the provisions and
agreements contained in the Stockholder Agreements.
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Irrevocable Proxy. Effective from the Tender Offer Purchase Time, each of
the five Option Grantors, who own an aggregate of 45.7% of the Company's
Shares, has agreed to grant to and appoint Purchaser and each of certain
officers of Purchaser, in their respective capacities as officers of Purchaser,
and their respective successors and designees, such Option Grantor's true and
lawful irrevocable (until the Termination Date) proxy and attorney-in-fact
(with full power of substitution) to vote the Shares, or to grant a consent or
approval in respect of such Shares.
Restriction on Transfer, Proxies and Non-Interference. Each Non-Tendering
Stockholder has agreed not, directly or indirectly, to: (i) tender his, her or
its Shares in the Offer or any other tender offer for Company Shares; (ii)
except as contemplated by the Stockholder Agreements or the Merger Agreement,
otherwise offer for sale, sell, transfer, tender, pledge, encumber, assign or
otherwise dispose of, or enter into any contract, option or other arrangement
or understanding with respect to or consent to the offer for sale, sale,
transfer, tender, pledge, encumbrance, assignment or other disposition of, any
or all of such Non-Tendering Stockholder's Shares or any interest therein;
(iii) grant any proxies or powers of attorney, deposit any Shares into a voting
trust or enter into a voting agreement with respect to any Shares; or (iv) take
any action that would make any representation or warranty made by such Non-
Tendering Stockholder untrue or incorrect or have the effect of preventing or
disabling such Non-Tendering Stockholder from performing such Non-Tendering
Stockholder's obligations under the applicable Stockholder Agreement.
Other Potential Acquirers. Each Non-Tendering Stockholder (i) is required
to immediately cease any existing discussions or negotiations, if any, with any
parties conducted before the date of the Stockholder Agreements with respect to
any acquisition of all or any material portion of the assets of, or any equity
interest in, the Company or any of its subsidiaries or any business combination
with the Company or any of its subsidiaries, and (ii) has agreed, from and
after the date of the Stockholder Agreements until termination of the Merger
Agreement, unless and until the Company is permitted to take such actions under
the terms of the Merger Agreement, not directly or indirectly to initiate,
solicit or knowingly encourage (including by way of furnishing non-public
information or assistance), or take any other action to facilitate knowingly,
any inquiries or the making of any proposal that constitutes, or may reasonably
be expected to lead to, any such transaction or acquisition, or agree to or
endorse any such transaction or acquisition, or authorize or permit any of such
Non-Tendering Stockholder's agents to do so, and such Non-Tendering Stockholder
shall promptly notify Marriott or Purchaser of any proposal and shall provide a
copy of any such written proposal and a summary of any oral proposal to
Marriott or Purchaser immediately after receipt thereof (and shall specify the
material terms and conditions of such proposal and identify the person making
such proposal) and thereafter keep Marriott or Purchaser advised of any
development with respect thereto.
Representations and Warranties. The Stockholder Agreements contain certain
customary representations and warranties of the parties thereto, including,
without limitation, representations and warranties by the Non-Tendering
Stockholders as to ownership of Shares, power and authority and investment
intention.
Termination. Generally, the Stockholder Agreements expire upon the earlier
of (a) termination of the Merger Agreement in accordance with its terms or (b)
the Effective Time.
Restrictive Covenants of Certain Executive Officers. The Stockholder
Agreement with the Senior Executives contains restrictive covenants, pursuant
to which each of the Senior Executives agreed that, for a period of seven years
from the Effective Time of the Merger (the "Restriction Period"), they will not
carry on or participate in a business that competes (a "Competing Business")
with a business conducted by the Company as of the date of the Stockholder
Agreement (a "Company Business") within 100 miles of a location at which
Marriott or its affiliates is conducting the Company Business. The Senior
Executives also agreed not to, during the Restriction Period and without the
written consent of Marriott, (i) solicit or offer employees of Marriott or its
affiliates employment in any business, (ii) solicit business for a Competing
Business from any customer of a Company Business, and (iii) provide or arrange
for or assist in the provision of services by a
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Competing Business to any customer of a Company Business. The Senior Executives
further agreed not to disclose confidential information of the Company to
Competing Businesses. The Stockholder Agreement with Benny Anderson contains
restrictive covenants similar to those contained in the Stockholder Agreement
with the Senior Executives, except that the Restriction Period for Benny
Anderson is three years from the date of termination of his employment with
Purchaser.
13. DIVIDENDS AND DISTRIBUTIONS
According to the Company's 1997 Annual Report on Form 10-K, on June 13,
1997, prior to its initial public offering, the Company declared a dividend
related to its S corporation status. The dividend consisted of approximately
$1.1 million representing prior years' capital contributions and a final S
corporation distribution totaling approximately $4.5 million equal to the
undistributed cumulative earnings. The Company has paid no other cash dividends
and, according to the 1997 Annual Report on Form 10-K, intends to continue this
policy for the foreseeable future. Pursuant to the terms of the Merger
Agreement, the Company will not split, combine or reclassify the outstanding
Shares or declare, set aside or pay any dividend payable in cash, stock or
property with respect to the Shares.
If on or after the date of the Merger Agreement the Company should declare
or pay any cash or stock dividend or other distribution on, or issue any rights
with respect to, the Shares, payable or distributable to stockholders of record
on a date prior to the transfer to the name of Purchaser or its nominees or
transferees on the Company's stock transfer records of the Shares purchased
pursuant to the Offer, then, without prejudice to Purchaser's rights under
Section 15 of this Offer to Purchase, the purchase price per Share payable by
Purchaser shall be adjusted accordingly.
14. EFFECTS OF THE OFFER ON THE MARKET FOR SHARES; NASDAQ STOCK MARKET AND
EXCHANGE ACT REGISTRATION
The purchase of Shares by Purchaser pursuant to the Offer will reduce the
number of Shares that might otherwise trade publicly and the number of holders
of Shares and could thereby adversely affect the liquidity and market value of
the remaining publicly held Shares.
Nasdaq Stock Market Inclusion
Marriott currently intends to cause the Company to terminate the inclusion
of the Shares on the Nasdaq Stock Market following the Tender Offer Purchase
Time and the Record Date. Inclusion of the Shares on the Nasdaq Stock Market is
voluntary, so the Company may terminate that inclusion at any time. In
addition, according to the Nasdaq Stock Market's current published guidelines,
the Shares would not be eligible to be included for continued listing if, among
other things, the number of publicly held Shares fell below 750,000, the number
of holders of Shares fell below 400, the aggregate market value of such
publicly held Shares fell below $5,000,000, or the net tangible assets fell
below $4,000,000. If these standards were not met, the Shares would no longer
be admitted to quotation on the Nasdaq Stock Market. Depending on the number of
Shares acquired pursuant to the Offer, price quotations for the Shares may no
longer meet the requirements for any continued trading over-the-counter,
including the Nasdaq "additional list" or a "local list." If, as a result of
the purchase of Shares pursuant to the Offer or otherwise, trading of the
Shares over-the-counter is discontinued, the liquidity of and market for the
Shares could be adversely affected. Any reduction in the number of Shares that
might otherwise trade publicly may have an adverse effect on the market price
for or marketability of the Shares and may cause future prices to be less than
the Offer Price.
Margin Regulations
The Shares are currently "margin securities" under the regulations of the
Board of Governors of the Federal Reserve System (the "Federal Reserve Board"),
which has the effect, among other things, of allowing brokers to extend credit
on the collateral of such Shares for the purpose of buying, carrying or trading
in securities ("Purpose Loans"). Depending upon factors similar to those
described above regarding the continued
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listing, public trading and market quotations of the Shares, it is possible
that, following the purchase of the Shares pursuant to the Offer, the Shares
would no longer constitute "margin securities" for the purposes of the margin
regulations of the Federal Reserve Board and therefore could no longer be used
as collateral for Purpose Loans made by brokers.
Exchange Act Registration
The Shares are currently registered under the Exchange Act. Marriott
currently intends to seek to cause the Company to terminate the registration of
the Shares under the Exchange Act as soon after the Tender Offer Purchase Time
as the requirements for termination of registration are met. The registration
may be terminated upon certification by the Company to the Commission that
there are fewer than 300 record holders of the Shares. The termination of the
registration of the Shares under the Exchange Act would take effect 90 days
after the Company's certification to the Commission as to the number of record
holders of Shares, although the periodic reporting requirements under the
Exchange Act would terminate on the date of the certification. The termination
of such reporting requirements would substantially reduce the information
required to be furnished by the Company to holders of Shares and to the
Commission. When effective, the deregistration would make certain other
provisions of the Exchange Act inapplicable to the Shares. In addition,
"affiliates" of the Company and persons holding "restricted securities" of the
Company may be deprived of the ability to dispose of such securities pursuant
to Rule 144 promulgated under the Securities Act of 1933, as amended. If
registration of the Shares under the Exchange Act were terminated, the Shares
would no longer be "margin securities" or be eligible for Nasdaq Stock Market
or Small Cap Market reporting.
15. CERTAIN CONDITIONS OF THE OFFER
Consummation of the Offer is conditioned upon satisfaction of the Minimum
Condition. In addition, the Merger Agreement permits Purchaser to terminate the
Offer, and have no further obligations to the Company (other than to comply
with applicable law) with respect to the Offer, if the Tender Offer Purchase
Time has not occurred by March 1, 1999. Furthermore, Purchaser shall not be
required to accept for payment or (subject to any applicable rules and
regulations of the Commission, including Rule 14e-l(c) under the Exchange Act
relating to Purchaser's obligation to pay for or return tendered Shares
promptly after termination or withdrawal of the Offer) pay for, and may delay
the acceptance for payment of, or (subject to the restrictions referred to
above) the payment for, any tendered Shares, and may amend the Offer consistent
with the terms of the Merger Agreement, including extending the deadline for
tendering Shares, or terminate the Offer, if any of the following events shall
occur:
(A) from the date of the Merger Agreement until the Tender Offer
Purchase Time, there shall have occurred any change, event, occurrence or
circumstance which individually or in the aggregate, has a material adverse
effect on the Company (except for changes, events, occurrences or
circumstances with respect to general economic or lodging industry
conditions);
(B) from the date of the Merger Agreement until the Tender Offer
Purchase Time, any governmental entity or court of competent jurisdiction
shall have enacted, issued, promulgated, enforced or entered any statute,
rule, regulation, executive order, decree, injunction or other order (and
if temporary or preliminary, not vacated within five business days of its
entry) which is in effect at the Tender Offer Purchase Time and which (1)
makes the acceptance for payment of, or the payment for, some or all of the
Shares illegal or otherwise prohibits or restricts consummation of the
Offer, the Merger or any of the other transactions contemplated thereby,
(2) imposes material limitations on the ability of Purchaser to acquire or
hold or to exercise any rights of ownership of the Shares, or effectively
to manage or control the Company and its business, assets and properties or
(3) has a material adverse effect on the Company; provided, however, that
the parties shall use reasonable efforts (subject to the proviso that in no
event shall any party hereto take, or be required to take, any action that
could reasonably be expected to have a material adverse effect on the
Company or that, individually or in the aggregate, could reasonably be
expected to have a material adverse effect on Marriott) to cause any such
decree, judgment or other order to be vacated or lifted prior to March 1,
1999;
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(C) the representations and warranties of the Company set forth in the
Merger Agreement shall not (i) have been true and correct in any material
respect on the date of the Merger Agreement or (ii) be true and correct in
any material respect as of the scheduled expiration date (as such date may
be extended) of the Offer as though made on or as of such date or the
Company shall have breached or failed in any respect to perform or comply
with any material obligation, agreement or covenant required by the Merger
Agreement to be performed or complied with by it except, in each case with
respect to clause (ii), (1) for changes specifically permitted by the
Merger Agreement and (2) (x) for those representations and warranties that
address matters only as of a particular date which are true and correct as
of such date or (y) where the failure of representations and warranties
(without regard to materiality qualifications therein contained) to be true
and correct, or the performance or compliance with such obligations,
agreements or covenants, would not, individually or in the aggregate, have
a material adverse effect on the Company;
(D) from the date of the Merger Agreement until the Tender Offer
Purchase Time, the Merger Agreement shall have been terminated in
accordance with its terms;
(E) from the date of the Merger Agreement until the Tender Offer
Purchase Time, there shall have occurred (i) a breach by the Company of any
of its obligations under Section 5.4 of the Merger Agreement (relating to
other potential acquirers), (ii) an acceptance by the Company of a Superior
Proposal, or (iii) a termination or a breach by any Non-Tendering
Stockholder of the applicable Stockholder Agreement;
(F) within five days after its receipt of a comfort letter and the
working papers associated therewith from the independent certified public
accountants of the Company, Marriott or Purchaser has notified the Company
that such letter or working papers revealed a material misstatement in the
financial information set forth in the Company's quarterly report on Form
10-Q for the quarter ended September 30, 1998 as filed with the Commission
on November 13, 1998;
(G) from the date of the Merger Agreement until the Tender Offer
Purchase Time, the Board of Directors of the Company shall have withdrawn
or modified in a manner adverse to Marriott its approval or recommendation
of the Offer, shall have recommended to the Company's stockholders another
proposal or offer or shall have adopted any resolution to effect any of the
foregoing;
(H) from the date of the Merger Agreement until the Tender Offer
Purchase Time, any of the consents, approvals, authorizations, orders or
permits required to be obtained by the Company, Purchaser, or their
respective subsidiaries in connection with the Merger from, or filings or
registrations required to be made by any of the same prior to the Tender
Offer Purchase Time with, any governmental entity in connection with the
execution, delivery and performance of the Merger Agreement shall not have
been obtained or made or shall have been obtained or made subject to
conditions or requirements, except where the failure to have obtained or
made any such consent, approval, authorization, order, permit, filing or
registration or such conditions or requirements could not reasonably be
expected to (1) have a material adverse effect on the Company or Marriott
or (2) impose material limitations on the ability of Purchaser to acquire
or hold or to exercise any rights of ownership of the Shares, or
effectively to manage or control the Company and its business, assets and
properties; or
(I) from the date of the Merger Agreement until the Tender Offer
Purchase Time, there shall have occurred (1) any general suspension of
trading in, or limitation on prices for, securities on the New York Stock
Exchange, Inc., (2) the declaration of a banking moratorium or any
suspension of payments in respect of banks in the United States (whether or
not mandatory), (3) the commencement of a war, armed hostilities or other
international or national calamity directly or indirectly involving the
United States and having a material adverse effect on the Company or
materially adversely affecting (or materially delaying) the consummation of
the Offer, (4) any limitation or proposed limitation (whether or not
mandatory) by any United States governmental authority or agency, or any
other event, that materially adversely affects generally the extension of
credit by banks or other financial institutions, (5) from the date of the
Merger Agreement through the date of termination or expiration of the
Offer, a decline of at least 25% in the Standard & Poor's 500 Index or (6)
in the case of any of the situations described in clauses (1) through (5)
above, existing at the date of the commencement of the Offer, a material
acceleration, escalation or worsening thereof;
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which, in the reasonable judgment of Purchaser, in any such case, and
regardless of the circumstances giving rise to any such condition, makes it
inadvisable to proceed with the Offer and/or with such acceptance for payment
or payments.
The foregoing conditions (the "Offer Conditions") are for the sole benefit
of Purchaser and may be waived by Purchaser, in whole or in part at any time
and from time to time in the sole discretion of Purchaser. The failure by
Purchaser at any time to exercise any of the foregoing rights shall not be
deemed a waiver of any such right and each such right shall be deemed an
ongoing right which may be asserted at any time and from time to time.
16. CERTAIN LEGAL MATTERS; REGULATORY APPROVALS
General
Except as described below, Marriott is not aware of any license or
regulatory permit that appears to be material to the business of the Company
and its subsidiaries, taken as a whole, that might be adversely affected by the
acquisition of Shares pursuant to the Offer, or of any approval or other action
by any governmental, administrative or regulatory agency or authority or public
body, domestic or foreign, that would be required for the acquisition or
ownership of Shares pursuant to the Offer. Should any such approval or other
action be required, it is presently contemplated that such approval or action
would be sought except as described below in this Section under "State Takeover
Statutes." While, except as otherwise expressly described herein, Marriott does
not currently intend to delay acceptance for payment of Shares tendered
pursuant to the Offer pending the outcome of any such matter, there can be no
assurance that any such approval or other action, if needed, would be obtained
without substantial conditions or that adverse consequences might not result to
the Company's business or that certain parts of the Company's business might
not have to be disposed of in the event that such approvals were not obtained
or such other actions were not taken or in order to obtain any such approval or
other action, any of which could cause Marriott to decline to accept for
payment or pay for any Shares tendered. Marriott's obligation under the Offer
to accept for payment and pay for shares is subject to the Offer Conditions,
including conditions relating to legal matters discussed in this Section 16.
Antitrust
Under the HSR Act and the rules that have been promulgated thereunder by the
Federal Trade Commission ("FTC"), certain acquisition transactions may not be
consummated unless certain information has been furnished to the Antitrust
Division of the Department of Justice (the "Antitrust Division") and the FTC
and certain waiting period requirements have been satisfied. The acquisition of
Shares pursuant to the Offer is subject to such requirements.
Marriott expects to file a Notification and Report Form with respect to the
Offer under the HSR Act as soon as practicable following commencement of the
Offer. The waiting period under the HSR Act with respect to the Offer will
expire at 11:59 p.m. New York City time, on the 15th day after the date such
form is filed, unless early termination of the waiting period is granted. In
addition, the Antitrust Division or the FTC may extend such waiting periods by
requesting additional information or documentary material from Marriott. If
such a request is made with respect to the Offer, the waiting period related to
the Offer will expire at 11:59 p.m. New York City time on the 10th day after
substantial compliance by Marriott with such request. With respect to each
acquisition, the Antitrust Division or the FTC may issue only one request for
additional information. In practice, complying with a request for additional
information or material can take a significant amount of time. In addition, if
the Antitrust Division or the FTC raises substantive issues in connection with
a proposed transaction, the parties may engage in negotiations with the
relevant governmental agency concerning possible means of addressing those
issues and may agree to delay consummation of the transaction while such
negotiations continue. Expiration or termination of applicable waiting periods
under the HSR Act is a condition to the obligation to accept for payment and
pay for Shares tendered pursuant to the Offer.
32
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The Antitrust Division and the FTC frequently scrutinize the legality under
the antitrust laws of transactions such as the proposed purchase of the Shares
pursuant to the Offer. At any time before or after such purchase, the Antitrust
Division or the FTC could take such action under the antitrust laws as it deems
necessary or desirable in the public interest, including seeking to enjoin the
transaction or seeking divestiture of the Shares so acquired or divestiture of
substantial assets of Marriott or the Company. Litigation seeking similar
relief could be brought by private parties.
Marriott does not believe that consummation of the Offer and the other
transactions contemplated by the Merger Agreement will result in violation of
any applicable antitrust laws. However, there can be no assurance that a
challenge to the Offer and the other transactions contemplated by the Merger
Agreement on antitrust grounds will not be made, or if such a challenge is
made, what the result will be. See Section 15 for certain conditions to the
purchase of the Shares, including conditions with respect to litigation and
certain governmental actions.
State Takeover Statutes
The Company is incorporated under the laws of the State of Maryland. Under
the MGCL, certain "business combinations" (including a merger, consolidation,
share exchange or, in certain circumstances, an asset transfer or issuance or
reclassification of equity securities) between a Maryland corporation and any
person who beneficially owns ten percent or more of the voting power of the
corporation's shares or an affiliate or associate (as defined in the MGCL) of
the corporation who, at any time within the two-year period prior to the date
in question, was the beneficial owner of ten percent or more of the voting
power of the then-outstanding voting stock of the corporation (an "Interested
Stockholder") or an affiliate of such an Interested Stockholder are prohibited
for five years after the most recent date on which the Interested Stockholder
becomes an Interested Stockholder. Thereafter, any such business combination
must be recommended by the board of directors of such corporation and approved
by the affirmative vote of at least (a) 80% of the votes entitled to be cast by
holders of outstanding shares of voting stock of the corporation and (b) two-
thirds of the votes entitled to be cast by holders of voting stock of the
corporation other than shares held by the Interested Stockholder with whom (or
with whose affiliate or associate) the business combination is to be effected,
unless, among other conditions, the corporation's common stockholders receive a
minimum price (as defined in the MGCL) for their shares and the consideration
is received in cash or in the same form as previously paid by the Interested
Stockholder for its shares. These provisions of the MGCL do not apply, however,
to business combinations that are approved or exempted by the board of
directors of the corporation prior to the time that the Interested Stockholder
becomes an Interested Stockholder. The Company's Board of Directors has
declared that the Merger is advisable on substantially the terms and conditions
set forth in its resolutions and approved the Merger Agreement and the
transactions contemplated thereby, including the Offer, the Preferred Stock
Issuance and the Merger, in all respects and such approval constitutes approval
of the Offer, the Merger Agreement and the Merger for purposes of state
corporate law, and has taken all necessary action, including but not limited to
all actions required to render the provisions of Title 3, Subtitle 6 of the
MGCL, "Special Voting Requirements", inapplicable to Marriott, Purchaser and
the Non-Tendering Stockholders.
The MGCL provides that "Control Shares" of a Maryland corporation acquired
in a "control share acquisition" have no voting rights except to the extent
approved by a vote of two-thirds of the votes entitled to be cast on the
matter, excluding shares of stock owned by the acquiror, by officers or by
directors who are employees of the corporation. "Control Shares" are voting
shares of stock which, if aggregated with all other such shares of stock
previously acquired by the acquirer or in respect of which the acquirer is able
to exercise or direct the exercise of voting power in electing directors within
one of the following ranges of voting power: (i) one-fifth or more but less
than one-third, (ii) one-third or more but less than a majority, or (iii) a
majority or more of all voting power. Control Shares do not include shares the
acquiring person is then entitled to vote as a result of having previously
obtained stockholder approval. A "control share acquisition" means the
acquisition of Control Shares, subject to certain exceptions. A person who has
made or proposes to make a control share acquisition, on satisfaction of
certain conditions (including an undertaking to pay expenses), may compel the
33
<PAGE>
board of directors of the corporation to call a special meeting of stockholders
to be held within 50 days of demand to consider the voting rights of the
shares. If no request for a meeting is made, the corporation may itself present
the question at any stockholder meeting. If voting rights are not approved at
the meeting or if the acquiring person does not deliver an "acquiring person
statement" as required by the statute, then, subject to certain conditions and
limitations, the corporation may redeem any or all of the control shares
(except those for which voting rights have previously been approved) for fair
value determined, without regard to the absence of voting rights for the
Control Shares, as of the date of the last control share acquisition by the
acquirer or of any meeting of stockholders at which the voting rights of such
shares are considered and not approved. If voting fights for Control Shares are
approved at a stockholders meeting and the acquirer becomes entitled to vote a
majority of the shares entitled to vote, all other stockholders may exercise
appraisal rights. The fair value of the shares as determined for purposes of
such appraisal rights may not be less than the highest price per share paid by
the acquirer in the control share acquisition.
The control share acquisition statute does not apply (a) to shares acquired
in a merger, consolidation or share exchange if the corporation is a party to
the transaction, or (b) to acquisitions approved or exempted by a provision in
the charter or bylaws of the corporation adopted before the acquisition of
shares. The Company is a party to the Merger and the Merger Agreement, and in
addition, the By-Laws of the Company empower the Company's Board of Directors
to determine that the provisions of the control share statutes of the MGCL do
not apply to any Shares or their owners. The Company's Board of Directors has
declared that the Merger is advisable on substantially the terms and conditions
set forth in its resolutions and approved the Merger Agreement and the
transactions contemplated thereby, including the Offer, the Preferred Stock
Issuance and the Merger, in all respects and such approval constitutes approval
of the Offer, the Merger Agreement and the Merger for purposes of state
corporate law, and has taken all necessary action, including but not limited to
all actions required to render the provisions of Title 3, Subtitle 7 of the
MGCL, "Voting Rights of Certain Control Shares", inapplicable to Marriott,
Purchaser and the Non-Tendering Stockholders.
Title 3, Subtitles 6 and 7 of the MGCL, "Special Voting Requirements" and
"Voting Rights of Certain Control Shares," respectively, are referred to
collectively as the "Maryland Antitakeover Statutes."
In addition to the foregoing, a number of other states have adopted
"takeover" statutes that purport to apply to attempts to acquire corporations
that are incorporated in such states, or whose business operations have
substantial economic effects in such states, or which have substantial assets,
security holders, employees, principal executive offices or places of business
in such states.
In Edgar v. MITE Corporation, the Supreme Court of the United States
invalidated on constitutional grounds the Illinois Business Takeover Act,
which, as a matter of state securities law, made takeovers of corporations
meeting certain requirements more difficult. However, in CTS Corp. v. Dynamics
Corp. of America, the Supreme Court held that a state may, as a matter of
corporate law and, in particular, those laws concerning corporate governance,
constitutionally disqualify a potential acquirer from voting on the affairs of
a target corporation without prior approval of the remaining stockholders,
provided that such laws were applicable only under certain conditions, in
particular, that the corporation has a substantial number of stockholders in
the state and is incorporated there.
Based on the Company's agreements and representations in the Merger
Agreement, and other information supplied by the Company, Marriott believes
that the Company, Marriott and Purchaser have complied with the Maryland
Antitakeover Statutes with respect to the Offer, the Merger and the other
transactions contemplated by the Merger Agreement and the Stockholder
Agreements. In addition, since the Company's Board of Directors has given its
approval, among other things, of such transactions for purposes of the Maryland
Antitakeover Statutes, the transactions fully comport with the policy behind
those Statutes. Accordingly, the Maryland Antitakeover Statutes should have no
effect on the consummation of any of those transactions.
As a separate matter, neither Purchaser nor Marriott has currently complied
with any other state takeover statute or regulation. Marriott reserves the
right to challenge the applicability or validity of any other state law
34
<PAGE>
purportedly applicable to the Offer, the Preferred Stock Issuance or the Merger
and nothing in this Offer to Purchase or any action taken in connection with
the Offer, the Preferred Stock Issuance or the Merger is intended as a waiver
of such right. If it is asserted that any other state takeover statute is
applicable to the Offer, the Preferred Stock Issuance or the Merger and if an
appropriate court does not determine that it is inapplicable or invalid as
applied to the Offer, the Preferred Stock Issuance or the Merger, Marriott
might be required to file certain information with, or to receive approvals
from, the relevant state authorities, and Marriott might be unable to accept
for payment or pay for Shares tendered pursuant to the Offer, or be delayed in
consummating the Offer or the merger. In such case, Marriott may not be obliged
to accept for payment or pay for any shares tendered pursuant to the Offer.
17. FEES AND EXPENSES
Marriott has retained MacKenzie Partners, Inc. to act as the Information
Agent and First Chicago Trust Company of New York to serve as the Depositary in
connection with the Offer. The Information Agent and the Depositary each will
receive reasonable and customary compensation for their services and be
reimbursed for certain reasonable out-of-pocket expenses. Marriott has also
agreed to indemnify the Information Agent and the Depositary against certain
liabilities and expenses in connection with the Offer, including certain
liabilities under the federal securities laws.
Marriott will not pay any fees or commissions to any broker or dealer or any
other person for soliciting tenders of Shares pursuant to the Offer (other than
to the Information Agent). Brokers, dealers, commercial banks, trust companies
and other nominees will, upon request, be reimbursed by Marriott for customary
mailing and handling expenses incurred by them in forwarding offering materials
to their customers.
18. MISCELLANEOUS
The Offer is not being made to (nor will tenders be accepted from or on
behalf of) holders of Shares in any jurisdiction in which the making of the
Offer or the acceptance thereof would not be in compliance with the securities,
blue sky or other laws of such jurisdiction. Purchaser may, in its discretion,
however, take such action as it may deem necessary to make the Offer in any
jurisdiction and extend the Offer to holders of Shares in any such
jurisdiction.
No person has been authorized to give any information or to make any
representation on behalf of Purchaser not contained herein or in the Letter of
Transmittal and, if given or made, such information or representation must not
be relied upon as having been authorized. Neither the delivery of this Offer to
Purchase nor any purchase pursuant to the Offer shall, under any circumstances,
create any implication that there has been no change in the affairs of
Purchaser, Marriott or the Company since the date as of which information is
furnished or the date of this Offer to Purchase.
Purchaser and Marriott have filed with the Commission a Tender Offer
Statement on Schedule 14D-1, together with exhibits, pursuant to Rule 14d-3
under the Exchange Act, furnishing certain additional information with respect
to the Offer. In addition, the Company has filed with the Commission a
Solicitation/Recommendation Statement on Schedule 14D-9, together with
exhibits, pursuant to Rule 14d-9 under the Exchange Act, setting forth the
recommendations of the Board with respect to the Offer and the reasons for such
recommendations and furnishing certain additional related information. Such
Schedules and any amendments thereto, including exhibits, may be inspected and
copies may be obtained from the Commission in the manner set forth in Section 7
(except that they will not be available at the regional offices of the
Commission).
MI SUBSIDIARY I, INC.
January 12, 1999
35
<PAGE>
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS OF MARRIOTT AND PURCHASER
The following table sets forth the name, business or residence address,
principal occupation or employment at the present time and during the last five
years, and the name of any corporation or other organization in which such
employment is conducted or was conducted of each executive officer or director
of Marriott. Except as otherwise indicated, all of the persons listed below are
citizens of the United States of America. Each occupation set forth opposite a
person's name, unless otherwise indicated, refers to employment with Marriott.
Unless otherwise indicated, the principal business address of each director or
executive officer is Marriott International, Inc., 10400 Fernwood Road,
Bethesda, Maryland 20857.
<TABLE>
<CAPTION>
NAME, CITIZENSHIP AND PRESENT OCCUPATION MATERIAL POSITIONS HELD
CURRENT BUSINESS ADDRESS OR EMPLOYMENT DURING THE PAST FIVE YEARS
- ------------------------ ------------------------------ --------------------------------------
<S> <C> <C>
J.W. Marriott, Jr....... Chairman of the Board President--Marriott Corporation since
and Chief Executive Officer 1964; Chief Executive Officer--
since 1997; Director--Marriott Marriott Corporation since 1972;
since March 1998. Chairman of the Board--Marriott
Corporation since 1985; Chairman and
Chief Executive Officer--of Sodexho
Marriott Services, Inc. (formerly
Marriott International, Inc. ("Old
Marriott") from 1993 to 1998;
Director--Host Marriott Corporation,
Host Marriott Services Corporation,
General Motors Corporation, and U.S.--
Russia Business Council; Member of the
Board of Trustees-- Mayo Foundation,
National Geographic Society, and
Georgetown University; Member--
President's Advisory Committee of the
American Red Cross, Executive
Committee of the World Travel &
Tourism Council, Business Council, and
the Business Roundtable.
Richard E. Marriott..... Director Chairman of the Board--Host Marriott
Corporation; Chairman of the Board--
First Media Corporation; Director--
Host Marriott Services Corporation and
Potomac Electric Power Company;
Trustee--Gallaudet University,
Polynesian Cultural Center, Primary
Children's Medical Center, Boys and
Girls Clubs of America SE Region, and
The J. Willard Marriott Foundation.
Member of Board of Trustees--Federal
City Council, Marriott Foundation for
People with Disabilities, and the
Advisory Committee for the
International Hotel and Restaurant
Association
Henry Cheng Kar-Shun.... Director Managing Director--New World
Development Company Limited since
1989; Chairman--New World
Infrastructure Limited and Tai Fook
Group Limited; Director--HKR
International Limited; Executive
Officer-- Chow Tai Fook Enterprises
Limited; Chairman
</TABLE>
I-1
<PAGE>
<TABLE>
<CAPTION>
NAME, CITIZENSHIP AND PRESENT OCCUPATION MATERIAL POSITIONS HELD
CURRENT BUSINESS ADDRESS OR EMPLOYMENT DURING THE PAST FIVE YEARS
- ------------------------ ------------------ --------------------------------------
<S> <C> <C>
and Director--Renaissance Hotel Group
N.V. from 1995 to 1997; Chairman--
Advisory Council for The Better Hong
Kong Foundation; Member--Services
Promotion Strategy Group; Committee
Member--Eighth Chinese People's
Political Consultative Committee of
the People's Republic of China;
Member--Election Committee of the Hong
Kong Special Administrative Region;
Director--Old Marriott from 1997 to
1998.
Gilbert M. Grosvenor.... Director Chairman of the Board--National
Geographic Society; Director or
Trustee--Chevy Chase Federal Savings
Bank, Ethyl Corporation, B.F. Saul
REIT and Saul Centers, Inc.; Member of
the Board of Visitors--Nicholas School
of the Environment of Duke University;
Member of the Board of Directors--Old
Marriott from 1987 to 1998.
Floretta Dukes Director Founder, Chairwoman and Chief
McKenzie............... Executive Officer--The McKenzie Group,
Inc.; Director or Trustee--Potomac
Electric Power Company, National
Geographic Society, Acacia Group,
Group Hospitalization and Medical
Services, Inc., Howard University,
White House Historical Association,
American Association of School
Administrators Leadership of Learning
Foundation, Lightspan Partnership,
Inc., Impact II-The Teachers Network,
National School Board Foundation,
Institute for Educational Leadership,
Inc., Forum for the American School
Superintendent, Harvard Graduate
School of Education Urban
Superintendents Program, and John
Hopkins Leadership Development
Program; Director--Old Marriott from
1992 to 1998.
Harry J. Pearce......... Director Vice Chairman of the Board--General
Motors Corporation; Director--General
Motors Acceptance Corporation, Hughes
Electronics Corporation, American
Automobile Manufacturers Association,
and MDU Resources Group, Inc.;
Member--U.S. Air Force Academy's Board
of Visitors; Member--Board of Trustees
of Howard University and Northwestern
University School of Law's Dean's
Advisory Council; Director--Old
Marriott from 1995 to 1998
</TABLE>
I-2
<PAGE>
<TABLE>
<CAPTION>
NAME, CITIZENSHIP AND PRESENT OCCUPATION MATERIAL POSITIONS HELD
CURRENT BUSINESS ADDRESS OR EMPLOYMENT DURING THE PAST FIVE YEARS
------------------------ ------------------------ --------------------------------------
<C> <S> <C>
W. Mitt Romney..... Director Director, President and Chief
Executive Officer--Bain Capital, Inc.;
Director--The Sports Authority, Inc.,
Staples, Inc.; Member--Executive Board
of the Boy Scouts of America; Member
of the Board--National Points of Light
Foundation and City Year; Member of
the Board of Directors--Old Marriott
from 1993 to 1998
Roger W. Sant...... Director Chairman of the Board and Co-founder--
The AES Corporation; Chairman of the
Board--World Wildlife Fund (U.S);
Member of the Board--World Resources
Institute and Worldwide Fund for
Nature; Director--Old Marriott from
1993 to 1998
William J. Shaw.... Director, President and President and Chief Operating
Chief Operating Officer Officer--Old Marriott until 1998;
since 1997 Executive Vice President and
President--Marriott Service Group
since 1993; Chairman of the Board--
Directors of Host Marriott Services
Corporation and Sodexho Marriott
Services, Inc.; Member Board of
Trustees--University of Notre Dame,
Loyola College in Maryland and
Suburban Hospital Foundation;
Director--Old Marriott from 1997 to
1998.
Lawrence M. Small.. Director President, Chief Operating Officer,
Director--Fannie Mae; Vice Chairman
and Chairman--Executive Committee of
the Boards of Directors of
Citicorp/Citibank; Director--The Chubb
Corporation; Chairman--Financial
Advisory Committee of Trans-Resources
International; Member of the Board of
Trustees--Morehouse College and New
York University Medical Center;
Member--U.S. Holocaust Memorial
Council; Director--Old Marriott from
1995 to 1998.
Arne M. Sorenson... Executive Vice President Senior Vice President--Business
and Chief Financial Development from 1996 to 1998;
Officer Partner, Latham & Watkins from 1986 to
1996.
Joseph Ryan........ Executive Vice President Executive Vice President and General
and General Counsel Counsel--Old Marriott from 1994 to
1998; partner, O'Melveny & Myers,
1976-1994.
</TABLE>
I-3
<PAGE>
The following table sets forth the name, business or residence address,
principal occupation or employment at the present time and during the last five
years, and the name of any corporation or other organization in which such
employment is conducted or was conducted of each executive officer or director
of Purchaser. Except as otherwise indicated, all of the persons listed below
are citizens of the United States of America. Each occupation set forth
opposite a person's name, unless otherwise indicated, refers to employment with
Purchaser. Unless otherwise indicated, the principal business address of each
director or executive officer is Marriott International, Inc., 10400 Fernwood
Road, Bethesda, Maryland 20857.
<TABLE>
<CAPTION>
NAME, CITIZENSHIP AND PRESENT OCCUPATION MATERIAL POSITIONS HELD
CURRENT BUSINESS ADDRESS OR EMPLOYMENT DURING THE PAST FIVE YEARS
- ------------------------ ------------------------ --------------------------------------
<S> <C> <C>
William J. Shaw......... President, Director President and Chief Operating
Officer--Marriott International, Inc.;
President and Chief Operating
Officer--Old Marriott until 1998;
Executive Vice President and
President--Marriott Service Group
since 1993; Chairman of the Board--
Directors of Host Marriott Services
Corporation and Sodexho Marriott
Services, Inc.; Member Board of
Trustees--University of Notre Dame,
Loyola College in Maryland and
Suburban Hospital Foundation;
Director--Old Marriott from 1997 to
1998.
Arne M. Sorenson........ Vice President, Director Executive Vice President and Chief
Financial Officer--Marriott
International, Inc. from September
1998 to date; Senior Vice President
Business Development from 1996 to
1998; Partner, Latham & Watkins from
1986 to 1996.
Joseph Ryan............. Vice President, Director Executive Vice President and General
Counsel--Marriot International,
Inc.;--Old Marriott from 1994 until
1998; partner, O'Melveny & Myers,
1976-1994.
G. Cope Stewart, III.... Vice President Executive Vice President and Associate
General Counsel--Marriott
International, Inc., Vice President
and Associate General Counsel--Old
Marriott from February 1994 to 1998;
Partner, Arent Fox Kintner Plotkin and
Kahn from September 1986 to January
1994.
M. Lester Pulse, Jr..... Vice President Senior Vice President--Taxes--Marriott
International, Inc. for the last five
years.
W. David Mann........... Secretary Corporate Secretary since February
1998, Senior Counsel since 1996 and
Corporate Counsel since 1995 with
Marriott International, Inc.;
Associate with Akin, Gump, Strauss,
Hauer & Feld, LLP from 1988 to 1995.
</TABLE>
I-4
<PAGE>
ANNEX A
TEXT OF TITLE 3, SUBTITLE 2, OF THE MARYLAND GENERAL CORPORATION LAW
(S) 3-201. "SUCCESSOR" DEFINED.
(a) Corporation amending charter.--In this subtitle, except as provided in
subsection (b) of this section, "successor" includes a corporation which
amends its charter in a way which alters the contract rights, as expressly set
forth in the charter, of any outstanding stock, unless the right to do so is
reserved by the charter of the corporation.
(b) Corporation whose stock is acquired.--When used with reference to a
share exchange, "successor" means the corporation the stock of which was
acquired in the share exchange.
(S) 3-202. RIGHT TO FAIR VALUE OF STOCK.
(a) General rule.--Except as provided in subsection (c) of this section, a
stockholder of a Maryland corporation has the right to demand and receive
payment of the fair value of the stockholder's stock from the successor if:
(1) The corporation consolidates or merges with another corporation;
(2) The stockholder's stock is to be acquired in a share exchange;
(3) The corporation transfers its assets in a manner requiring action
under (S) 3-105(d) of this title;
(4) The corporation amends its charter in a way which alters the
contract rights, as expressly set forth in the charter, of any outstanding
stock and substantially adversely affects the stockholder's rights, unless
the right to do so is reserved by the charter of the corporation; or
(5) The transaction is governed by (S) 3-602 of this title or exempted
by (S) 3-603(b) of this title.
(b) Basis of fair value.--
(1) Fair value is determined as of the close of business:
(i) With respect to a merger under (S) 3-106 of this title of a 90
percent or more owned subsidiary into its parent, on the day notice is
given or waived under (S) 3-106; or
(ii) With respect to any other transaction, on the day the
stockholders voted on the transaction objected to.
(2) Except as provided in paragraph (3) of this subsection, fair value
may not include any appreciation or depreciation which directly or
indirectly results from the transaction objected to or from its proposal.
(3) In any transaction governed by (S) 3-602 of this title or exempted
by (S) 3-603(b) of this title, fair value shall be value determined in
accordance with the requirements of (S) 3-603(b) of this title.
(c) When right to fair value does not apply.--Unless the transaction is
governed by (S) 3-602 of this title or is exempted by (S) 3-603(b) of this
title, a stockholder may not demand the fair value of his stock and is bound
by the terms of the transaction if:
(1) The stock is listed on a national securities exchange or is
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc.:
(i) With respect to a merger under (S) 3-106 of this title of a 90
percent or more owned subsidiary into its parent, on the date notice is
given or waived under (S) 3-106; or
(ii) With respect to any other transaction, on the record date for
determining stockholders entitled to vote on the transaction objected
to;
A-1
<PAGE>
(2) The stock is that of the successor in a merger, unless:
(i) The merger alters the contract rights of the stock as expressly
set forth in the charter, and the charter does not reserve the right to
do so; or
(ii) The stock is to be changed or converted in whole or in part in
the merger into something other than either stock in the successor or
cash, scrip, or other rights or interests arising out of provisions for
the treatment of fractional shares of stock in the successor; or
(3) The stock is that of an open-end investment company registered with
the Securities and Exchange Commission under the Investment Company Act of
1940 and the value placed on the stock in the transaction is its net asset
value.
(S) 3-203. PROCEDURE BY STOCKHOLDER.
(a) Specific duties.--A stockholder of a corporation who desires to receive
payment of the fair value of his stock under this subtitle:
(1) Shall file with the corporation a written objection to the proposed
transaction:
(i) With respect to a merger under (S) 3-106 of this title of a 90
percent or more owned subsidiary into its parent, within 30 days after
notice is given or waived under (S) 3-106; or
(ii) With respect to any other transaction, at or before the
stockholders' meeting at which the transaction will be considered;
(2) May not vote in favor of the transaction; and
(3) Within 20 days after the Department accepts the articles for record,
shall make a written demand on the successor for payment for his stock,
stating the number and class of shares for which he demands payment.
(b) Failure to comply with section.--A stockholder who fails to comply with
this section is bound by the terms of the consolidation, merger, share
exchange, transfer of assets, or charter amendment.
(S) 3-204. EFFECT OF DEMAND ON DIVIDEND AND OTHER RIGHTS.
A stockholder who demands payment for his stock under this subtitle:
(1) Has no right to receive any dividends or distributions payable to
holders of record of that stock on a record date after the close of
business on the day as at which fair value is to be determined under (S) 3-
202 of this subtitle; and
(2) Ceases to have any rights of a stockholder with respect to that
stock, except the right to receive payment of its fair value.
(S) 3-205. WITHDRAWAL OF DEMAND.
A demand for payment may be withdrawn only with the consent of the
successor.
(S) 3-206. RESTORATION OF DIVIDEND AND OTHER RIGHTS.
(a) When rights restored.--The rights of a stockholder who demands payment
are restored in full, if:
(1) The demand for payment is withdrawn;
(2) A petition for an appraisal is not filed within the time required by
this subtitle;
(3) A court determines that the stockholder is not entitled to relief;
or
A-2
<PAGE>
(4) The transaction objected to is abandoned or rescinded.
(b) Effect of restoration.--The restoration of a stockholder's rights
entitles him to receive the dividends, distributions, and other rights he
would have received if he had not demanded payment for his stock. However, the
restoration does not prejudice any corporate proceedings taken before the
restoration.
(S) 3-207. NOTICE AND OFFER TO STOCKHOLDERS.
(a) Duty of successor.--
(1) The successor promptly shall notify each objecting stockholder in
writing of the date the articles are accepted for record by the Department.
(2) The successor also may send a written offer to pay the objecting
stockholder what it considers to be the fair value of his stock. Each offer
shall be accompanied by the following information relating to the
corporation which issued the stock:
(i) A balance sheet as of a date not more than six months before the
date of the offer;
(ii) A profit and loss statement for the 12 months ending on the date
of the balance sheet; and
(iii) Any other information the successor considers pertinent.
(b) Manner of sending notice.--The successor shall deliver the notice and
offer to each objecting stockholder personally or mail them to him by
certified mail, return receipt requested, bearing a postmark from the United
States Postal Service, at the address he gives the successor in writing, or,
if none, at his address as it appears on the records of the corporation which
issued the stock.
(S) 3-208. PETITION FOR APPRAISAL; CONSOLIDATION OF PROCEEDINGS; JOINDER OF
OBJECTORS.
(a) Petition for appraisal.--Within 50 days after the Department accepts
the articles for record, the successor or an objecting stockholder who has not
received payment for his stock may petition a court of equity in the county
where the principal office of the successor is located or, if it does not have
a principal office in this State, where the resident agent of the successor is
located, for an appraisal to determine the fair value of the stock.
(b) Consolidation of suits; joinder of objectors.--
(1) If more than one appraisal proceeding is instituted, the court shall
direct the consolidation of all the proceedings on terms and conditions it
considers proper.
(2) Two or more objecting stockholders may join or be joined in an
appraisal proceeding.
(S) 3-209. NOTATION ON STOCK CERTIFICATE.
(a) Submission of certificate.--At any time after a petition for appraisal
is filed, the court may require the objecting stockholders parties to the
proceeding to submit their stock certificates to the clerk of the court for
notation on them that the appraisal proceeding is pending. If a stockholder
fails to comply with the order, the court may dismiss the proceedings as to
him or grant other appropriate relief.
(b) Transfer of stock bearing notation.--If any stock represented by a
certificate which bears a notation is subsequently transferred, the new
certificate issued for the stock shall bear a similar notation and the name of
the original objecting stockholder. The transferee of this stock does not
acquire rights of any character with respect to the stock other than the
rights of the original objecting stockholder.
A-3
<PAGE>
(S) 3-210. APPRAISAL OF FAIR VALUE
(a) Court to appoint appraisers.--If the court finds that the objecting
stockholder is entitled to an appraisal of his stock, it shall appoint three
disinterested appraisers to determine the fair value of the stock on terms and
conditions the court considers proper. Each appraiser shall take an oath to
discharge his duties honestly and faithfully.
(b) Report of appraisers--Filing.--Within 60 days after their appointment,
unless the court sets a longer time, the appraisers shall determine the fair
value of the stock as of the appropriate date and file a report stating the
conclusion of the majority as to the fair value of the stock.
(c) Same--Contents.--The report shall state the reasons for the conclusion
and shall include a transcript of all testimony and exhibits offered.
(d) Same--Service; objection.--
(1) On the same day that the report is filed, the appraisers shall mail
a copy of it to each party to the proceedings.
(2) Within 15 days after the report is filed, any party may object to it
and request a hearing.
(S) 3-211. ACTION BY COURT ON APPRAISERS' REPORT.
(a) Order of court.--The court shall consider the report and, on motion of
any party to the proceeding, enter an order which:
(1) Confirms, modifies, or rejects it; and
(2) If appropriate, sets the time for payment to the stockholder.
(b) Procedure after order.--
(1) If the appraisers' report is confirmed or modified by the order,
judgment shall be entered against the successor and in favor of each
objecting stockholder party to the proceeding for the appraised fair value
of his stock.
(2) If the appraisers' report is rejected, the court may:
(i) Determine the fair value of the stock and enter judgment for the
stockholder; or
(ii) Remit the proceedings to the same or other appraisers on terms
and conditions it considers proper.
(c) Judgment includes interest.--
(1) Except as provided in paragraph (2) of this subsection, a judgment
for the stockholder shall award the value of the stock and interest from
the date as at which fair value is to be determined under (S) 3-202 of this
subtitle.
(2) The court may not allow interest if it finds that the failure of the
stockholder to accept an offer for the stock made under (S) 3-207 of this
subtitle was arbitrary and vexatious or not in good faith. In making this
finding, the court shall consider:
(i) The price which the successor offered for the stock;
(ii) The financial statements and other information furnished to the
stockholder; and
(iii) Any other circumstances it considers relevant.
A-4
<PAGE>
(d) Costs of proceedings.--
(1) The costs of the proceedings, including reasonable compensation and
expenses of the appraisers, shall be set by the court and assessed against
the successor. However, the court may direct the costs to be apportioned
and assessed against any objecting stockholder if the court finds that the
failure of the stockholder to accept an offer for the stock made under (S)
3-207 of this subtitle was arbitrary and vexatious or not in good faith. In
making this finding, the court shall consider:
(i) The price which the successor offered for the stock;
(ii) The financial statements and other information furnished to the
stockholder; and
(iii) Any other circumstances it considers relevant.
(2) Costs may not include attorney's fees or expenses. The reasonable
fees and expenses of experts may be included only if:
(i) The successor did not make an offer for the stock under (S) 3-
207 of this subtitle; or
(ii) The value of the stock determined in the proceeding materially
exceeds the amount offered by the successor.
(e) Effect of judgment.--The judgment is final and conclusive on all parties
and has the same force and effect as other decrees in equity. The judgment
constitutes a lien on the assets of the successor with priority over any
mortgage or other lien attaching on or after the effective date of the
consolidation, merger, transfer, or charter amendment.
(S) 3-212. SURRENDER OF STOCK.
The successor is not required to pay for the stock of an objecting
stockholder or to pay a judgment rendered against it in a proceeding for an
appraisal unless, simultaneously with payment:
(1) The certificates representing the stock are surrendered to it,
endorsed in blank, and in proper form for transfer; or
(2) Satisfactory evidence of the loss or destruction of the certificates
and sufficient indemnity bond are furnished.
(S) 3-213. RIGHTS OF SUCCESSOR WITH RESPECT TO STOCK.
(a) General rule.--A successor which acquires the stock of an objecting
stockholder is entitled to any dividends or distributions payable to holders of
record of that stock on a record date after the close of business on the day as
at which fair value is to be determined under (S) 3-202 of this subtitle.
(b) Successor in transfer of assets.--After acquiring the stock of an
objecting stockholder, a successor in a transfer of assets may exercise all the
rights of an owner of the stock.
(c) Successor in consolidation, merger, or share exchange.--Unless the
articles provide otherwise, stock in the successor of a consolidation, merger,
or share exchange otherwise deliverable in exchange for the stock of an
objecting stockholder has the status of authorized but unissued stock of the
successor. However, a proceeding for reduction of the capital of the successor
is not necessary to retire the stock or to reduce the capital of the successor
represented by the stock.
A-5
<PAGE>
Manually signed facsimile copies of the Letter of Transmittal will be
accepted. Letters of Transmittal and certificates for Shares should be sent or
delivered by each stockholder of the Company or his broker, dealer, commercial
bank or trust company to the Depositary at one of its addresses set forth
below:
The Depositary for the Offer is:
FIRST CHICAGO TRUST COMPANY OF NEW YORK
By Mail: By Federal Express or By Hand:
other Courier
First Chicago Trust First Chicago Trust
Company First Chicago Trust Company
of New York Company of New York
Corporate Actions, Suite of New York c/o Securities Transfer
4660 Corporate Actions, Suite and
P.O. Box 2569 4680 Reporting Services Inc.
Jersey City, NJ 07303- 14 Wall Street, 8th Fl. Attn: Corporate Actions
2569 New York, NY 10005 100 William Street,
Galleria
New York, NY 10038
By Facsimile Transmission: Confirm by Telephone:
(For Eligible Institutions Only)
(201) 222-4720 or
(201) 222-4721 (201) 222-4707
Any questions or requests for assistance may be directed to the Information
Agent at its address and telephone numbers set forth below. Requests for
additional copies of this Offer to Purchase and the Letter of Transmittal may
be directed to the Information Agent or the Depositary. Stockholders may also
contact their brokers, dealers, commercial banks or trust companies for
assistance concerning the Offer.
The Information Agent for the Offer is:
[LOGO OF MACKENZIE PARTNERS, INC. APPEARS HERE]
156 FIFTH AVENUE
NEW YORK, NEW YORK 10010
(212) 929-5500 (CALL COLLECT)
OR
CALL TOLL FREE (800) 322-2885
<PAGE>
Exhibit (a)(2)
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
OF
EXECUSTAY CORPORATION
AT
$14.00 NET PER SHARE
PURSUANT TO THE OFFER TO PURCHASE DATED JANUARY 12, 1999
OF
MI SUBSIDIARY I, INC.
A WHOLLY OWNED SUBSIDIARY OF
MARRIOTT INTERNATIONAL, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT MIDNIGHT, NEW YORK CITY TIME,
ON THURSDAY, FEBRUARY 11, 1999, UNLESS THE OFFER IS EXTENDED.
The Depositary for the Offer is:
FIRST CHICAGO TRUST COMPANY OF NEW YORK
By Mail: By Federal Express or By Hand:
other Courier:
First Chicago Trust First Chicago Trust First Chicago Trust
Company Company Company
of New York of New York of New York
Corporate Actions, Suite Corporate Actions, Suite c/o Securities Transfer
4660 4680 and
P.O Box 2569 14 Wall Street, 8th Fl. Reporting Services Inc.
Jersey City, NJ 07303- New York, NY 10005 Attn: Corporate Actions
2569 100 William Street,
Galleria
New York, NY 10038
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN ONE LISTED ABOVE
DOES NOT CONSTITUTE A VALID DELIVERY. YOU MUST SIGN THIS LETTER OF TRANSMITTAL
IN THE APPROPRIATE SPACE PROVIDED THEREFOR, WITH SIGNATURE GUARANTEE IF
REQUIRED, AND COMPLETE THE SUBSTITUTE FORM W-9 SET FORTH BELOW. SEE INSTRUCTION
1.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
This Letter of Transmittal is to be used either if certificates are to be
forwarded herewith or, unless an Agent's Message (as defined in the Offer to
Purchase) is utilized, if delivery is to be made by book-entry transfer to the
account maintained by the Depositary at The Depository Trust Company (the
"Book-Entry Transfer Facility") pursuant to the procedures set forth in
Section 2 of the Offer to Purchase. Stockholders whose certificates are not
immediately available or who cannot deliver their certificates or deliver
confirmation of the book-entry transfer of their Shares (as defined below)
into the Depositary's account at the Book-Entry Transfer Facility ("Book-Entry
Confirmation") and all other documents required hereby to the Depositary on or
prior to the Expiration Date (as defined in the Offer to Purchase) must tender
their Shares according to the guaranteed delivery procedures set forth in
Section 2 of the Offer to Purchase. See Instruction 2. DELIVERY OF DOCUMENTS
TO THE BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO THE
DEPOSITARY.
<PAGE>
[_]CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO THE ACCOUNT MAINTAINED BY THE DEPOSITARY WITH A BOOK-ENTRY
TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution: _______________________________________________
Account Number _______________________________________________________________
Transaction Code Number ______________________________________________________
[_]CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE
FOLLOWING:
Name(s) of Registered Owner(s): ______________________________________________
Window Ticket Number (if any): _______________________________________________
Date of Execution of Notice of Guaranteed Delivery: __________________________
Name of Institution that Guaranteed Delivery: ________________________________
Account Number _______________________________________________________________
Transaction Code Number ______________________________________________________
DESCRIPTION OF SHARES TENDERED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) SHARE CERTIFICATE(S) AND SHARE(S) TENDERED
(PLEASE FILL IN, IF BLANK) (ATTACH ADDITIONAL LIST IF NECESSARY)
- --------------------------------------------------------------------------------------------------
TOTAL NUMBER
SHARE OF SHARES NUMBER
CERTIFICATE REPRESENTED BY OF SHARES
NUMBER(S)* CERTIFICATE(S) TENDERED**
-------------------------------------------------
<S> <C> <C> <C>
-------------------------------------------------
-------------------------------------------------
-------------------------------------------------
-------------------------------------------------
-------------------------------------------------
TOTAL SHARES
- --------------------------------------------------------------------------------------------------
</TABLE>
* Need not be completed by stockholders tendering by book-entry transfer.
** Unless otherwise indicated, it will be assumed that all Shares being
delivered to the Depositary are being tendered. See Instruction 4.
2
<PAGE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW.
PLEASE READ CAREFULLY THE ACCOMPANYING INSTRUCTIONS.
Ladies and Gentlemen:
The undersigned hereby tenders to MI Subsidiary I, Inc., a Delaware
corporation (the "Purchaser"), which is a wholly owned, direct subsidiary of
Marriott International, Inc., a Delaware corporation, the above described
shares of Common Stock, par value $.01 per share (the "Common Stock" or the
"Shares"), of ExecuStay Corporation, a Maryland corporation (the "Company"),
pursuant to Purchaser's offer to purchase all of the outstanding Shares upon
the terms and subject to the conditions set forth in the Offer to Purchase
dated January 12, 1999 (the "Offer to Purchase"), receipt of which is hereby
acknowledged, and in this Letter of Transmittal (which together constitute the
"Offer"), at the purchase price of $14.00 per Share, net to the tendering
stockholder in cash.
Subject to, and effective upon, acceptance for payment of the Shares
tendered herewith in accordance with the terms and subject to the conditions
of the Offer, the undersigned hereby sells, assigns, and transfers to, or upon
the order of, Purchaser all right, title and interest in and to all the Shares
that are being tendered hereby (and any and all other Shares or other
securities issued or issuable in respect thereof on or after February 12,
1999) and irrevocably constitutes and appoints the Depositary the true and
lawful agent and attorney-in-fact of the undersigned with respect to such
Shares (and any such other Shares or securities) with full power of
substitution (such power of attorney being deemed to be an irrevocable power
coupled with an interest), to (a) deliver certificates for such Shares (and
any such other Shares or securities), or transfer ownership of such Shares
(and any such other Shares or securities) on the account books maintained by a
Book-Entry Transfer Facility, together in either such case with all
accompanying evidences of transfer and authenticity, to or upon the order of
Purchaser upon receipt by the Depositary, as the undersigned's agent, of the
purchase price (adjusted, if appropriate, as provided in the Offer to
Purchase), (b) present such Shares (and any such other Shares or securities)
for transfer on the books of the Company and (c) receive all benefits and
otherwise exercise all rights of beneficial ownership of such Shares (and any
such other Shares or securities), all in accordance with the terms of the
Offer.
The undersigned hereby irrevocably appoints each designee of Purchaser as
the attorney-in-fact and proxy of the undersigned, each with full power of
substitution, to vote in such manner as each such attorney and proxy or his
substitute shall in his sole discretion deem proper, and otherwise act
(including pursuant to written consent) with respect to all the Shares
tendered hereby which have been accepted for payment by Purchaser prior to the
time of such vote or action (and any and all other Shares or securities issued
or issuable in respect thereof on or after February 12, 1999), which the
undersigned is entitled to vote at any meeting of stockholders (whether annual
or special and whether or not an adjourned meeting) of the Company, or consent
in lieu of any such meeting, or otherwise. This proxy is coupled with an
interest in the Company and in the Shares and is irrevocable and is granted in
consideration of, and is effective upon, the deposit by Purchaser with the
Depositary of the purchase price for such Shares in accordance with the terms
of the Offer. Such acceptance for payment shall revoke all prior proxies
granted by the undersigned at any time with respect to such Shares (and any
such other Shares or other securities) and no subsequent proxies will be given
(and if given will be deemed not to be effective) with respect thereto by the
undersigned.
The undersigned hereby represents and warrants that the undersigned has full
power and authority to tender, sell, assign and transfer the Shares tendered
hereby (and any and all other Shares or other securities issued or issuable in
respect thereof on or after February 12, 1999) and that, when the same are
accepted for payment by Purchaser, Purchaser will acquire good and
unencumbered title thereto, free and clear of all liens, restrictions, charges
and encumbrances and the same will not be subject to any adverse claim. The
undersigned, upon request, will execute and deliver any additional documents
deemed by the Depositary or Purchaser to be necessary or desirable to complete
the sale, assignment and transfer of the Shares tendered hereby (and any and
all such other Shares or other securities).
3
<PAGE>
All authority herein conferred or agreed to be conferred in this Letter of
Transmittal shall not be affected by, and shall survive, the death or
incapacity of the undersigned and any obligation of the undersigned hereunder
shall be binding upon the successors, assigns, heirs, executors,
administrators and legal representatives of the undersigned. Except as stated
in the Offer to Purchase, this tender is irrevocable.
The undersigned understands that tenders of Shares pursuant to any one of
the procedures described in Section 2 of the Offer to Purchase and in the
instructions hereto will constitute a binding agreement between the
undersigned and Purchaser upon the terms and subject to the conditions of the
Offer.
Unless otherwise indicated herein under "Special Payment Instructions,"
please issue the check for the purchase price or any certificates for Shares
not tendered or accepted for payment in the name(s) of the undersigned.
Similarly, unless otherwise indicated under "Special Delivery Instructions,"
please mail the check for the purchase price or return any certificates for
Shares not tendered or accepted for payment (and accompanying documents, as
appropriate) to the undersigned at the address shown in the box titled
"Description of Shares Tendered." In the event that both the Special Delivery
Instructions and the Special Payment Instructions are completed, please issue
the check for the purchase price or any certificates for Shares not tendered
or accepted for payment in the name of, and deliver such check or return such
certificates to the person or persons so indicated. Stockholders delivering
Shares by book-entry transfer may request that any Shares not accepted for
payment be returned by crediting such account maintained at the Book-Entry
Transfer Facility as such stockholder may designate by making an appropriate
entry under "Special Payment Instructions." The undersigned recognizes that
Purchaser has no obligation pursuant to the Special Payment Instructions to
transfer any Shares from the name of the registered holder thereof if
Purchaser does not accept for payment any of the Shares so tendered.
4
<PAGE>
SPECIAL PAYMENT INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7) (SEE INSTRUCTIONS 1, 4, 5, 6 AND 7)
To be completed ONLY if certifi-
cates for Shares not tendered or To be completed ONLY if certifi-
not purchased and/or the check cates for Shares not tendered or
for the purchase price of Shares not purchased and/or the check
purchased are to be issued in the for the purchase price of Shares
name of someone other than the purchased are to be sent to some-
undersigned. one other than the undersigned,
or to the undersigned at an ad-
Issue check and/or certificate dress other than that shown
to: above.
Issue check and/or certificate
to:
Name _____________________________ Name _____________________________
(PLEASE PRINT) (PLEASE PRINT)
Address __________________________ Address __________________________
__________________________________ __________________________________
(INCLUDE ZIP CODE) (INCLUDING ZIP CODE)
__________________________________
(TAX IDENTIFICATION OR SOCIAL
SECURITY NUMBER)
5
<PAGE>
SIGN HERE
(COMPLETE SUBSTITUTE FORM W-9 ON REVERSE)
X __________________________________________________________________________
X __________________________________________________________________________
(SIGNATURE(S) OF OWNER(S))
Dated: , 1999
(Must be signed by registered holder(s) exactly as name(s) appear(s) on
stock certificate(s) or on a security position listing or by person(s)
authorized to become registered holder(s) by certificates and documents
transmitted herewith. If signature is by a trustee, executor,
administrator, guardian, attorney-in-fact, agent, officer of a corporation
or other person acting in a fiduciary or representative capacity, please
provide the following information. See Instructions 1 and 5.)
Name(s) ____________________________________________________________________
____________________________________________________________________________
(PLEASE PRINT)
Capacity (Full Title) ______________________________________________________
(SEE INSTRUCTION 5)
Address ____________________________________________________________________
____________________________________________________________________________
(INCLUDE ZIP CODE)
Area Code and Telephone Number ( ) _______________________________________
Employer Identification or Social Security Number __________________________
(COMPLETE SUBSTITUTE FORM
W-9 ON REVERSE)
GUARANTEE OF SIGNATURE(S)
(IF REQUIRED--SEE INSTRUCTIONS 1 AND 5)
Authorized Signature _______________________________________________________
Name _______________________________________________________________________
(PLEASE PRINT)
Title ______________________________________________________________________
Name of Firm _______________________________________________________________
Address ____________________________________________________________________
(INCLUDE ZIP CODE)
Area Code and Telephone Number ( ) _______________________________________
Dated: , 1999
6
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. No signature guarantee on this Letter of
Transmittal is required (i) if this Letter of Transmittal is signed by the
registered holder of the Shares (which term, for purposes of this document,
shall include any participant in the Book-Entry Transfer Facility whose name
appears on a security position listing as the owner of Shares) tendered
herewith, unless such holder has completed either the box entitled "Special
Delivery Instructions" or the box entitled "Special Payment Instructions" on
the reverse hereof, or (ii) if such Shares are tendered for the account of a
bank, broker, dealer, credit union, savings association or other entity that
is a member in good standing of the Securities Transfer Agents Medallion
Program, the New York Stock Exchange Medallion Signature Guarantee Program or
the Stock Exchange Medallion Program (each an "Eligible Institution"). In all
other cases, all signatures on this Letter of Transmittal must be guaranteed
by an Eligible Institution. See Instruction 5.
2. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES. This Letter of
Transmittal is to be completed by stockholders either if certificates are to
be forwarded herewith or if tenders of Shares are to be made pursuant to the
procedures for delivery by book-entry transfer set forth in Section 2 of the
Offer to Purchase. Certificates for all physically tendered Shares, or any
Book-Entry Confirmation of Shares, as the case may be, as well as a properly
completed and duly executed Letter of Transmittal (or facsimile thereof),
unless an Agent's Message (as defined in the Offer to Purchase) is utilized,
and any other documents required by this Letter of Transmittal, must be
received by the Depositary at one of its addresses set forth herein on or
prior to the Expiration Date (as defined in Section 1 of the Offer to
Purchase). Stockholders whose certificates for Shares are not immediately
available or who cannot deliver their certificates and all other required
documents to the Depositary on or prior to the Expiration Date may tender
their Shares by properly completing and duly executing the Notice of
Guaranteed Delivery pursuant to the guaranteed delivery procedure set forth in
Section 2 of the Offer to Purchase. Pursuant to such procedure, (i) such
tender must be made by or through an Eligible Institution, (ii) a properly
completed and duly executed Notice of Guaranteed Delivery, substantially in
the form provided by Purchaser, must be received by the Depositary prior to
the Expiration Date, and (iii) the certificates for all physically tendered
Shares or Book-Entry Confirmation of Shares, as the case may be, together with
a properly completed and duly executed Letter of Transmittal (or facsimile
thereof), unless an Agent's Message is utilized, and any other documents
required by this Letter of Transmittal, must be received by the Depositary
within three Nasdaq Stock Market trading days after the date of execution of
such Notice of Guaranteed Delivery, all as provided in Section 2 of the Offer
to Purchase.
THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, THE CERTIFICATE FOR
SHARES AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH A BOOK-
ENTRY TRANSFER FACILITY, IS AT THE OPTION AND RISK OF THE TENDERING
STOCKHOLDER AND, EXCEPT AS OTHERWISE PROVIDED IN THIS INSTRUCTION 2, THE
DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF
DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY
INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO
ENSURE TIMELY DELIVERY.
No alternative, conditional or contingent tenders will be accepted and no
fractional Shares will be purchased. All tendering stockholders, by execution
of this Letter of Transmittal (or facsimile thereof), waive any right to
receive any notice of the acceptance of their Shares for payment.
3. INADEQUATE SPACE. If the space provided herein is inadequate, the
certificate numbers and/or the number of Shares should be listed on a separate
signed schedule attached hereto.
4. PARTIAL TENDERS. (Not applicable to stockholders who tender by book-entry
transfer.) If fewer than all the Shares evidenced by any certificate submitted
are to be tendered, fill in the number of Shares which are to
7
<PAGE>
be tendered in the box entitled "Number of Shares Tendered." In such case, new
certificate(s) for the remainder of the Shares that were evidenced by your old
certificate(s) will be sent to you, unless otherwise provided in the
appropriate box on this Letter of Transmittal, as soon as practicable after
the Expiration Date. All Shares represented by certificates delivered to the
Depositary will be deemed to have been tendered unless otherwise indicated.
5. SIGNATURES ON LETTER OF TRANSMITTAL, STOCK POWERS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the registered holder(s) of the Shares
tendered hereby, the signature(s) must correspond exactly with the name(s) as
written on the face of the certificate(s) without alteration, enlargement or
any change whatsoever.
If any of the Shares tendered hereby are owned of record by two or more
joint owners, all such owners must sign this Letter of Transmittal.
If any tendered Shares are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many
separate Letters of Transmittal as there are different registrations of
certificates.
If this Letter of Transmittal or any certificates or stock powers are signed
by a trustee, executor, administrator, guardian, attorney-in-fact, officer of
a corporation or other person acting in a fiduciary or representative
capacity, such person should so indicate when signing, and proper evidence
satisfactory to Purchaser of such person's authority so to act must be
submitted.
When this Letter of Transmittal is signed by the registered owner(s) of the
Shares listed and transmitted hereby, no endorsements of certificates or
separate stock powers are required unless payment or certificates for Shares
not tendered or purchased are to be issued to a person other than the
registered owner(s). Signatures on such certificates or stock powers must be
guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered owner(s) of the Shares listed, the certificates must be endorsed or
accompanied by appropriate stock powers, in either case signed exactly as the
name or names of the registered owner or owners appear on the certificates.
Signatures on such certificates or stock powers must be guaranteed by an
Eligible Institution.
6. STOCK TRANSFER TAXES. Except as set forth in this Instruction 6,
Purchaser will pay or cause to be paid any stock transfer taxes with respect
to the transfer and sale of purchased Shares to it or its order pursuant to
the Offer. If payment of the purchase price is to be made to, or if
certificates for Shares not tendered or purchased are to be registered in the
name of, any person other than the registered holder, or if tendered
certificates are registered in the name of any person other than the person(s)
signing this Letter of Transmittal, the amount of any stock transfer taxes
(whether imposed on the registered holder or such person) payable on account
of the transfer to such person will be deducted from the purchase price unless
satisfactory evidence of the payment of such taxes or exemption therefrom is
submitted.
EXCEPT AS PROVIDED IN THIS INSTRUCTION 6, IT WILL NOT BE NECESSARY FOR
TRANSFER TAX STAMPS TO BE AFFIXED TO THE CERTIFICATES LISTED IN THIS LETTER OF
TRANSMITTAL.
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check or certificates
for unpurchased Shares are to be issued in the name of a person other than the
signer of this Letter of Transmittal or if a check is to be sent or such
certificates are to be returned to someone other than the signer of this
Letter of Transmittal or to an address other than that shown above, the
appropriate boxes on this Letter of Transmittal should be completed.
8
<PAGE>
8. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Requests for assistance may
be directed to, or additional copies of the Offer to Purchase, this Letter of
Transmittal and the Notice of Guaranteed Delivery may be obtained from, the
Information Agent at its respective address set forth below or from your
broker, dealer, commercial bank or trust company.
9. WAIVER OF CONDITIONS. Subject to the terms of the Merger Agreement (as
defined in the Offer to Purchase), the conditions of the Offer may be waived
by Purchaser, in whole or in part, at any time and from time to time in the
Purchaser's sole discretion, in the case of any Shares tendered.
10. SUBSTITUTE FORM W-9. The tendering stockholder is required to provide
the Depositary with a correct Taxpayer Identification Number ("TIN") on
Substitute Form W-9 which is provided under "Important Tax Information" below,
and to certify whether the stockholder is subject to backup withholding of
Federal income tax. If a tendering stockholder is subject to backup
withholding, the stockholder must cross out item (2) of the Certification box
of the Substitute Form W-9. Failure to provide the information on the
Substitute Form W-9 may subject the tendering stockholder to 31% Federal
income tax withholding on the payment of the purchase price. If the tendering
stockholder has not been issued a TIN and has applied for a number or intends
to apply for a number in the near future, he or she should write "Applied For"
in the space provided for the TIN in Part I, and sign and date the Substitute
Form W-9. If "Applied For" is written in Part I, the Depositary will withhold
31% on all payments of the purchase price, but such withholdings will be
refunded if the tendering stockholder provides a TIN within 60 days.
11. LOST, DESTROYED OR STOLEN CERTIFICATES. If any certificate(s)
representing Shares has been lost, destroyed or stolen, the stockholder should
promptly notify the Transfer Agent for the Company. The stockholder will then
be instructed as to the steps that must be taken in order to replace the
certificate(s). This Letter of Transmittal and related documents cannot be
processed until the procedures for replacing lost or destroyed certificates
have been followed.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A FACSIMILE THEREOF), TOGETHER
WITH CERTIFICATES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL OTHER
REQUIRED DOCUMENTS, MUST BE RECEIVED BY THE DEPOSITARY, OR THE NOTICE OF
GUARANTEED DELIVERY MUST BE RECEIVED BY THE DEPOSITARY, ON OR PRIOR TO THE
EXPIRATION DATE.
9
<PAGE>
IMPORTANT TAX INFORMATION
Under Federal income tax law, a stockholder whose tendered Shares are
accepted for payment is required to provide the Depositary with such
stockholder's correct TIN on Substitute Form W-9 below. If such stockholder is
an individual, the TIN is his or her social security number. If a tendering
stockholder is subject to backup withholding, he or she must cross out item
(2) of the Certification box on the Substitute Form W-9. If the Depositary is
not provided with the correct TIN, the stockholder may be subject to a $50
penalty imposed by the Internal Revenue Service. In addition, payments that
are made to such stockholder with respect to Shares purchased pursuant to the
Offer may be subject to backup withholding.
Certain stockholders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. In order for a foreign individual to qualify as an exempt
recipient, that stockholder must submit a statement, signed under penalties of
perjury, attesting to that individual's exempt status. Such statements may be
obtained from the Depositary. Exempt stockholders, other than foreign
individuals, should furnish their TIN, write "Exempt" on the face of the
Substitute Form W-9 below and sign, date and return the Substitute Form W-9 to
the Depositary. See the enclosed Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9 for additional instructions.
If backup withholding applies, the Depositary is required to withhold 31% of
any payments made to the stockholder. Backup withholding is not an additional
tax. Rather, the tax liability of persons subject to backup withholding will
be reduced by the amount of tax withheld. If withholding results in an
overpayment of taxes, a refund may be obtained.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding on payments that are made to a stockholder
with respect to Shares purchased pursuant to the Offer, the stockholder is
required to notify the Depositary of his or her correct TIN by completing the
form below certifying that the TIN provided on the Substitute Form W-9 is
correct (or that such stockholder is awaiting a TIN).
WHAT NUMBER TO GIVE THE DEPOSITARY
The stockholder is required to give the Depositary the social security
number or employer identification number of the record owner of the Shares. If
the Shares are in more than one name or are not in the name of the actual
owner, consult the enclosed Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9 for additional guidelines on
which number to report. If the tendering stockholder has not been issued a TIN
and has applied for a number or intends to apply for a number in the near
future, the stockholder should write "Applied For" in the space provided for
the TIN in Part I, and sign and date the Substitute Form W-9. If "Applied For"
is written in Part I, the Depositary will withhold 31% on all payments of the
purchase price, but such withholdings will be refunded if the tendering
stockholder provides a TIN within 60 days.
10
<PAGE>
PAYOR'S NAME: FIRST CHICAGO TRUST COMPANY OF NEW YORK
- -------------------------------------------------------------------------------
PART I--Please provide your
TIN in the box at right and ______________________
certify by signing and Social Security Number
dating below. or Employer
SUBSTITUTE Identification Number
(if awaiting TIN write
FORM W-9 "Applied For")
--------------------------------------------------------
PART II--For Payees exempt from backup withholding,
see the attached Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9
and complete as instructed therein.
--------------------------------------------------------
Certification--Under penalties of perjury, I certify
that:
(1) The number shown on this form is my correct
Taxpayer Identification Number (or a Taxpayer
Identification Number has not been issued to me)
DEPARTMENT OF and either (a) I have mailed or delivered an
THE TREASURY application to receive a Taxpayer Identification
INTERNAL Number to the appropriate Internal Revenue
REVENUE Service ("IRS") or Social Security Administration
SERVICE office or (b) I intend to mail or deliver an
application in the near future. (I understand
that if I do not provide a Taxpayer
Identification Number to the Depositary, 31% of
all reportable payments made to me will be
withheld, but will be refunded if I provided a
certified Taxpayer Identification Number within
60 days); and
(2) I am not subject to backup withholding either
because I have not been notified by the IRS that
I am subject to backup withholding as a result of
a failure to report all interest or dividends, or
the IRS has notified me that I am no longer
subject to backup withholding.
--------------------------------------------------------
Certification Instructions--You must cross out item
(2) above if you have been notified by the IRS that
PAYOR'S REQUEST FOR you are subject to backup withholding because of
TAXPAYER underreporting interest or dividends on your tax re-
IDENTIFICATION turn. However, if after being notified by the IRS
NUMBER ("TIN") that you were subject to backup withholding you re-
ceived another notification from the IRS that you are
no longer subject to backup withholding, do not cross
out item (2). (Also see instructions in the enclosed
Guidelines.)
--------------------------------------------------------
Signature: _____________ Date: ________________
- --------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER.
PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
The Information Agent for the Offer is:
MACKENZIE PARTNERS, INC.
156 Fifth Avenue
New York, NY 10010
(212) 929-5500 (call collect)
or
CALL TOLL FREE (800) 322-2885
11
<PAGE>
Exhibit (a)(3)
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF SHARES OF COMMON STOCK
OF
EXECUSTAY CORPORATION
TO
MI SUBSIDIARY I, INC.
A WHOLLY OWNED SUBSIDIARY OF
MARRIOTT INTERNATIONAL, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT MIDNIGHT, NEW YORK CITY TIME,
ON THURSDAY, FEBRUARY 11, 1999, UNLESS THE OFFER IS EXTENDED.
This form, or one substantially equivalent hereto, must be used to accept
the Offer (as defined below) if certificates representing shares of common
stock, par value $.01 per share (the "Shares"), of ExecuStay Corporation, a
Maryland corporation, are not immediately available, if the procedure for
Book-Entry transfer cannot be completed on a timely basis, or if time will not
permit all required documents to reach the Depositary (as defined in the Offer
to Purchase) prior to the Expiration Date (as defined in the Offer to
Purchase). Such form may be delivered by hand or transmitted by telegram,
facsimile transmission or mail to the Depositary. See Section 2 of the Offer
to Purchase.
The Depositary for the Offer is:
FIRST CHICAGO TRUST COMPANY OF NEW YORK
By Mail: By Federal Express or By Hand:
other Courier:
First Chicago Trust First Chicago Trust
Company First Chicago Trust Company
of New York Company of New York
Corporate Actions, of New York c/o Securities Transfer
Suite 4660 Corporate Actions, Suite and Reporting Services
P.O. Box 2569 4680 Inc.
Jersey City, NJ 07303- 14 Wall Street, 8th Fl. Attn: Corporate Actions
2569 New York, NY 10005 100 William Street,
Galleria
New York, NY 10038
Confirm by Telephone:
By Facsimile Transmission:
(For Eligible Institutions Only)
(201) 222-4707
(201) 222-4720 or (201) 222-4721
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION
OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
Ladies and Gentlemen:
The undersigned hereby tenders to MI Subsidiary I, Inc., a Delaware
corporation and a direct, wholly owned subsidiary of Marriott International,
Inc., a Delaware corporation, upon the terms and subject to the conditions set
forth in the Offer to Purchase dated January 12, 1999 and the related Letter
of Transmittal (which together constitute the "Offer"), receipt of which is
hereby acknowledged, the number of Shares indicated below pursuant to the
guaranteed delivery procedures set forth in Section 2 of the Offer to
Purchase.
<PAGE>
Certificate No(s). (if available) ___________________________________________
Number of Shares: ___________________________________________________________
Account Number_______________________________________________________________
Dated ________________________________________________________________ , 1999
Name(s) of Record Holder(s) _________________________________________________
(PLEASE TYPE OR PRINT)
Address(es) _________________________________________________________________
ZIP CODE
Area Code and Tel. No. ______________________________________________________
Signature(s) ________________________________________________________________
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a bank, broker, dealer, credit union, savings association
or other entity that is a member in good standing of the Securities Transfer
Agents Medallion Program, the New York Stock Exchange Medallion Signature
Guarantee Program or the Stock Exchange Medallion Program, (a) represents
that the above named person(s) "own(s)" the Shares tendered hereby within
the meaning of Rule 14e-4 promulgated under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), (b) represents that such tender of
Shares complies with Rule 14e-4 under the Exchange Act, and (c) guarantees
delivery to the Depositary, at one of its addresses set forth above, of
certificates representing the Shares tendered hereby in proper form for
transfer, or confirmation of book-entry transfer of such Shares into the
Depositary's accounts at The Depository Trust Company, in each case with
delivery of a properly completed and duly executed Letter of Transmittal (or
facsimile thereof), and any other required documents, within three Nasdaq
Stock Market trading days after the date hereof.
Name of Firm: _______________________ ____________________________________
AUTHORIZED SIGNATURE
____________________________________
TITLE
Address: ____________________________ Name: ______________________________
PLEASE TYPE OR PRINT
_____________________________________
ZIP CODE Title: _____________________________
AREA CODE AND TELEPHONE NUMBER: _____
DATED:________________________, 1999
NOTE: DO NOT SEND SHARE CERTIFICATES WITH THIS NOTICE. SHARE CERTIFICATES
SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL.
2
<PAGE>
Exhibit (a)(4)
MACKENZIE PARTNERS, INC.
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
EXECUSTAY CORPORATION
AT
$14.00 NET PER SHARE
BY
MI SUBSIDIARY I, INC.
A WHOLLY OWNED SUBSIDIARY OF
MARRIOTT INTERNATIONAL, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT MIDNIGHT,
NEW YORK CITY TIME, ON THURSDAY, FEBRUARY 11, 1999 (THE "EXPIRATION DATE"),
UNLESS THE OFFER IS EXTENDED.
January 12, 1999
To Brokers, Dealers, Commercial Banks,
Trust Companies And Other Nominees:
We have been engaged to act as Information Agent in connection with the
offer by MI Subsidiary I, Inc., a Delaware corporation ("Purchaser") and a
wholly owned subsidiary of Marriott International, Inc., a Delaware
corporation, to purchase all outstanding shares of common stock, par value
$.01 per share (the "Shares"), of ExecuStay Corporation, a Maryland
corporation (the "Company"), at $14.00 per Share, net to the seller in cash,
upon the terms and subject to the conditions set forth in Purchaser's Offer to
Purchase dated January 12, 1999 (the "Offer to Purchase") and the related
Letter of Transmittal (which together constitute the "Offer").
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THE SATISFACTION OR
WAIVER OF CERTAIN CONDITIONS TO THE OBLIGATIONS OF PURCHASER AND THE COMPANY
TO CONSUMMATE THE OFFER, INCLUDING (1) THERE BEING VALIDLY TENDERED BY THE
EXPIRATION DATE AND NOT WITHDRAWN AT LEAST 2,000,000 SHARES AND (2) RECEIPT BY
PURCHASER AND THE COMPANY OF CERTAIN GOVERNMENTAL AND REGULATORY APPROVALS.
For your information and for forwarding to your clients for whom you hold
Shares registered in your name or in the name of your nominee, or who hold
Shares registered in their own names, we are enclosing the following
documents:
1. Offer to Purchase dated January 12, 1999;
<PAGE>
2. Letter of Transmittal to tender Shares for your use and for the
information of your clients. Facsimile copies of the Letter of Transmittal
may be used to tender Shares;
3. Letter to Clients which may be sent to your clients for whose account
you hold Shares in your name or in the name of your nominees, with space
provided for obtaining such clients' instructions with regard to the Offer;
4. Notice of Guaranteed Delivery to be used to accept the Offer if
certificates for Shares are not immediately available or time will not
permit all required documents to reach the Depositary prior to the
Expiration Date (as defined in the Offer to Purchase) or if the procedures
for book-entry transfer, as set forth in the Offer to Purchase, cannot be
completed on a timely basis;
5. The Letter to Stockholders of the Company from Gary R. Abrahams, the
President and Chief Executive Officer of the Company, accompanied by the
Company's Solicitation/Recommendation Statement on Schedule 14D-9.
6. Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9; and
7. Return envelope addressed to First Chicago Trust Company of New York,
as Depositary.
Upon the terms and subject to the satisfaction or waiver (where applicable)
of the conditions of the Offer, Purchaser will purchase, by accepting for
payment, and will pay for, all Shares validly tendered on or prior to the
Expiration Date promptly after the Expiration Date. For purposes of the Offer,
Purchaser will be deemed to have accepted for payment, and thereby purchased,
tendered Shares if, as and when Purchaser gives oral or written notice to the
Depositary of Purchaser's acceptance of such Shares for payment. In all cases,
payment for Shares accepted for payment pursuant to the Offer will be made
only after timely receipt by the Depositary of (i) certificates for Shares or
timely confirmation of a book-entry transfer of such Shares, if such procedure
is available, into the Depositary's account at a Book-Entry Transfer Facility
(as defined in the Offer to Purchase) pursuant to the procedures set forth in
Section 2 of the Offer to Purchase, (ii) the Letter of Transmittal (or
facsimile thereof), properly completed and duly executed, or an Agent's
Message (as defined in the Offer to Purchase) and (iii) any other documents
required by the Letter of Transmittal.
Purchaser will not pay any fees or commissions to any broker or dealer or
other person (other than the Depositary and the Information Agent as described
in the Offer to Purchase) in connection with the solicitation of tenders of
Shares pursuant to the Offer. However, Purchaser will upon request, reimburse
you for customary mailing and handling expenses incurred by you in forwarding
the enclosed materials to your clients.
Purchaser will pay or cause to be paid any stock transfer taxes payable on
the transfer of Shares to it, except as otherwise provided in Instruction 6 of
the enclosed Letter of Transmittal.
YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS AS
PROMPTLY AS POSSIBLE. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT MIDNIGHT,
NEW YORK CITY TIME, ON THURSDAY, FEBRUARY 11, 1999, UNLESS THE OFFER IS
EXTENDED.
In order to take advantage of the Offer, a duly executed and properly
completed Letter of Transmittal and any other required documents should be
sent to the Depositary and certificates representing the tendered Shares
should be delivered, or such Shares should be tendered by book-entry transfer,
all in accordance with the instructions set forth in the Letter of Transmittal
and the Offer to Purchase.
If holders of Shares wish to tender, but it is impracticable for them to
forward their certificates or other required documents prior to the expiration
of the Offer, a tender may be effected by following the guaranteed delivery
procedures specified under Section 2 in the Offer to Purchase.
2
<PAGE>
Any inquiries you may have with respect to the Offer or requests for
additional copies of the enclosed materials should be addressed to the
Information Agent at the address and telephone number set forth on the back
cover page of the enclosed Offer to Purchase.
Very truly yours,
Mackenzie Partners, Inc.
ENCLOSURES
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR
ANY PERSON AS AN AGENT OF PURCHASER, THE DEPOSITARY OR THE INFORMATION AGENT
OR AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY
STATEMENTS ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN
THE DOCUMENTS ENCLOSED AND THE STATEMENTS CONTAINED THEREIN.
3
<PAGE>
Exhibit (a)(5)
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
EXECUSTAY CORPORATION
AT
$14.00 NET PER SHARE
BY
MI SUBSIDIARY I, INC.
A WHOLLY OWNED SUBSIDIARY OF
MARRIOTT INTERNATIONAL, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT MIDNIGHT,
NEW YORK CITY TIME, ON THURSDAY, FEBRUARY 11, 1999,
UNLESS THE OFFER IS EXTENDED.
January 12, 1999
To Our Clients:
Enclosed for your consideration is an Offer to Purchase dated January 12,
1999 and the related Letter of Transmittal (which together constitute the
"Offer") relating to an offer by MI Subsidiary I, Inc., a Delaware corporation
("Purchaser"), and a wholly owned subsidiary of Marriott International, Inc.,
a Delaware corporation ("Marriott"), to purchase all outstanding shares of
common stock, par value $.01 per share (the "Shares"), of ExecuStay
Corporation, a Maryland corporation (the "Company"), at a purchase price of
$14.00 per Share, net to the seller in cash, upon the terms and subject to the
conditions set forth in the Offer. We are the holder of record of Shares held
by us for your account. The Letter of Transmittal is furnished to you for your
information only and cannot be used by you to tender Shares. A tender for such
Shares can be made only by us as the holder of record and pursuant to your
instructions.
We request instructions as to whether you wish to tender any or all of such
Shares held by us for your account, pursuant to the terms and conditions set
forth in the Offer.
Your attention is directed to the following:
1. The tender price is $14.00 per Share, net to the seller in cash.
2. This Offer is being made pursuant to the terms of a Merger Agreement,
dated as of January 6, 1998 (the "Merger Agreement") by and among the
Company, Purchaser and Marriott. The Merger Agreement provides, among other
things, for the making of the Offer by Purchaser, and further provides
that, following the purchase of Shares pursuant to the Offer and promptly
after the satisfaction or waiver of certain conditions, the Company will be
merged with and into Purchaser (the "Merger"). Purchaser will
<PAGE>
continue as the surviving corporation after the Merger and will be a
direct, wholly owned subsidiary of Marriott.
3. The Board of Directors of the Company has approved the Offer, the
Merger and the other transactions contemplated by the Merger Agreement, has
determined that the Offer, the Merger and the other transactions
contemplated by the Merger Agreement are fair to and in the best interests
of the Company's stockholders and recommends that stockholders of the
Company accept the Offer and tender their Shares.
4. The Offer and withdrawal rights will expire at Midnight, New York City
time, on Thursday, February 11, 1999, unless extended.
5. THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THE SATISFACTION OR
WAIVER OF CERTAIN CONDITIONS TO THE OBLIGATIONS OF PURCHASER AND THE
COMPANY TO CONSUMMATE THE OFFER, INCLUDING (1) THERE BEING VALIDLY TENDERED
BY THE EXPIRATION DATE AND NOT WITHDRAWN AT LEAST 2,000,000 SHARES AND (2)
RECEIPT BY PURCHASER AND THE COMPANY OF CERTAIN GOVERNMENTAL AND REGULATORY
APPROVALS.
6. Stockholders who tender Shares will not be obligated to pay brokerage
commissions or, except as set forth in Instruction 6 of the Letter of
Transmittal, transfer taxes on the purchase of Shares by Purchaser pursuant
to the Offer.
If you wish to have us tender any or all of your Shares, please complete,
sign and return the form set forth on the reverse side of this letter. Your
instructions to us should be forwarded in ample time to permit us to submit a
tender on your behalf prior to the expiration of the Offer.
<PAGE>
INSTRUCTIONS WITH RESPECT TO THE OFFER
TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF
COMMON STOCK
OF
EXECUSTAY CORPORATION
AT
$14.00 NET PER SHARE
BY
MI SUBSIDIARY I, INC.
A WHOLLY OWNED SUBSIDIARY OF
MARRIOTT INTERNATIONAL, INC.
The undersigned acknowledge(s) receipt of your letter enclosing the Offer to
Purchase, dated January 12, 1999, of MI Subsidiary I, Inc., a Delaware
corporation ("Purchaser") and a wholly owned subsidiary of Marriott
International, Inc., and the related Letter of Transmittal, relating to shares
of common stock, par value $0.01 per share (the "Shares"), of ExecuStay
Corporation, a Maryland corporation.
This will instruct you to tender to Purchaser the number of Shares indicated
below held by you for the account of the undersigned, on the terms and subject
to the conditions set forth in the Offer to Purchase and Letter of
Transmittal.
NUMBER OF SHARES TO BE TENDERED:
SIGN HERE
___________________ SHARES ______________________________________
Account Number: ______________________ ______________________________________
Signature(s)
______________________________________
Dated: _________________________, 1999
______________________________________
Please print name(s) and address(es)
here
______________________________________
Tax Identification or Social Security
Number
- --------
* Unless otherwise indicated, it will be assumed that all of your Shares held
by us for your account are to be tendered.
<PAGE>
Exhibit (a)(6)
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER.--Social Security numbers have nine digits separated by two hyphens:
i.e. 000-00-0000. Employer identification numbers have nine digits separated
by only one hyphen: i.e. 00-0000000. The table below will help determine the
number to give the payer.
- --------------------------------------------------------------------------------
GIVE THE
FOR THIS TYPE OF ACCOUNT: SOCIAL SECURITY
NUMBER OF--
- --------------------------------------------------------------------------------
1. An individual's account The individual
2. Two or more individuals The actual owner of the account or, if combined
(joint account) funds, the first individual on the account(1)
3. Husband and wife (joint The actual owner of the account or, if joint
account) funds, either person(1)
4. Custodian account of a The minor(2)
minor (Uniform Gift to
Minors Act)
5. Adult and minor (joint The adult or, if the minor is the only
account) contributor, the minor(1)
6. Account in the name of The ward, minor, or incompetent person(3)
guardian or committee for a
designated ward, minor, or
incompetent person
7. a. A revocable savings The grantor-trustee(1)
trust account (in which
grantor is also
trustee)
b. Any "trust" account The actual owner(1)
that is not a legal
or valid trust under
State law
8. Sole proprietorship The owner(4)
account
- --------------------------------------------------------------------------------
GIVE THE EMPLOYER
FOR THIS TYPE OF ACCOUNT: IDENTIFICATION
NUMBER OF --
- --------------------------------------------------------------------------------
9. A valid trust, estate, The legal entity (do not furnish the identifying
or pension number of the personal representative or
trustee unless the legal entity itself is not
designated in the account title) (5)
10. Corporate account The corporation
11. Religious, charitable or The organization
educational organization
account
12. Partnership account held The partnership
in the name of the
business
13. Association, club, or The organization
other tax-exempt
organization
14. A broker or registered The broker or nominee
nominee
15. Account with the The public entity
Department of
Agriculture in the
name of a public entity
(such as a State or
local government,
school district, or
prison) that receives
agricultural program
payments
- --------------------------------------------------------------------------------
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's Social Security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) Show the name of the owner. If the owner does not have an employer
identification number, furnish the owner's social security number.
(5) List first and circle the name of the legal trust, estate, or pension
trust.
NOTE: If no name is circled when there is more than one name, the number will
be considered to be that of the first name listed.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you do not have a taxpayer identification number or you do not know your
number, obtain Form SS-5, Application for a Social Security Number Card (for
resident individuals), Form SS-4, Application for Employer Identification
Number (for businesses and all other entities), or Form W-7 for International
Taxpayer Identification Number (for alien individuals required to file U.S.
tax returns), at an office of the Social Security Administration or the
Internal Revenue Service.
To complete Substitute Form W-9, if you do not have a taxpayer identification
number, write "Applied For" in the space for the taxpayer identification
number in Part 1, sign and date the Form, and give it to the requester.
Generally, you will then have 60 days to obtain a taxpayer identification
number and furnish it to the requester. If the requester does not receive your
taxpayer identification number within 60 days, backup withholding, if
applicable, will begin and will continue until you furnish your taxpayer
identification number to the requester.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include
the following:
. A corporation.
. A financial institution.
. An organization exempt from tax under section 501(a), or an individual re-
tirement plan, or a custodial account under section 403(b)(7).
. The United States or any agency or instrumentality thereof.
. A state, the District of Columbia, a possession of the United States, or
any political subdivision or instrumentality thereof.
. A foreign government or a political subdivision, agency or instrumentality
thereof.
. An international organization or any agency or instrumentality thereof.
. A registered dealer in securities or commodities registered in the United
States or a possession of the United States.
. A real estate investment trust.
. A common trust fund operated by a bank under section 584(a).
. An exempt charitable remainder trust, or a non-exempt trust described in
section 4947(a)(1).
. An entity registered at all times during the tax year under the Investment
Company Act of 1940.
. A foreign central bank of issue.
. Unless otherwise noted herein, all references below to section numbers or
to regulations are references to the Internal Revenue Code and the regula-
tions promulgated thereunder.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
. Payments to nonresident aliens subject to withholding under section 1441.
. Payments to partnerships not engaged in a trade or business in the United
States and which have at least one nonresident partner.
. Payments of patronage dividends where the amount received is not paid in
money.
. Payments made by certain foreign organizations.
. Payments made to a nominee.
Payments of interest not generally subject to backup withholding include the
following:
. Payments of interest on obligations issued by individuals. NOTE: You may
be subject to backup withholding if (i) this interest is $600 or more, and
(ii) the interest is paid in the course of the payer's trade or business
and (iii) you have not provided your correct taxpayer identification num-
ber to the payer.
. Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
. Payments described in section 6049(b)(5) to non-resident aliens.
. Payments on tax-free covenant bonds under section 1451.
. Payments made by certain foreign organizations.
. Payments made to a nominee.
EXEMPT PAYEES DESCRIBED ABOVE SHOULD FILE A SUBSTITUTE FORM W-9 TO AVOID
POSSIBLE ERRONEOUS BACKUP WITHHOLDING. FILE THIS FORM WITH THE PAYER, FURNISH
YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM,
AND RETURN IT TO THE PAYER.
Certain payments other than interest, dividends, and patronage dividends that
are not subject to information reporting are also not subject to backup with-
holding. For details, see the regulations under sections 6041, 6041A(a), 6045,
and 6050A.
PRIVACY ACT NOTICES. Section 6109 requires most recipients of dividends, in-
terest, or other payments to give taxpayer identification numbers to payers
who must report the payments to the IRS. The IRS uses the numbers for identi-
fication purposes and to help verify the accuracy of your tax return. Payers
must be given the numbers whether or not recipients are required to file tax
returns. Payers must generally withhold 31% of taxable interest, dividends,
and certain other payments to a payee who does not furnish a taxpayer identi-
fication number to a payer. Certain penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you
fail to furnish your taxpayer identification number to a payer, you are sub-
ject to a penalty of $50 for each such failure unless your failure is due to
reasonable cause and not to willful neglect.
(2) FAILURE TO REPORT CERTAIN DIVIDEND AND INTEREST PAYMENTS.--If you fail to
include any portion of an includible payment for interest, dividends, or pat-
ronage dividends in gross income and such failure is due to negligence, a pen-
alty of 20% is imposed on any portion of an underpayment attributable to the
failure.
(3) CIVIL PENALTY FOR FALSE STATEMENTS WITH RESPECT TO WITHHOLDING.--If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(4) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--If you falsify certifica-
tions or affirmations, you are subject to criminal penalties including fines
and/or imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.
<PAGE>
Exhibit (a)(7)
This announcement is neither an offer to purchase nor a solicitation of an offer
to sell Shares (as defined below). The Offer (as defined below) is made solely
by the Offer to Purchase, dated January 12, 1999, and the related Letter of
Transmittal, and is being made to all holders of Shares. The Offer is not being
made to (nor will tenders be accepted from or on behalf of) holders of Shares in
any jurisdiction in which the making of the Offer or the acceptance thereof
would not be in compliance with the securities, blue sky or other laws of such
jurisdiction. Purchaser (as defined below) may, in its discretion, however, take
such action as it may deem necessary to make the Offer in any jurisdiction and
extend the Offer to holders of Shares in such jurisdiction. In any jurisdiction
where the securities, blue sky or other laws require the Offer to be made by a
licensed broker or dealer, the Offer shall be deemed to be made on behalf of
Purchaser by or one or more registered brokers or dealers licensed under the
laws of such jurisdiction.
NOTICE OF OFFER TO PURCHASE FOR CASH
ALL ISSUED AND OUTSTANDING SHARES OF
COMMON STOCK
OF
EXECUSTAY CORPORATION
AT
$14.00 PER SHARE
BY
MI SUBSIDIARY I, INC.
A WHOLLY OWNED SUBSIDIARY
OF
MARRIOTT INTERNATIONAL, INC.
MI Subsidiary I, Inc., a Delaware corporation ("Purchaser"), which is a
newly formed, wholly owned subsidiary of Marriott International, Inc., a
Delaware corporation ("Marriott"), is offering to purchase all of the issued and
outstanding shares of common stock, par value $0.01 per share (the "Shares"), of
ExecuStay Corporation, a Maryland corporation (the "Company"), at a price of
$14.00 per Share, net to each tendering stockholder in cash, without interest
(the "Offer Price"), upon the terms and subject to the conditions set forth in
the Offer to Purchase dated January 12, 1999 (the "Offer to Purchase") and in
the related Letter of Transmittal (which, together with the Offer to Purchase,
constitute the "Offer"). Among these conditions is the requirement that at least
2,000,000 Shares be tendered.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT
MIDNIGHT, NEW YORK CITY TIME, ON THURSDAY,
FEBRUARY 11, 1999, UNLESS THE OFFER IS EXTENDED
<PAGE>
The Offer is being made pursuant to the terms of the Merger Agreement,
dated as of January 6, 1999 (the "Merger Agreement"), by and among the Company,
Purchaser and Marriott. The Merger Agreement provides, among other things, for
the making of the Offer, and further provides that, following the purchase of
Shares pursuant to the Offer and promptly after the satisfaction or waiver of
certain other conditions, the Company will be merged with and into Purchaser
(the "Merger"). The Purchaser will continue as the surviving corporation after
the Merger (the "Surviving Corporation"). Immediately before consummation of
the Merger, the Company will provide for the issuance to certain stockholders
(the "Non-Tendering Stockholders") who have entered into stockholder agreements
with Purchaser and Marriott (collectively, the "Stockholder Agreements") shares
of newly-designated non-voting preferred stock (the "Preferred Shares") as
described herein in exchange for the Shares that such Non-Tendering Stockholders
have agreed not to tender. Pursuant to the Stockholder Agreements, the Non-
Tendering Stockholders have agreed not to tender the Shares subject to the
Stockholder Agreement in the Offer and to vote their Shares in favor of the
Merger. At the effective time of the Merger (the "Effective Time"), (i)(a) each
outstanding Preferred Share held by the three senior executive officers (the
"Senior Executives") of the Company will be converted into the right to receive
shares of common stock, $0.01 par value per share, of Marriott ("Marriott
Shares") at the equivalent of $13.00 per Preferred Share and (b) each
outstanding Preferred Share held by two employees of the Company and by certain
other stockholders of the Company will be converted into the right to receive
Marriott Shares at the equivalent of $14.00 per Preferred Share, and (ii) each
outstanding Share (except for Shares owned by Marriott, Purchaser or any
subsidiary of Marriott, Purchaser or the Company) will be converted into the
right to receive the Offer Price, net to the holder in cash, without interest
(the "Cash Merger Consideration"). It is anticipated that no dissenters' rights
will be available in connection with the Merger.
At the Effective Time, all Shares shall be canceled and retired and shall
cease to exist, and each certificate formerly representing any of such Shares
shall thereafter represent only the right to receive the Cash Merger
Consideration.
THE BOARD OF DIRECTORS OF THE COMPANY, HAS UNANIMOUSLY DETERMINED THAT THE
MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER
AND THE MERGER, TAKEN TOGETHER, ARE FAIR TO AND IN THE BEST INTERESTS OF THE
STOCKHOLDERS OF THE COMPANY, HAS APPROVED THE MERGER AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER AND THE MERGER, AND
RECOMMENDS THAT THE STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES
PURSUANT TO THE OFFER.
The Offer is conditioned upon, among other things, the satisfaction or
waiver of certain conditions to the obligations of Purchaser, Marriott and the
Company to consummate the transactions contemplated by the Merger Agreement,
including (i) there being validly tendered by the Expiration Date and not
withdrawn at least 2,000,000 Shares and (ii) receipt by Purchaser, Marriott and
the Company of certain governmental and regulatory approvals and (iii) certain
other conditions. Consumation of the Offer is not subject to any financing
condition.
2
<PAGE>
Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of any such extension
or amendment), Purchaser will accept for payment and pay for all Shares validly
tendered on or prior to the Expiration Date and not withdrawn in accordance with
the provisions set forth in the Offer to Purchase. The term "Expiration Date"
shall mean Midnight, New York City time, on Thursday, February 11, 1999, unless
and until Purchaser, subject to restrictions contained in the Merger Agreement,
shall from time to time have extended the period of time during which the Offer
is open, in which event the term "Expiration Date" shall mean the latest time
and date at which the Offer, as so extended by Purchaser, shall expire.
Purchaser expressly reserves the right, subject to the terms and conditions
of the Merger Agreement, at any time and from time to time to (i) terminate or
amend the Offer, (ii) extend the Offer and postpone acceptance for payment of
any Shares or (iii) waive any condition to completion of the Offer.
Any extension by Purchaser shall be effective by giving oral or written
notice of such extension to First Chicago Trust Company of New York as
depositary (the "Depositary"). During any such extension, all Shares previously
tendered and not withdrawn will remain subject to the Offer, subject to the
rights of a tendering stockholder to withdraw such stockholder's Shares. If
Purchaser extends the Offer, or if Purchaser (whether before or after its
acceptance for payment of Shares) is delayed in its payment for Shares or is
unable to pay for Shares pursuant to the Offer for any reason, then, without
prejudice to Purchaser's rights under the Offer, the Depositary may retain
tendered Shares on behalf of Purchaser, and such Shares may not be withdrawn
except to the extent tendering stockholders are entitled to withdrawal rights as
described in the Offer to Purchase. However, the ability of Purchaser to delay
payment for Shares that Purchaser has accepted for payment is limited by Rule
14e-1(c) under the Securities Exchange Act of 1934, as amended (the "Exchange
Act").
In all cases, payment for Shares tendered and accepted for payment pursuant
to the Offer will be made only after timely receipt by the Depositary of (i) the
certificates representing Shares (or timely book-entry confirmation of the book-
entry transfer of such Shares into the Depositary's account at the Book-Entry
Transfer Facility (as defined in the Offer to Purchase) pursuant to the
procedures set forth in the Offer to Purchase, (ii) the Letter of Transmittal
(or facsimile thereof) properly completed and duly executed, together with any
required signature guarantees, or an Agent's Message (as defined in the Offer to
Purchase), in connection with a book-entry transfer, and (iii) any other
documents required by the Letter of Transmittal at one of its addresses set
forth on the back cover of the Offer to Purchase.
Pursuant to the Merger Agreement, Purchaser may make any changes in the
terms and conditions of the Offer, provided that, unless previously approved by
the Company in writing, Purchaser may not (i) decrease the Offer Price, (ii)
change the form of consideration payable in the Offer, (iii) add conditions to
the Offer in addition to those set forth in the Merger Agreement or (iv) broaden
the scope of those conditions.
Tenders of Shares made pursuant to the Offer will be irrevocable, except
that Shares tendered may be withdrawn at any time prior to the Expiration Date,
and, unless theretofore
3
<PAGE>
accepted for payment and paid for as provided in the Offer to Purchase, may also
be withdrawn at any time on or after March 15, 1999.
For a withdrawal to be effective, a written, telegraphic or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth on the back cover of the Offer to Purchase. Any
notice of withdrawal must specify the name of the person who tendered the Shares
to be withdrawn, the number of Shares to be withdrawn and the name of the
registered holder of the Shares to be withdrawn as set forth on such Share
certificates if different from the name of the person who tendered such Shares.
If Share certificates have been delivered or otherwise identified to the
Depositary, then, prior to the physical release of such Share certificates, the
serial numbers shown on such Share certificates must be furnished to the
Depositary and, unless such Shares have been tendered by an Eligible Institution
(as defined in the Offer to Purchase), the signatures on the notice of
withdrawal must be guaranteed by an Eligible Institution. If Shares have been
delivered pursuant to the procedures for book-entry transfer set forth in the
Offer to Purchase, any notice of withdrawal must specify the name and number of
the account at the Book-Entry Transfer Facility to be credited with such
withdrawn Shares and otherwise comply with the Book-Entry Transfer Facility's
procedures for withdrawal, in which case a notice of withdrawal will be
effective if delivered to the Depositary by any method of delivery described in
the first sentence of this paragraph.
All questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by Purchaser in its sole discretion,
and its determination will be final and binding. None of Purchaser, the
Depositary, the Information Agent or any other person will be obligated to give
notice of any defects or irregularities in any notice of withdrawal, nor shall
any of them incur any liability for failure to give any such notice.
Withdrawals of tenders of Shares may not be rescinded, and any Shares
properly withdrawn will thereafter be deemed not validly tendered for purposes
of the Offer. However, withdrawn Shares may be retendered by following one of
the procedures described in the Offer to Purchase at any time prior to the
Expiration Date.
The Company has provided Purchaser with the Company's stockholder list, a
nonobjecting beneficial owners list, and security position listings for the
purpose of disseminating the Offer to holders of Shares. The Offer to Purchase
and the Letter of Transmittal and other relevant materials will be mailed to
record holders of Shares and furnished to brokers, dealers, commercial banks,
trust companies and similar persons whose names, or the names of whose nominees,
appear on the stockholder list or, if applicable, who are listed as participants
in a clearing agency's security position listing, for subsequent transmittal to
beneficial owners of Shares.
The information required to be disclosed by Rule 14d-6(e)(1)(vii) of the
General Rules and Regulations under the Exchange Act is contained in the Offer
to Purchase and is incorporated herein by reference.
THE OFFER TO PURCHASE AND THE LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION WHICH SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE WITH
RESPECT TO THE OFFER.
4
<PAGE>
Requests for copies of the Offer to Purchase, the Letter of Transmittal and
other materials related to the Offer may be directed to the Information Agent as
set forth below, and copies will be furnished promptly at Purchaser's expense.
Questions or requests for assistance may be directed to the Information Agent.
5
<PAGE>
The Information Agent for the Offer is:
MACKENZIE PARTNERS, INC.
156 FIFTH AVENUE
NEW YORK, NY 10010
(212) 929-5500 (CALL COLLECT)
OR
CALL TOLL FREE (800) 322-2885
January 12, 1999
6
<PAGE>
Exhibit (a)(8)(1)
Wednesday January 6, 3:52 pm Eastern Time
Marriott International to Acquire ExecuStay
MARRIOTT INTL. INC. (NEW) To Acquire ExecuStay Corp.
Jan. 6, 1998, Marriott International Inc. (NYSE:MAR - news) said it signed a
definitive agreement to acquire ExecuStay Corp. (Nasdaq:EXEC - news).
The total acquisition cost is approximately $128 million, including cash,
stock and assumed debt (approximately $13.5 million, net of existing assets).
Under terms of the agreement, the public shareholders of EXEC will receive $14
per share in cash.
<PAGE>
Exhibit (a)(8)(2)
Monday January 11, 4:48 pm Eastern Time
Company Press Release
SOURCE: Marriott International, Inc.
Marriott International Commences Tender Offer for ExecuStay
WASHINGTON, Jan. 11 /PRNewswire/ -- Marriott International, Inc. (NYSE: MAR -
news) said today that it has commenced its tender offer to purchase all
outstanding public shares of common stock of ExecuStay Corporation (Nasdaq: EXEC
- - news) for $14.00 per share. The offer and withdrawal rights will expire at
12:01 a.m. Eastern Standard Time, on Thursday, February 11, 1999, unless
extended by Marriott. The offer is conditioned upon a minimum of two million
shares (which is 70% of the shares outstanding) being tendered.
MacKenzie Partners, Inc. is the Information Agent, and First Chicago Trust
Company of New York is the Issuing and Paying Agent.
Questions concerning the offer and requests for copies of the Offer to Purchase
and related materials should be directed to MacKenzie Partners at 212-929-5500
or 800-322-2885.
MARRIOTT INTERNATIONAL, INC. is a leading worldwide hospitality company, with
over 1,700 operating units in the United States and 53 other countries and
territories. Major businesses include hotels operated and franchised under the
Marriott, Ritz-Carlton, Courtyard, Residence Inn, Fairfield Inn, TownePlace
Suites, SpringHill Suites, Renaissance, and Ramada International brands;
vacation ownership (timeshare) resorts; senior living communities and services;
and food service distribution. The company is headquartered in Washington, D.C.
and has approximately 131,000 employees. In fiscal year 1997, Marriott
International reported total sales of $9.0 billion.
<PAGE>
Exhibit (c)(1)
MERGER AGREEMENT
DATED AS OF JANUARY 6, 1999
AMONG
MARRIOTT INTERNATIONAL, INC.
EXECUSTAY CORPORATION
AND
MI SUBSIDIARY I, INC.
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE 1 THE OFFER ........................................................1
SECTION 1.1. The Offer .....................................................1
SECTION 1.2. Company Action ................................................2
SECTION 1.3. Boards of Directors and Committees; Section 14(f) .............3
ARTICLE 2 THE MERGER .......................................................4
SECTION 2.1. Issuance of Class A and Class B Preferred Stock ...............4
SECTION 2.2. The Merger ....................................................5
SECTION 2.3. Closing of the Merger .........................................5
SECTION 2.4. Effective Time ................................................5
SECTION 2.5. Effects of the Merger .........................................5
SECTION 2.6. Charter and Bylaws ............................................5
SECTION 2.7. Directors .....................................................5
SECTION 2.8. Officers ......................................................6
SECTION 2.9. Conversion of A Shares ........................................6
SECTION 2.10. Conversion of Class B Shares .................................6
SECTION 2.11. Conversion of Shares .........................................6
SECTION 2.12. Payment of Cash Merger Consideration .........................7
SECTION 2.13 Exchange of Certificates ......................................8
SECTION 2.14. Stock Options ................................................10
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY ....................10
SECTION 3.1. Organization and Qualification; Subsidiaries ..................10
SECTION 3.2. Capitalization of the Company and its Subsidiaries ............11
SECTION 3.3. Authority Relative to this Agreement; Recommendation ..........12
SECTION 3.4. SEC Reports; Financial Statements .............................12
SECTION 3.5. Information Supplied ..........................................13
SECTION 3.6. Consents and Approvals; No Violations .........................13
SECTION 3.7. Compliance with Applicable Law ................................14
SECTION 3.8. No Undisclosed Liabilities; Absence of Changes ................14
SECTION 3.9. Litigation ....................................................15
SECTION 3.10. Year 2000 Compliance .........................................15
SECTION 3.11. Employee Benefit Plans, Labor Matters ........................15
SECTION 3.12. Environmental Laws and Regulations ...........................18
SECTION 3.13. Taxes ........................................................18
SECTION 3.14. Properties ...................................................20
SECTION 3.15. Material Contracts and Commitments ...........................20
SECTION 3.16. Intangible Property ..........................................21
SECTION 3.17. Brokers ......................................................22
SECTION 3.18 CERTAIN BUSINESS PRACTICES ....................................22
SECTION 3.19 EMPLOYEES .....................................................22
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF PARENT AND ACQUISITION .........23
SECTION 4.1. Organization ..................................................23
SECTION 4.2. Authority Relative to this Agreement ..........................23
SECTION 4.3. Information Supplied ..........................................23
SECTION 4.4. Financing .....................................................24
SECTION 4.5. Consents and Approvals; No Violations .........................24
SECTION 4.6. SEC Reports; Financial Statements .............................24
i
<PAGE>
ARTICLE 5 COVENANT .........................................................25
SECTION 5.1. Interim Operations ............................................25
SECTION 5.2. Stockholders' Meeting and Issuance of Parent Shares ...........27
SECTION 5.3. Termination of Registration of Shares .........................27
SECTION 5.4. Other Potential Acquirers .....................................28
SECTION 5.5. Access to Information .........................................29
SECTION 5.6. Further Actions ...............................................29
SECTION 5.7. Public Announcements ..........................................30
SECTION 5.8. Employee Benefit Matters ......................................30
SECTION 5.9. Expenses ......................................................30
SECTION 5.10. Notification of Certain Matters ..............................30
SECTION 5.11. Guarantee of Performance .....................................31
SECTION 5.12. Tax Treatment ................................................31
SECTION 5.13 HART-SCOTT-RODINO FILING ......................................31
SECTION 5.14 INDEMNIFICATION, DIRECTORS' AND OFFICERS' INSURANCE ...........31
ARTICLE 6 DISSENTING SHARES; EXCHANGE OF SHARES ............................31
SECTION 6.1 Dissenting Shares ..............................................31
ARTICLE 7 CONDITIONS TO THE OFFER ..........................................32
SECTION 7.1. Conditions to the Offer .......................................34
ARTICLE 8 CONDITIONS TO CONSUMMATION OF THE MERGER .........................34
SECTION 8.1. Conditions to Each Party's Obligations to Effect the Merger ...35
ARTICLE 9 TERMINATION; AMENDMENT; WAIVER ...................................35
SECTION 9.1. Termination ...................................................35
SECTION 9.2. Effect of Termination .........................................36
SECTION 9.3. Fees and Expenses .............................................36
SECTION 9.4. Amendment .....................................................36
SECTION 9.5. Extension; Waiver .............................................36
ARTICLE 10 MISCELLANEOUS ...................................................37
SECTION 10.1. Nonsurvival of Representations and Warranties ................37
SECTION 10.2. Entire Agreement; Assignment .................................37
SECTION 10.3. Validity .....................................................37
SECTION 10.4. Notices ......................................................37
SECTION 10.5. Governing Law ................................................38
SECTION 10.6. Descriptive Headings .........................................38
SECTION 10.7. Parties in Interest ..........................................38
SECTION 10.8. Certain Definitions ..........................................38
SECTION 10.9. Personal Liability ...........................................39
SECTION 10.10. Specific Performance ........................................39
SECTION 10.11. Counterparts ................................................39
ii
<PAGE>
TABLE OF DEFINED TERMS
----------------------
Cross Reference
Term in Agreement Page
- ---- ---------------------- ----
401(k) Plan.................................Section 3.11(h) ............17
Acquisition........................................Preamble .............1
affiliate...................................Section 10.8(a) ............39
Blue Sky Laws...................................Section 3.6 ............13
Board..............................................Preamble .............1
business day................................Section 10.8(b) ............39
Cash Merger Consideration...................Section 2.12(b) .............7
Certificates................................Section 2.12(b) .............7
Class A Exchange Ratio.......................Section 2.9(b) .............6
Class A Holder..................................Section 2.1 .............4
Class A Merger Consideration....................Section 2.9 .............6
Class A Share...................................Section 2.1 .............4
Class B Exchange Ratio......................Section 2.10(b) .............6
Class B Holder..................................Section 2.1 .............4
Class B Merger Consideration................Section 2.10(a) .............6
Class B Share...................................Section 2.1 .............4
Closing Time....................................Section 2.3 .............5
Code........................................Section 3.11(c) ............16
Company............................................Preamble .............1
Company Disclosure Schedule..............Article 3 Preamble ............10
Company Employee Plan.......................Section 3.11(a) ............16
Company IRS Letter..........................Section 3.11(h) ............17
Company Option Plan.........................Section 2.14(a) ............10
Company Personnel...........................Section 3.11(a) ............16
Company Real Assets............................Section 3.14 ............20
Company SEC Reports..........................Section 3.4(a) ............13
Company Securities...........................Section 3.2(a) ............12
Company Stock Option........................Section 2.14(a) ............10
Contracts......................................Section 3.15 ............20
Cure Time....................................Section 7.1(c) ............35
DGCL............................................Section 2.4 .............5
Disclosure Statements...........................Section 3.5 ............13
Dissenting Shares...............................Section 6.1 ............32
Effective Time..................................Section 2.4 .............5
Environmental Claim.........................Section 3.12(b) ............19
Environmental Laws..........................Section 3.12(a) ............18
ERISA.......................................Section 3.11(a) ............16
Exchange Act.................................Section 1.1(a) .............1
Exchange Fund...............................Section 2.13(a) .............8
Governmental Entity.............................Section 3.6 ............13
HSR Act.........................................Section 3.6 ............13
Intangible Property.........................Section 3.16(c) ............22
Knowledge.......................................Section 3.7 ............14
Lien.........................................Section 3.2(b) ............12
Liquidated Damages Amount....................Section 9.3(a) ............37
Maryland Department.............................Section 2.4 .............5
Material Adverse Effect......................Section 3.1(b) ............11
Merger Certificate..............................Section 2.4 .............5
Merger..........................................Section 2.2 .............5
iii
<PAGE>
Merger Fund.................................Section 2.12(a) .............7
MGCL.........................................Section 1.2(a) .............3
Millennial Dates...............................Section 3.10 ............15
Minimum Condition............................Section 1.1(a) .............2
Notice of Superior Proposal..................Section 5.4(b) ............28
NYSE.........................................Section 2.9(b) .............6
Offer..............................................Preamble .............1
Offer Documents..............................Section 1.1(b) .............2
Parent Common Stock..........................Section 2.9(a) .............6
Parent.............................................Preamble .............1
Parent Material Adverse Effect...............Section 4.1(b) ............23
Parent SEC Reports...........................Section 4.6(a) ............24
Payment Agent...............................Section 2.13(a) .............7
Permitted Liens................................Section 3.14 ............20
Per Share Amount...................................Preamble .............1
person......................................Section 10.8(d) ............39
Potential Proposal...........................Section 5.4(a) ............28
Preferred Certificate.......................Section 2.13(b) .............8
Preferred Stock Issuance........................Section 2.1 .............4
Proxy Statement.................................Section 3.5 ............13
Schedule 14D-9...............................Section 1.2(b) .............3
SEC..........................................Section 1.1(b) .............2
Securities Act...............................Section 3.4(a) ............13
Shares..........................................Section 2.1 .............4
stock.......................................Section 10.8(c) ............38
Stockholder Agreements..........................Section 2.1 .............4
Stockholders' Meeting.....................Section 5.2(a)(i) ............27
subsidiary..................................Section 10.8(e) ............39
Superior Proposal............................Section 5.4(b) ............29
Surviving Corporation...........................Section 2.2 .............5
Systems........................................Section 3.10 ............15
Tax......................................Section 3.13(a)(i) ............19
Tax Return..............................Section 3.13(a)(ii) ............19
Tender Offer Purchase Time...................Section 1.3(a) .............3
Third Party Acquisition......................Section 5.4(b) ............29
Third Party..................................Section 5.4(b) ............29
iv
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MERGER AGREEMENT
THIS MERGER AGREEMENT (this "Agreement") dated as of January
6, 1999, is among EXECUSTAY CORPORATION, a Maryland corporation ("Company"),
MARRIOTT INTERNATIONAL, INC., a Delaware corporation ("Parent"), and MI
SUBSIDIARY I, INC., a Delaware corporation and a wholly owned, direct subsidiary
of Parent ("Acquisition").
WHEREAS, the Board of Directors of the Company (the "Board")
has, in light of and subject to the terms and conditions set forth herein, (i)
determined that each of the Offer and the Merger (each as defined below) is
advisable on substantially the terms and conditions set forth herein and is fair
to the stockholders of the Company and in the best interests of such
stockholders and (ii) approved and adopted this Agreement and the transactions
contemplated hereby and resolved to recommend acceptance of the Offer and
approval and adoption by the stockholders of the Company, if necessary, of this
Agreement;
WHEREAS, in furtherance thereof, it is proposed that
Acquisition shall, within five (5) business days after the public announcement
hereof, commence a tender offer (the "Offer") to acquire all of the
publicly-held Shares (defined herein), at a price of $14.00 per Share (such
amount, being hereinafter referred to as the "Per Share Amount"), net to the
seller in cash, less any required withholding of taxes, in accordance with the
terms and subject to the conditions provided herein; and
WHEREAS, in anticipation of consummation of the Merger, it is
proposed that newly-designated Class A Shares and Class B Shares (each as
defined herein) of the Company will be issued to certain stockholders of the
Company in exchange for their Shares;
NOW THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements herein contained and
intending to be legally bound hereby, the Company, Parent and Acquisition hereby
agree as follows:
ARTICLE 1
THE OFFER
SECTION 1.1. The Offer. (a) Provided that this Agreement shall
---------
not have been terminated in accordance with Section 9.1 and none of the events
or conditions set forth in Article 7 shall have occurred and be existing, as
promptly as practicable, but in no event later than five (5) business days after
the public announcement of the execution hereof by the parties, Acquisition
shall commence (within the meaning of Rule 14d-2 under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), the Offer; and Acquisition shall
use reasonable efforts to consummate the Offer, including, without limitation,
engaging an information agent in connection therewith. Acquisition shall accept
for payment Shares which have been validly tendered and not withdrawn pursuant
to the Offer at the earliest time following expiration of the Offer that all
conditions to the Offer shall have been satisfied or waived by Acquisition. The
obligation of Acquisition to accept for payment, purchase and pay for Shares
tendered pursuant to the Offer shall be subject only to the condition that at
least 2,000,000 Shares be validly tendered (the
<PAGE>
"Minimum Condition") and the other conditions set forth in Article 7.
Acquisition expressly reserves the right to increase the price per Share payable
in the Offer or to make any other changes in the terms and conditions of the
Offer (provided that, unless previously approved by the Company in writing, no
change may be made which decreases the Per Share Amount, which changes the form
of consideration to be paid in the Offer, which imposes conditions to the Offer
in addition to those set forth in Article 7 or which broadens the scope of such
conditions). It is agreed that the conditions set forth in Article 7 are for the
sole benefit of Acquisition and may be asserted by Acquisition regardless of the
circumstances giving rise to any such condition (including any action or
inaction by Acquisition) or may be waived by Acquisition, in whole or in part at
any time and from time to time, in its sole discretion. The failure by
Acquisition at any time to exercise any of the foregoing rights shall not be
deemed a waiver of any such right and each such right shall be deemed an ongoing
right which may be asserted at any time and from time to time. Any determination
(which shall be made in good faith) by Acquisition with respect to any of the
foregoing conditions (including, without limitation, the satisfaction of such
conditions) shall be final and binding on the parties. The Per Share Amount
shall be paid net to the seller in cash, less any required withholding of taxes,
upon the terms and subject to such conditions of the Offer. The Company agrees
that no Shares held by the Company or any of its subsidiaries will be tendered
in the Offer. Pursuant to separate agreements, the persons listed in Schedules
2.1(a) and 2.1(b) have agreed not to tender in the Offer the number of Shares
listed in such Schedules without Parent's consent.
(b) As soon as practicable after the date hereof,
Acquisition shall file with the Securities and Exchange Commission (the "SEC") a
Tender Offer Statement on Schedule 14D-1 with respect to the Offer, which shall
include an offer to purchase and form of transmittal letter (together with any
amendments thereof or supplements thereto, collectively the "Offer Documents").
The Offer Documents will comply in all material respects with the provisions of
applicable federal securities laws. The information provided and to be provided
by the Company, Parent a nd Acquisition for use in the Offer Documents shall
not, on the date filed with the SEC and on the date first published or sent or
given to the Company's stockholders, as the case may be, contain any untrue
statement of a material fact nor omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading, provided, however,
that no representation or warranty is made by Parent or Acquisition with respect
to information supplied by the Company or any of its stockholders for inclusion
in the Offer Documents. The Company agrees that information provided by the
Company for inclusion or incorporation in the Offer Documents shall not contain
any untrue statement of a material fact nor omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Parent, Acquisition and the Company each agrees promptly to correct
any information provided by it for use in the Offer Documents if and to the
extent that such information shall have become false or misleading in any
material respect and Acquisition further agrees to take all steps necessary to
cause the Offer Documents as so corrected to be filed with the SEC and to be
disseminated to holders of Shares, in each case as and to the extent required by
applicable federal securities laws.
SECTION 1.2. Company Action. (a) The Company hereby approves
--------------
of and consents to the Offer and the Merger and represents and warrants that the
Board, including all of the independent directors of the Company, at a meeting
duly called and held, has, subject to the terms and conditions set forth herein,
adopted final and binding resolutions, which have not been amended or repealed,
pursuant to which the Board (i) determined that this Agreement and the
transactions contemplated hereby, including the Offer and the Merger, are fair
to, and in the best interests of, the stockholders of the
2
<PAGE>
Company, (ii) declared that the Merger is advisable on substantially the terms
and conditions set forth in such resolutions and approved this Agreement and the
transactions contemplated hereby, including the Offer, the Preferred Stock
Issuance and the Merger, in all respects and such approval constitutes approval
of the Offer, this Agreement and the Merger for purposes of Section 3-105 of the
Maryland General Corporation Law (the "MGCL") and similar provisions of any
other similar state statutes that might be deemed applicable to the transactions
contemplated hereby, (iii) took all action that the Board reasonably believes to
be necessary, including but not limited to all actions required to render the
provisions of Title 3, Subtitles 2, 6 and 7 of the MGCL, "Rights of Objecting
Stockholders", "Special Voting Requirements" and "Voting Rights of Certain
Control Shares", respectively, inapplicable to Parent, Acquisition and the Class
A and Class B Holders, and (iv) recommended that the stockholders of the Company
accept the Offer, tender their Shares thereunder to Acquisition and, if required
by law, approve and adopt this Agreement and the Merger; and in addition that
the Company consents to the inclusion of such recommendation and approval in the
Offer Documents.
(b) The Company hereby agrees to file with the SEC as soon
as practicable after the date hereof a Solicitation/Recommendation Statement on
Schedule 14D-9 pertaining to the Offer (together with any amendments thereof or
supplements thereto, the "Schedule 14D-9") containing the recommendation
described in Section 1.2(a) and to promptly mail the Schedule 14D-9 to the
stockholders of the Company. The Company represents and warrants that the
Schedule 14D-9 will comply in all material respects with the provisions of
applicable federal securities laws and, on the date filed with the SEC and on
the date first published, sent or given to the Company's stockholders, shall not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading, except that no representation is made by the Company with respect to
information supplied by Parent or Acquisition in writing for inclusion in the
Schedule 14D-9. The Company, Parent and Acquisition each agrees promptly to
correct any information provided by it for use in the Schedule 14D-9 if and to
the extent that such information shall have become false or misleading in any
material respect and the Company further agrees to take all steps necessary to
cause the Schedule 14D-9 as so corrected to be filed with the SEC and
disseminated to the holders of Shares, in each case as and to the extent
required by applicable federal securities laws.
(c) In connection with the Offer, the Company will promptly
furnish Parent and Acquisition with mailing labels, security position listings
and any available listing or computer files containing the names and addresses
of the record holders of the Shares as of a recent date and shall furnish
Acquisition with such additional information and assistance (including, without
limitation, updated lists of stockholders, mailing labels and lists of
securities positions) as Acquisition or its agents may reasonably request in
communicating the Offer to the record and beneficial holders of Shares. Subject
to the requirements of applicable law, and except for such steps as are
necessary to disseminate the Offer Documents and any other documents necessary
to consummate the Merger, Parent, Acquisition and their affiliates, associates,
agents and advisors shall use the information contained in any such labels,
listings and files only in connection with the Offer and the Merger, and, if
this Agreement shall be terminated, will deliver to the Company all copies of
such information then in their possession.
SECTION 1.3. Boards of Directors and Committees; Section
-------------------------------------------
14(f). (a) Promptly upon the purchase by Acquisition of Shares following the
- -----
expiration date (as such date may be extended) of, and pursuant to the Offer
(the "Tender Offer Purchase Time") and from time to time thereafter, and subject
to the last sentence of this
3
<PAGE>
Section 1.3(a), Acquisition shall be entitled to designate directors of the
Company constituting a majority of the Board, and the Company shall use its best
efforts to, upon request by Acquisition, promptly, at the Company's election,
either increase the size of the Board (subject to the provisions of Article
Eleventh of the Company's charter) or secure the resignation of such number of
directors as is necessary to enable Acquisition's designees to be elected to the
Board and to cause Acquisition's designees to be so elected and to constitute at
all times after the Tender Offer Purchase Time a majority of the Board. At such
times, and subject to the last sentence of this Section 1.3(a), the Company will
use its best efforts to cause persons designated by Acquisition to constitute
the same percentage as is on the Board of (i) each committee of the Board (other
than any committee of the Board established to take action under this
Agreement), (ii) each board of directors of each subsidiary of the Company and
(iii) each committee of each such board. Notwithstanding the foregoing, the
Company shall use its best efforts to ensure that Gary R. Abrahams, Marc B.
Kaplan and Robert W. Zaugg shall remain members of the Board until the Effective
Time (as defined in Section 2.3 hereof).
(b) The Company's obligation to appoint designees to the
Board shall be subject to Section 14(f) of the Exchange Act and Rule 14f-1
promulgated thereunder. The Company shall promptly take all action required
pursuant to such Section and Rule in order to fulfill its obligations under this
Section 1.3 and shall include in the Schedule 14D-9 such information with
respect to the Company and its officers and directors as is required under such
Section and Rule in order to fulfill its obligations under this Section 1.3.
Acquisition will supply to the Company in writing and be solely responsible for
any information with respect to itself and its nominees, officers, directors and
affiliates required by such Section and Rule.
(c) Following the election or appointment of Acquisition's
designees pursuant to this Section 1.3 and prior to the Effective Time, if there
shall be any directors of the Company who were directors as of the date hereof,
any amendment of this Agreement, any termination of this Agreement by the
Company, any extension by the Company of the time for the performance of any of
the obligations or other acts of Acquisition or Parent or waiver of any of the
Company's rights hereunder, will require the concurrence of a majority of such
directors.
ARTICLE 2
THE MERGER
SECTION 2.1. Issuance of Class A and Class B Preferred Stock.
-----------------------------------------------
Within two days prior to the Closing Time (defined below), the Company will
provide for the issuance ("Preferred Stock Issuance") of (a) shares of a
newly-designated Class A preferred stock, par value $.01 per share (individually
a "Class A Share" and collectively, the "Class A Shares"), to the persons listed
on Schedule 2.1(a) hereto (the "Class A Holders"), on a share-for-share basis in
exchange for a certain number (as set forth in the applicable Stockholder
Agreement by and between Parent and Acquisition, on one hand, and Class A
Holders and the Class B Holders, respectively, on the other hand, dated as of
January 6, 1999, each referred to herein as a "Stockholder Agreement") of the
issued and outstanding shares of common stock, par value $.01 per share, of the
Company (individually a "Share" and collectively, the "Shares"), owned of record
or beneficially by such persons, and (b) shares of a newly-designated Class B
preferred stock, par value $.01 per share (individually a "Class B Share" and
collectively, the "Class B Shares"), to the persons listed on Schedule 2.1(b)
hereto (the "Class B Holders"), on a share-for-share basis in exchange for a
certain number (as set forth in the applicable Stockholder Agreement) of the
issued and outstanding Shares owned of record or beneficially by such
4
<PAGE>
persons. The Class A Shares and the Class B Shares shall have no voting rights,
but shall have the same rights to dividends, distributions and other economic
benefits (other than a liquidation preference as to par value) as the Shares.
Except as to the Shares so exchanged by the Class A Holders and the Class B
Holders, all the Shares will remain issued and outstanding. Outstanding but
unexercised options to purchase Shares held by the Class A Holders and the Class
B Holders will be treated in accordance with Section 2.14.
SECTION 2.2. The Merger. At the Effective Time (as defined
----------
below) and upon the terms and subject to the conditions of this Agreement and in
accordance with the MGCL, the Company shall be merged with and into Acquisition
(the "Merger"). Following the Merger, Acquisition shall continue as the
surviving corporation (the "Surviving Corporation") and the separate corporate
existence of the Company shall cease. Parent, as the sole stockholder of
Acquisition, hereby approves this Agreement, the Merger and the other
transactions contemplated hereby.
SECTION 2.3. Closing of the Merger. The closing of the Merger
---------------------
will take place at a time (the "Closing Time") and on a date to be specified by
the parties, which shall be no later than the second business day after
satisfaction of the latest to occur of the conditions set forth in Article 8 at
the offices of Gibson, Dunn & Crutcher LLP, 1050 Connecticut Avenue, N.W.,
Washington, D.C. 20036, unless another time, date or place is agreed to in
writing by the parties hereto.
SECTION 2.4. Effective Time. Subject to the terms and
--------------
conditions set forth in this Agreement, Articles of Merger and a Certificate of
Merger or Certificate of Ownership and Merger, if applicable (the foregoing,
collectively, "Merger Certificate") shall be duly executed and acknowledged by
Acquisition and the Company and thereafter delivered at the Closing Time (as
defined in Section 2.3) to the State Department of Assessments and Taxation of
Maryland (the "Maryland Department") and the Secretary of State of the State of
Delaware for filing pursuant to the MGCL and the Delaware General Corporation
Law (the "DGCL"), respectively. The Merger shall become effective at such time
as a properly executed and certified copy of the Merger Certificate is duly
accepted for record (i) by the Maryland Department pursuant to the MGCL, and
(ii) by the Secretary of State of the State of Delaware for filing pursuant to
the DGCL, or such later time as Acquisition and the Company may agree upon and
set forth in the Merger Certificate (not exceeding 30 days after the Merger
Certificate is accepted for record; the time the Merger becomes effective being
referred to herein as the "Effective Time").
SECTION 2.5. Effects of the Merger. The Merger shall have the
---------------------
effects set forth in the MGCL and the DGCL. Without limiting the generality of
the foregoing and subject thereto at the Effective Time, all the properties,
rights, privileges, powers and franchises of the Company and Acquisition shall
vest in the Surviving Corporation and all debts, liabilities and duties of the
Company and Acquisition shall become the debts, liabilities and duties of the
Surviving Corporation.
SECTION 2.6. Charter and Bylaws. The Certificate of
------------------
Incorporation of Acquisition in effect at the Effective Time shall be the
charter of the Surviving Corporation until amended in accordance with applicable
law. The Bylaws of Acquisition in effect at the Effective Time shall be the
Bylaws of the Surviving Corporation until amended in accordance with applicable
law.
SECTION 2.7. Directors. The directors of Acquisition at the
---------
Effective Time shall be the initial directors of the Surviving Corporation, each
to hold office in accordance with the charter and Bylaws of the Surviving
Corporation until the next annual
5
<PAGE>
meeting of stockholders and until each such director's successor is duly elected
or appointed and qualified.
SECTION 2.8. Officers. The officers of the Company at the
--------
Effective Time shall be the initial officers of the Surviving Corporation, each
to hold office in accordance with the charter and Bylaws of the Surviving
Corporation until such officer's successor is duly elected or appointed and
qualified.
SECTION 2.9. Conversion of Class A Shares.
----------------------------
(a) At the Effective Time, each Class A Share issued and
outstanding immediately prior to the Effective Time shall, by virtue of the
Merger and without any action on the part of Acquisition, the Company or the
holder thereof, be converted into and shall become a number of fully paid and
nonassessable shares of common stock, $.01 par value per share, of Parent
("Parent Common Stock") equal to the Class A Exchange Ratio (as defined below)
(the "Class A Merger Consideration"). Notwithstanding the foregoing if, between
the date of this Agreement and the Effective Time, the outstanding shares of
Parent Common Stock or the Shares shall have been changed into a different
number of shares or a different class by reason of any stock dividend,
subdivision, reclassification, recapitalization, split, combination or exchange
of shares, then the exchange ratio contemplated by the Merger shall be
correspondingly adjusted to reflect such stock dividend, subdivision,
reclassification, recapitalization, split, combination or exchange of shares.
(b) The "Class A Exchange Ratio" is 0.4484, which represents
a fraction, the numerator of which is 13 and the denominator of which is the
average of the closing prices for Parent Common Stock as reported on the New
York Stock Exchange (the "NYSE") Composite Transactions reporting system for the
10 full business days prior to the date hereof.
SECTION 2.10. Conversion of Class B Shares.
----------------------------
(a) At the Effective Time, each Class B Share issued and
outstanding immediately prior to the Effective Time shall, by virtue of the
Merger and without any action on the part of Acquisition, the Company or the
holder thereof, be converted into and shall become a number of fully paid and
nonassessable shares of Parent Common Stock equal to the Class B Exchange Ratio
(as defined below) (the "Class B Merger Consideration"). Notwithstanding the
foregoing if, between the date of this Agreement and the Effective Time, the
outstanding shares of Parent Common Stock or the Shares shall have been changed
into a different number of shares or a different class by reason of any stock
dividend, subdivision, reclassification, recapitalization, split, combination or
exchange of shares, then the exchange ratio contemplated by the Merger shall be
correspondingly adjusted to reflect such stock dividend, subdivision,
reclassification, recapitalization, split, combination or exchange of shares.
(b) The "Class B Exchange Ratio" is 0.4829, which represents
a fraction, the numerator of which is 14 and the denominator of which is the
average of the closing prices for Parent Common Stock as reported on the NYSE
Composite Transactions reporting system for the 10 full business days prior to
the date hereof.
SECTION 2.11. Conversion of Shares.
--------------------
(a) At the Effective Time, each Share issued and outstanding
immediately prior to the Effective Time (other than (i) Shares held by any of
the
6
<PAGE>
Company's subsidiaries and (ii) Shares held by Parent, Acquisition or any other
subsidiary of Parent) shall, by virtue of the Merger and without any action on
the part of Acquisition, the Company or the holder thereof, be converted into
and shall become the right to receive the Per Share Amount in cash, without
interest (the "Cash Merger Consideration"). Notwithstanding the foregoing, if
between the date of this Agreement and the Effective Time, the Shares shall have
been changed into a different number of shares or a different class by reason of
any stock dividend, subdivision, reclassification, recapitalization, split,
combination or exchange of shares, then the Cash Merger Consideration
contemplated by the Merger shall be correspondingly adjusted to reflect such
stock dividend, subdivision, reclassification, recapitalization, split,
combination or exchange of shares.
(b) At the Effective Time, each Share held by Parent,
Acquisition or any subsidiary of Parent, Acquisition or the Company immediately
prior to the Effective Time shall, by virtue of the Merger and without any
action on the part of Acquisition, the Company or the holder thereof, be
canceled and retired and will cease to exist and no payment shall be made with
respect thereto.
SECTION 2.12. Payment of Cash Merger Consideration.
------------------------------------
(a) As of the Effective Time, Acquisition shall deposit with
such agent or agents as may be appointed by Parent and Acquisition (the "Payment
Agent") for the benefit of the holders of Shares in cash the aggregate amount
necessary to pay the Cash Merger Consideration (such cash is hereinafter
referred to as the "Merger Fund") payable pursuant to Section 2.11 in exchange
for outstanding Shares.
(b) As soon as reasonably practicable after the Effective
Time, the Payment Agent shall mail to each holder of record of a certificate or
certificates which immediately prior to the Effective Time represented
outstanding Shares (the "Certificates") whose shares were converted into the
right to receive the Cash Merger Consideration pursuant to Section 2.11: (i) a
letter of transmittal (which shall specify that delivery shall be effected and
risk of loss and title to the Certificates shall pass only upon delivery of the
Certificates to the Payment Agent and shall be in such form and have such other
provisions as Parent and the Company may reasonably specify) and (ii)
instructions on how to surrender the Certificates in exchange for the Cash
Merger Consideration. Upon surrender to the Payment Agent of a Certificate for
cancellation, together with such letter of transmittal duly executed, the holder
of such Certificate shall be entitled to receive in exchange therefor a check
representing the Cash Merger Consideration which such holder has the right to
receive pursuant to the provisions of this Article 2 and the Certificate so
surrendered shall forthwith be canceled. In the event of a transfer of ownership
of Shares which is not registered in the transfer records of the Company,
payment of the Cash Merger Consideration may be made to a transferee if the
Certificate representing such Shares is presented to the Payment Agent
accompanied by all documents required to evidence and effect such transfer and
by evidence that any applicable stock transfer taxes have been paid. Until
surrendered as contemplated by this Section 2.12, each Certificate shall be
deemed at any time after the Effective Time to represent only the right to
receive upon such surrender the Cash Merger Consideration as contemplated by
this Section 2.12.
(c) In the event that any Certificate shall have been lost,
stolen or destroyed, the Payment Agent shall issue in exchange therefor, upon
the making of an affidavit of that fact by the holder thereof, such Cash Merger
Consideration as may be required pursuant to this Agreement; provided, however,
that Acquisition or its Payment Agent may, in its discretion, require the
delivery of a suitable bond or indemnity.
7
<PAGE>
(d) All Cash Merger Consideration paid upon the surrender
for exchange of Shares in accordance with the terms hereof shall be deemed to
have been paid in full satisfaction of all rights pertaining to such Shares;
subject, however, to the Surviving Corporation's obligation to pay any dividends
or make any other distributions with a record date prior to the Effective Time
which may have been declared or made by the Company on such Shares in accordance
with the terms of this Agreement, or prior to the date hereof and which remain
unpaid at the Effective Time, and there shall be no further registration of
transfers on the stock transfer books of the Surviving Corporation of the Shares
which were outstanding immediately prior to the Effective Time. If after the
Effective Time Certificates are presented to the Surviving Corporation for any
reason they shall be canceled and exchanged as provided in this Article 2.
(e) Any portion of the Merger Fund which remains
undistributed to the stockholders of the Company for six months after the
Effective Time shall be delivered to Parent upon demand and any stockholders of
the Company who have not theretofore complied with this Article 2 shall
thereafter look only to Parent for payment of their claim for the Cash Merger
Consideration.
(f) Neither Acquisition nor the Company shall be liable to
any holder of Shares for cash from the Merger Fund delivered to a public
official pursuant to any applicable abandoned property, escheat or similar law.
SECTION 2.13 Exchange of Certificates.
------------------------
(a) From time to time following the Effective Time, as
required by subsections (b) and (c) below, Parent shall deliver to the Surviving
Corporation for the benefit of the holders of Class A Shares and Class B Shares
for exchange in accordance with this Article 2 through the Surviving
Corporation: (i) certificates representing the appropriate number of shares of
Parent Common Stock and (ii) cash to be paid in lieu of fractional shares of
Parent Common Stock (such shares of Parent Common Stock and such cash are
hereinafter referred to as the "Exchange Fund") issuable pursuant to Sections
2.9 and 2.10 in exchange for outstanding Class A Shares and Class B Shares,
respectively.
(b) As soon as reasonably practicable after the Effective
Time, the Surviving Corporation shall mail to each holder of a certificate or
certificates (each a "Preferred Certificate") which immediately prior to the
Effective Time represented outstanding Class A Shares or Class B Shares whose
shares were converted into the right to receive shares of Parent Common Stock
pursuant to Section 2.9 or 2.10: (i) a letter of transmittal (which shall
specify that delivery shall be effected and risk of loss and title to the
Preferred Certificates shall pass only upon delivery of the Preferred
Certificates to the Surviving Corporation and shall be in such form and have
such other provisions as Parent and the Company may reasonably specify) and (ii)
instructions for use in effecting the surrender of the Preferred Certificates in
exchange for certificates representing shares of Parent Common Stock. Upon
surrender to the Surviving Corporation of a Preferred Certificate for
cancellation, together with such letter of transmittal duly executed, the holder
of such Preferred Certificate shall be entitled to receive in exchange therefor
a certificate representing that number of whole shares of Parent Common Stock
and, if applicable, a check representing the cash consideration to which such
holder may be entitled on account of a fractional share of Parent Common Stock
which such holder has the right to receive pursuant to the provisions of this
Article 2 and the Preferred Certificate so surrendered shall forthwith be
canceled. In the event of a transfer of ownership of Class A or Class B Shares
which are not registered in the transfer records of the Company, a certificate
representing the proper number of shares of Parent Common
8
<PAGE>
Stock may be issued to a transferee if the Preferred Certificate representing
such Class A Shares or Class B Shares is presented to the Surviving Corporation
accompanied by all documents required to evidence and effect such transfer and
by evidence that any applicable stock transfer taxes have been paid. Until
surrendered as contemplated by this Section 2.13, each Preferred Certificate
shall be deemed at any time after the Effective Time to represent only the right
to receive upon such surrender the certificate representing shares of Parent
Common Stock and cash in lieu of any fractional shares of Parent Common Stock as
contemplated by this Section 2.13.
(c) No dividends or other distributions declared or made
after the Effective Time with respect to Parent Common Stock with a record date
after the Effective Time shall be paid to the holder of any unsurrendered
Preferred Certificate with respect to the shares of Parent Common Stock
represented thereby and no cash payment in lieu of fractional shares shall be
paid to any such holder pursuant to Section 2.13(f) until the holder of record
of such Preferred Certificate shall surrender such Preferred Certificate.
Subject to the effect of applicable laws, following surrender of any such
Preferred Certificate there shall be paid to the record holder of the
certificates representing whole shares of Parent Common Stock issued in exchange
therefor without interest (i) at the time of such surrender the amount of any
cash payable in lieu of a fractional share of Parent Common Stock to which such
holder is entitled pursuant to Section 2.13(f) and the amount of dividends or
other distributions with a record date after the Effective Time theretofore paid
with respect to such whole shares of Parent Common Stock and (ii) at the
appropriate payment date the amount of dividends or other distributions with a
record date after the Effective Time but prior to surrender and a payment date
subsequent to surrender payable with respect to such whole shares of Parent
Common Stock.
(d) In the event that any Preferred Certificate shall have
been lost, stolen or destroyed, the Surviving Corporation shall issue in
exchange therefor, upon the making of an affidavit of that fact by the holder
thereof, certificates representing such shares of Parent Common Stock and cash
in lieu of fractional shares if any as may be required pursuant to this
Agreement provided, however, that Parent or its Surviving Corporation may, in
its discretion, require the delivery of a suitable bond or indemnity.
(e) All shares of Parent Common Stock issued upon the
surrender for exchange of Preferred Certificates in accordance with the terms
hereof (including any cash paid pursuant to Section 2.13(c) or 2.13(f)) shall be
deemed to have been issued in full satisfaction of all rights pertaining to such
Class A Shares or Class B Shares; subject, however, to the Surviving
Corporation's obligation to pay any dividends or make any other distributions
with a record date prior to the Effective Time which may have been declared or
made by the Company on such Class A Shares or Class B Shares in accordance with
the terms of this Agreement, and which remain unpaid at the Effective Time, and
there shall be no further registration of transfers on the stock transfer books
of the Surviving Corporation of the Class A Shares or Class B Shares which were
outstanding immediately prior to the Effective Time. If after the Effective Time
Preferred Certificates are presented to the Surviving Corporation for any reason
they shall be canceled and exchanged as provided in this Article 2.
(f) No fractions of a share of Parent Common Stock shall be
issued in the Merger but in lieu thereof each holder of Class A Shares or Class
B Shares otherwise entitled to a fraction of a share of Parent Common Stock
shall upon surrender of his or her Preferred Certificate or Preferred
Certificates be entitled to receive an amount of cash (without interest)
determined by multiplying the closing price for Parent Common Stock as reported
on the NYSE Composite Transactions reporting system on the business day five
days prior to the Effective Time by the fractional share interest to which such
holder
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would otherwise be entitled. The parties acknowledge that payment of the cash
consideration in lieu of issuing fractional shares was not separately bargained
for consideration but merely represents a mechanical rounding off for purposes
of simplifying the corporate and accounting complexities which would otherwise
be caused by the issuance of fractional shares.
(g) Neither Parent nor the Company shall be liable to any
holder of Class A Shares or Class B Shares or Parent Common Stock as the case
may be for such shares (or dividends or distributions with respect thereto) or
cash from the Exchange Fund delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law.
SECTION 2.14. Stock Options.
-------------
(a) At the Effective Time, each outstanding option to
purchase Shares (a "Company Stock Option" or collectively "Company Stock
Options") issued pursuant to the Company's 1997 Incentive and Stock Option Plan
("Company Option Plan") shall vest in full and the Surviving Corporation shall
pay to the holder of each outstanding Company Stock Option an amount equal to
the excess, if any, of the Per Share Amount over the exercise price per Share of
such Company Stock Option, less the amount of Taxes (defined below) required to
be withheld under Federal, state or local laws and regulations multiplied by the
number of Shares subject to such Company Stock Option. If and to the extent
required by the terms of the Company Option Plan or the terms of any Company
Stock Option granted thereunder, the Company shall cooperate with Parent and
Acquisition in obtaining the consent of each holder of outstanding Company Stock
Options to the foregoing treatment of such Company Stock Options and to take any
other action necessary to effectuate the foregoing provisions. The Surviving
Corporation may require each such holder to execute such a consent, in form and
substance reasonably satisfactory to the Surviving Corporation.
(b) Except as provided herein or as otherwise agreed to by
the parties and to the extent permitted by the Company Option Plan, the Company
Option Plan shall terminate as of the Effective Time and any rights under any
provisions under the Company Option Plan and any awards issued thereunder shall
be canceled as of the Effective Time.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth on the Disclosure Schedule previously
delivered by the Company to Parent (the "Company Disclosure Schedule"), the
Company hereby represents and warrants to each of Parent and Acquisition, as of
the date hereof and as of the Tender Offer Purchase Time as follows:
SECTION 3.1. Organization and Qualification; Subsidiaries.
--------------------------------------------
(a) Section 3.1 of the Company Disclosure Schedule
identifies each subsidiary of the Company as of the date hereof and its
respective jurisdiction of incorporation or organization, as the case may be.
Each of the Company and each of its subsidiaries is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization as set forth in Section 3.1 of the Company
Disclosure Schedule and has all requisite power and authority to own lease and
operate its properties and to carry on its businesses as now being conducted.
The Company has heretofore provided Acquisition or Parent with access to
accurate and complete copies of
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the charter and Bylaws (or similar governing documents), as currently in effect,
of the Company and its subsidiaries.
(b) Except as disclosed in Section 3.1(b) of the Company Disclosure
Schedule, each of the Company and its subsidiaries is duly qualified or licensed
and in good standing to do business in each jurisdiction in which the property
owned, leased or operated by it or the nature of the business conducted by it
makes such qualification or licensing necessary, except in such jurisdictions
where the failure to be so duly qualified or licensed and in good standing would
not have a Material Adverse Effect (as defined below) on the Company. When used
in connection with the Company or its subsidiaries, the term "Material Adverse
Effect" means any change or effect (i) that is materially adverse to the
business, growth over the next four years in "EBITDA" (earnings before interest
expense, income taxes, depreciation and amortization), properties, financial
condition or results of operations of the Company and its subsidiaries, taken as
whole, or (ii) that would materially impair the ability of the Company to
consummate the transactions contemplated hereby.
SECTION 3.2. Capitalization of the Company and its Subsidiaries.
--------------------------------------------------
(a) As of the date hereof and as of the Tender Offer Purchase Time,
the authorized stock of the Company consists of 45,000,000 Shares, of which, as
of September 30, 1998, 8,235,806 Shares were issued and outstanding, and
5,000,000 shares of preferred stock, par value $.01 per share, no shares of
which are outstanding. All of the outstanding Shares have been validly issued
and are fully paid, nonassessable and free of preemptive rights. As of October
31, 1998, approximately 356,500 Shares were reserved for issuance and issuable
upon or otherwise deliverable in connection with the exercise of outstanding
Company Stock Options issued pursuant to the Company Option Plan referred to in
Section 2.14(a). Between September 30, 1998 and the date hereof, no shares of
the Company's stock have been issued other than pursuant to Company Stock
Options, and between October 31, 1998 and the date hereof no stock options have
been granted. Except as set forth above and in Sections 3.2(a) and 3.19 of the
Company Disclosure Schedule, as of the date hereof, there are issued, reserved
for issuance, or outstanding (i) no shares of stock or other voting securities
of the Company, (ii) no securities of the Company or its subsidiaries
convertible into or exchangeable for shares of stock or voting securities of the
Company, (iii) no options or other rights to acquire from the Company or its
subsidiaries and, except as described in the Company SEC Reports (as defined
below), no obligations of the Company or its subsidiaries to issue any stock,
voting securities or securities convertible into or exchangeable for stock or
voting securities of the Company, (iv) no bonds, debentures, notes or other
indebtedness or obligations of the Company or any of its subsidiaries entitling
the holders thereof to have the right to vote (or which are convertible into, or
exercisable or exchangeable for, securities entitling the holders thereof to
have the right to vote) with the stockholders of the Company or any of its
subsidiaries on any matter, and (v) no equity equivalent interests in the
ownership or earnings of the Company or its subsidiaries or other similar rights
(collectively "Company Securities"). As of the date hereof, other than the
provisions of Section 2.1, there are no outstanding obligations of the Company
or its subsidiaries (absolute, contingent or otherwise) to repurchase, redeem or
otherwise acquire any Company Securities. There are no Shares outstanding
subject to rights of first refusal of the Company, nor are there any pre-emptive
rights with respect to any Shares. Other than this Agreement, there are no
stockholder agreements, voting trusts or other agreements or understandings to
which the Company is a party or by which it is bound relating to the voting or
registration of any shares of stock of the Company.
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(b) Except as disclosed in Section 3.2(b) of the Company Disclosure
Schedule, all of the outstanding stock of the Company's subsidiaries is owned by
the Company, directly or indirectly, free and clear of any Lien (as defined
below) or any other limitation or restriction (including any restriction on the
right to vote or sell the same except as may be provided as a matter of law).
There are no securities of the Company or its subsidiaries convertible into or
exchangeable for, no options or other rights to acquire from the Company or its
subsidiaries and no other contract, understanding, arrangement or obligation
(whether or not contingent) providing for, the issuance or sale, directly or
indirectly, of any stock or other ownership interests in, or any other
securities of any subsidiary of, the Company. There are no outstanding
contractual obligations of the Company or its subsidiaries to repurchase, redeem
or otherwise acquire any outstanding shares of capital stock or other ownership
interests in any subsidiary of the Company. For purposes of this Agreement,
"Lien" means, with respect to any asset (including without limitation any
security), any mortgage, lien, pledge, charge, security interest or encumbrance
of any kind in respect of such asset.
(c) The Shares constitute the only class of equity securities of the
Company or its subsidiaries registered or required to be registered under the
Exchange Act.
SECTION 3.3. Authority Relative to this Agreement; Recommendation.
----------------------------------------------------
The Company has all necessary corporate power and authority to execute
and deliver this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
Board and no other corporate proceedings on the part of the Company are
necessary to authorize this Agreement or to consummate the transactions
contemplated hereby except, if required by law, the approval and adoption of
this Agreement and the Merger by the holders of the outstanding Shares. This
Agreement has been duly and validly executed and delivered by the Company and
constitutes a valid, legal and binding agreement of the Company enforceable
against the Company in accordance with its terms, except as such enforceability
may be limited by any applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the enforcement of creditors' rights
generally, and except as the availability of equitable remedies may be limited
by the application of general principles of equity (regardless of whether such
equitable principle is applied in a proceeding at law or in equity).
The Board has duly and validly approved, and taken all corporate
actions required to be taken by the Board (including but not limited to all
actions the Board reasonably believes to be required to render the provisions of
Title 3, Subtitles 2, 6 and 7 of the MGCL, "Special Voting Requirements" and
"Voting Rights of Certain Control Shares", respectively, inapplicable to Parent
and Acquisition) for the consummation of, the transactions contemplated hereby,
including the Offer and the acquisition of the Shares pursuant thereto, the
Preferred Stock Issuance and the Merger.
SECTION 3.4. SEC Reports; Financial Statements.
---------------------------------
(a) The Company has filed all required forms, reports and documents
("Company SEC Reports") with the SEC since August 27, 1997, each of which has
complied in all material respects with all applicable requirements of the
Securities Act of 1933, as amended (the "Securities Act"), and the Exchange Act,
each as in effect on the dates such forms, reports and documents were filed.
None of such Company SEC Reports, including, without limitation, any financial
statements or schedules included or
12
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incorporated by reference therein, contained when filed any untrue statement of
a material fact or omitted to state a material fact required to be stated or
incorporated by reference therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The audited consolidated financial statements of the Company
included in the Company SEC Reports fairly present in conformity with GAAP
(except as may be indicated in the notes thereto or, in the case of unaudited
consolidated quarterly statements, as permitted by Form 10-Q of the SEC) the
consolidated financial position of the Company and its consolidated subsidiaries
as of the dates thereof and their consolidated results of operations and changes
in financial position for the periods then ended.
(b) The Company has heretofore made available or promptly will make
available to Acquisition or Parent a complete and correct copy of any amendments
or modifications which are required to be filed with the SEC but have not yet
been filed with the SEC to agreements, documents or other instruments which
previously had been filed by the Company with the SEC pursuant to the Exchange
Act.
SECTION 3.5. Information Supplied. None of the information supplied or
--------------------
to be supplied by the Company for inclusion or incorporation by reference in the
Offer Documents, Schedule 14D-9, any other tender offer materials, Schedule 14A
or 14C, or the proxy statement or information statement ("Proxy Statement")
relating to any meeting of the Company's stockholders to be held in connection
with the Merger (all of the foregoing documents, collectively, the "Disclosure
Statements") will, at the date each and any of the Disclosure Statements is
mailed to stockholders of the Company and at the time of the meeting of
stockholders of the Company to be held, if necessary, in connection with the
Merger, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading. The Disclosure Statements will comply as to form in all material
respects with all provisions of applicable law. None of the information supplied
by the Company in writing for inclusion in the Disclosure Statements or provided
by the Company in the Schedule 14D-9 will, at the respective times that any
Disclosure Statement and the Schedule 14D-9 or any amendments thereof or
supplements thereto are filed with the SEC and are first published or sent or
given to holders of Shares, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading.
SECTION 3.6. Consents and Approvals; No Violations. Except for
-------------------------------------
filings, permits, authorizations, consents and approvals as may be required
under, and other applicable requirements of, the Exchange Act, state securities
laws ("Blue Sky Laws"), the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act"), and the filing and recordation and acceptance
for record of the Merger Certificate as required by the MGCL and the DGCL,
respectively, no filing with or notice to and no permit, authorization, consent
or approval of any court or tribunal, or administrative governmental or
regulatory body, agency or authority (a "Governmental Entity") is necessary for
the execution and delivery by the Company of this Agreement or the consummation
by the Company of the transactions contemplated hereby, except where the failure
to obtain such permits, authorizations, consents or approvals or to make such
filings or give such notice would not have a Material Adverse Effect. Neither
the execution, delivery and performance of this Agreement by the Company nor the
consummation by the Company of the transactions contemplated hereby will (i)
conflict with or result in any breach of any provision of the respective charter
or Bylaws (or similar governing documents) of the Company or any of its
subsidiaries, (ii) result in a violation or
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breach of or constitute (with or without due notice or lapse of time or both) a
default (or give rise to any right of termination, amendment, cancellation or
acceleration or Lien) under any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, lease, license, contract, agreement or other
instrument or obligation to which the Company or any of its subsidiaries is a
party or by which any of them or any of their respective properties or assets
may be bound or (iii) conflict with or violate any order, writ, injunction,
decree, law, statute, rule or regulation applicable to the Company or any of its
subsidiaries or any of their respective properties or assets except, in the case
of (ii) or (iii), for violations, breaches or defaults which would not have a
Material Adverse Effect.
SECTION 3.7. Compliance with Applicable Law. Neither the Company nor
------------------------------
any of its subsidiaries is in conflict with, or in default or violation of, (a)
its respective charter or certificate of incorporation, bylaws, or other charter
or organization documents, (b) to the Company's Knowledge (defined below), any
law, statute, rule, regulation, order, judgment, writ, injunction or decree
applicable to the Company or any of its subsidiaries or any of their respective
properties or assets, or (c) any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which the Company or any of its subsidiaries is a party or by which the
Company or any of its subsidiaries or any property or asset of the Company or
any of its subsidiaries may be bound or affected, the effect of which conflict,
default or violation, either individually or in the aggregate, would be
reasonably likely to be a Material Adverse Effect. To the Company's Knowledge,
the Company and its subsidiaries hold all material licenses, permits, approvals
and other authorizations of Governmental Entities, and are in substantial
compliance with all applicable laws and governmental regulations in connection
with their businesses as now being conducted. For the purposes hereof, the term
"Knowledge" with respect to the Company means the actual knowledge of any of the
Class A Holders, Benny E. Anderson or any of the managers of the regional
offices of the Company.
SECTION 3.8. No Undisclosed Liabilities; Absence of Changes. Except to
----------------------------------------------
the extent publicly disclosed in the Company's SEC Reports or in the Company
Disclosure Schedule, as of September 30, 1998, none of the Company or any of its
subsidiaries had any liabilities or obligations of any nature, whether or not
accrued, contingent or otherwise, that would be required by GAAP to be reflected
on a consolidated balance sheet of the Company and its subsidiaries (including
the notes thereto) or which would have a Material Adverse Effect and since such
date, the Company has incurred no such liability or obligation. Since December
31, 1997, except as disclosed in the Company SEC Reports, (a) the Company and
its subsidiaries have conducted their respective businesses only in the ordinary
course and in a manner consistent with past practice and (b) there has not been
(i) any change, event, occurrence or circumstance in the business, operations,
properties, financial condition or results of operations of the Company or any
of its subsidiaries which, individually or in the aggregate, has a Material
Adverse Effect (except for changes, events, occurrences or circumstances (A)
with respect to general economic or lodging industry conditions or (B) arising
as a result of the transactions contemplated hereby), (ii) any material change
by the Company in its accounting methods, principles or practices, (iii) any
authorization, declaration, setting aside or payment of any dividend or
distribution or capital return in respect of any stock of, or other equity
interest in, the Company or any of its subsidiaries, (iv) any material
revaluation for financial statement purposes by the Company or any of its
subsidiaries of any asset (including, without limitation, any writing down of
the value of any property, investment or asset or writing off of notes or
accounts receivable), (v) other than payment of compensation for services
rendered to the Company or any of its subsidiaries in the ordinary course of
business consistent with past practice or the grant of Company Stock
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Options as described in (and in amounts consistent with) Section 3.2, any
material transactions between the Company or any of its subsidiaries, on the one
hand, and any (A) officer or director of the Company or any of its subsidiaries,
(B) record or beneficial owner of five percent (5%) or more of the voting
securities of the Company, or (C) affiliate of any such officer, director or
beneficial owner, on the other hand, or (vi) other than pursuant to the terms of
the plans, programs or arrangements specifically referred to in Section 3.11 or
in the ordinary course of business consistent with past practice, any increase
in or establishment of any bonus, insurance, welfare, severance, deferred
compensation, pension, retirement, profit sharing, stock option (including,
without limitation, the granting of stock options, stock appreciation rights,
performance awards or restricted stock awards), stock purchase or other employee
benefit plan, or any other increase in the compensation payable or to become
payable to any employees, officers, directors or consultants of the Company or
any of its subsidiaries, which increase or establishment, individually or in the
aggregate, will result in a material liability.
SECTION 3.9. Litigation. Except as publicly disclosed in the
----------
Company SEC Reports, there is no suit, claim, action, proceeding or
investigation pending or, to the Company's Knowledge, threatened against the
Company or any of its subsidiaries or any of their respective properties or
assets before any Governmental Entity which individually or in the aggregate
could reasonably be expected to have a Material Adverse Effect on the Company or
could reasonably be expected to prevent or delay the consummation of the
transactions contemplated by this Agreement. Except as publicly disclosed by the
Company in the Company SEC Reports, none of the Company or its subsidiaries nor
any property or asset of the Company or any of its subsidiaries is subject to
any outstanding order, writ, injunction or decree which insofar as can be
reasonably foreseen in the future could reasonably be expected to have a
Material Adverse Effect on the Company or could reasonably be expected to
prevent or delay the consummation of the transactions contemplated hereby.
SECTION 3.10. Year 2000 Compliance. To the Company's Knowledge,
--------------------
all equipment, products, software and systems utilized or relied on by the
Company or its subsidiaries in the conduct of its business, which operate,
create, store, process and/or output information (including, without limitation,
all computer software, computer firmware, computer hardware (whether general or
specific purpose), automated systems, systems that utilize embedded microchips,
HVAC systems, elevators, fire and life safety systems, alarm and security
systems, computer systems, telephone systems and television systems)
(collectively, the "Systems") are designed to correctly operate, create, store,
process and output information related to or including dates before, on or after
January 1, 2000 ("Millennial Dates"). To the Company's Knowledge, the occurrence
in or use by the Systems of Millennial Dates will not adversely affect those
Systems' performance with respect to date-dependent data, computations, output,
operations or other functions (including, without limitation, calculating,
comparing and sequencing), and the Systems will not malfunction, cease to
function, or provide invalid or incorrect results as a result of date/time data,
to the extent that other Systems, used in combination with the Systems of the
Company and its subsidiaries, properly exchange date/time data with the Systems
of Company and its subsidiaries.
SECTION 3.11. Employee Benefit Plans; Labor Matters.
-------------------------------------
(a) Section 3.11(a) of the Company Disclosure Schedule sets
forth each plan which is subject to the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), and each other material agreement, arrangement or
commitment which is an employment or consulting agreement, executive or
incentive compensation plan, bonus plan, deferred compensation agreement,
employee pension, profit sharing,
15
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savings or retirement plan, employee stock option or stock purchase plan, group
life, health, or accident insurance or other employee benefit plan, agreement,
arrangement or commitment, including, without limitation, severance, vacation,
holiday or other bonus plans, currently maintained by the Company or any of its
subsidiaries for the benefit of any present or former employees, officers or
directors of the Company or any of its subsidiaries ("Company Personnel") or
with respect to which the Company or any of its subsidiaries has liability or
makes or has an obligation to make contributions (each such plan, agreement,
arrangement or commitment set forth in Section 3.11(a) of the Company Disclosure
Schedule being hereinafter referred to as a "Company Employee Plan").
(b) The Company has made available to the Parent (i) copies of
all Company Employee Plans or in the case of an unwritten plan, a written
description thereof, (ii) copies of the most recent annual, financial and, if
applicable, actuarial reports and Internal Revenue Service determination letters
relating to such Company Employee Plans and (iii) copies of all summary plan
descriptions relating to such Company Employee Plans and distributed to Company
Personnel.
(c) Except as disclosed in Section 3.11(c) of the Company
Disclosure Schedule, there are no Company Personnel who are entitled to any
medical, dental or life insurance benefits to be paid under any Company Employee
Plans after termination of employment other than as required by Section 601 of
ERISA, Section 4980B of the Internal Revenue Code of 1986, as amended (the
"Code"), or applicable state law.
(d) Each Company Employee Plan that is an employee welfare
benefit plan under Section 3(1) of ERISA is either (i) funded through an
insurance company contract and is not a "welfare benefit fund" within the
meaning of Section 419 of the Code or (ii) unfunded. There is no liability in
the nature of a retroactive rate adjustment or loss-sharing or similar
arrangement, with respect to any such Company Employee Plan which is an employee
welfare benefit plan.
(e) All contributions or payments due with respect to any
periods prior to the Closing Time under any Company Employee Plan have been made
or appropriate charges have been made on the financial statements. Except as
disclosed in Section 3.11(e) of the Company Disclosure Schedule, each Company
Employee Plan by its terms and operation is in compliance in all material
respects with all applicable laws (including, but not limited to, ERISA, the
Code and the Age Discrimination in Employment Act of 1967, as amended).
(f) There are no actions, suits or claims pending or, to the
Company's Knowledge, threatened (other than routine noncontested claims for
benefits), against any Company Employee Plan or, to the Company's Knowledge, any
administrator or fiduciary of any such Company Employee Plan. As to each Company
Employee Plan for which an annual report is required to be filed under ERISA or
the Code, all such filings, including schedules, have been made on a timely
basis and, with respect to the most recent report regarding each such Company
Employee Plan, which is a funded pension benefit plan, liabilities do not exceed
assets, and no material adverse change has occurred with respect to the
financial materials covered thereby.
(g) Except as disclosed in Section 3.11(g) of the Company
Disclosure Schedule:
(x) neither the Company nor any of its subsidiaries
(nor any entity that is treated as a single employer with the Company or any of
its subsidiaries under Section 414(b), (c), (m) or (o) of the Code) maintains,
contributes to or is required to
16
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contribute to any plan under which more than one employer makes contributions
(within the meaning of Section 4064(a) of ERISA), any plan that is a
multiemployer plan within the meaning of Section 3(37) of ERISA, or any plan
subject to the minimum funding requirements of Section 412 of the Code;
(y) neither the Company nor any of its subsidiaries (nor
any entity that is or was at the relevant time treated as a single employer with
the Company or any of its subsidiaries under Section 414(b), (c), (m) or (o) of
the Code) has at any time incurred any liability to the Pension Benefit Guaranty
Corporation or otherwise under Title IV of ERISA (other than the payment of
premiums, none of which is overdue) which liability has not been satisfied; and
(z) neither the Company nor any of its subsidiaries (nor
any entity that is or was at the relevant time treated as a single employer with
the Company or any of its subsidiaries under Section 414(b), (c), (m) or (o) of
the Code) has at any time incurred liability in connection with an "accumulated
funding deficiency" within the meaning of Section 412 of the Code, whether or
not waived, which liability has not been satisfied and which can result in a
Material Adverse Effect on the Company. No notice of a "reportable event,"
within the meaning of Section 4043 of ERISA, for which the 30-day reporting
requirement has not been waived has been required to be filed for any Company
Employee Plan.
(h) The Executive Amenities, Inc. 401(k) Profit Sharing Plan
maintained by the Company (the "401(k) Plan") has received a favorable
determination letter from the Internal Revenue Service which provides that the
401(k) Plan is qualified under Sections 401(a) and 401(k) of the Code (the
"Company IRS Letter"). To the Company's Knowledge, nothing has occurred since
the date of the most recent Company IRS Letter to cause such letter to be no
longer valid or effective, except for changes in the law which may be in effect
but with respect to which amendments to such Plan do not have to be adopted on
or before the date hereof.
(i) Neither the Company nor any of its subsidiaries (nor, to
the Company's Knowledge, any other person, including any fiduciary) has engaged
in any "prohibited transaction" (as defined in Section 4975 of the Code or
Section 406 of ERISA) or committed any breach of fiduciary duty, which could
subject any of the Company Employee Plans (or their trusts), the Company, any of
its subsidiaries or any person whom the Company or any of its subsidiaries has
an obligation to indemnify, to any material tax or penalty or other liability
imposed under the Code or ERISA.
(j) None of the assets of the Company Employee Plans is
invested in any property constituting employer real property or an employer
security within the meaning of Section 407(d) of ERISA.
(k) Except as disclosed in Section 3.11(k) of the Company
Disclosure Schedule, the transactions contemplated by this Agreement (either
alone or together with any other transaction(s) or event(s)) will not (i)
entitle any Company Personnel to severance pay or other similar payments under
any Company Employee Plan, (ii) accelerate the time of payment or vesting or
increase the amount of benefits due under any Company Employee Plan or
compensation to any Company Personnel, (iii) result in any payments (including
parachute payments) under any Company Employee Plan becoming due to any Company
Personnel, or (iv) terminate or modify or give a third party a right to
terminate or modify the provisions or terms of any Company Employee Plan.
Section 3.11(k) of the Company Disclosure Schedule sets forth, for each employee
of the Company or any of its subsidiaries that will receive any parachute
payment within the
17
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meaning of Section 280G of the Code, a preliminary calculation of the base
amount for such employee and of the amount of each such parachute payment, based
upon information currently known by the Company and assuming all circumstances
that could give rise to such payment occur.
(l) Except as set forth in Section 3.11(l) of the Company
Disclosure Schedule, neither the Company nor any of its subsidiaries is a party
to any collective bargaining or other labor union contract applicable to any
Company Personnel. There is no pending or, to the Company's Knowledge,
threatened labor dispute, strike or work stoppage against the Company or any of
its subsidiaries. Neither the Company nor any of its subsidiaries nor their
respective representatives or employees has committed any unfair labor practices
in connection with the operation of the respective businesses of the Company or
its subsidiaries, and there is no pending or, to the Company's Knowledge,
threatened charge or complaint against the Company or its subsidiaries by the
National Labor Relations Board or any comparable state governmental agency. To
the Company's Knowledge, the Company and its subsidiaries are in compliance in
all material respects with all applicable laws and regulations respecting
employment, employment practices, labor relations, employment discrimination,
safety and health, wages, hours and terms and conditions of employment.
SECTION 3.12. Environmental Laws and Regulations.
----------------------------------
(a) Except as publicly disclosed in the Company SEC Reports, to
the Company's Knowledge, (i) the properties, assets and operations of the
Company and its subsidiaries are in material compliance with all applicable
federal, state, local and foreign laws and regulations, orders, decrees,
judgments, permits and licenses relating to public and worker health and safety
and to the protection and clean-up of the natural environment (including,
without limitation, ambient air, surface water, ground water, land surface or
subsurface strata) and activities or conditions relating thereto, including,
without limitation, those relating to the generation, handling, disposal,
transportation or release of hazardous materials (collectively "Environmental
Laws"), except for non-compliance that would not have a Material Adverse Effect,
which compliance includes but is not limited to, the possession by the Company
and its subsidiaries of all material permits and other governmental
authorizations required under applicable Environmental Laws and compliance with
the terms and conditions thereof; (ii) none of the Company or its subsidiaries
has received written notice of or, to the Company's Knowledge, is the subject of
any Environmental Claim (defined below) that could reasonably be expected to
have a Material Adverse Effect on the Company; and (iii) to the Company's
Knowledge, there are no circumstances that are reasonably likely to prevent or
interfere with such material compliance in the future.
(b) Except as disclosed in the Company SEC Reports, there is no
action, cause of action, claim, investigation, demand or notice by any person or
entity alleging liability under or non-compliance with any Environmental Law (an
"Environmental Claim") which could reasonably be expected to have a Material
Adverse Effect that is pending or, to the Company's Knowledge, threatened
against the Company or its subsidiaries or, to the Company's Knowledge, against
any person or entity whose liability for any Environmental Claim the Company or
any of its subsidiaries has or may have retained or assumed either contractually
or by operation of law.
SECTION 3.13. Taxes.
-----
(a) For purposes of this Agreement: (i) "Tax" or "Taxes" means
any taxes, charges, fees, levies, or other assessments imposed by any U.S. or
foreign governmental
18
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entity, whether national, state, county, local or other political subdivision,
including, without limitation, all net income, gross income, sales and use, rent
and occupancy, value added, ad valorem, transfer, gains, profits, excise,
franchise, real and personal property, gross receipt, capital stock, business
and occupation, disability, employment, payroll, license, estimated, or
withholding taxes or charges imposed by any governmental entity, and includes
any interest and penalties on or additions to any such taxes (and includes taxes
for which the Company and/or any of its subsidiaries, as the case may be, may be
liable in its own right, or as the transferee of the assets of, or as successor
to, any other corporation, association, partnership, joint venture, or other
entity, or under Treasury Regulation Section 1.1502-6 or any similar provision
of foreign, state or local law), provided, however, that to the extent that the
following representations relate to state and local sales taxes or lodging
taxes, such representations are limited to the Company's Knowledge; and (ii)
"Tax Return" means a report, return or other information required to be supplied
to a governmental entity with respect to Taxes including, where permitted or
required, group, combined or consolidated returns for any group of entities that
includes the Company or any of its subsidiaries.
(b) Except as set forth in Section 3.13(b) of the Company
Disclosure Schedule, the Company and each of its subsidiaries, and any
affiliated or combined group of which the Company or any of its subsidiaries is
or was a member for applicable Tax purposes, have (i) filed all federal income
and all other Tax Returns required to be filed by applicable law and all such
federal income and other Tax Returns (A) reflect the liability for Taxes of the
Company and each of its subsidiaries, and (B) were filed on a timely basis and
(ii) within the time and in the manner prescribed by law, paid (and until the
Closing Time will pay within the time and in the manner prescribed by law) all
Taxes that were or are due and payable as set forth in such Tax Returns.
(c) Each of the Company and, where applicable, the Company's
subsidiaries has established (and until the Closing Time will maintain) on its
books and records reserves adequate to pay all Taxes of the Company or such
respective subsidiary, as the case may be, in accordance with GAAP, which are
reflected in the most recent consolidated financial statements of the Company
and its subsidiaries contained in the Company SEC Documents, as applicable, to
the extent required by GAAP.
(d) Except as disclosed in Section 3.13(d) of the Company
Disclosure Schedule, neither the Company nor any subsidiary thereof has
requested any extension of time within which to file any income, franchise or
other Tax Return, which Tax Return has not been filed as of the date hereof.
(e) Except as disclosed in Section 3.13(d) of the Company
Disclosure Schedule, neither the Company nor any subsidiary thereof has executed
any outstanding waivers or comparable consents regarding the application of the
statute of limitations with respect to any income, franchise or other Taxes or
Tax Returns.
(f) Except as disclosed in Section 3.13(f) of the Company
Disclosure Schedule, no deficiency for any Tax which, alone or in the aggregate
with any other deficiency or deficiencies, would exceed $25,000, has been
proposed, asserted, or assessed against the Company and/or any subsidiary
thereof that has not been resolved and paid in full or otherwise settled, no
audits or other administrative proceedings are presently in progress or pending
or threatened in writing with regard to any Taxes or Tax Returns of the Company
and/or any subsidiary thereof, and no written claim is currently being made by
any authority in a jurisdiction where any of the Company or any subsidiary
thereof, as the case may be, does not file Tax Returns that it is or may be
subject to Tax in that jurisdiction.
19
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(g) Except as disclosed on Section 3.13(g) of the Company
Disclosure Schedule, neither the Company nor any of its subsidiaries is a party
to any agreement relating to allocating or sharing of the payment of, or
liability for, Taxes.
(h) The Company does not constitute and for the past five
years has not constituted a "United States real property holding corporation"
within the meaning of Section 897(c)(2) of the Code.
SECTION 3.14. Properties. Section 3.14 of the Company
----------
Disclosure Schedule contains a true and complete list (identifying the relevant
owners, lessors and lessees) of all real properties owned by the Company or any
of its subsidiaries. Each of the Company and its subsidiaries has good and
marketable title to all properties, assets and rights of any kind whatsoever
(whether real, personal or mixed, and whether tangible or intangible) owned by
it (collectively, the "Company Real Assets"), in each case free and clear of any
mortgage, security interest, deed of trust, claim, charge, title defect or other
lien or encumbrance, except (a) as shown on the consolidated balance sheet of
the Company and its subsidiaries dated September 30, 1998 and the notes thereto,
(b) for any mortgage, security interest, deed of trust, claim, charge, title
defect or other lien or encumbrance arising by reason of (i) taxes, assessments
or governmental charges not yet delinquent or which are being contested in good
faith, (ii) deposits to secure public or statutory obligations in lieu of surety
or appeal bonds entered into in the ordinary course of business, and (iii)
operation of law in favor of carriers, warehousemen, landlords, mechanics,
materialmen, laborers, employees or suppliers, incurred in the ordinary course
of business for sums which are not yet delinquent or are being contested in good
faith by negotiations or by appropriate proceedings which suspend the collection
thereof ("Permitted Liens"), or (c) as set forth on Section 3.14 of the Company
Disclosure Schedule. There are no pending or, to the Company's Knowledge,
threatened condemnation proceedings against or affecting any material Company
Real Assets, and none of the material Company Real Assets is subject to any
commitment or other arrangement for its sale to a third party outside the
ordinary course of business.
SECTION 3.15. Material Contracts and Commitments.
----------------------------------
(a) Section 3.15 of the Company Disclosure Schedule contains a
true and complete list of all of the following contracts, agreements and
commitments, whether oral or written ("Contracts"), to which the Company or any
of its subsidiaries is a party or by which any of them or any of their material
Company Real Assets is bound, as each such contract or commitment may have been
amended, modified or supplemented:
(i) all Contracts pursuant to which the Company or its
subsidiaries holds a leasehold interest in or otherwise has an
economic interest in any real property, other than property
described in Section 3.14 of the Company Disclosure Schedule
and other than apartment leases entered into in the ordinary
course of business by the Company;
(ii) all Contracts providing for management of any temporary
lodging business by the Company or any of its subsidiaries;
(iii) all Contracts granting or obtaining a franchise or
license to utilize a brand name or other rights of a system
providing residential services, or granting a license or
sublicense of any material trademark, trade name, copyright,
patent, service mark or trade secret, or any rights therein or
application therefor;
20
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(iv) all partnership or joint venture Contracts;
(v) all loan agreements, notes, bonds, debentures, debt
instruments, evidences of indebtedness, debt securities, or
other Contracts relating to any indebtedness of the Company or
any of its subsidiaries in an amount in excess of $100,000, or
involving the direct or indirect guaranty or suretyship by the
Company or any of its subsidiaries of any indebtedness in an
amount in excess of $100,000;
(vi) all Contracts that, after the date hereof, obligate the
Company or any of its subsidiaries to pay, pledge, or encumber
or restrict assets in an aggregate amount in excess of
$100,000;
(vii) all Contracts by which the Company has committed to
extend credit to third parties;
(viii) all Contracts with customers of the Company that
involve payments which, in the aggregate, exceed $50,000; and
(ix) all Contracts that limit or restrict the ability of the
Company or any of its affiliates to compete or otherwise to
conduct business in any material manner or place.
(b) The Company has heretofore made available to the Parent
true and complete copies of all of the Contracts required to be set forth in
Section 3.15 of the Company Disclosure Schedule. Each such Contract is valid and
binding in accordance with its terms, and is in full force and effect (except as
set forth in Section 3.15 of the Company Disclosure Schedule). Neither the
Company nor any of its subsidiaries is in default in any material respect with
respect to any such Contract, nor (to the Company's Knowledge) does any
condition exist that with notice or lapse of time or both would constitute such
a material default thereunder or permit any other party thereto to terminate
such Contract. To the Company's Knowledge, no other party to any such Contract
is in default in any material respect with respect to any such Contract. No
party has given any written or (to the Company's Knowledge) oral notice (i) of
termination or cancellation of any such Contract or (ii) that it intends to
assert a breach of any such Contract, whether as a result of the transactions
contemplated hereby or otherwise. Each Contract identified in Section 3.15 of
the Company Disclosure Schedule in response to any item under this Section 3.15
shall be deemed incorporated by reference to all other items in this Section
3.15.
SECTION 3.16. Intangible Property.
-------------------
(a) The Company has made available to the Parent a list of
the Intangible Property (as defined below) which is material to the Company and
its subsidiaries in which the Company or any of its subsidiaries has an
interest.
(b) Except as set forth on Section 3.16 of the Company
Disclosure Schedule:
(i) the Company and its subsidiaries own and have the right
to use, sell, license or dispose of all Intangible Property
used in the conduct of their business as presently conducted;
21
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(ii) the Company and its subsidiaries have performed all
material obligations required to be performed by them, and are
not in default under any material contract or arrangement
relating to any Intangible Property;
(iii) the execution, delivery and performance of this
Agreement and the consummation of the transactions
contemplated hereby will not breach, violate or conflict with
any material Intangible Property, will not cause the
forfeiture or termination or give rise to a right of
forfeiture or termination of, or in any material way impair
the right of the Company or any of its subsidiaries to use,
sell, license or dispose of or to bring any action for the
infringement of, any material Intangible Property or material
portion thereof;
(iv) there are no royalties, honoraria, fees or other
payments payable by the Company or any of its subsidiaries to
any person by reason of the ownership, use, license, sale or
disposition of any material Intangible Property;
(v) the conduct of the business by the Company and its
subsidiaries does not violate any license or agreement with
any third party; and
(vi) neither the Company nor any of its subsidiaries has
received any notice to the effect (or is otherwise aware) that
any material Intangible Property or the use thereof by the
Company or any of its subsidiaries conflicts with any rights
of any person.
(c) As used herein "Intangible Property" means all
intellectual property rights, including patents, patent applications (pending or
otherwise), computer software, research findings, market and competitive
analyses, brand names, copyrights, service marks, trademarks, tradenames, and
all registrations or applications for registration of any of the foregoing.
SECTION 3.17. Brokers. No broker, finder or investment banker
-------
(other than A.G. Edwards & Sons, Inc., the Company's financial adviser, a true
and correct copy of whose entire engagement agreement has been provided to
Acquisition or Parent) is entitled to any brokerage, finder's or other fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of the Company.
SECTION 3.18. Certain Business Practices. None of the Company,
--------------------------
any of its subsidiaries or any directors or officers of the Company or any of
its subsidiaries, nor to the Company's Knowledge, agents or employees of the
Company or any of its subsidiaries, has (a) used any funds for unlawful
contributions, gifts, entertainment or other unlawful expenses related to
political activity, (b) made any unlawful payment to foreign or domestic
government officials or employees or to foreign or domestic political parties or
campaigns or violated any provision of the Foreign Corrupt Practices Act of
1977, as amended, or (c) made any other unlawful payment.
SECTION 3.19. Employees. Section 3.19 of the Company
---------
Disclosure Schedule sets forth the following information concerning each of the
Company Personnel: (a) name; (b) base salary and bonuses paid in 1998; (c)
whether or not the employee has an employment contract, and if so, its
expiration date; (d) if the employee has been granted options to purchase
Shares, the number of Shares for which the options are
22
<PAGE>
exercisable; and (e) if there is an employment contract, whether it is
assignable by its terms.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
OF PARENT AND ACQUISITION
Parent and Acquisition hereby represent and warrant to the
Company as follows:
SECTION 4.1. Organization.
------------
(a) Each of Parent and Acquisition is duly organized, validly
existing and in good standing under the laws of the State of Delaware, and has
all requisite power and authority to own, lease and operate its properties and
to carry on its businesses as now being conducted. Parent has heretofore
delivered to the Company accurate and complete copies of their Certificates of
Incorporation and Bylaws as currently in effect.
(b) Each of Parent and Acquisition is duly qualified or
licensed and in good standing to do business in each jurisdiction in which the
property owned, leased or operated by it or the nature of the business conducted
by it makes such qualification or licensing necessary, except in such
jurisdictions where the failure to be so duly qualified or licensed and in good
standing would not have a Parent Material Adverse Effect. The term "Parent
Material Adverse Effect" means any change or effect that is (i) materially
adverse to the business, results of operations condition (financial or
otherwise) or prospects of Parent and its subsidiaries, taken as a whole, other
than any change or effect arising out of general economic conditions unrelated
to any businesses in which Parent and its subsidiaries are engaged or (ii) that
may impair the ability of Parent and/or Acquisition to consummate the
transactions contemplated hereby.
SECTION 4.2. Authority Relative to this Agreement. Each of
------------------------------------
Parent and Acquisition has all necessary corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and validly
authorized by the boards of directors of Parent and Acquisition and by Parent as
the sole stockholder of Acquisition and no other corporate proceedings on the
part of Parent or Acquisition are necessary to authorize this Agreement or to
consummate the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by each of Parent and Acquisition and
constitutes a valid, legal and binding agreement of each of Parent and
Acquisition enforceable against each of Parent and Acquisition in accordance
with its terms, except as such enforceability may be limited by any applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally, and except as the
availability of equitable remedies may be limited by the application of general
principles of equity (regardless of whether such equitable principle are applied
in a proceeding at law or in equity).
SECTION 4.3. Information Supplied. None of the information
--------------------
supplied by Parent or Acquisition in writing for inclusion in the Disclosure
Statements or the Schedule 14D-9 will, at the respective times that the Proxy
Statement (if necessary) and the Schedule 14D-9 and any amendments thereof or
supplements thereto are filed with the SEC and are first published or sent or
given to holders of Shares, and in the case of any required Proxy Statement, at
the time that it or any amendment thereof or supplement
23
<PAGE>
thereto is mailed to the Company's stockholders, at the time of the
Stockholders' Meeting, if such is required, or at the Effective Time, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
SECTION 4.4. Financing. Parent has or will have sufficient
---------
funds available to purchase all of the Shares that Parent agrees, subject to the
terms and conditions hereof, to purchase hereunder and to pay all related fees
and expenses, and will make such funds available to Acquisition when required
for the performance of its obligations hereunder. Sufficient unissued shares of
Parent Common Stock are authorized under Parent's Certificate of Incorporation
to fulfill Parent's obligations under Article 2 hereof.
SECTION 4.5. Consents and Approvals; No Violations. Except for
-------------------------------------
filings, permits, authorizations, consents and approvals as may be required
under, and other applicable requirements of, the Securities Act, the Exchange
Act, Blue Sky Laws, the HSR Act and the filing and acceptance for record or
recordation of the Merger Certificate as required by the MGCL and the DGCL,
respectively, no filing with or notice to, and no permit, authorization, consent
or approval of, any Governmental Entity is necessary for the execution and
delivery by Parent or Acquisition of this Agreement or the consummation by
Parent or Acquisition of the transactions contemplated hereby, except where the
failure to obtain such permits, authorizations, consents or approvals or to make
such filings or give such notice would not have a Parent Material Adverse
Effect. Neither the execution, delivery and performance of this Agreement by
Parent or Acquisition nor the consummation by Parent or Acquisition of the
transactions contemplated hereby will (i) conflict with or result in any breach
of any provision of the respective Certificates of Incorporation or Bylaws (or
similar governing documents) of Parent or Acquisition, (ii) result in a
violation or breach of or constitute (with or without due notice or lapse of
time or both) a default (or give rise to any right of termination, amendment,
cancellation or acceleration or Lien) under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, lease, license, contract,
agreement or other instrument or obligation to which Parent or Acquisition or
any of Parent's other subsidiaries is a party or by which any of them or any of
their respective properties or assets may be bound or (iii) violate any order,
writ, injunction, decree, law, statute, rule or regulation applicable to Parent
or Acquisition or any of Parent's other subsidiaries or any of their respective
properties or assets except, in the case of (ii) or (iii), for violations,
breaches or defaults which would not have a Parent Material Adverse Effect.
SECTION 4.6. SEC Reports; Financial Statements. Parent and any
---------------------------------
predecessor company have filed all required forms, reports and documents
("Parent SEC Reports") with the SEC since December 31, 1996, each of which has
complied in all material respects with all applicable requirements of the
Securities Act and the Exchange Act, each as in effect on the dates such forms,
reports and documents were filed. None of such Parent SEC Reports, including,
without limitation, any financial statements or schedules included or
incorporated by reference therein, contained when filed any untrue statement of
a material fact or omitted to state a material fact required to be stated or
incorporated by reference therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The audited consolidated financial statements of Parent included in
the Parent SEC Reports fairly present in conformity with GAAP (except as may be
indicated in the notes thereto) the consolidated financial position of Parent
and its consolidated subsidiaries as of the dates thereof and their consolidated
results of operations and changes in financial position for the periods then
ended.
24
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ARTICLE 5
COVENANTS
SECTION 5.1. Interim Operations. From the date of this
------------------
Agreement until the Closing Time, except as set forth in Section 5.1 of the
Company Disclosure Schedule or as expressly contemplated by any other provision
of this Agreement, unless the Parent has consented in writing thereto, the
Company shall, and shall cause each of its subsidiaries to:
(a) conduct its business and operations only in the ordinary
course of business consistent with past practice;
(b) use reasonable efforts to preserve intact the business,
organization, goodwill, rights, licenses, permits and
franchises of the Company and its subsidiaries and maintain
their existing relationships with customers, suppliers and
other persons having business dealings with them;
(c) use reasonable efforts to keep in full force and effect
adequate insurance coverage and maintain and keep its
properties and assets in good repair, working order and
condition, normal wear and tear excepted;
(d) not amend or modify its respective charter or certificate
of incorporation, by-laws, partnership agreement or other
charter or organization documents;
(e) except as required under Section 2.1, not authorize for
issuance, issue, sell, grant, deliver, pledge or encumber or
agree or commit to issue, sell, grant, deliver, pledge or
encumber any shares of any class or series of capital stock of
the Company or any of its subsidiaries or any other equity or
voting security or equity or voting interest in the Company or
any of its subsidiaries, any securities convertible into or
exercisable or exchangeable for any such shares, securities or
interests, or any options, warrants, calls, commitments,
subscriptions or rights to purchase or acquire any such
shares, securities or interests (other than issuances of
Shares upon exercise of Company Stock Options granted prior to
the date of this Agreement to directors, officers, employees
and consultants of the Company in accordance with the Company
Stock Plan as currently in effect);
(f) not (i) split, combine or reclassify any shares of its
stock or issue or authorize or propose the issuance of any
other securities in respect of, in lieu of, or in substitution
for, shares of its stock, (ii) in solely the case of the
Company, declare, set aside or pay any dividends on, or make
other distributions in respect of, any of the Company's stock,
or (iii) except as required under Section 2.1, repurchase,
redeem or otherwise acquire, or agree or commit to repurchase,
redeem or otherwise acquire, any shares of stock or other
equity or debt securities or equity interests of the Company
or any of its subsidiaries;
(g) not amend or otherwise modify the terms of any Company
Stock Options or the Company Option Plan, the effect of which
shall be to make such terms more favorable to the holders
thereof or persons eligible for participation therein;
25
<PAGE>
(h) other than regularly scheduled seniority increases in the
ordinary course of business consistent with past practice, not
increase the compensation payable or to become payable to any
directors, officers or employees of the Company or any of its
subsidiaries, or grant any severance or termination pay to, or
enter into any employment or severance agreement with any
director or officer of the Company or any of its subsidiaries,
or establish, adopt, enter into or amend in any material
respect or take action to accelerate any material rights or
benefits under any collective bargaining, bonus, profit
sharing, thrift, compensation, stock option, restricted stock,
pension, retirement, deferred compensation, employment,
termination, severance or other plan, agreement, trust, fund,
policy or arrangement for the benefit of any director, officer
or employee of the Company of any of its subsidiaries;
(i) not acquire or agree to acquire (including, without
limitation, by merger, consolidation, or acquisition of stock,
equity securities or interests, or assets) any corporation,
partnership, joint venture, association or other business
organization or division thereof or otherwise acquire or agree
to acquire any assets of any other person outside the ordinary
course of business consistent with past practice or any
interest in any real properties (whether or not in the
ordinary course of business);
(j) not incur, assume or guarantee any indebtedness for
borrowed money (including draw-downs on letters or lines of
credit) or issue or sell any notes, bonds, debentures, debt
instruments, evidences of indebtedness or other debt
securities of the Company or any of its subsidiaries or any
options, warrants or rights to purchase or acquire any of the
same, except for (i) renewals of existing bonds and letters of
credit in the ordinary course of business not to exceed
$100,000 in the aggregate; and (ii) advances, loans or other
indebtedness in the ordinary course of business consistent
with past practice in an aggregate amount not to exceed
$100,000;
(k) not sell, lease, license, encumber or otherwise dispose
of, or agree to sell, lease, license, encumber or otherwise
dispose of, any material properties or assets of the Company
or any of its subsidiaries;
(l) not authorize or make any capital expenditures (including
by lease) in excess of $100,000 in the aggregate for the
Company and all of its subsidiaries;
(m) not make any material change in any of its accounting or
financial reporting (including tax accounting and reporting)
methods, principles or practices, except as may be required by
GAAP;
(n) not make any material tax election or settle or compromise
any material United States or foreign tax liability;
(o) except in the ordinary course of business consistent with
past practice, not amend, modify or terminate any Contract
required to be listed in Section 3.15 of the Company
Disclosure Schedule or waive, release or assign any material
rights or claims thereunder;
26
<PAGE>
(p) not adopt a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring,
recapitalization or other reorganization of the Company or any
of its subsidiaries;
(q) not take any action that would, or would be reasonably
likely to, result in any of the representations and warranties
set forth in this Agreement not being true and correct in any
material respect (as if such representation or warranty were
made and in effect on the date such action would have been
taken, notwithstanding any other provisions hereof) or (except
as to any action permitted under Section 5.4) any of the
conditions set forth in Article 7 or 8 not being satisfied;
and
(r) except as to subsections (a), (b) and (c) of Section 5.1,
not agree or commit in writing or otherwise to do any of the
foregoing.
SECTION 5.2. Stockholders' Meeting and Issuance of Parent
--------------------------------------------
Shares.
- ------
(a) The Company, acting through the Board, shall, if required
for the Merger under the MGCL:
(i) duly call, give notice of, convene and hold a
meeting of its stockholders (the "Stockholders' Meeting"), to
be held as soon as practicable after the Tender Offer Purchase
Time for the purpose of considering and taking action upon
this Agreement, using a record date, to the extent possible,
that is a day on which the Shares are listed on the Nasdaq
National Market;
(ii) except as otherwise permitted under Section
5.4, include in the Proxy Statement (A) the recommendation of
the Board that stockholders of the Company vote in favor of
the approval and adoption of this Agreement, the Merger and
the other transactions contemplated hereby (including the Plan
and Agreement of Merger attached hereto as Exhibit A), and (B)
a statement that the Board believes that the consideration to
be received by the stockholders of the Company pursuant to the
Merger is fair to such stockholders;
(iii) except as otherwise permitted under Section
5.4, use reasonable efforts (A) to obtain and furnish the
information required to be included by it in the Disclosure
Statements and, after consultation with Parent and
Acquisition, cause the Proxy Statement to be mailed to its
stockholders at the earliest practicable time following the
Tender Offer Purchase Time, and (B) to obtain the necessary
approvals by its stockholders of this Agreement and the
transactions contemplated hereby. At such meeting, Parent,
Acquisition will, and will cause their affiliates to, vote all
Shares owned by them in favor of approval and adoption of this
Agreement, the Merger and the transactions contemplated
hereby.
SECTION 5.3. Termination of Registration of Shares. The
-------------------------------------
Company, acting through its Board, at the earliest practicable time following
the Tender Offer Purchase Time (but in no event prior to the record date for a
stockholders' meeting, if necessary, called for the purpose of approving the
Merger), if the number of holders of record of the Shares at such time is
smaller than 300, take all steps necessary or
27
<PAGE>
appropriate to terminate registration of the Shares under the Exchange Act,
including without limitation the filing of Exchange Act Form 15 with the SEC and
of a notice to the Nasdaq National Market to delist the Shares.
SECTION 5.4. Other Potential Acquirers.
-------------------------
(a) The Company, its affiliates and their respective officers,
directors, employees, representatives and agents shall immediately cease any
discussions or negotiations with any parties with respect to any Third Party
Acquisition (as defined below). Neither the Company nor any of its affiliates
shall, nor shall the Company authorize or permit any of its or their respective
officers, directors, employees, representatives or agents to, directly or
indirectly, encourage, solicit, participate in or initiate discussions or
negotiations with or provide any non-public information to any person or group
(other than Parent and Acquisition or any designees of Parent and Acquisition)
concerning any Third Party Acquisition; provided, however, that nothing herein
shall prevent the Board from taking and disclosing to the Company's stockholders
a position contemplated by Rules 14d-9 and 14e-2 promulgated under the Exchange
Act with regard to any tender offer; and provided further, that notwithstanding
the foregoing, if, prior to the Tender Offer Purchase Time, the Company receives
a "Potential Proposal" (defined as an unsolicited Superior Proposal (defined
below) or an unsolicited proposal, offer or indication that the Company in good
faith believes may lead to a Superior Proposal), then following written notice
to Parent and Acquisition, the Company may provide the person making the
Potential Proposal with the same non-public information that the Company
supplied to Parent. The Company shall promptly, and in any event before
furnishing non-public information to any such person, notify the Parent in the
event it receives any proposal or inquiry concerning a Third Party Acquisition,
including the terms and conditions thereof and the identity of the party
submitting such proposal; and shall advise the Parent from time to time of the
status and any material developments concerning the same.
(b) Except as set forth in this Section 5.4(b), the Board
shall not withdraw its recommendation of the transactions contemplated hereby or
approve or recommend, or cause the Company to enter into any agreement with
respect to, any Third Party Acquisition. Notwithstanding the provisions of
Section 5.4(a), if prior to the Tender Offer Purchase Time the Board by a
majority vote determines in its good faith judgment, after consultation with and
consistent with the advice of legal counsel, that it is required to do so in
order to comply with its fiduciary duties, the Board may withdraw its
recommendation of the transactions contemplated hereby or approve or recommend a
Superior Proposal, but in each case only (i) after providing reasonable written
notice to Parent (a "Notice of Superior Proposal") advising Parent that the
Board has received a Superior Proposal, specifying the material terms and
conditions of such Superior Proposal and identifying the person making such
Superior Proposal and (ii) if Parent does not, within three business days of
Parent's receipt of the Notice of Superior Proposal, make an offer which the
Company Board by a majority vote determines in its good faith judgment
(consistent with the advice of a financial adviser of nationally recognized
reputation) to be as favorable to the Company's stockholders as such Superior
Proposal; provided, however, that the Company shall not be entitled to enter
into any agreement with respect to a Superior Proposal unless and until this
Agreement is terminated by its terms pursuant to Section 9.1. For the purposes
of this Agreement, "Third Party Acquisition" means the occurrence of any of the
following events: (i) the acquisition of the Company by merger or otherwise by
any person (which includes a "person" as such term is defined in Section
13(d)(3) of the Exchange Act) other than Parent, Acquisition or any affiliate
thereof (a "Third Party"); (ii) the acquisition by a Third Party of more than
20% of the total assets of the Company and its subsidiaries taken as a whole;
(iii) the acquisition by a Third Party of
28
<PAGE>
20% or more of the outstanding Shares; (iv) the adoption by the Company of a
plan of liquidation or the declaration or payment of an extraordinary dividend;
(v) the repurchase by the Company or any of its subsidiaries of more than 20% of
the outstanding Shares (other than the exchange planned in connection with the
Preferred Stock Issuance); or (vi) the acquisition by the Company or any
subsidiary by merger, purchase of stock or assets, joint venture or otherwise of
a direct or indirect ownership interest or investment in any business whose
annual revenues net income or assets is equal or greater than 20% of the annual
revenues net income or assets of the Company. For purposes of this Agreement a
"Superior Proposal" means any bona fide proposal to acquire directly or
indirectly for consideration consisting of cash and/or securities more than 50%
of the Shares then outstanding or all or substantially all the assets of the
Company and otherwise on terms which the Company Board by a majority vote
determines in its good faith judgment (consistent with the advice of a financial
adviser of nationally recognized reputation) to be more favorable to the
Company's stockholders than the Merger and the Offer. At and after the Tender
Offer Purchase Time, the Company shall not under any circumstances withdraw its
recommendation of the transactions contemplated hereby or approve or recommend,
or cause the Company to enter into any agreement with respect to, any Third
Party Acquisition.
SECTION 5.5 Access to Information. From the date of this
---------------------
Agreement until the Closing Time, upon reasonable prior notice, the Company
shall (and shall cause each of its subsidiaries to) give the Parent and its
representatives (including lenders to and financing sources for such party) full
access, during normal business hours and at other reasonable times without
disruption to the Company's normal business affairs, to the officers, employees,
agents, books, records, contracts, commitments, properties, offices and other
facilities of it and its subsidiaries, and shall furnish promptly to the Parent
and its representatives such financial and operating data and other information
concerning the business, operations, properties, contracts, records and
personnel of the Company and its subsidiaries as the Parent may from time to
time reasonably request. All information obtained by the Parent pursuant to this
Section 5.5 shall be kept confidential in accordance with the confidentiality
provisions of the Letter Agreement between Parent and the Company dated July 30,
1998. No representations and warranties or conditions to the consummation of the
Merger contained herein or in any certificate or instrument delivered in
connection herewith shall be deemed waived or otherwise affected by any
investigation made by the parties or their respective representatives.
SECTION 5.6. Further Actions. (a) Each of the parties hereto
---------------
shall use reasonable efforts to take, or cause to be taken, all actions, and to
do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations, and consult and fully cooperate with and
provide reasonable assistance to each other party hereto and their respective
representatives in order, to consummate and make effective the transactions
contemplated by this Agreement as promptly as practicable hereafter, including,
without limitation, (i) using reasonable efforts to make all filings,
applications, notifications, reports, submissions and registrations with, and to
obtain all consents, approvals, authorizations or permits of, Governmental
Entities or other persons or entities as are necessary for the consummation of
the Merger and the other transactions contemplated hereby (including, without
limitation, pursuant to the HSR Act, the Securities Act, the Exchange Act, Blue
Sky Laws, Maryland law and other applicable laws and regulations in effect in
the United States or any other jurisdiction), and (ii) taking such actions and
doing such things as any other party hereto may reasonably request in order to
cause any of the conditions to such other party's obligation to consummate the
Merger as specified in Article 8 of this Agreement to be fully satisfied. Prior
to making any application to or filing with any Governmental Entity or other
person or entity in connection with this Agreement, the Company, on the one
hand, and the Parent, on the
29
<PAGE>
other hand, shall provide the other with drafts thereof and afford the other a
reasonable opportunity to comment on such drafts.
(b) Without limiting the generality of the foregoing, each
of the Parent and the Company agree to cooperate and use reasonable efforts to
vigorously contest and resist any action, suit, proceeding or claim, and to have
vacated, lifted, reversed or overturned any injunction, order, judgment or
decree (whether temporary, preliminary or permanent), that delays, prevents or
otherwise restricts the consummation of the Merger or any other transaction
contemplated by this Agreement, and to take any and all actions (including,
without limitation, the disposition of assets, divestiture of businesses, or the
withdrawal from doing business in particular jurisdictions) as may be required
by Governmental Entities as a condition to the granting of any such necessary
approvals or as may be required to avoid, vacate, lift, reverse or overturn any
injunction, order, judgment, decree or regulatory action (provided, however,
that in no event shall any party hereto take, or be required to take, any action
that could reasonably be expected to have a Material Adverse Effect on the
Company or that, individually or in the aggregate, could reasonably be expected
to have a Parent Material Adverse Effect).
SECTION 5.7. Public Announcements. Parent, Acquisition and
--------------------
the Company, as the case may be, will consult with one another before issuing
any press release or otherwise making any public statements with respect to the
transactions contemplated by this Agreement, including, without limitation, the
Merger, and shall not issue any such press release or make any such public
statement prior to such consultation except to the extent that such consultation
may be prohibited by applicable law or by obligations pursuant to any listing
agreement with the NYSE as determined by Parent, Acquisition or the Company, as
the case may be.
SECTION 5.8. Employee Benefit Matters; Company Stock Options.
-----------------------------------------------
The Company shall, or shall cause one of its subsidiaries to, take such action
effective as of the Effective Time with respect to any Company Employee Plan as
Parent shall reasonably request, including termination of any such plan. The
Company shall (a) cooperate with Parent and Acquisition in obtaining waivers, in
form and substance reasonably satisfactory to Parent and Acquisition, of all
terms of the Company Option Plan and all terms of outstanding Company Stock
Options, which terms could prevent, restrict or impair the ability of Parent,
Acquisition and the Company to effectuate fully the provisions of Section 2.14,
and (b) use reasonable efforts to cause its Compensation Committee to interpret
the Company Option Plan, to the extent possible, so as to enable the Company,
Parent and Acquisition to effectuate fully the provisions of Section 2.14.
SECTION 5.9. Expenses. Whether or not the Merger is
--------
consummated, subject to Section 9.3 hereof, all costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby
(including, without limitation, fees and disbursements of representatives) shall
be borne by the party which incurs such cost or expense; provided, however, that
(a) the filing fee in connection with the filings under the HSR Act by the
parties hereto required in connection herewith, and (b) all out-of-pocket costs
and expenses related to the printing, filing and mailing (as applicable) of the
Offer Documents, and all SEC and other regulatory filing fees incurred in
connection with the Offer, shall be borne by the Parent.
SECTION 5.10. Notification of Certain Matters. The Company
-------------------------------
shall give prompt notice to Parent and Acquisition, and Parent and Acquisition
shall give prompt notice to the Company, of (i) the occurrence or nonoccurrence
of any event the occurrence or nonoccurrence of which would be likely to cause
(A) any representation or warranty contained in this Agreement to be untrue or
inaccurate in any material respect at
30
<PAGE>
or prior to the Effective Time or (B) any covenant, condition or agreement
contained in this Agreement not to be complied with or satisfied in all material
respects and (ii) any material failure of the Company, Parent or Acquisition, as
the case may be to comply with or satisfy any covenant, condition or agreement
to be complied with or satisfied by it hereunder; provided, however, that the
delivery of any notice pursuant to this Section 5.10 shall not cure such breach
or non-compliance or limit or otherwise affect the remedies available hereunder
to the party receiving such notice.
SECTION 5.11. Guarantee of Performance. Parent hereby
------------------------
guarantees the performance by Acquisition of its obligations under this
Agreement.
SECTION 5.12. Tax Treatment. The Company, Parent and
-------------
Acquisition acknowledge that it is their intention that the Merger shall be
treated as a reorganization as that term is defined in Section 368(a) of the
Code. The parties will proceed with the Merger and the other transactions
contemplated hereby in a manner consistent with such intention.
SECTION 5.13 Hart-Scott-Rodino Filing. The Company may lend to
------------------------
the Class A Holders the amounts necessary (the "Loans") to pay filing fees for
any filings required to be made by the Class A Holders under the HSR Act in
connection with the transactions contemplated hereby and by the Stockholders
Agreements. The Company will require repayment of each Loan in full on the
earlier of (a) the third anniversary of the date the Loan was made, or (b) the
date the applicable Loan recipient effects his first sale of Parent Common Stock
following the Merger. Such amounts may be advanced only as a Loan; the Company
shall not pay or reimburse any Class A Holder the amount of such filing fees, or
any part thereof, as bonus, salary or other business expense.
SECTION 5.14 Indemnification; Directors' and Officers'
----------------------------------------
Insurance. Subject to the occurrence of the Effective Time, until the third
- ---------
anniversary thereof, the Surviving Corporation will cause its Certificate of
Incorporation and Bylaws to continue to provide indemnification provisions, for
the benefit of those individuals who have served as directors or officers of the
Company at any time prior to the Effective Time, comparable to such provisions
as are currently contained in the Company's charter and Bylaws. In the event the
Surviving Corporation or any of its successors or assigns (a) consolidates with
or merges into any other person and the Surviving Corporation shall not be the
continuing or surviving corporation or entity of such consolidation or merger or
(b) transfer all or substantially all of its properties and assets to any
person, then, and in each such case, proper provision shall be made so that the
successors and assigns of the Surviving Corporation shall assume the obligations
set forth in this Section 5.14. The Surviving Corporation shall obtain and
maintain in effect for not less than three years after the Effective Time,
insurance coverage substantially equivalent to the current directors' and
officers' liability insurance policies currently maintained by the Company, with
no lapse in such coverage and on similar terms and conditions, with respect to
all matters, including the transactions contemplated hereby, occurring prior to,
and including, the Effective Time; provided, however, that the Surviving
Corporation may, at its option, provide such coverage as part of the insurance
or self-insurance provided or guaranteed by Parent for the directors and
officers of Parent and other subsidiaries of Parent.
ARTICLE 6
DISSENTING SHARES; EXCHANGE OF SHARES
SECTION 6.1 Dissenting Shares. Notwithstanding anything in
-----------------
this Agreement to the contrary, in the event that dissenters' rights are
available in connection
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<PAGE>
with the Merger pursuant to Title 3, Subtitle 2 of the MGCL, Shares that are
issued and outstanding immediately prior to the Effective Time and that are held
by stockholders who did not vote in favor of the Merger and who comply with all
of the relevant provisions of Title 3, Subtitle 2 of the MGCL (the "Dissenting
Shares") shall not be converted into or be exchangeable for the right to receive
the Cash Merger Consideration, but instead shall be converted into the right to
receive such consideration as may be determined to be due to such stockholders
pursuant to Title 3, Subtitle 2 of the MGCL, unless and until such holders shall
have failed to perfect or shall have effectively withdrawn or lost their rights
to appraisal under the MGCL. If any such holder shall have failed to perfect or
shall have effectively withdrawn or lost such right, such holder's Shares shall
thereupon be deemed to have been converted into and to have become exchangeable
for the right to receive, as of the Effective Time, the Cash Merger
Consideration without any interest thereon. The Company shall give Parent (i)
prompt notice of any written demands for appraisal of Shares received by the
Company and (ii) the opportunity to participate in all negotiations and
proceedings with respect to any such demands. The Company shall not, without the
prior written consent of Parent, voluntarily make any payment with respect to,
or settle or offer to settle, any such demands.
ARTICLE 7
CONDITIONS TO THE OFFER
SECTION 7.1. Conditions to the Offer. (a) Notwithstanding any
-----------------------
other provisions of the Offer, to the extent that the Tender Offer Purchase Time
has not occurred prior to March 1, 1999, Acquisition shall have no further
obligations hereunder (other than to comply with applicable law) with respect to
the Offer. Furthermore, notwithstanding any other provisions of the Offer,
Acquisition shall not be required to accept for payment or, subject to any
applicable rules and regulations of the SEC including Rule 14e-l(c) under the
Exchange Act (relating to Acquisition's obligation to pay for or return tendered
Shares promptly after termination or withdrawal of the Offer), pay for, and may
delay the acceptance for payment of or, subject to the restrictions referred to
above, the payment for, any tendered Shares, and may amend the Offer consistent
with the terms of this Agreement, including extending the deadline for tendering
Shares, or terminate the Offer, if any of the following events shall occur:
(i) from the date of this Agreement until the Tender Offer
Purchase Time, there shall have occurred any change, event,
occurrence or circumstance which, individually or in the
aggregate, has a Material Adverse Effect on the Company
(except for changes, events, occurrences or circumstances with
respect to general economic or lodging industry conditions);
(ii) from the date of this Agreement until the Tender Offer
Purchase Time, any Governmental Entity or court of competent
jurisdiction shall have enacted, issued, promulgated, enforced
or entered any statute, rule, regulation, executive order,
decree, injunction or other order (and if temporary or
preliminary, not vacated within five business days of its
entry) which is in effect at the Tender Offer Purchase Time
and which (1) makes the acceptance for payment of, or the
payment for, some or all of the Shares illegal or otherwise
prohibits or restricts consummation of the Offer, the Merger
or any of the other transactions contemplated hereby, (2)
imposes material limitations on the ability of Acquisition to
acquire or hold or to exercise any rights of ownership of the
Shares, or effectively to manage or control the Company and
its business, assets and properties or (3) has a Material
Adverse Effect on the Company; provided, however, that
32
<PAGE>
the parties shall use reasonable efforts (subject to the
proviso in Section 5.6(b)) to cause any such decree, judgment
or other order to be vacated or lifted prior to March 1, 1999;
(iii) the representations and warranties of the Company set
forth in this Agreement shall not (A) have been true and
correct in one or more material respects on the date hereof or
(B) be true and correct in one or more material respect as of
the scheduled expiration date (as such date may be extended)
of the Offer as though made on or as of such date or the
Company shall have breached or failed in any respect to
perform or comply with any material obligation, agreement or
covenant required by this Agreement to be performed or
complied with by it except, in each case with respect to
clause (B), (1) for changes specifically permitted by this
Agreement and (2)(x) for those representations and warranties
that address matters only as of a particular date which are
true and correct as of such date or (y) where the failure of
representations and warranties (without regard to materiality
qualifications therein contained) to be true and correct, or
the performance or compliance with such obligations,
agreements or covenants, would not, individually or in the
aggregate, have a Material Adverse Effect on the Company;
(iv) from the date of this Agreement until the Tender Offer
Purchase Time, this Agreement shall have been terminated in
accordance with its terms;
(v) from the date of this Agreement until the Tender Offer
Purchase Time, there shall have occurred (A) a breach by the
Company of any of its obligations under Section 5.4, (B) an
acceptance by the Company of a Superior Proposal, or (C) a
termination or a breach by any Class A Holder or Class B
Holder of the applicable Stockholder Agreement;
(vi) within 5 days after its receipt of an SAS 71 comfort
letter and the working papers associated therewith, Parent or
Acquisition has notified the Company that such letter or
working papers revealed a material misstatement in the
financial information set forth in the Company's report on
Form 10-Q filed with the SEC as of November 13, 1998;
(vii) from the date of this Agreement until the Tender Offer
Purchase Time, the Board shall have withdrawn or modified in a
manner adverse to Parent its approval or recommendation of the
Offer, shall have recommended to the Company's stockholders
another proposal or offer or shall have adopted any resolution
to effect any of the foregoing;
(viii) from the date of this Agreement until the Tender Offer
Purchase Time, any of the consents, approvals, authorizations,
orders or permits required to be obtained by the Company,
Acquisition, or their respective subsidiaries in connection
with the Merger from, or filings or registrations required to
be made by any of the same prior to the Tender Offer Purchase
Time with, any Governmental Entity in connection with the
execution, delivery and performance of this Agreement shall
not have been obtained or made or shall have been obtained or
made subject to conditions or requirements, except where the
failure to have obtained or made any such consent, approval,
authorization, order, permit, filing or registration or such
conditions or requirements could not reasonably be expected to
(A) have a Material Adverse Effect on the Company or the
Parent or
33
<PAGE>
(B) impose material limitations on the ability of
Acquisition to acquire or hold or to exercise any rights of
ownership of the Shares, or effectively to manage or control
the Company and its business, assets and properties; or
(ix) from the date of this Agreement until the Tender Offer
Purchase Time, there shall have occurred (A) any general
suspension of trading in, or limitation on prices for,
securities on the NYSE, (B) the declaration of a banking
moratorium or any suspension of payments in respect of banks
in the United States (whether or not mandatory), (C) the
commencement of a war, armed hostilities or other
international or national calamity directly or indirectly
involving the United States and having a Material Adverse
Effect on the Company or materially adversely affecting (or
materially delaying) the consummation of the Offer, (D) any
limitation or proposed limitation (whether or not mandatory)
by any United States governmental authority or agency, or any
other event, that materially adversely affects generally the
extension of credit by banks or other financial institutions,
(E) from the date of this Agreement through the date of
termination or expiration of the Offer, a decline of at least
25% in the Standard & Poor's 500 Index or (F) in the case of
any of the situations described in clauses (A) through (E)
inclusive, existing at the date of the commencement of the
Offer, a material acceleration, escalation or worsening
thereof;
which, in the reasonable judgment of Acquisition, in any such
case, and regardless of the circumstances giving rise to any such condition,
makes it inadvisable to proceed with the Offer and/or with such acceptance for
payment or payments.
(b) The conditions set forth in Section 7.1(a) are for the
sole benefit of Acquisition and may be asserted by Acquisition regardless of any
circumstances giving rise to any condition and may be waived by Acquisition, in
whole or in part, at any time and from time to time, in the sole discretion of
Acquisition. The failure by Parent or Acquisition (or any affiliate of
Acquisition) at any time to exercise any of the foregoing rights will not be
deemed a waiver of any right and each right will be deemed an ongoing right
which may be asserted at any time and from time to time.
(c) Notwithstanding the foregoing, if within the "Cure Time"
(defined below) the Company has cured one or more conditions set forth in
subsections (a)(i), (ii), (iii), (vi), (viii) or (ix) of Section 7.1, and
following such cure, no condition enumerated in Section 7.1(a) continues to
exist, then this Article shall not relieve Acquisition of its obligations
hereunder with respect to the Offer. For purposes hereof, "Cure Time" means the
earlier of (A) prior to two full business days before the scheduled expiration
date of the Offer (as such period may be extended) or (B) within ten full
business days following notice to the Company of the existence of such
condition.
ARTICLE 8
CONDITIONS TO CONSUMMATION OF THE MERGER
SECTION 8.1. Conditions to Each Party's Obligations to Effect
------------------------------------------------
the Merger. The respective obligations of each party hereto to effect the Merger
- ----------
are subject to the satisfaction at or prior to the Closing Time of the following
conditions:
(a) this Agreement, the Preferred Stock Issuance, the Merger
and the other transactions contemplated hereby shall have been approved by all
necessary
34
<PAGE>
corporate action of the Company, including, if necessary, adoption by vote of
the stockholders of the Company;
(b) no Governmental Entity or court of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered any
statute, rule, regulation, executive order, decree, injunction or other order
(and if temporary or preliminary, not vacated within five business days of its
entry) which is in effect and which (1) makes the payment of the Class A Merger
Consideration, the Class B Merger Consideration or Cash Merger Consideration
illegal or otherwise prohibits or restricts consummation of the Merger or any of
the other applicable transactions contemplated hereby, (2) imposes material
limitations on the ability of Parent to acquire or hold or to exercise any
rights of ownership of the Surviving Corporation, or effectively to manage or
control the Surviving Corporation and its business, assets and properties or (3)
has a Material Adverse Effect on the Company;
(c) any waiting period applicable to the Merger under the
HSR Act shall have terminated or expired and any other governmental or
regulatory notices or approvals required with respect to the transactions
contemplated hereby shall have been either filed or received;
(d) Acquisition shall have purchased Shares pursuant to the
Offer; and
(e) this Agreement and each of the Stockholder Agreements
shall remain in effect; and, unless consented to by Parent or Acquisition, no
Class A Holder or Class B Holder shall have defaulted under any of the
provisions of the applicable Stockholder Agreement.
ARTICLE 9
TERMINATION; AMENDMENT; WAIVER
SECTION 9.1. Termination. This Agreement may be terminated
-----------
and the Merger may be abandoned at any time prior to the Closing Time whether
before or after approval and adoption of this Agreement by the Company's
stockholders:
(a) by mutual written consent of Parent, Acquisition and
the Company;
(b) by Parent and Acquisition if (i) due to an occurrence or
circumstance which would result in a failure to satisfy any of the conditions
set forth in (A) Article 7, Parent or Acquisition shall have terminated the
Offer, or (B) Article 8, Parent or Acquisition shall have declined to complete
the Merger; (ii) there shall have been a breach of any covenant or agreement on
the part of the Company resulting in a Material Adverse Effect on the Company or
materially adversely affecting (or materially delaying) the consummation of the
Merger, which shall not have been cured prior to ten full business days
following notice of such breach;
(c) by the Company prior to the Tender Offer Purchase Time
if (i) there shall not have been a material breach of any representation,
warranty, covenant or agreement on the part of the Company and Acquisition shall
have terminated the Offer without purchasing Shares therefrom; (ii) the Company
shall have received a Superior Proposal, shall have furnished Parent a Notice of
Superior Proposal as contemplated by Section 5.4(b) and Parent shall not, within
three business days of Parent's receipt of the Notice of Superior Proposal, have
made an offer which the Company Board, by a majority vote, determines in its
good faith judgment (consistent with the advice of a financial
35
<PAGE>
advisor of nationally recognized reputation) to be as favorable to the Company's
stockholders as such Superior Proposal, provided, however, that such termination
under this clause (ii) shall not be effective until payment of the fee required
by Section 9.3(b) or waiver thereof pursuant to Section 9.3(c); (iii) there
shall have been a breach of any representation or warranty on the part of Parent
or Acquisition which materially adversely affects (or materially delays) the
consummation of the Offer or (iv) there shall have been a material breach of any
covenant or agreement on the part of Parent or Acquisition and which materially
adversely affects (or materially delays) the consummation of the Offer which
shall not have been cured prior to the earliest of (A) 10 days following notice
of such breach and (B) two business days prior to the date on which the Offer
expires.
SECTION 9.2. Effect of Termination. In the event of the
---------------------
termination and abandonment of this Agreement pursuant to Section 9.1, this
Agreement shall forthwith become void and have no effect without any liability
on the part of any party hereto or its affiliates, directors, officers or
stockholders other than the provisions of this Section 9.2 and Sections 5.5,
9.3, and 10.1 through 10.11 hereof. Nothing contained in this Section 9.2 shall
relieve any party from liability for any breach of this Agreement.
SECTION 9.3. Fees and Expenses. (a) In the event this
-----------------
Agreement is terminated pursuant to certain provisions, as set forth in Section
9.3(b) below, Parent and Acquisition would suffer direct and substantial
damages, which damages cannot be determined with reasonable certainty. Subject
to the provisions of Section 9.3(c), to compensate Parent and Acquisition for
such damages, the Company shall pay to Acquisition the amount of $4 million as
liquidated damages (the "Liquidated Damages Amount") immediately upon such a
termination. It is specifically agreed that the amount to be paid pursuant to
this Section 9.3(a) represents liquidated damages and not a penalty.
(b) Subject to the provisions of Section 9.3(c), the Liquidated
Damages Amount shall be payable (i) if the Offer is terminated pursuant to
Section 7.1(a)(v); and (ii) if there shall be a proposal by a Third Party for a
Third Party Acquisition, and (A) Parent and Acquisition shall have terminated
this Agreement pursuant to Section 9.1(b); or (B) the Company shall have
terminated this Agreement pursuant to Section 9.1(c)(ii).
(c) Notwithstanding the provisions of subsections (a) and (b) above,
Acquisition may, at its sole option, waive payment of the Liquidated Damages
Amount in order to exercise its options to purchase certain Shares pursuant to
Section 12 of each Stockholder Agreement. In the event of such exercise, the
Liquidated Damages Amount shall no longer be payable.
(d) Except as specifically provided in this Section 9.3 and in
Section 5.9 each party shall bear its own expenses in connection with this
Agreement and the transactions contemplated hereby.
SECTION 9.4. Amendment. This Agreement may be amended by
---------
action taken by the Board, and by Parent and Acquisition at any time before or
after approval, if necessary, of the Merger by the stockholders of the Company
but, after any such approval, no amendment shall be made which requires the
approval of such stockholders under applicable law without such approval. This
Agreement may not be amended except by an instrument in writing signed on behalf
of the parties hereto.
SECTION 9.5. Extension; Waiver. At any time prior to the
-----------------
Closing Time, each party hereto may (i) extend the time for the performance of
any of the obligations or other acts of the other party, (ii) waive any
inaccuracies in the representations and
36
<PAGE>
warranties of the other party contained herein or in any document certificate or
writing delivered pursuant hereto or (iii) waive compliance by the other party
with any of the agreements or conditions contained herein. Any agreement on the
part of any party hereto to any such extension or waiver shall be valid only if
set forth in an instrument, in writing, signed on behalf of such party. The
failure of any party hereto to assert any of its rights hereunder shall not
constitute a waiver of such rights.
ARTICLE 10
MISCELLANEOUS
SECTION 10.1. Nonsurvival of Representations and Warranties.
---------------------------------------------
The representations and warranties made herein shall not survive beyond the
Tender Offer Purchase Time or a termination of this Agreement; provided,
however, that this Section 10.1 shall not limit any covenant or agreement of the
parties hereto which by its terms requires performance after the Tender Offer
Purchase Time including, without limitation, the covenants and agreements set
forth in Article 5.
SECTION 10.2. Entire Agreement; Assignment. This Agreement (a)
----------------------------
constitutes the entire agreement between the parties hereto with respect to the
subject matter hereof and supersedes all other prior agreements and
understandings both written and oral between the parties with respect to the
subject matter hereof and (b) shall not be assigned by operation of law or
otherwise; provided, however, that Acquisition may assign any or all of its
rights and obligations under this Agreement to any subsidiary of Parent, but no
such assignment shall relieve Acquisition of its obligations hereunder if such
assignee does not perform such obligations.
SECTION 10.3. Validity. If any provision of this Agreement or
--------
the application thereof to any person or circumstance is held invalid or
unenforceable the remainder of this Agreement and the application of such
provision to other persons or circumstances shall not be affected thereby and to
such end the provisions of this Agreement are agreed to be severable.
SECTION 10.4. Notices. All notices, requests, claims, demands
-------
and other communications hereunder shall be in writing and shall be given (and
shall be deemed to have been duly given upon receipt) by delivery in person, by
facsimile or by registered or certified mail (postage prepaid, return receipt
requested) to each other party as follows:
if to Parent or Acquisition: MARRIOTT INTERNATIONAL, INC.
10400 Fernwood Road
Bethesda, Maryland 20857
Telecopier: (301) 380-6727
Attention: General Counsel, Dept. 52/923
with a copy to: Gibson Dunn & Crutcher LLP
1050 Connecticut Avenue, N.W.
Washington, D.C. 20036
Telecopier: (202) 467-0539
Attention: John F. Olson, Esq.
37
<PAGE>
if to the Company to: EXECUSTAY CORPORATION
7595 Rickenbacker Drive
Gaithersburg, Maryland 20879
Telecopier: (301) 948-7118
Attention: Robert W. Zaugg and
Gary R. Abrahams
with a copy to: Dorsey & Whitney LLP
220 South Sixth Street
Minneapolis, MN 55402-1498
Telecopier: (612) 340-2868
Attention: Jack Kramer
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
SECTION 10.5. Governing Law. This Agreement shall be governed
-------------
by and construed in accordance with the laws of the State of New York without
regard to the principles of conflicts of law thereof.
SECTION 10.6. Descriptive Headings. The descriptive headings
--------------------
herein are inserted for convenience of reference only and are not intended to be
part of or to affect the meaning or interpretation of this Agreement.
SECTION 10.7. Parties in Interest. This Agreement shall be
-------------------
binding upon and inure solely to the benefit of each party hereto and its
successors and permitted assigns and nothing in this Agreement express or
implied is intended to or shall confer upon any other person any rights,
benefits or remedies of any nature whatsoever under or by reason of this
Agreement.
SECTION 10.8. Certain Definitions. For the purposes of this
-------------------
Agreement the term:
(a) "affiliate" means a person that, directly or
indirectly, through one or more intermediaries controls, is controlled by or is
under common control with the first-mentioned person;
(b) "business day" means any day other than a day on which
the NYSE is closed;
(c) "stock" means common stock, preferred stock,
partnership interests, limited liability company interests or other ownership
interests entitling the holder thereof to vote with respect to matters involving
the issuer thereof;
(d) "person" means an individual, corporation, partnership,
limited liability company, association, trust, unincorporated organization or
other legal entity; and
(e) "subsidiary" or "subsidiaries" of the Company, Parent,
the Surviving Corporation or any other person means any corporation,
partnership, limited liability company, association, trust, unincorporated
association or other legal entity of which the Company, Parent, the Surviving
Corporation or any such other person, as the case may be, (either alone or
through or together with any other subsidiary) owns, directly or indirectly, 50%
or more of the capital stock the holders of which are generally entitled
38
<PAGE>
to vote for the election of the board of directors or other governing body of
such corporation or other legal entity.
SECTION 10.9. Personal Liability. This Agreement shall not
------------------
create or be deemed to create or permit any personal liability or obligation on
the part of any direct or indirect stockholder of the Company or Parent or any
officer, director, employee, agent, representative or investor of any party
hereto.
SECTION 10.10. Specific Performance. The parties hereby
--------------------
acknowledge and agree that the failure of any party to perform its agreements
and covenants hereunder, including its failure to take all actions as are
necessary on its part to the consummation of the Merger, will cause irreparable
injury to the other parties, for which damages, even if available, will not be
an adequate remedy. Accordingly, each party hereby consents to the issuance of
injunctive relief by any court of competent jurisdiction to compel performance
of such party's obligations and to the granting by any court of the remedy of
specific performance of its obligations hereunder; provided, however, that if a
party hereto is entitled to receive the Liquidated Damages Amount pursuant to
Section 9.3 it shall not also be entitled to specific performance to compel the
consummation of the Merger.
SECTION 10.11. Counterparts. This Agreement may be executed
------------
in one or more counterparts, each of which shall be deemed to be an original but
all of which shall constitute one and the same agreement.
39
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this
Agreement to be duly executed on its behalf as of the day and year first above
written.
MARRIOTT INTERNATIONAL, INC.
By: /s/ Joseph Ryan
---------------------------
Name: Joseph Ryan
---------------------------
Title: Executive Vice President
--------------------------
EXECUSTAY CORPORATION
By: /s/ Gary R. Abrahams
---------------------------
Name: Gary R. Abrahams
---------------------------
Title: Chairman of the Board and
Chief Executive Officer
---------------------------
MI SUBSIDIARY I, INC.
By: /s/ Joseph Ryan
---------------------------
Name: Joseph Ryan
---------------------------
Title: Vice President
---------------------------
40
<PAGE>
Exhibit (c)(2)
STOCKHOLDERS AGREEMENT
THIS STOCKHOLDERS AGREEMENT (the "Agreement") is dated as of January 6,
1999, by and among Marriott International, Inc., a Delaware corporation
("Marriott"), MI Subsidiary I, Inc., a Delaware corporation and a direct,
wholly-owned subsidiary of Marriott ("Acquisition") and each of the other
parties signatory hereto (individually, a "Stockholder" and collectively, the
"Stockholders").
WHEREAS, concurrently herewith, Marriott, Acquisition and ExecuStay
Corporation, a Maryland corporation ("ExecuStay"), are entering into a Merger
Agreement, a form of which is appended hereto as Exhibit I (as such agreement
may hereafter be amended from time to time, the "Merger Agreement"), pursuant to
which ExecuStay will be merged with and into Acquisition (the "Merger").
Capitalized terms used and not defined herein have the respective meanings
assigned to them in the Merger Agreement;
WHEREAS, concurrently herewith, certain other stockholders of ExecuStay are
entering into two agreements with Marriott and Acquisition (the "Other
Stockholders Agreements"), concerning certain matters connected with the Merger
and their ExecuStay Shares (defined below);
WHEREAS, each of the Stockholders Beneficially Owns (as defined herein) the
number of shares, par value $0.01 per share, of common stock (the "Common
Stock") of ExecuStay (the "ExecuStay Shares") set forth opposite such
Stockholder's name on Schedule A hereto;
WHEREAS, the Merger Agreement contemplates that, in anticipation of
consummation of the Merger, one share of Class A Preferred Stock, par value
$0.01 per share, of ExecuStay ("Class A Shares") will be issued to each
Stockholder in exchange (the "Exchange") for each ExecuStay Share held by such
Stockholder (as used herein, the term "Shares" refers to the ExecuStay Shares
prior to the Exchange and the Class A Shares after the Exchange);
WHEREAS, Marriott has agreed that each Stockholder shall receive shares of
Marriott common stock, par value $0.01 per share ("Marriott Stock"), in the
Merger, in respect of their Shares, and each such Stockholder desires to receive
such Marriott Stock; and
WHEREAS, as an inducement and a condition to entering into the Merger
Agreement, Marriott has required that the Stockholders agree, and the
Stockholders have agreed, to enter into this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual promises,
representations, warranties, covenants and agreements contained herein, the
parties hereby agree as follows:
1. Agreement to Vote; Irrevocable Proxy.
------------------------------------
(a) Each Stockholder hereby agrees that during the period commencing
at the Tender Offer Purchase Time and continuing until the first to occur of the
Closing and the
<PAGE>
termination of the Merger Agreement in accordance with its terms, at any meeting
of the holders of the Shares, however called, or in connection with any written
consent of the holders of Shares, such Stockholder shall vote (or cause to be
voted) the Shares held of record or Beneficially Owned (as defined herein) by
such Stockholder, whether owned on the date hereof or hereafter acquired, (i) in
favor of approval of the Merger Agreement, all transactions contemplated
thereby, and any actions required in furtherance thereof and hereof (including
election of such directors of ExecuStay as Marriott is entitled to designate
pursuant to the Merger Agreement); (ii) against any action or agreement that is
intended, or could reasonably be expected, to impede, interfere with, or prevent
the Merger or result in a breach in any respect of any covenant, representation
or warranty or any other obligation or agreement of ExecuStay or any of its
subsidiaries under the Merger Agreement, the Other Stockholders Agreements or
this Agreement; and (iii) except as specifically requested in writing in advance
by Marriott or Acquisition, against the following actions (other than the
Exchange, the Merger and the transactions contemplated by the Merger Agreement,
the Other Stockholders Agreements and this Agreement): (A) any extraordinary
corporate transaction, such as a merger, consolidation or other business
combination involving ExecuStay or any of its subsidiaries or affiliates; (B) a
sale, lease, transfer or disposition by ExecuStay or any of its subsidiaries of
any assets outside the ordinary course of business or any assets which in the
aggregate are material to ExecuStay and its subsidiaries taken as a whole, or a
reorganization, recapitalization, dissolution or liquidation of ExecuStay or any
of its subsidiaries or affiliates; (C)(1) any change in the management of
ExecuStay or in a majority of the persons who constitute the board of directors
of ExecuStay; (2) any change in the present capitalization of ExecuStay or any
amendment of ExecuStay's charter or By-Laws; (3) any other material change in
ExecuStay's or any of its subsidiaries' corporate structure or business; or (4)
any other action that, in the case of each of the matters referred to in clauses
(C)(1), (2) or (3), is intended, or could reasonably be expected, to impede,
interfere with, delay, postpone or materially adversely affect the Exchange, the
Merger or the transactions contemplated by this Agreement, the Other
Stockholders Agreements and the Merger Agreement. No Stockholder shall enter
into any agreement or understanding with any Person (as defined herein) the
effect of which would be inconsistent with or violative of the provisions and
agreements contained in Section 1 or 2 hereof.
(b) By his execution hereof and in order to secure his obligations
hereunder, each Stockholder hereby grants to, and appoints, Acquisition and
Kenneth R. Rehmann and Joseph Ryan, in their respective capacities as officers
of Acquisition, and any individual who shall hereafter succeed to any such
office of Acquisition, and any other designee of Acquisition, and each of them
individually, such Stockholder's true and lawful irrevocable (until the
Termination Date) proxy and attorney-in-fact (with full power of substitution)
to vote the Shares, or grant a consent or approval in respect of such Shares, as
indicated in Section 1(a) above, provided, however, that this proxy shall not
take effect until purchase of the Shares by Acquisition at the Tender Offer
Purchase Time. Each Stockholder intends this proxy to be irrevocable (from the
Tender Offer Purchase Time until the Termination Date) and coupled with an
interest and will take such further action and execute such other instruments as
may be necessary to effectuate the intent of this proxy and hereby represents
that any proxy heretofore given in respect of his Shares is not irrevocable, and
hereby revokes any proxy previously granted by such Stockholder with respect to
the Shares. Each Stockholder understands and acknowledges that Acquisition is
entering into the Merger Agreement in reliance on his execution and delivery of
this irrevocable
2
<PAGE>
proxy. Each Stockholder hereby affirms that this irrevocable proxy is given in
connection with the execution of this Agreement and the Merger Agreement, and
further affirms that this irrevocable proxy is coupled with an interest in this
Agreement for the term stated herein and may under no circumstances be revoked.
Such Stockholder hereby ratifies and confirms all that this irrevocable proxy
may lawfully do or cause to be done by virtue hereof. This proxy is executed and
intended to be irrevocable in accordance with the provisions of Section 2-507(d)
of the Maryland General Corporation Law. This proxy shall terminate
automatically on the termination of the Merger Agreement.
2. Other Covenants, Representations and Warranties. Each Stockholder
-----------------------------------------------
hereby represents and warrants to Marriott and Acquisition as of the date hereof
and as of the Closing as follows:
(a) Ownership of Shares. Such Stockholder is the record and
-------------------
Beneficial Owner of the number of Shares set forth opposite such Stockholder's
name on Schedule A hereto. On the date hereof, the Shares set forth opposite
such Stockholder's name on Schedule A hereto constitute all of the Shares owned
of record or Beneficially Owned by such Stockholder. Such Stockholder owns such
Shares free and clear of all liens, claims, charges, security interests,
mortgages or other encumbrances, and such Shares are subject to no rights of
first refusal, put rights, other rights to purchase or encumber such Shares, or
to any agreements other than this Agreement as to the encumbrance or disposition
of such Shares. Such Shares are duly and validly issued, fully paid and non-
assessable. Such Stockholder has sole voting power and sole power to issue
instruction with respect to the matters set forth in Section 1 hereof, sole
power of disposition, sole power of conversion, sole power to demand appraisal
rights and sole power to agree to all of the matters set forth in this
Agreement, in each case with respect to all of the Shares set forth opposite
such Stockholder's name on Schedule A hereto, with no limitations,
qualifications or restrictions on such rights.
(b) Power; Binding Agreement. Such Stockholder has the legal
------------------------
capacity, power and authority to enter into and perform all of such
Stockholder's obligations under this Agreement. The execution, delivery and
performance of this Agreement by such Stockholder will not violate any other
agreement to which such Stockholder is a party including, without limitation,
any voting agreement, shareholder agreement or voting trust. This Agreement has
been duly and validly executed and delivered by such Stockholder and constitutes
a valid and binding agreement of such Stockholder, enforceable against such
Stockholder in accordance with its terms, except as such enforceability may be
limited by any applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting the enforcement of creditors' rights generally, and
except as the availability of equitable remedies may be limited by the
application of general principles of equity (regardless of whether such
equitable principles are applied in a proceeding at law or in equity). There is
no beneficiary or holder of a voting trust certificate or other interest of any
trust of which such Stockholder is trustee who is not a party to this Agreement
and whose consent is required for the execution and delivery of this Agreement
or the consummation by such Stockholder of the transactions contemplated hereby.
If such Stockholder is married and such Stockholder's Shares constitute
community property, this Agreement has been duly authorized, executed and
delivered by, and constitute a valid and binding agreement of, such
Stockholder's spouse, enforceable against such person in accordance with its
terms, except
3
<PAGE>
as such enforceability may be limited by any applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights generally, and except as the availability of equitable
remedies may be limited by the application of general principles of equity
(regardless of whether such equitable principles are applied in a proceeding at
law or in equity).
(c) No Conflicts. (i) Except for filings, permits, authorizations,
------------
consents and approvals as may be required under and other applicable
requirements of the HSR Act, no filing with, and no permit, authorization,
consent or approval of, any state or federal public body or authority is
necessary for the execution of this Agreement by such Stockholder and the
consummation by such Stockholder of the transactions contemplated hereby and
(ii) none of the execution or delivery of this Agreement by such Stockholder,
the consummation by such Stockholder of the transactions contemplated hereby or
compliance by such Stockholder with any of the provisions hereof shall (A)
result in a violation or breach of, or constitute (with or without notice or
lapse of time or both) a default (or give rise to any third party right of
termination, cancellation, material modification or acceleration) under any of
the terms, conditions or provisions of any note, bond, mortgage, indenture,
license, contract, commitment, arrangement, understanding, agreement or other
instrument or obligation of any kind to which such Stockholder is a party or by
which such Stockholder or, to the best of such Stockholder's knowledge, any of
such Stockholder's properties or assets may be bound, or (B) violate any order,
writ, injunction, decree, judgment, order, statute, rule or regulation
applicable to such Stockholder or any of such Stockholder's properties or
assets. This Agreement hereby supersedes all prior agreements to which such
Stockholder is a party with respect to such Stockholder's Shares, including
without limitation any registration rights agreement with respect to any of such
Stockholder's Shares.
(d) No Finder's Fees. No broker, investment banker, financial adviser or
----------------
other person is entitled to any broker's, finder's, financial adviser's or other
similar fee or commission in connection with the transactions contemplated by
the Merger Agreement based upon arrangements made by or on behalf of such
Stockholder.
(e) Other Potential Acquirers. Such Stockholder (i) shall immediately
-------------------------
cease any existing discussions or negotiations, if any, with any parties
conducted heretofore with respect to any acquisition of all or any material
portion of the assets of, or any equity interest in, ExecuStay or any of its
subsidiaries or any business combination with ExecuStay or any of its
subsidiaries, in his or her capacity as such, and (ii) from and after the date
hereof until termination of the Merger Agreement, unless and until ExecuStay is
permitted to take such actions under Section 5.4 of the Merger Agreement, shall
not, in such capacity, directly or indirectly, initiate, solicit or knowingly
encourage (including by way of furnishing non-public information or assistance),
or take any other action to facilitate knowingly, any inquiries or the making of
any proposal that constitutes, or may reasonably be expected to lead to, any
such transaction or acquisition, or agree to or endorse any such transaction or
acquisition, or authorize or permit any of such Stockholder's agents to do so,
and such Stockholder shall promptly notify Marriott or Acquisition of any
proposal and shall provide a copy of any such written proposal and a summary of
any oral proposal to Marriott or Acquisition immediately after receipt thereof
(and shall specify
4
<PAGE>
the material terms and conditions of such proposal and identify the person
making such proposal) and thereafter keep Marriott or Acquisition advised of any
development with respect thereto.
(f) Restriction on Transfer, Proxies and Non-Interference. Such
-----------------------------------------------------
Stockholder shall not, directly or indirectly: (i) tender his Shares in the
Offer (as defined in the preamble to the Merger Agreement) or any other tender
offer for ExecuStay Shares; (ii) except as contemplated by this Agreement, the
Other Stockholders Agreements or the Merger Agreement, otherwise offer for sale,
sell, transfer, tender, pledge, encumber, assign or otherwise dispose of, or
enter into any contract, option or other arrangement or understanding with
respect to or consent to the offer for sale, sale, transfer, tender, pledge,
encumbrance, assignment or other disposition of, any or all of such
Stockholder's Shares or any interest therein; (iii) grant any proxies or powers
of attorney, deposit any Shares into a voting trust or enter into a voting
agreement with respect to any Shares; or (iv) take any action that would make
any representation or warranty of such Stockholder contained herein untrue or
incorrect or have the effect of preventing or disabling such Stockholder from
performing such Stockholder's obligations under this Agreement.
(g) Investment Intention.
---------------------
(i) Such Stockholder confirms that Marriott and Acquisition
have made available to such Stockholder, and his representatives and agents, (A)
information about Marriott, (B) the opportunity to ask questions of the officers
and employees of Marriott and (C) the opportunity to acquire such additional
information about the business and financial condition of Marriott as such
Stockholder has requested, and such information has been received.
(ii) The shares of Marriott Stock to be issued to such
Stockholder in connection with the Merger will be acquired for investment and
not with a view to distribution of such shares within the meaning of Section
2(11) of the Securities Act.
(iii) Such Stockholder does not have in mind the sale or other
disposition of shares of Marriott Stock at some fixed time in the future (such
as the expiration of the holding period for capital gains tax treatment) or upon
the occurrence or nonoccurrence of any particular events.
(iv) Such Stockholder is an "accredited investor" within the
meaning of Section 2(a)(15) of the Securities Act.
(h) Employee Waivers. Such Stockholder will (a) cooperate with Parent
----------------
and Acquisition in obtaining waivers, in form and substance reasonably
satisfactory to Parent and Acquisition, of all terms of the Company Option Plan
and all terms of outstanding Company Stock Options, which terms could prevent,
restrict or impair the ability of Parent, Acquisition and the Company to
effectuate fully the provisions of Section 2.14 of the Merger Agreement, and (b)
use reasonable efforts to cause its Compensation Committee to interpret the
Company Option Plan so as to enable the Company, Parent and Acquisition to
effectuate fully the provisions of Section 2.14 of the Merger Agreement.
5
<PAGE>
(i) Reliance by Marriott and Acquisition. Such Stockholder
------------------------------------
understands and acknowledges that Marriott and Acquisition are relying upon the
foregoing representations by the Stockholder, and on the Stockholder's execution
and delivery of this Agreement (i) in entering into the Merger Agreement and
(ii) in issuing the Marriott Stock in connection with the Merger without
registration under the Securities Act or qualification under any state
securities laws (collectively, "Blue Sky Laws"). Each Stockholder agrees that
the Marriott Stock will not be transferred until such time as the Form S-3
(defined below) is declared effective by the SEC.
3. Further Assurances; Merger Agreement Compliance. From time to time, at
-----------------------------------------------
Marriott's or Acquisition's request and without further consideration, each
Stockholder agrees to execute and deliver such additional documents and take all
such further lawful action as may be necessary or desirable to consummate and
make effective, and to cause the Company to consummate and make effective, in
the most expeditious manner practicable, the transactions contemplated by this
Agreement, the Other Stockholders Agreements and the Merger Agreement. Each
Stockholder further agrees not to take any action, or omit to take an action,
which would, or would be reasonably likely to, result in a breach by the Company
of any of the provisions of the Merger Agreement.
4. Stop Transfer; Form of Legend.
-----------------------------
(a) Each Stockholder agrees with, and covenants to, Marriott that
such Stockholder shall not request that ExecuStay register the transfer (book-
entry or otherwise) of any certificate or uncertificated interest representing
any of such Stockholder's Shares, unless such transfer is made in compliance
with this Agreement. In the event of a stock dividend or distribution, or any
change in the Common Stock, the Class A Shares or the Class B Shares by reason
of any stock dividend, split-up, recapitalization, combination, exchange of
shares or the like, the term "Shares" shall be deemed to refer to and include
the Shares as well as all such stock dividends and distributions and any shares
into which or for which any or all of the Shares may be changed or exchanged.
(b) All certificates representing any of such Stockholder's Shares
shall contain the following legend:
"The securities represented by this certificate are subject to certain
restrictions on transfer and other terms of a Stockholders Agreement,
dated as of January 6, 1999, among Marriott International, Inc., MI
Subsidiary I, Inc. and the parties listed on the signatures pages
thereto, a copy of which is on file in the principal office of
Marriott International, Inc."
5. Stock Issuance and Registration.
-------------------------------
(a) In accordance with the provisions of Section 2.1 of the Merger
Agreement, immediately prior to the Merger, ExecuStay will, in the Exchange,
issue to the Stockholders on a share-for-share basis, Class A Shares in exchange
for Common Stock held of record or Beneficially Owned by them. In the Merger,
each Stockholder shall receive, in respect of each
6
<PAGE>
Class A Share held of record or Beneficially Owned by such Stockholder, shares
of Marriott Stock in an amount determined by the "Class A Exchange Ratio" as
defined in Section 2.9(b) of the Merger Agreement.
(b) Marriott shall, no later than the First Registration Date (as
defined below), file with the SEC and thereafter use its reasonable efforts to
cause to be declared effective, a registration statement on Form S-3 or an
equivalent successor form (the "Form S-3") relating to the offer and sale from
time to time by the Stockholders of shares of Marriott Stock held by them that
are Registrable Securities. As used herein, the "First Registration Date" means
the later of (i) 30 days following the Closing Time, or (ii) April 30, 1999,
provided, however, that if on such date Marriott is not eligible to use Form S-3
for registration of the resale of Registrable Securities as provided herein,
then the First Registration Date shall be the earliest date after April 30, 1999
on which Marriott becomes eligible to use Form S-3 in connection with such
resale registration. Subject to the limitations contained herein, Marriott shall
use its reasonable efforts to keep the Form S-3 continuously effective in order
to permit the prospectus forming part thereof to be usable by the Stockholders
for a period of one year from the Closing Time, or for such shorter period that
will terminate when all Registrable Securities covered by the Form S-3 have been
sold pursuant to the Form S-3 or cease to be outstanding or otherwise to be
Registrable Securities.
(c) Marriott further agrees, if necessary, to supplement or amend the
Form S-3, as required by Section 6 below, and to furnish to Stockholders holding
Registrable Securities copies of any such supplement or amendment promptly after
its being used or filed with the SEC.
(d) Marriott agrees to use its reasonable efforts to ensure that (i)
the Form S-3 and any amendments thereof, at the time each such Form S-3 or
amendment thereof becomes effective, and any prospectus forming a part thereof
and any supplement thereto complies in all material respects with the Securities
Act and the rules and regulations thereunder, (ii) the Form S-3 and any
amendment thereto does not, when it becomes effective, contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading and
(iii) any prospectus forming part of the Form S-3, and any supplement to such
prospectus (as amended or supplemented from time to time)(each, as of the date
thereof), does not include an untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements, in light of the
circumstances under which they were made, not misleading; provided that clauses
(ii) and (iii) of this paragraph shall not apply to any information provided by
a Stockholder.
(e) No Stockholder may use the Form S-3 unless he provides Marriott
with the information required by Section 8 of this Agreement on a timely basis.
Notwithstanding any other provision herein or in the Merger Agreement, (i)
Marriott shall have no obligation under Sections 5 or 6 hereof with respect to
any shares of Marriott Stock that are (x) not Registrable Securities or (y) held
of record or Beneficially Owned by a Stockholder who has not performed his
obligations under, or otherwise has breached, violated or is in default under,
the Agreement or the Merger Agreement, and (ii) all obligations of Marriott
under Sections 5 and 6 hereof automatically shall terminate and be of no further
force or effect in the event that the Merger Agreement is terminated or the
Offer or the Merger is not consummated.
7
<PAGE>
(f) Notwithstanding any other provision herein, Marriott may delay
filing the Form S-3, may withhold efforts to cause the Form S-3 to become
effective, and may advise holders of Registrable Securities to suspend use of
the prospectus that is part of the Form S-3, for limited periods of time if and
to the extent that Marriott reasonably determines in good faith that any such
action is necessary in order for Marriott to comply with its disclosure
obligations under Section 5(d) hereof. In the event that Marriott advises the
holders of registered Registrable Securities that Marriott considers it
appropriate to suspend the use of the prospectus, such holders shall suspend any
further sales of their registered securities until Marriott advises them that
the Form S-3 has been amended or that such sales may be resumed.
6. Registration Procedures.
-----------------------
(a) Marriott shall prepare and file a Form S-3, within the relevant time
period specified in Section 5(a), and use its reasonable efforts to cause such
Form S-3 to become effective and remain effective in accordance with Section 5
hereof.
(b) Marriott shall prepare and file such amendments and post-effective
amendments to the Form S-3 as may be necessary under applicable law to keep such
Form S-3 effective for the applicable period; and cause each prospectus that is
part of the Form S-3 to be supplemented by any required prospectus supplement,
and as so supplemented to be filed with the SEC pursuant to applicable
requirements of the Securities Act and the rules and regulations thereunder.
(c) Marriott shall use its reasonable efforts to register or qualify the
Registrable Securities under all applicable Blue Sky Laws as any Stockholder
holding Registrable Securities covered by the Form S-3 shall reasonably request;
provided, however, that Marriott shall not be required to (i) qualify as a
foreign corporation or as a dealer in securities in any jurisdiction where it
would not otherwise be required to qualify but for this Section 6(c), or (ii)
take any action which would subject it to general service of process or taxation
in any such jurisdiction where it is not then so subject.
(d) Marriott shall furnish to each Stockholder of Registrable Securities,
without charge, as many copies of each prospectus and any amendment thereof or
supplement thereto as such Stockholder may reasonably request.
(e) Marriott shall cooperate with the selling Stockholders of Registrable
Securities to facilitate the timely preparation and delivery of certificates
representing Registrable Securities to be sold and not bearing any restrictive
legends.
(f) Marriott shall cause all Registrable Securities covered by the Form S-
3 to be listed on the NYSE.
7. Transfer Restrictions on Marriott Stock.
---------------------------------------
(a) No Stockholder shall directly or indirectly offer for sale, sell,
transfer, tender, pledge, encumber, assign or otherwise dispose of, or enter
into any contract, option or other arrangement or understanding with respect to
or consent to the offer for sale, sale, transfer, tender, pledge, encumbrance or
other disposition of, or exercise any discretionary powers to
8
<PAGE>
distribute, any or all of the Marriott Stock owned by it or any interest
therein; provided, however, that the transfer restrictions set forth in this
Section 7 shall not apply: (a) as of the Effective Time, to one-third of the
shares of the Marriott Stock held of record or Beneficially Owned by such
Stockholder on the Effective Time (the "Effective Time Shares"); (b) as of the
first anniversary of the Effective Time, to an additional one-third of the
Effective Time Shares; and (c) as of the second anniversary of the Effective
Time, to the remaining one-third of the Effective Time Shares. All certificates
representing any of the Stockholders' shares of Marriott Stock shall contain the
legend set forth in Section 4(b) hereof.
(b) Notwithstanding anything herein to the contrary, with respect to
Effective Time Shares held by a Stockholder, the transfer restrictions set forth
in Section 7(a) hereof shall expire and be of no further force or effect in the
event of, and immediately upon, a termination by Acquisition of such
Stockholder's employment without cause.
8. Condition Precedent. It shall be a condition precedent to the
-------------------
obligations of Marriott to take any action pursuant hereto that the Stockholders
shall furnish to Marriott such information regarding them, the Registrable
Securities held by them and the intended method of disposition of such
Registrable Securities as Marriott shall reasonably request and as shall be
required in connection with the action to be taken by Marriott.
9. Expenses of Registration. All expenses incurred in connection with any
------------------------
registrations pursuant to Section 5 hereof, including without limitation all
registration and qualification fees, printers' and accounting fees, reasonable
fees and disbursements of counsel for Marriott, shall be borne by Marriott,
except for (a) fees and disbursements of counsel for the selling Stockholders,
and (b) any underwriting or brokers' discounts or similar transaction fees,
which shall be borne by the selling Stockholders.
10. Indemnification.
---------------
(a) Marriott agrees to indemnify and hold harmless each Stockholder
and each person, if any, who controls such Stockholder within the meaning of the
Securities Act (the "Holder Indemnified Parties"), against any losses, claims,
damages or liabilities, joint or several, to which any Holder Indemnified Party
may become subject, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based on any Misstatement
(defined below) in the Form S-3 or any amendments thereof or supplements
thereto. Marriott will reimburse each such Holder Indemnified Party for any
legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action.
Notwithstanding anything to the contrary contained in this Section 10(a), the
indemnity agreement contained in this paragraph 10(a) shall not (i) apply to
amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of Marriott (which consent
shall not be unreasonably withheld); (ii) apply to any such case for any such
loss, claim, damage, liability, or action to the extent that it arises out of or
is based upon a Misstatement made in reliance upon and in conformity with
written information furnished expressly for use in connection with such
registration by any such Holder Indemnified Party.
9
<PAGE>
(b) Each Stockholder agrees to indemnify and hold harmless Marriott,
each of its directors, each of its officers who have signed the Form S-3, and
each person, if any, who controls Marriott within the meaning of the Securities
Act, and each agent (the "Marriott Indemnified Parties") against any losses,
claims, damages or liabilities to which any Marriott Indemnified Party may
become subject, insofar as such losses, claims, damages or liabilities (or
actions in respect thereto) (i) arise out of or are based upon any Misstatement
in the Form S-3 and any amendments thereof or supplements thereto made in
reliance upon and in conformity with written information furnished expressly for
use in connection with such registration by any such Holder Indemnified Party.
Each such Stockholder will reimburse any legal or other expenses reasonably
incurred by such Marriott Indemnified Party in connection with investigating or
defending any such loss, claim, damage, liability or action. Notwithstanding
anything to the contrary contained in this Section 10(b), the indemnity
agreement contained in this Section 10(b) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of such Stockholder (which consent
shall not be unreasonably withheld).
(c) If the indemnification provided for in this Section 10 is
unavailable to an indemnified party under Section 10(a) or Section 10(b) above
(other than by reason of exceptions provided in those Sections) in respect of
any losses, claims, damages or liabilities referred to in such Sections, then
each applicable indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages or liabilities in such proportion as
is appropriate to reflect the relative benefit and relative fault as well as any
other equitable considerations. The amount paid or payable by a party as a
result of the losses, claims, damages, or liabilities referred to above shall be
deemed to include, subject to the limitations set forth in Section 10(d), any
legal or other fees or expenses reasonably incurred by such party in connection
with investigating or defending any action or claim. The relative benefit shall
be determined by the allocation of proceeds from such Form S-3. The relative
fault of the indemnified party on the one hand and of the indemnifying party on
the other shall be determined by reference to, among other things, whether the
Misstatement or alleged Misstatement relates to information supplied by the
indemnified party or the indemnifying party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
Misstatement or alleged Misstatement. Marriott and the Stockholders agree that
it would not be just and equitable if contribution pursuant to this Section
10(c) were determined by pro rata allocation or by any other method of
allocation which does not take account of the equitable considerations referred
to above. No person guilty of fraudulent misrepresentation (within the meaning
of Section 10(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation.
(d) Any person entitled to indemnification hereunder will: (i) give
prompt notice to the indemnifying party of any claim with respect to which it
seeks indemnification; and (ii) unless in such indemnified party's reasonable
judgment a conflict of interest between such indemnified and indemnifying
parties may exist with respect to such claim, permit such indemnifying party to
assume the defense of such claim with counsel reasonably satisfactory to the
indemnified party. If such defense is assumed, the indemnifying party will not
be subject to any liability for any settlement made without its consent (but
such consent will not be unreasonably withheld). An indemnifying party who is
not entitled or elects not to assume the defense of a
10
<PAGE>
claim will not be obligated to pay the fees and expenses of more than one
counsel for all parties indemnified by such indemnifying party with respect to
such claim, unless in the reasonable judgment of any indemnified party a
conflict of interest may exist between such indemnified party and any other such
indemnified parties with respect to such claim. The failure to notify an
indemnifying party promptly of the commencement of any such action, if
prejudicial to his ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this
paragraph, but the omission so to notify the indemnifying party will not relieve
him of any liability that he may have to any indemnified party otherwise than
under this Section.
11. Termination of Marriott's Obligations. Marriott shall have no
-------------------------------------
obligations pursuant to Section 6 with respect to Registrable Securities more
than one year after the Closing.
12. Employment Agreements. Following the date hereof, but prior to the
---------------------
commencement of the Offer, each Stockholder agrees to negotiate and execute
employment agreements with respect to his employment by Acquisition following
the Closing, in accordance with the form of employment agreement attached as
Exhibit II.
13. The Options. Each Stockholder hereby agrees as follows:
-----------
(a) Grant of Options. Subject to the terms of this Section 13, each
----------------
Stockholder hereby grants to Acquisition (or its designee), effective upon the
purchase of the Shares by Acquisition at the Tender Offer Purchase Time, an
irrevocable option (each, an "Option") to purchase all Shares held of record or
Beneficially Owned by such Stockholder at a purchase price per Share equal to
$13.
(b) Exercise of Options. Acquisition may exercise the Options, in
-------------------
whole or in part, at any time and from time to time, following the occurrence of
a Purchase Event (as defined below); provided that any Options not theretofore
exercised shall expire and be of no further force and effect upon the earliest
to occur (the "Expiration Date") of (i) the Closing Time, (ii) 5 months after
the first occurrence of a Purchase Event, or (iii) termination of the Merger
Agreement in accordance with its terms. Notwithstanding anything herein to the
contrary, in the event of termination of the Merger Agreement, Marriott at its
option either may elect to exercise the Options, or may accept payment of the
Liquidated Damages Amount provided for in Section 9.3 of the Merger Agreement,
but shall not be entitled to exercise the Options and retain Liquidated Damages
Amount. In the event Marriott determines to exercise the Options, promptly upon
a termination of the Merger Agreement giving rise to payment of the Liquidated
Damages Amount, Marriott shall notify ExecuStay of its waiver of receipt of the
Liquidated Damages Amount pursuant to the Merger Agreement.
As used herein, a "Purchase Event" shall mean any of the following events that
occurs after the date hereof:
(i) Beneficial Ownership of more than 20% of the outstanding
capital stock of ExecuStay (or rights to acquire such capital stock of
ExecuStay) shall have been acquired by any Person or "group" other than
Acquisition, any affiliate of Acquisition or one or more of the Stockholders;
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<PAGE>
(ii) ExecuStay shall have entered into a definitive agreement
or approved or recommended any proposal which provides for the acquisition of
20% or more of the outstanding capital stock of ExecuStay or substantially all
of the assets of ExecuStay by any Person or group other than Acquisition, an
affiliate of Acquisition or one or more of the Stockholders;
(iii) (A) the failure of ExecuStay's stockholders to approve the
Merger Agreement or the transactions contemplated thereby at a meeting called to
consider such Merger Agreement, if such meeting shall have been preceded by (x)
the public announcement by any Person or group (other than Acquisition or an
affiliate of Acquisition) of an offer or proposal to acquire, merge or
consolidate with ExecuStay, or (y) the Board of Directors of ExecuStay's
publicly withdrawing or modifying, or publicly announcing its intent to withdraw
or modify, its recommendation that the stockholders of ExecuStay approve the
transactions contemplated by the Merger Agreement, as prohibited by Section
5.4(b) of the Merger Agreement; or (B) the acceptance by ExecuStay's Board of
Directors of, or the public recommendation by ExecuStay's Board of Directors
that the stockholders of ExecuStay accept, an offer or proposal from any Person
or group (other than Acquisition or an affiliate of Acquisition), to acquire 20%
or more of the outstanding capital stock of ExecuStay or for a merger or
consolidation or any similar transaction involving ExecuStay, as prohibited by
Section 5.4(b) of the Merger Agreement;
(iv) a proposal made by a third party to ExecuStay, its
affiliates or their respective officers, directors, employees, representatives
or agents, as described in Section 5.4 of the Merger Agreement, resulting in a
breach by ExecuStay of the covenant and obligation contained in that Section 5.4
and such breach (x) would entitle Acquisition or Marriott to terminate the
Merger Agreement pursuant to Section 9.1(b) thereof and (y) shall not have been
cured prior to the date that Acquisition duly gives notices to the Stockholder
of its desire to exercise an Option pursuant to Section 13 hereof; or
(v) any breach by a Stockholder of this Agreement.
(c) Notice of Exercise. To exercise an Option, Acquisition shall,
------------------
prior to the Expiration Date, give written notice to the Stockholder who granted
such Option specifying the location in Maryland or Washington, D.C. and time for
the closing (the "Option Closing") of such purchase. The Option Closing shall be
held on the date that is no later than three business days after the date on
which each of the conditions set forth in Section 13(d) below has been satisfied
or waived by Acquisition.
(d) Conditions to Option Closing Following Exercise of Options. The
----------------------------------------------------------
occurrence of the Option Closing shall be subject to the satisfaction of each of
the following conditions:
(i) to the extent necessary, any applicable waiting periods (and
any extension thereof) under the HSR Act with respect to the purchase of the
Shares following the exercise of an Option shall have expired or been
terminated; and
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<PAGE>
(ii) no preliminary or permanent injunction or other order,
decree or ruling issued by any court of governmental or regulatory authority,
domestic or foreign, of competent jurisdiction prohibiting the exercise of an
Option or the delivery of Shares shall be in effect.
(e) Transferability of Options. Acquisition may sell or transfer the
--------------------------
Options and any Shares acquired upon exercise of an Option at any time, without
the written consent of the Stockholder, to any affiliate or affiliates of
Acquisition.
(f) Payment for and Delivery of Certificates. At the Option Closing,
----------------------------------------
(i) Acquisition (or its designee) shall pay, by check, an amount equal to the
product of (x) $13 and (y) the number of Shares owned by such Stockholder; and
(ii) each Stockholder whose Shares are being purchased shall deliver or shall
cause to be delivered to Acquisition a certificate or certificates evidencing
such Stockholder's Shares, and such Stockholder agrees that such Shares shall be
transferred free and clear of all liens. All such certificates representing
Shares shall be duly endorsed in blank, or with appropriate stock powers, duly
executed in blank, attached thereto, in proper form for transfer, with the
signature of such Stockholder thereon guaranteed, and with all applicable taxes
paid or provided for.
14. Termination. Except as otherwise provided herein, the covenants and
-----------
agreements contained herein with respect to the Shares shall terminate upon the
earliest of (a) termination of the Merger Agreement in accordance with its
terms, or (b) the Effective Time.
15. Stockholder Capacity. No person executing this Agreement who is or
--------------------
becomes during the term hereof a director or executive officer of ExecuStay
makes any agreement or understanding herein in his or her capacity as such
director or executive officer. Each Stockholder signs solely in his or her
capacity as the record and/or beneficial owner of such Stockholder's Shares.
16. Waiver of Appraisal and Dissenter's Rights. Each Stockholder hereby
------------------------------------------
irrevocably waives any rights of appraisal or rights to dissent from the Merger
that such Stockholder may have.
17. Restrictive Covenants
---------------------
(a) The parties acknowledge and agree that the Class A Merger
Consideration, the Class B Merger Consideration and the Cash Merger
Consideration to be transferred in connection with the consummation of the Offer
and the Merger constitute consideration for, among other things, the
confidential information, trade secrets, intellectual property, and customer and
vendor goodwill of the Company and the Company's investment in the skills and
know-how of its employees. In recognition thereof, the Stockholders hereby agree
to be bound by the covenants set forth in this Section 17, subject to the terms
and conditions set forth herein, for the period beginning on the date of the
Closing and ending on the seventh anniversary of the date of the Closing (the
"Restriction Period").
(b) The Stockholders agree that during the Restriction Period the
Stockholders will not, without the written consent of Marriott, in each instance
directly or indirectly, carry on
13
<PAGE>
or participate in a business that is the same as or is similar to or in
competition with a business (a "Competing Business") conducted or engaged in by
the Company or any of its subsidiaries as of the date hereof (a "Company
Business") within the Restricted Area (as defined below). The "Restricted Area"
shall mean the geographic area that is within 100 miles of a location at which
Marriott or any of its subsidiaries or affiliates is conducting or engaging in a
Company Business during the Restriction Period.
(c) The term "carry on or participate in a business" shall include
engaging in any of the following activities, directly or indirectly, other than
carrying on or engaging in activities expressly permitted under this Agreement:
(i) Carrying on or engaging in a Competing Business as a
principal, or on his own account, or solely or jointly with others as a
director, officer, agent, employee, consultant or partner, or stockholder,
limited partner or other interest holder owning more than five (5) percent
of the stock or equity interests or securities convertible into more than
five (5) percent of the stock of or equity interests in any entity.
(ii) As agent or principal carrying on or engaging in any
activities or negotiations with respect to the acquisition or disposition
of a Competing Business.
(iii) Extending credit for the purpose of establishing or
operating a Competing Business.
(iv) Lending or allowing his name or reputation to be used in a
Competing Business.
(v) Giving advice to any other person or entity carrying on or
engaging in a Competing Business.
(vi) Otherwise allowing his skill, knowledge or experience to be
used in a Competing Business.
(d) The Stockholders agree that during the Restriction Period the
Stockholders will not, without the written consent of Marriott, in each case
directly or indirectly, solicit, raid, entice, induce or offer any person who is
employed by Marriott or any of its subsidiaries or affiliates in a Company
Business to become employed by any person or entity in any business whether or
not it is a Competing Business.
(e) The Stockholders agree that during the Restriction Period the
Stockholders will not, without the written consent of Marriott, in each case
directly or indirectly, solicit business for a Competing Business from any
person or entity that is then a customer of a Company Business or that is being
solicited by a Company Business.
(f) The Stockholders agree that during the Restriction Period the
Stockholders will not, without the written consent of Marriott, in each case
directly or indirectly, provide, or arrange for or assist in the provision of
services by a Competing Business to any person or entity that is then a customer
of a Company Business or that is being solicited by a Company Business.
14
<PAGE>
(g) Upon breach of this Section 17 by any Stockholder, Marriott shall
be entitled to injunctive relief, both pendente lite and permanently, against
the breaching Stockholder, as a remedy at law would be inadequate. In addition,
Marriott shall be entitled to such damages as it can show it has sustained,
directly or indirectly, by reason of such a breach, and neither Marriott nor any
of its subsidiaries or affiliates shall be limited in such damages to the
consideration paid to the breaching Stockholder pursuant to the Merger
Agreement. Nothing in this Agreement shall be construed as limiting Marriott's
remedies in any way.
(h) Except as permitted or directed by Marriott or in connection with
his employment by Marriott or one of its subsidiaries or affiliates, each
Stockholder agrees to keep confidential and not to divulge or use any
information, materials, methods or developments of any nature and in any form
that at the time or times concerned is not generally known to those persons
engaged in a Competing Business and that relates to any one or more aspects of a
Company Business which the Stockholder has acquired or become acquainted with
prior to the termination of his employment with the Company or Marriott or any
of its subsidiaries or affiliates, whether developed by the Stockholder or by
others, including, without limitation, internal business policies, processes,
techniques, know-how, development plans, financial matters, customers and
customer lists, vendors and vendor lists, leases and sub-leases or any other
confidential information or secret aspect of any Company Business. Each
Stockholder acknowledges that the above-described knowledge or information
constitutes a unique and valuable asset of the Company and represents a
substantial investment of time and expense by the Company and that any
disclosure or use of such knowledge or information other than for the sole
benefit of the Company or Marriott or any of its subsidiaries or affiliates
would be wrongful and would cause irreparable harm to Marriott and its
subsidiaries and affiliates. The terms of this paragraph shall survive the
Restriction Period.
(i) The validity, interpretation, performance, and enforcement of the
provisions of this Section 17 shall be governed by the laws of the State of
Maryland without reference to the conflict of laws provisions thereof. To the
extent that any provision of this Section 17 shall be determined to be invalid
or unenforceable, the invalid or unenforceable portion of such provision shall
be deleted from this Agreement, and the validity and enforceability of the
remainder of such provision and of this Section 17 shall be unaffected. In
furtherance and not in limitation of the foregoing, it is expressly agreed that,
should the duration of, or geographical extent of, or business activities
covered by, the covenants contained in this Section 17 be determined to be in
excess of that which is valid or enforceable under applicable law, then such
covenants shall be construed to cover only that duration or geographical extent
or those activities that may be validly covered and enforced; provided, however,
that to the full extent that the provisions of any applicable law may be waived
by a Stockholder, they are hereby waived, such that this Section 17 may be
deemed to be valid and enforceable to the greatest possible extent. The
Stockholders acknowledge the uncertainty of the law in this respect and
expressly stipulate that this Section 17 shall be construed in a manner that
renders its provisions valid and enforceable to the maximum extent possible
under applicable law.
15
<PAGE>
18. Miscellaneous.
-------------
(a) Certain Definitions. As used in this Agreement, the following
-------------------
capitalized terms shall have the following meanings:
(i) "Beneficially Own" or "Beneficial Ownership" with respect
to any securities shall mean having "beneficial ownership" of such securities
(as determined pursuant to Rule 13d-3 under the Exchange Act), including
pursuant to any agreement, arrangement or understanding, whether or not in
writing. Without duplicative counting of the same securities by the same holder,
securities Beneficially Owned by a Person shall include securities Beneficially
Owned by all other Persons with whom such Person would constitute a "group" as
within the meanings of Section 13(d)(3) of the Exchange Act.
(ii) "Misstatement" means an untrue statement of a material
fact or an omission to state a material fact required to be stated in a
publicly-filed document necessary to make the statements in such a document not
misleading; provided, however, that such term shall not apply to any statement
or omission based on information supplied by an indemnified person to an
indemnifying person for inclusion in the publicly-filed document.
(iii) "Person" shall mean an individual, corporation,
partnership, joint venture, association, trust, unincorporated organization or
other entity.
(iv) "register," "registered," and "registration" refer to a
registration effected by preparing and filing with the SEC a registration
statement in compliance with the Securities Act and the declaration or ordering
by the SEC of effectiveness of such registration statement.
(v) "Registrable Securities" refers to any and all of the
shares of Marriott Stock held by the Stockholders as of the Closing, except that
any such Marriott Stock shall cease to be Registrable Securities when and to the
extent (A) a Form S-3 with respect to the sale of such Marriott Stock has become
effective under the Securities Act and such Marriott Stock has been disposed of
in accordance with such Form S-3; (B) such Marriott Stock has been sold to the
public pursuant to Rule 144 or any successor provision under the Securities Act;
(C) such Marriott Stock shall have been otherwise transferred, new certificates
therefor not bearing a legend restricting further transfer shall have been
delivered by Marriott and subsequent disposition of such Marriott Stock does not
require registration or qualification under the Securities Act or any similar
state law then in force in the opinion of legal counsel for Marriott; or (D)
such Common Stock shall have ceased to be outstanding.
(vi) "subsidiary " or "subsidiaries " of Marriott, Acquisition,
ExecuStay or any other person means any corporation, partnership, limited
liability company, association, trust, unincorporated association or other legal
entity of which the Marriott, Acquisition, ExecuStay or any such other person,
as the case may be, (either alone or through or together with any other
subsidiary) owns, directly or indirectly, 50% or more of the capital stock the
holders of which are generally entitled to vote for the election of the board of
directors or other governing body of such corporation or other legal entity.
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<PAGE>
(b) Entire Agreement. This Agreement, the Other Stockholder
----------------
Agreements and the Merger Agreement constitute the entire agreement between the
parties with respect to the subject matter hereof and supersede all other prior
agreements and understandings, both written and oral, between the parties with
respect to the subject matter hereof.
(c) Certain Events. Each Stockholder agrees that this Agreement and
--------------
the obligations hereunder shall attach to such Stockholder's Shares and shall be
binding upon any person or entity to which legal or beneficial ownership of such
Shares shall pass, whether by operation of law or otherwise, including, without
limitation, such Stockholder's heirs, guardians, administrators or successors.
Notwithstanding any transfer of Shares, the transferor shall remain liable for
the performance of all obligations under this Agreement of the transferor.
(d) Assignment. This Agreement shall not be assigned by operation of
----------
law or otherwise without the prior written consent of the other party, provided
that Marriott may assign, in its sole discretion, its rights and obligations
hereunder to any direct or indirect wholly-owned subsidiary of Marriott, but no
such assignment shall relieve Marriott of its obligations hereunder if such
assignee does not perform such obligations.
(e) Amendments, Waivers, Etc. This Agreement may not be amended,
------------------------
changed, supplemented, waived or otherwise modified or terminated, with respect
to any one or more Stockholders, except upon the execution and delivery of a
written agreement executed by the relevant parties hereto; provided that
--------
Schedule A hereto may be supplemented by Marriott by adding the name and other
relevant information concerning any Stockholder of ExecuStay who agrees to be
bound by the terms of this Agreement (by executing a counterpart signature page
hereof) without the agreement of any other party hereto, and thereafter such
added stockholder shall be treated as a "Stockholder" for all purposes of this
Agreement.
(f) Notices. All notices, requests, claims, demands and other
-------
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly received if so given) by hand delivery, telegram, telex
or telecopy, or by mail (registered or certified mail, postage prepaid, return
receipt requested) or by any courier service, such as Federal Express, providing
proof of delivery. All communications hereunder shall be addressed to the
respective parties at the following addresses:
If to any Stockholder: At the addresses set forth on Schedule A
hereto.
If to Marriott or Acquisition: MARRIOTT INTERNATIONAL, INC.
10400 Fernwood Road
Bethesda, Maryland 20857
Telecopier: (301) 380-6727
Attention: General Counsel, Dept. 52/923
with a copy to: Gibson, Dunn & Crutcher LLP
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<PAGE>
1050 Connecticut Avenue, N.W.
Washington, D.C. 20036
Telephone: (202) 955-8522
Facsimile: (202) 467-0539
Attention: John F. Olson, Esq.
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
(g) Severability. Whenever possible, each provision or portion of any
------------
provision of this Agreement will be interpreted in such manner as to be
effective and valid under applicable law, but if any provision or portion of any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability will not affect any other provision
or portion of any provision in such jurisdiction, and this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision or portion of any provision had never been
contained herein.
(h) Specific Performance. Each of the parties hereto recognizes and
--------------------
acknowledges that a breach by it of any covenants or agreements contained in
this Agreement will cause the other party to sustain damages for which it would
not have an adequate remedy at law for money damages, and therefore each of the
parties hereto agrees that in the event of any such breach the aggrieved party
shall be entitled to the remedy of specific performance of such covenants and
agreements and injunctive and other equitable relief in addition to any other
remedy to which it may be entitled, at law or in equity.
(i) Remedies Cumulative. All rights, powers and remedies provided
-------------------
under this Agreement or otherwise available in respect hereof at law or in
equity shall be cumulative and not alternative, and the exercise of any thereof
by any party shall not preclude the simultaneous or later exercise of any other
such right, power or remedy by such party.
(j) No Waiver. The failure of any party hereto to exercise any right,
---------
power or remedy provided under this Agreement or otherwise available in respect
hereof at law or in equity, or to insist upon compliance by any other party
hereto with its obligations hereunder, and any custom or practice of the parties
at variance with the terms hereof, shall not constitute a waiver by such party
of its right to exercise any such or other right, power or remedy or to demand
such compliance.
(k) No Third Party Beneficiaries. This Agreement is not intended to
----------------------------
be for the benefit of, and shall not be enforceable by, any person or entity who
or which is not a party hereto.
(l) Governing Law. Except as to Section 17, which shall be governed
-------------
by the laws of the State of Maryland, without giving effect to the principles of
conflicts of laws thereof, this Agreement shall be governed and construed in
accordance with the laws of the State of New York, without giving effect to the
principles of conflicts of laws thereof.
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(m) Descriptive Headings. The descriptive headings used herein are
--------------------
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.
(n) Counterparts. This Agreement may be executed in counterparts,
------------
each of which shall be deemed to be an original, but all of which, taken
together, shall constitute one and the same Agreement.
19
<PAGE>
IN WITNESS WHEREOF, Marriott and Acquisition have caused this Agreement to
be duly executed, and each Stockholder has duly executed this Agreement, as of
the day and year first above written.
MARRIOTT INTERNATIONAL, INC.
By: /s/ Joseph Ryan
--------------------------------
Name: Joseph Ryan
Title: Executive Vice President and
General Counsel
MI SUBSIDIARY I, INC.
By: /s/ Joseph Ryan
--------------------------------
Name: Joseph Ryan
Title: Vice President
/s/ Gary R. Abrahams
- ------------------------
Gary R. Abrahams
/s/ Marc B. Kaplan
- ------------------------
Marc B. Kaplan
/s/ Robert W. Zaugg
- ------------------------
Robert W. Zaugg
20
<PAGE>
SCHEDULE A
----------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
NAME OF STOCKHOLDER ADDRESS NUMBER OF SHARES OWNED
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Gary R. Abrahams c/o ExecuStay Corporation 1,187,500
7595 Rickenbacker Drive
Gaithersburg, Maryland 20879
- ------------------------------------------------------------------------------------------------
Marc B. Kaplan c/o ExecuStay Corporation 1,187,500
7595 Rickenbacker Drive
Gaithersburg, Maryland 20879
- ------------------------------------------------------------------------------------------------
Robert W. Zaugg c/o ExecuStay Corporation 1,187,500
7595 Rickenbacker Drive
Gaithersburg, Maryland 20879
- ------------------------------------------------------------------------------------------------
</TABLE>
21
<PAGE>
Exhibit __
Form of Employment Agreement
Employment Agreement
This Employment Agreement (the "Agreement") is entered into this ____
day of ___________, 1999 by and among Marriott International, Inc., a Delaware
corporation ("Marriott"), MI Subsidiary I, Inc. (to be renamed ExecuStay, Inc.),
a Delaware corporation and a direct, wholly-owned subsidiary of Marriott
("ExecuStay") and _____________, a resident of the state of Maryland
("Employee").
WHEREAS, pursuant to the terms and conditions of the Merger Agreement
Dated as of _____________ __, 1999 Among Marriott, ExecuStay Corporation, a
Maryland Corporation ("Old ExecuStay") and ExecuStay (the "Merger Agreement"),
Old ExecuStay agreed to merge with and into ExecuStay (the "Merger"); and
WHEREAS, pursuant to the terms and conditions of the Stockholders
Agreement dated as of _____________ __, 1999 by and among Marriott, ExecuStay
and each of the other parties signatory thereto (the "Stockholders Agreement"),
including Employee, the parties agreed to enter into this Agreement; and
WHEREAS, contingent upon the consummation of the Merger, ExecuStay
wishes to employ Employee on the terms and conditions set forth in this
Agreement, and Employee wishes to be employed by ExecuStay on such terms and
conditions;
NOW, THEREFORE, in consideration of the mutual promises of the parties
and for other good and valuable consideration the receipt and sufficiency of
which is acknowledged, Marriott, ExecuStay and Employee agree as follows:
1. Employment. Contingent upon consummation of the Merger, ExecuStay
----------
agrees to employ Employee, and Employee accepts such employment for the period
and upon the terms and conditions set forth in this Agreement. Marriott and
ExecuStay will recognize continuous service of Employee with ExecuStay prior to
the Merger as prior service with Marriott and its affiliates.
2. Term. Unless terminated earlier in accordance with the terms of
----
this Agreement, the term of Employee's employment shall be for a period of three
(3) years commencing on the date of the Closing (as defined in the Merger
Agreement) and ending on the third anniversary of the Closing (the "Term"),
subject to extension by mutual agreement of the parties.
3. Position and Duties. Employee will serve as [Title] of ExecuStay
-------------------
and perform such duties consistent with Employee's position and such other
reasonable duties as the Board of Directors of ExecuStay shall assign Employee
from time to time. Employee agrees to devote Employee's full time, attention and
efforts to the business and affairs of ExecuStay during the
<PAGE>
Term. Employee agrees to comply with all practices, policies, standards, rules
and regulations of Marriott and ExecuStay that are established from time to
time. Employee shall not at any time during the Term render or perform any
services for compensation to any other person or entity other than ExecuStay and
its related entities, unless given express permission to do so by ExecuStay.
4. Location. The principal place of employment and the location of
--------
Employee's principal office and normal place of work shall be the
Baltimore-Washington, D.C. metropolitan area; provided, however, that Employee
shall perform such temporary travel away from that area as is reasonably
required for the proper rendition of services under this Agreement, subject to
reimbursement for reasonable travel expenses in accordance with Marriott
policies and procedures.
5. Compensation.
------------
(a) Base Salary. During the Term, ExecuStay shall pay Employee an
-----------
annual base salary ("Base Salary") of $175,000, payable in biweekly
installments in accordance with Marriott's payroll practices for
managers less applicable withholding amounts.
(b) Annual Bonus. During the Term, Employee will participate
------------
in the Marriott bonus program during each fiscal year of Marriott. The
annual bonus ("Annual Bonus") will be awarded in cash in accordance
with Marriott policies; provided that the minimum bonus will be 25
percent of Base Salary earned during the period and the maximum bonus
will be 40 percent of Base Salary earned during the period, in each
case less applicable withholding amounts. If Employee's employment
terminates at the end of the Term without renewal or replacement of
this Agreement or an offer to continue employment in the same position
with ExecuStay, a pro rata Annual Bonus for the portion of the fiscal
year in which termination occurs will be paid to Employee.
(c) Deferred Bonus Stock. During the Term, Employee will
--------------------
participate in the Marriott deferred bonus stock program under the
Marriott 1998 Comprehensive Stock and Cash Incentive Plan (the "Stock
Plan"), pursuant to which Employee will receive a deferred bonus stock
award for each fiscal year having a value of 20 percent of Employee's
Annual Bonus for that fiscal year. Employee must be employed on the
last day of the fiscal year in order to participate in the deferred
bonus stock program for that fiscal year. The deferred bonus stock
award will be subject to the terms of the Stock Plan, including those
related to vesting.
(d) Stock Options. During the Term, Employee will participate
-------------
in the Marriott stock option program under the Stock Plan, pursuant to
which Employee will be eligible to receive an annual award of options
to purchase Marriott Common Stock in
2
<PAGE>
amounts determined by the Compensation Policy Committee of the Marriott
Board of Directors. The stock options will be subject to the terms of
the Stock Plan and the award agreement.
(e) Supplemental Stock Option. A supplemental option to acquire
-------------------------
Marriott Common Stock under the Stock Plan will be issued to Employee
on the first business day following the Merger on which Marriott Common
Stock is publicly traded on the New York Stock Exchange, substantially
in the form attached hereto as Exhibit A (the "Supplemental Option").
The exercise price of the Supplemental Option will be the average of
the high and low trading prices of Marriott Common Stock on the New
York Stock Exchange on the date on which the Supplemental Option is
granted.
(f) Supplemental Bonus. In addition to the Annual Bonus described
------------------
above, for fiscal years 1999, 2000 and 2001, Employee will be entitled
to a supplemental bonus ("Supplemental Bonus") of $150,000 per year if
110 percent of the Target Rate specified in the Supplemental Option for
those fiscal years is reached or exceeded; provided that the EBITDA of
ExecuStay grows at a cumulative annual rate (but not compounded) of at
least 35 percent beginning with the 1999 fiscal year. A percentage of
the Supplemental Bonus will be earned if at least 105 percent of the
Target Rate is reached according to the following schedule:
At least this percentage Percentage of Supplemental
of the Target Rate is reached Bonus Earned
------------------------------ ------------
105 10
106 20
107 30
108 50
109 70
110 100
The determination of EBITDA, any adjustments thereto and the
achievement of Target Rates shall be determined in the same manner as
for the Supplemental Option. This Supplemental Bonus, if any, shall be
excluded from the bonus amount taken into account for purposes of
calculating the deferred bonus stock award described in Section 5(c)
above.
(g) Other Benefits. Employee shall be entitled to participate in
--------------
such other benefits, including welfare benefit plans, executive
deferred compensation plans and fringe benefit policies as are
generally applicable to managers employed by ExecuStay. In the ordinary
course of business, benefit programs evolve as business needs and laws
3
<PAGE>
change. To the extent it becomes necessary and desirable to change any
of the plans in which ExecuStay managers participate, such changes will
apply to Employee as they do to other ExecuStay managers.
6. Termination of Employment.
-------------------------
(a) Death and Disability. This Agreement and Employee's
--------------------
employment shall terminate upon the date of Employee's death and upon
the date Employee is determined to be suffering from a Permanent
Disability as that term is defined in the Marriott International, Inc.
Employees' Profit Sharing, Retirement and Savings Plan. In either such
event ExecuStay shall be obligated to pay Employee, if living, or the
Employee's estate, accrued and unpaid Base Salary through the date of
termination and a pro rata maximum Annual Bonus and pro rata
Supplemental Bonus if the Target Rate was met as of the preceding
quarterly interim period (each such bonus will be pro rated based on
the number of days in the fiscal year up to the date of termination
divided by 360) and shall have no further obligations under this
Agreement; provided that the terms of any award or employee benefit
plan in which Employee participates shall govern the rights of
Employee, Employee's estate or Employee's beneficiaries with respect to
any such award or plan, including with respect to the Supplemental
Option.
(b) Termination For Cause. This Agreement and Employee's employment
---------------------
shall terminate upon ExecuStay terminating Employee's employment "for
cause" during the Term. For purposes of this Agreement, "for cause"
shall mean (i) any fraud, misappropriation or embezzlement by Employee;
(ii) any conviction of or nolo contendere plea to a felony or gross
misdemeanor by Employee; (iii) any neglect by Employee to perform the
duties assigned to Employee hereunder, provided that Employee shall
first have received a written notice from ExecuStay which sets forth
the manner in which Employee has neglected Employee's duties and
Employee shall have a period of thirty days to cure unless a cure
cannot be reasonably effected within such period; (iv) any material
breach by Employee of Employee's obligations under this Agreement; and
(v) any public conduct of Employee that has or can reasonably be
expected to have a detrimental effect on ExecuStay. In the event
Employee is terminated for cause, ExecuStay shall be obligated to pay
Employee accrued and unpaid Base Salary through the date of termination
and shall have no further obligation to Employee.
(c) Termination Other Than For Cause. This Agreement and Employee's
employment shall terminate upon ExecuStay terminating Employee's
employment other than "for cause" as defined in Section 6(b) above.
ExecuStay reserves the right to terminate Employee's employment for any
reason during or after the Term. In the event that ExecuStay terminates
Employee's employment other than "for cause", ExecuStay shall pay
Employee the Base Salary and the maximum Annual Bonus through the
4
<PAGE>
remainder of the Term and a pro rata Supplemental Bonus if the Target
Rate was met as of the preceding quarterly interim period (such bonus
will be pro rated based on the number of days in the fiscal year up to
the date of termination divided by 360) and shall have no further
obligations under this Agreement; provided that the terms of any award
or employee benefit plan in which Employee participates shall govern
the rights of Employee with respect to such award or plan, including
with respect to the Supplemental Option; and provided further that
Employee shall not be entitled to any benefits under the Marriott
Severance Plan or any other plan, policy or arrangement providing for
severance or similar pay or benefits following termination of
employment. Following termination other than "for cause," Employee
shall not be entitled to any further awards of deferred bonus stock or
stock options.
(d) Resignation From Employment. This Agreement and Employee's
---------------------------
employment shall terminate if Employee voluntarily resigns from
employment with ExecuStay. In such event, ExecuStay shall be obligated
to pay Employee accrued and unpaid Base Salary through the date of
termination and shall have no further obligations under this Agreement;
provided that the terms of any award or employee benefit plan in which
Employee participates shall govern the rights of Employee, with respect
to any such award or plan, including with respect to the Supplemental
Option.
(e) Return of Property. Upon termination of Employee's employment
------------------
for any reason, Employee shall promptly deliver to ExecuStay all
records, manuals, books, blank forms, documents, letters, memoranda,
notes, notebooks, reports, data or copies thereof, and all other
tangible property of ExecuStay or Marriott, that are in Employee's
possession or under Employee's control.
7. Employment Covenants and Agreements.
-----------------------------------
(a) Non-Competition.
---------------
(1) While Employee is employed by ExecuStay or another
Marriott affiliate and for a period of three (3) years following
termination of employment (the "Restriction Period"), Employee will
not, without the written consent of ExecuStay, in each instance
directly or indirectly, carry on or participate in a business that
is the same as or is similar to or in competition with a business (a
"Competing Business") conducted or engaged in by ExecuStay or any of
its subsidiaries (a "Company Business") within the Restricted Area
(as defined below). The "Restricted Area" shall mean the geographic
area that is within 100 miles of a location at which Marriott or any
of its subsidiaries or affiliates is conducting or engaging in a
Company Business during the Restriction Period.
5
<PAGE>
(2) The term "carry on or participate in a business"
shall include engaging in any of the following activities, directly
or indirectly, other than carrying on or engaging in activities
expressly permitted under this Agreement:
(i) Carrying on or engaging in a Competing Business as
a principal, or on his own account, or solely or jointly with
others as a director, officer, agent, employee, consultant or
partner, or stockholder, limited partner or other interest
holder owning more than five (5) percent of the stock or
equity interests or securities convertible into more than five
(5) percent of the stock of or equity interests in any entity.
(ii) As agent or principal carrying on or engaging in
any activities or negotiations with respect to the acquisition
or disposition of a Competing Business.
(iii) Extending credit for the purpose of establishing or
operating a Competing Business.
(iv) Lending or allowing his name or reputation to be
used in a Competing Business.
(v) Giving advice to any other person or entity
carrying on or engaging in a Competing Business.
(vi) Otherwise allowing his skill, knowledge or
experience to be used in a Competing Business.
(3) During the Restriction Period Employee will not, without
the written consent of ExecuStay, in each case directly or
indirectly, solicit, raid, entice, induce or offer any person who
is employed by Marriott or any of its subsidiaries or affiliates in
a Company Business to become employed by any person or entity in
any business whether or not it is a Competing Business.
(4) During the Restriction Period Employee will not, without
the written consent of ExecuStay, in each case directly or
indirectly, solicit business for a Competing Business from any
person or entity that is then a customer of a Company Business or
that is being solicited by a Company Business.
(5) During the Restriction Period Employee will not, without
the written consent of ExecuStay, in each case directly or
indirectly, provide, or arrange for or assist in the provision of
services by a Competing Business to any
6
<PAGE>
person or entity that is then a customer of a Company Business or
that is being solicited by a Company Business.
(6) Upon breach of this Section 7(a) by Employee,
ExecuStay shall be entitled to injunctive relief, both pendente
lite and permanently, against Employee, as a remedy at law would be
inadequate. In addition, ExecuStay shall be entitled to such
damages as it can show it has sustained, directly or indirectly, by
reason of such a breach, and neither ExecuStay nor any of its
subsidiaries or affiliates shall be limited in such damages to the
consideration paid to Employee pursuant to this Agreement. Nothing
in this Agreement shall be construed as limiting ExecuStay's
remedies in any way.
(b) Confidential Information. Except as permitted or directed
------------------------
by ExecuStay or in connection with Employee's employment by ExecuStay
or one of its subsidiaries or affiliates, Employee agrees to keep
confidential and not to divulge or use any information, materials,
methods or developments of any nature and in any form that at the time
or times concerned is not generally known to those persons engaged in a
Competing Business and that relates to any one or more aspects of a
Company Business which Employee has acquired or become acquainted with
prior to the termination of employment with ExecuStay, Old ExecuStay or
any of their subsidiaries or affiliates, whether developed by Employee
or by others, including, without limitation, internal business
policies, processes, techniques, know-how, development plans, financial
matters, customers and customer lists, vendors and vendor lists, leases
and sub-leases or any other confidential information or secret aspect
of any Company Business. Employee acknowledges that the above-described
knowledge or information constitutes a unique and valuable asset of
ExecuStay and represents a substantial investment of time and expense
by ExecuStay and that any disclosure or use of such knowledge or
information other than for the sole benefit of ExecuStay or Marriott or
any of its subsidiaries or affiliates would be wrongful and would cause
irreparable harm to ExecuStay and its subsidiaries and affiliates. The
terms of this paragraph shall survive the Restriction Period.
(c) Employee's Knowledge. Employee agrees to make available to
--------------------
ExecuStay all knowledge possessed by Employee relating to any methods,
developments, improvements, processes or other knowledge that concerns
Company Business in any way, whether acquired by Employee before or
during employment with ExecuStay.
8. Governing Law. The validity, interpretation, performance, and
-------------
enforcement of the provisions of this Agreement shall be governed by the laws of
the State of Maryland without reference to the conflict of laws principles
thereof.
7
<PAGE>
9. Severability. To the extent that any provision of this Agreement
------------
shall be determined to be invalid or unenforceable, the invalid or unenforceable
portion of such provision shall be deleted from this Agreement, and the validity
and enforceability of the remainder of such provision and of this Agreement
shall be unaffected. In furtherance and not in limitation of the foregoing, it
is expressly agreed that, should the duration of, or geographical extent of, or
business activities covered by, the covenants contained in Section 7 be
determined to be in excess of that which is valid or enforceable under
applicable law, then such covenants shall be construed to cover only that
duration or geographical extent or those activities that may be validly covered
and enforced; provided, however, that to the full extent that the provisions of
any applicable law may be waived by Employee, they are hereby waived, such that
Section 7 may be deemed to be valid and enforceable to the greatest possible
extent. Employee acknowledges the uncertainty of the law in this respect and
expressly stipulates that Section 7 shall be construed in a manner that renders
its provisions valid and enforceable to the maximum extent possible under
applicable law.
10. Assignment. This Agreement shall be binding upon and inure to the
----------
benefit of ExecuStay and its successors and assigns. Employee may not assign
this Agreement or any of Employee's rights hereunder, including the right to the
payment of money or other property. Any purported or attempted assignment or
transfer by the Employee of this Agreement or any of the Employee's duties,
responsibilities or obligations hereunder shall be void.
11. Notices. All notices, requests, demands and other communications
-------
under this Agreement shall be in writing, and shall be deemed to have been duly
given on the date of service if personally served on the party to whom notice is
to be given, or on the second day after mailing if mailed to the party to whom
notice is to be given by first class mail, postage prepaid, and properly
addressed as follows:
If to Employee:
If to ExecuStay or Marriott:
or to such other address as either party shall have furnished to the other in
writing in accordance herewith.
12. Withholding. ExecuStay may withhold from any amounts payable under
-----------
this Agreement such Federal, state and local taxes as shall be required to be
withheld pursuant to any
8
<PAGE>
applicable law or regulation and any amounts required to be withheld pursuant to
court order or Employee's election.
13. Entire Agreement and Amendments. This Agreement constitutes the
-------------------------------
entire agreement between Marriott, ExecuStay and Employee on the subject of
Employee's employment with ExecuStay, supersedes any and all prior agreements
among the parties with respect to the subject matter hereof, shall be the only
agreement among the parties with respect to the subject matter hereof, and may
be modified, amended or waived with respect to any party only by written
instrument executed by the parties.
14. Waiver. A party's failure to insist upon strict compliance with any
------
provision of this Agreement or the failure to assert any right a party might
have under this Agreement, shall not be deemed to be a waiver of such provision
or right and no waiver of any right or remedy in respect of any occurrence or
event on one or more occasions shall be deemed a waiver of such right or remedy
in respect of any other occurrence or event, whether similar or dissimilar, on
any other occasion.
15. Captions and Headings. The captions and paragraph headings used in
---------------------
this Agreement are for convenience of reference only, and shall not affect the
construction or interpretation of this Agreement.
9
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
executed by their signatures below.
MARRIOTT INTERNATIONAL, INC.
By: Date:
----------------------------- -----------
Name:
Title:
MI SUBSIDIARY I, INC.
By: Date:
------------------------------ -----------
Name:
Title:
EMPLOYEE
Date:
- ---------------------------------- -----------
10
<PAGE>
Exibit (c)(3)
STOCKHOLDER AGREEMENT
THIS STOCKHOLDER AGREEMENT (the "Agreement") is dated as of January 6,
1999, by and among Marriott International, Inc., a Delaware corporation
("Marriott"), MI Subsidiary I, Inc., a Delaware corporation and a direct,
wholly-owned subsidiary of Marriott ("Acquisition") and Benny E. Anderson
("Anderson").
WHEREAS, concurrently herewith, Marriott, Acquisition and ExecuStay
Corporation, a Maryland corporation ("ExecuStay"), are entering into a Merger
Agreement, a form of which is appended hereto as Exhibit I (as such agreement
may hereafter be amended from time to time, the "Merger Agreement"), pursuant to
which ExecuStay will be merged with and into Acquisition (the "Merger").
Capitalized terms used and not defined herein have the respective meanings
assigned to them in the Merger Agreement;
WHEREAS, concurrently herewith, certain other stockholders of ExecuStay are
entering into two agreements with Marriott and Acquisition (the "Other
Stockholders Agreements"), concerning certain matters connected with the Merger
and their ExecuStay Shares (defined below);
WHEREAS, Anderson Beneficially Owns (as defined herein) the number of
shares, par value $0.01 per share, of common stock (the "Common Stock") of
ExecuStay (the "ExecuStay Shares") set forth opposite Anderson's name on
Schedule A hereto;
WHEREAS, the Merger Agreement contemplates that, in anticipation of
consummation of the Merger, one share of Class B Preferred Stock, par value
$0.01 per share, of ExecuStay ("Class B Shares") will be issued to Anderson in
exchange (the "Exchange") for each ExecuStay Share held by Anderson (as used
herein, the term "Shares" refers to the ExecuStay Shares prior to the Exchange
and the Class B Shares after the Exchange);
WHEREAS, Marriott has agreed that Anderson shall receive shares of Marriott
common stock, par value $0.01 per share ("Marriott Stock"), in the Merger, in
respect of his Shares, and Anderson desires to receive such Marriott Stock; and
WHEREAS, as an inducement and a condition to entering into the Merger
Agreement, Marriott has required that Anderson agrees, and Anderson has agreed,
to enter into this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual promises,
representations, warranties, covenants and agreements contained herein, the
parties hereby agree as follows:
1. Agreement to Vote; Irrevocable Proxy.
------------------------------------
(a) Anderson hereby agrees that during the period commencing on the
Tender Offer Purchase Time and continuing until the first to occur of the
Closing and the termination of the Merger Agreement in accordance with its
terms, at any meeting of the holders of the Shares,
<PAGE>
however called, or in connection with any written consent of the holders of
Shares, Anderson shall vote (or cause to be voted) the Shares held of record or
Beneficially Owned (as defined herein) by Anderson, whether owned on the date
hereof or hereafter acquired, (i) in favor of approval of the Merger Agreement,
all transactions contemplated thereby, and any actions required in furtherance
thereof and hereof (including election of such directors of ExecuStay as
Marriott is entitled to designate pursuant to the Merger Agreement); (ii)
against any action or agreement that is intended, or could reasonably be
expected, to impede, interfere with, or prevent the Merger or result in a breach
in any respect of any covenant, representation or warranty or any other
obligation or agreement of ExecuStay or any of its subsidiaries under the Merger
Agreement, the Other Stockholders Agreements or this Agreement; and (iii) except
as specifically requested in writing in advance by Marriott or Acquisition,
against the following actions (other than the Exchange, the Merger and the
transactions contemplated by the Merger Agreement and this Agreement): (A) any
extraordinary corporate transaction, such as a merger, consolidation or other
business combination involving ExecuStay or any of its subsidiaries or
affiliates; (B) a sale, lease, transfer or disposition by ExecuStay or any of
its subsidiaries of any assets outside the ordinary course of business or any
assets which in the aggregate are material to ExecuStay and its subsidiaries
taken as a whole, or a reorganization, recapitalization, dissolution or
liquidation of ExecuStay or any of its subsidiaries or affiliates; (C)(1) any
change in the management of ExecuStay or in a majority of the persons who
constitute the board of directors of ExecuStay; (2) any change in the present
capitalization of ExecuStay or any amendment of ExecuStay's charter or By-Laws;
(3) any other material change in ExecuStay's or any of its subsidiaries'
corporate structure or business; or (4) any other action that, in the case of
each of the matters referred to in clauses (C)(1), (2) or (3), is intended, or
could reasonably be expected, to impede, interfere with, delay, postpone or
materially adversely affect the Exchange, the Merger or the transactions
contemplated by this Agreement, the Other Stockholders Agreements and the Merger
Agreement. Anderson shall not enter into any agreement or understanding with any
Person (as defined herein) the effect of which would be inconsistent with or
violative of the provisions and agreements contained in Section 1 or 2 hereof.
(b) By his execution hereof and in order to secure his obligations
hereunder, Anderson hereby grants to, and appoints, Acquisition and Kenneth R.
Rehmann and Joseph Ryan, in their respective capacities as officers of
Acquisition, and any individual who shall hereafter succeed to any such office
of Acquisition, and any other designee of Acquisition, and each of them
individually, Anderson's true and lawful irrevocable (until the Termination
Date) proxy and attorney-in-fact (with full power of substitution) to vote the
Shares, or grant a consent or approval in respect of such Shares, as indicated
in Section 1(a) above, provided, however, that this proxy shall not take effect
until purchase of the Shares at the Tender Offer Purchase Time. Anderson
intends this proxy to be irrevocable (from the Tender Offer Purchase Time until
the Termination Date) and coupled with an interest and will take such further
action and execute such other instruments as may be necessary to effectuate the
intent of this proxy and hereby represents that any proxy heretofore given in
respect of his Shares is not irrevocable, and hereby revokes any proxy
previously granted by Anderson with respect to the Shares. Anderson understands
and acknowledges that Acquisition is entering into the Merger Agreement in
reliance on his execution and delivery of this irrevocable proxy. Anderson
hereby affirms that this irrevocable proxy is given in connection with the
execution of this Agreement and the Merger Agreement, and further
2
<PAGE>
affirms that this irrevocable proxy is coupled with an interest in this
Agreement for the term stated herein and may under no circumstances be revoked.
Anderson hereby ratifies and confirms all that this irrevocable proxy may
lawfully do or cause to be done by virtue hereof. This proxy is executed and
intended to be irrevocable in accordance with the provisions of Section 2-507(d)
of the Maryland General Corporation Law. This proxy shall terminate
automatically on the termination of the Merger Agreement.
2. Other Covenants, Representations and Warranties. Anderson hereby
-----------------------------------------------
represents and warrants to Marriott and Acquisition as of the date hereof and as
of the Closing as follows:
(a) Ownership of Shares. Anderson is the record and Beneficial Owner
-------------------
of the number of Shares set forth opposite Anderson's name on Schedule A hereto.
On the date hereof, the Shares set forth opposite Anderson's name on Schedule A
hereto constitute all of the Shares owned of record or Beneficially Owned by
Anderson. Anderson owns such Shares free and clear of all liens, claims,
charges, security interests, mortgages or other encumbrances, and such Shares
are subject to no rights of first refusal, put rights, other rights to purchase
or encumber such Shares, or to any agreements other than this Agreement as to
the encumbrance or disposition of such Shares. Such Shares are duly and validly
issued, fully paid and non-assessable. Anderson has sole voting power and sole
power to issue instruction with respect to the matters set forth in Section 1
hereof, sole power of disposition, sole power of conversion, sole power to
demand appraisal rights and sole power to agree to all of the matters set forth
in this Agreement, in each case with respect to all of the Shares set forth
opposite Anderson's name on Schedule A hereto, with no limitations,
qualifications or restrictions on such rights.
(b) Power; Binding Agreement. Anderson has the legal capacity, power
------------------------
and authority to enter into and perform all of Anderson's obligations under this
Agreement. The execution, delivery and performance of this Agreement by
Anderson will not violate any other agreement to which Anderson is a party
including, without limitation, any voting agreement, shareholder agreement or
voting trust. This Agreement has been duly and validly executed and delivered
by Anderson and constitutes a valid and binding agreement of Anderson,
enforceable against Anderson in accordance with its terms, except as such
enforceability may be limited by any applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights generally, and except as the availability of equitable
remedies may be limited by the application of general principles of equity
(regardless of whether such equitable principle are applied in a proceeding at
law or in equity). There is no beneficiary or holder of a voting trust
certificate or other interest of any trust of which Anderson is trustee who is
not a party to this Agreement and whose consent is required for the execution
and delivery of this Agreement or the consummation by Anderson of the
transactions contemplated hereby. If Anderson is married and Anderson's Shares
constitute community property, this Agreement has been duly authorized, executed
and delivered by, and constitute a valid and binding agreement of, Anderson's
spouse, enforceable against such person in accordance with its terms, except as
such enforceability may be limited by any applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights generally, and except as the availability of equitable
remedies may be limited by the application of general principles of equity
(regardless of whether such equitable principle are applied in a proceeding at
law or in equity).
3
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(c) No Conflicts. (i) Except for filings, permits, authorizations,
------------
consents and approvals as may be required under and other applicable
requirements of the HSR Act, no filing with, and no permit, authorization,
consent or approval of , any state or federal public body or authority is
necessary for the execution of this Agreement by Anderson and the consummation
by Anderson of the transactions contemplated hereby and (ii) none of the
execution or delivery of this Agreement by Anderson, the consummation by
Anderson of the transactions contemplated hereby or compliance by Anderson with
any of the provisions hereof shall (A) result in a violation or breach of, or
constitute (with or without notice or lapse of time or both) a default (or give
rise to any third party right of termination, cancellation, material
modification or acceleration) under any of the terms, conditions or provisions
of any note, bond, mortgage, indenture, license, contract, commitment,
arrangement, understanding, agreement or other instrument or obligation of any
kind to which Anderson is a party or by which Anderson or, to the best of
Anderson's knowledge, any of Anderson's properties or assets may be bound, or
(B) violate any order, writ, injunction, decree, judgment, order, statute, rule
or regulation applicable to Anderson or any of Anderson's properties or assets.
This Agreement hereby supersedes all prior agreements to which Anderson is a
party with respect to Anderson's Shares, including without limitation any
registration rights agreement with respect to any of Anderson's Shares.
(d) No Finder's Fees. No broker, investment banker, financial adviser
----------------
or other person is entitled to any broker's, finder's, financial adviser's or
other similar fee or commission in connection with the transactions contemplated
by the Merger Agreement based upon arrangements made by or on behalf of
Anderson.
(e) Other Potential Acquirors. Anderson (i) shall immediately cease
-------------------------
any existing discussions or negotiations, if any, with any parties conducted
heretofore with respect to any acquisition of all or any material portion of the
assets of, or any equity interest in, ExecuStay or any of its subsidiaries or
any business combination with ExecuStay or any of its subsidiaries, in his
capacity as such, and (ii) from and after the date hereof until termination of
the Merger Agreement, unless and until ExecuStay is permitted to take such
actions under Section 5.4 of the Merger Agreement, shall not, in such capacity,
directly or indirectly, initiate, solicit or knowingly encourage (including by
way of furnishing non-public information or assistance), or take any other
action to facilitate knowingly, any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to, any such transaction or
acquisition, or agree to or endorse any such transaction or acquisition, or
authorize or permit any of Anderson's agents to do so, and Anderson shall
promptly notify Marriott or Acquisition of any proposal and shall provide a copy
of any such written proposal and a summary of any oral proposal to Marriott or
Acquisition immediately after receipt thereof (and shall specify the material
terms and conditions of such proposal and identify the person making such
proposal) and thereafter keep Marriott or Acquisition advised of any development
with respect thereto.
(f) Restriction on Transfer, Proxies and Non-Interference. Anderson
-----------------------------------------------------
shall not, directly or indirectly: (i) tender his Shares in the Offer (as
defined in the preamble to the Merger Agreement) or any other tender offer for
ExecuStay Shares; (ii) except as contemplated by this Agreement, the Other
Stockholders Agreements or the Merger Agreement, otherwise offer for sale, sell,
transfer, tender, pledge, encumber, assign or otherwise dispose of, or enter
into any contract, option or other arrangement or understanding with respect to
or consent to the offer for
4
<PAGE>
sale, sale, transfer, tender, pledge, encumbrance, assignment or other
disposition of, any or all of Anderson's Shares or any interest therein; (iii)
grant any proxies or powers of attorney, deposit any Shares into a voting trust
or enter into a voting agreement with respect to any Shares; or (iv) take any
action that would make any representation or warranty of Anderson contained
herein untrue or incorrect or have the effect of preventing or disabling
Anderson from performing Anderson's obligations under this Agreement.
(g) Investment Intention.
---------------------
(i) Anderson confirms that Marriott and Acquisition have made
available to Anderson, and his representatives and agents, (A) information about
Marriott, (B) the opportunity to ask questions of the officers and employees of
Marriott and (C) the opportunity to acquire such additional information about
the business and financial condition of Marriott as Anderson has requested, and
such information has been received.
(ii) The shares of Marriott Stock to be issued to Anderson in
connection with the Merger will be acquired for investment and not with a view
to distribution of such shares within the meaning of Section 2(11) of the
Securities Act.
(iii) Anderson does not have in mind the sale or other disposition
of shares of Marriott Stock at some fixed time in the future (such as the
expiration of the holding period for capital gains tax treatment) or upon the
occurrence or nonoccurrence of any particular events.
(iv) Anderson is an "accredited investor" within the meaning of
Section 2(a)(15) of the Securities Act.
(h) Reliance by Marriott and Acquisition. Anderson understands and
------------------------------------
acknowledges that Marriott and Acquisition are relying upon the foregoing
representations by Anderson, and on Anderson's execution and delivery of this
Agreement (i) in entering into the Merger Agreement and (ii) in issuing the
Marriott Stock in connection with the Merger without registration under the
Securities Act or qualification under any state securities laws (collectively,
"Blue Sky Laws"). Anderson agrees that the Marriott Stock will not be
transferred unless in the opinion of Marriott's legal counsel such transfer will
not violate the registration requirements of the Securities Act or Blue Sky
Laws.
3. Further Assurances; Merger Agreement Compliance. From time to time, at
-----------------------------------------------
Marriott's or Acquisition's request and without further consideration, Anderson
agrees to execute and deliver such additional documents and take all such
further lawful action as may be necessary or desirable to consummate and make
effective, and to cause the Company to consummate and make effective, in the
most expeditious manner practicable, the transactions contemplated by this
Agreement, the Other Stockholders Agreements and the Merger Agreement. Anderson
further agrees not to take any action, or omit to take any action, which would,
or would be reasonably likely to, result in a breach by the Company of any of
the provisions of the Merger Agreement.
5
<PAGE>
4. Stop Transfer; Form of Legend.
-----------------------------
(a) Anderson agrees with, and covenants to, Marriott that Anderson shall
not request that ExecuStay register the transfer (book-entry or otherwise) of
any certificate or uncertificated interest representing any of Anderson's
Shares, unless such transfer is made in compliance with this Agreement. In the
event of a stock dividend or distribution, or any change in the Common Stock or
the Class B Shares by reason of any stock dividend, split-up, recapitalization,
combination, exchange of shares or the like, the term "Shares" shall be deemed
to refer to and include the Shares as well as all such stock dividends and
distributions and any shares into which or for which any or all of the Shares
may be changed or exchanged.
(b) All certificates representing any of Anderson's Shares shall contain
the following legend:
"The securities represented by this certificate are subject to certain
restrictions on transfer and other terms of a Stockholder Agreement,
dated as of January 6, 1999, among Marriott International, Inc., MI
Subsidiary I, Inc. and Benny E. Anderson, a copy of which is on file
in the principal office of Marriott International, Inc."
5. Stock Issuance and Registration.
-------------------------------
(a) In accordance with the provisions of Section 2.1 of the Merger
Agreement, immediately prior to the Merger, ExecuStay will, in the Exchange,
issue to Anderson on a share-for-share basis, Class B Shares in exchange for
Common Stock held of record or Beneficially Owned by them. In the Merger,
Anderson shall receive, in respect of each Class B Share held of record or
Beneficially Owned by Anderson, shares of Marriott Stock in an amount determined
by the "Class B Exchange Ratio" as defined in Section 2.9(b) of the Merger
Agreement.
(b) Marriott shall, no later than the First Registration Date (as
defined below), file with the SEC and thereafter use its reasonable efforts to
cause to be declared effective, a registration statement on Form S-3 or an
equivalent successor form (the "Form S-3") relating to the offer and sale from
time to time by Anderson of shares of Marriott Stock held by him that are
Registrable Securities. As used herein, the "First Registration Date" means the
later of (i) 30 days following the Closing Time, or (ii) April 30, 1999,
provided, however, that if on such date Marriott is not eligible to use Form S-3
for registration of the resale of Registrable Securities as provided herein,
then the First Registration Date shall be the earliest date after April 30, 1999
on which Marriott becomes eligible to use Form S-3 in connection with such
resale registration. Subject to the limitations contained herein, Marriott shall
use its reasonable efforts to keep the Form S-3 continuously effective in order
to permit the prospectus forming part thereof to be usable by Anderson for a
period of one year from the Closing Time, or for such shorter period that will
terminate when all Registrable Securities covered by the Form S-3 have been sold
pursuant to the Form S-3 or cease to be outstanding or otherwise to be
Registrable Securities.
(c) Marriott further agrees, if necessary, to supplement or amend the
Form S-3, as required by Section 6 below, and to furnish to Anderson, if he is
holding Registrable
6
<PAGE>
Securities copies of any such supplement or amendment promptly after its being
used or filed with the SEC.
(d) Marriott agrees to use its reasonable efforts to ensure that (i) the
Form S-3 and any amendments thereof, at the time each such Form S-3 or amendment
thereof becomes effective, and any prospectus forming a part thereof and any
supplement thereto complies in all material respects with the Securities Act and
the rules and regulations thereunder, (ii) the Form S-3 and any amendment
thereto does not, when it becomes effective, contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading and (iii) any prospectus
forming part of the Form S-3, and any supplement to such prospectus (as amended
or supplemented from time to time)(each, as of the date thereof), does not
include an untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements, in light of the circumstances under
which they were made, not misleading; provided that clauses (ii) and (iii) of
this paragraph shall not apply to any information provided by Anderson.
(e) Anderson may not use the Form S-3 unless he provides Marriott with
the information required by Section 7 of this Agreement on a timely basis.
Notwithstanding any other provision herein or in the Merger Agreement, (i)
Marriott shall have no obligation under Sections 5 or 6 hereof with respect to
any shares of Marriott Stock that are (x) not Registrable Securities or (y) held
of record or Beneficially Owned by Anderson if he has not performed his
obligations under, or otherwise has breached, violated or is in default under,
the Agreement or the Merger Agreement, and (ii) all obligations of Marriott
under Sections 5 and 6 hereof automatically shall terminate and be of no further
force or effect in the event that the Merger Agreement is terminated or the
Offer or the Merger is not consummated.
(f) Notwithstanding any other provision herein, Marriott may delay
filing the Form S-3, may withhold efforts to cause the Form S-3 to become
effective, and may advise holders of Registrable Securities to suspend use of
the prospectus that is part of the Form S-3, for limited periods of time if and
to the extent that Marriott reasonably determines in good faith that any such
action is necessary in order for Marriott to comply with its disclosure
obligations under Section 5(d) hereof. In the event that Marriott advises the
holders of registered Registrable Securities that Marriott considers it
appropriate to suspend the use of the prospectus, such holders shall suspend any
further sales of their registered securities until Marriott advises them that
the Form S-3 has been amended or that such sales may be resumed.
6. Registration Procedures.
-----------------------
(a) Marriott shall prepare and file a Form S-3, within the relevant time
period specified in Section 5(a), and use its reasonable efforts to cause such
Form S-3 to become effective and remain effective in accordance with Section 5
hereof.
(b) Marriott shall prepare and file such amendments and post-effective
amendments to the Form S-3 as may be necessary under applicable law to keep such
Form S-3 effective for the applicable period; and cause each prospectus that is
part of the Form S-3 to be supplemented by
7
<PAGE>
any required prospectus supplement, and as so supplemented to be filed with the
SEC pursuant to applicable requirements of the Securities Act and the rules and
regulations thereunder.
(c) Marriott shall use its reasonable efforts to register or qualify the
Registrable Securities under all applicable Blue Sky Laws as Anderson, if he is
holding Registrable Securities covered by the Form S-3 shall reasonably request;
provided, however, that Marriott shall not be required to (i) qualify as a
foreign corporation or as a dealer in securities in any jurisdiction where it
would not otherwise be required to qualify but for this Section 6(c), or (ii)
take any action which would subject it to general service of process or taxation
in any such jurisdiction where it is not then so subject.
(d) Marriott shall furnish to Anderson, if he is holding Registrable
Securities, without charge, as many copies of each prospectus and any amendment
thereof or supplement thereto as Anderson may reasonably request.
(e) Marriott shall cooperate with Anderson as a selling stockholder of
Registrable Securities to facilitate the timely preparation and delivery of
certificates representing Registrable Securities to be sold and not bearing any
restrictive legends.
(f) Marriott shall cause all Registrable Securities covered by the Form S-3
to be listed on the NYSE.
7. Condition Precedent. It shall be a condition precedent to the
-------------------
obligations of Marriott to take any action pursuant hereto that Anderson shall
furnish to Marriott such information regarding him, the Registrable Securities
held by him and the intended method of disposition of such Registrable
Securities as Marriott shall reasonably request and as shall be required in
connection with the action to be taken by Marriott.
8. Expenses of Registration. All expenses incurred in connection with any
------------------------
registrations pursuant to Section 5 hereof, including without limitation all
registration and qualification fees, printers' and accounting fees, reasonable
fees and disbursements of counsel for Marriott, shall be borne by Marriott,
except for (a) fees and disbursements of counsel for Anderson, and (b) any
underwriting or brokers' discounts or similar transaction fees, which shall be
borne by Anderson.
8
<PAGE>
9. Indemnification.
---------------
(a) Marriott agrees to indemnify and hold harmless Anderson (as the
"Holder Indemnified Party"), against any losses, claims, damages or liabilities,
joint or several, to which the Holder Indemnified Party may become subject,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based on any Misstatement (defined below) in the
Form S-3 or any amendments thereof or supplements thereto. Marriott will
reimburse such Holder Indemnified Party for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability or action. Notwithstanding anything to the
contrary contained in this Section 9(a), the indemnity agreement contained in
this Section 9(a) shall not (i) apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is effected without
the consent of Marriott (which consent shall not be unreasonably withheld); (ii)
apply to any such case for any such loss, claim, damage, liability, or action to
the extent that it arises out of or is based upon a Misstatement made in
reliance upon and in conformity with written information furnished expressly for
use in connection with such registration by such Holder Indemnified Party.
(b) Anderson agrees to indemnify and hold harmless Marriott, each of
its directors, each of its officers who have signed the Form S-3, and each
person, if any, who controls Marriott within the meaning of the Securities Act,
and each agent (the "Marriott Indemnified Parties") against any losses, claims,
damages or liabilities to which any Marriott Indemnified Party may become
subject, insofar as such losses, claims, damages or liabilities (or actions in
respect thereto) (i) arise out of or are based upon any Misstatement in the Form
S-3 and any amendments thereof or supplements thereto made in reliance upon and
in conformity with written information furnished expressly for use in connection
with such registration by any such Holder Indemnified Party. Anderson will
reimburse any legal or other expenses reasonably incurred by such Marriott
Indemnified Party in connection with investigating or defending any such loss,
claim, damage, liability or action. Notwithstanding anything to the contrary
contained in this Section 9(b), the indemnity agreement contained in this
Section 9(b) shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability or action if such settlement is effected without the
consent of Anderson (which consent shall not be unreasonably withheld).
(c) If the indemnification provided for in this Section 9 is
unavailable to an indemnified party under Section 9(a) or Section 9(b) above
(other than by reason of exceptions provided in those Sections) in respect of
any losses, claims, damages or liabilities referred to in such Sections, then
each applicable indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages or liabilities in such proportion as
is appropriate to reflect the relative benefit and relative fault as well as any
other equitable considerations.. The amount paid or payable by a party as a
result of the losses, claims, damages, or liabilities referred to above shall be
deemed to include, subject to the limitations set forth in Section 9(d), any
legal or other fees or expenses reasonably incurred by such party in connection
with investigating or defending any action or claim. The relative benefit shall
be determined by the allocation of proceeds from such Form S-3. The relative
fault of the indemnified party on the one hand and of the indemnifying party on
the other shall be determined by reference to, among other things, whether the
Misstatement or alleged Misstatement relates to information supplied by the
indemnified party or
9
<PAGE>
the indemnifying party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such Misstatement or alleged
Misstatement. Marriott and Anderson agree that it would not be just and
equitable if contribution pursuant to this Section 9(c) were determined by pro
rata allocation or by any other method of allocation which does not take account
of the equitable considerations referred to above. No person guilty of
fraudulent misrepresentation (within the meaning of Section 9(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
(d) Any person entitled to indemnification hereunder will: (i) give
prompt notice to the indemnifying party of any claim with respect to which it
seeks indemnification; and (ii) unless in such indemnified party's reasonable
judgment a conflict of interest between such indemnified and indemnifying
parties may exist with respect to such claim, permit such indemnifying party to
assume the defense of such claim with counsel reasonably satisfactory to the
indemnified party. If such defense is assumed, the indemnifying party will not
be subject to any liability for any settlement made without its consent (but
such consent will not be unreasonably withheld). An indemnifying party who is
not entitled or elects not to assume the defense of a claim will not be
obligated to pay the fees and expenses of more than one counsel for all parties
indemnified by such indemnifying party with respect to such claim, unless in the
reasonable judgment of any indemnified party a conflict of interest may exist
between such indemnified party and any other such indemnified parties with
respect to such claim. The failure to notify an indemnifying party promptly of
the commencement of any such action, if prejudicial to his ability to defend
such action, shall relieve such indemnifying party of any liability to the
indemnified party under this paragraph, but the omission so to notify the
indemnifying party will not relieve him of any liability that he may have to any
indemnified party otherwise than under this Section.
10. Termination of Marriott's Obligations. Marriott shall have no
-------------------------------------
obligations pursuant to Section 6 with respect to Registrable Securities more
than one year after the Closing.
11. Employment Agreement. Following the date hereof, but prior to the
--------------------
commencement of the Offer, Anderson agrees to negotiate and execute employment
agreements with respect to his employment by Acquisition following the Closing,
in accordance with the form of employment agreement attached as Exhibit II.
12. The Options. Anderson hereby agrees as follows:
-----------
(a) Grant of Options. Subject to the terms of this Section 12, Anderson
----------------
hereby grants to Acquisition (or its designee), effective upon the purchase of
the shares by Acquisition at the Tender Offer Purchase Time, an irrevocable
option (each, an "Option") to purchase all Shares held of record or Beneficially
Owned by Anderson at a purchase price per Share equal to $14.
(b) Exercise of Options. Acquisition may exercise the Options, in
-------------------
whole or in part, at any time and from time to time, following the occurrence of
a Purchase Event (as defined below); provided that any Options not theretofore
exercised shall expire and be of no further force and effect upon the earliest
to occur (the "Expiration Date") of (i) the Closing Time, (ii) 5 months after
the first occurrence of a Purchase Event, or (iii) termination of the Merger
Agreement in accordance with its terms. Notwithstanding anything herein to the
contrary, in the
10
<PAGE>
event of termination of the Merger Agreement, Marriott at its option either may
elect to exercise the Options, or may accept payment of the Liquidated Damages
Amount provided for in Section 9.3 of the Merger Agreement, but shall not be
entitled to exercise the Options and retain Liquidated Damages Amount. In the
event Marriott determines to exercise the Options, promptly upon a termination
of the Merger Agreement giving rise to payment of the Liquidated Damages Amount,
Marriott shall notify ExecuStay of its waiver of receipt of the Liquidated
Damages Amount pursuant to the Merger Agreement.
As used herein, a "Purchase Event" shall mean any of the following events that
occurs after the date hereof:
(i) Beneficial Ownership of more than 20% of the outstanding capital
stock of ExecuStay (or rights to acquire such capital stock of ExecuStay) shall
have been acquired by any Person or "group" other than Acquisition, any
affiliate of Acquisition or Anderson;
(ii) ExecuStay shall have entered into a definitive agreement or
approved or recommended any proposal which provides for the acquisition of 20%
or more of the outstanding capital stock of ExecuStay or substantially all of
the assets of ExecuStay by any Person or group other than Acquisition, an
affiliate of Acquisition or Anderson;
(iii) (A) the failure of ExecuStay's stockholders to approve the
Merger Agreement or the transactions contemplated thereby at a meeting called to
consider such Merger Agreement, if such meeting shall have been preceded by (x)
the public announcement by any Person or group (other than Acquisition or an
affiliate of Acquisition) of an offer or proposal to acquire, merge or
consolidate with ExecuStay, or (y) the Board of Directors of ExecuStay's
publicly withdrawing or modifying, or publicly announcing its intent to withdraw
or modify, its recommendation that the stockholders of ExecuStay approve the
transactions contemplated by the Merger Agreement, as prohibited by Section
5.4(b) of the Merger Agreement; or (B) the acceptance by ExecuStay's Board of
Directors of, or the public recommendation by ExecuStay's Board of Directors
that the stockholders of ExecuStay accept, an offer or proposal from any Person
or group (other than Acquisition or an affiliate of Acquisition), to acquire 20%
or more of the outstanding capital stock of ExecuStay or for a merger or
consolidation or any similar transaction involving ExecuStay, as prohibited by
Section 5.4(b) of the Merger Agreement;
(iv) a proposal made by a third party to ExecuStay, its affiliates or
their respective officers, directors, employees, representatives or agents, as
described in Section 5.4 of the Merger Agreement, resulting in a breach by
ExecuStay of the covenant and obligation contained in that Section 5.4 and such
breach (x) would entitle Acquisition or Marriott to terminate the Merger
Agreement pursuant to Section 9.1(b) thereof and (y) shall not have been cured
prior to the date that Acquisition duly gives notices to Anderson of its desire
to exercise an Option pursuant to Section 12 hereof; or
(v) any breach by Anderson of this Agreement.
11
<PAGE>
(c) Notice of Exercise. To exercise an Option, Acquisition shall,
------------------
prior to the Expiration Date, give written notice to Anderson specifying the
location in Maryland or Washington, D.C. and time for the closing (the "Option
Closing") of such purchase. The Option Closing shall be held on the date that is
no later than three business days after the date on which each of the conditions
set forth in Section 12(d) below has been satisfied or waived by Acquisition.
(d) Conditions to Option Closing Following Exercise of Options. The
----------------------------------------------------------
occurrence of the Option Closing shall be subject to the satisfaction of each of
the following conditions:
(i) to the extent necessary, any applicable waiting periods (and
any extension thereof) under the HSR Act with respect to the purchase of the
Shares following the exercise of an Option shall have expired or been
terminated; and
(ii) no preliminary or permanent injunction or other order, decree
or ruling issued by any court of governmental or regulatory authority, domestic
or foreign, of competent jurisdiction prohibiting the exercise of an Option or
the delivery of Shares shall be in effect.
(e) Transferability of Options. Acquisition may sell or transfer the
---------------------------
Options and any Shares acquired upon exercise of an Option at any time, without
the written consent of Anderson, to any affiliate or affiliates of Acquisition.
(f) Payment for and Delivery of Certificates. At the Option Closing,
----------------------------------------
(i) Acquisition (or its designee) shall pay, by check, an amount equal to the
product of (x) $14 and (y) the number of Shares owned by Anderson; and (ii)
Anderson shall deliver or shall cause to be delivered to Acquisition a
certificate or certificates evidencing Anderson's Shares, and Anderson agrees
that such Shares shall be transferred free and clear of all liens. All such
certificates representing Shares shall be duly endorsed in blank, or with
appropriate stock powers, duly executed in blank, attached thereto, in proper
form for transfer, with the signature of Anderson thereon guaranteed, and with
all applicable taxes paid or provided for.
14. Termination. Except as otherwise provided herein, the covenants and
-----------
agreements contained herein with respect to the Shares shall terminate upon the
earliest of (a) termination of the Merger Agreement in accordance with its
terms, or (b) the Effective Time.
15. Anderson's Capacity. To the extent that Anderson is or becomes during
-------------------
the term hereof a director or executive officer of ExecuStay makes any agreement
or understanding herein in his capacity as such director or executive officer.
Anderson signs solely in his capacity as the record and/or beneficial owner of
his Shares.
16. Waiver of Appraisal and Dissenter's Rights. Anderson hereby
------------------------------------------
irrevocably waives any rights of appraisal or rights to dissent from the Merger
that he may have.
12
<PAGE>
17. Restrictive Covenants
---------------------
(a) The parties acknowledge and agree that the Class A Merger
Consideration, the Class B Merger Consideration and the Cash Merger
Consideration to be transferred in connection with the consummation of the Offer
and the Merger constitute consideration for, among other things, the
confidential information, trade secrets, intellectual property, and customer and
vendor goodwill of the Company and the Company's investment in the skills and
know-how of its employees. In recognition thereof, Anderson hereby agrees to be
bound by the covenants set forth in this Section 17, subject to the terms and
conditions set forth herein, for the period beginning on the date of the Closing
and ending on the third anniversary of the last day of his employment with the
Company (the "Restriction Period").
(b) Anderson agrees that during the Restriction Period he will not,
without the written consent of Marriott, in each instance directly or
indirectly, carry on or participate in a business that is the same as or is
similar to or in competition with a business (a "Competing Business") conducted
or engaged in by the Company or any of its subsidiaries as of the date hereof (a
"Company Business") within the Restricted Area (as defined below). The
"Restricted Area" shall mean the geographic area that is within 100 miles of a
location at which Marriott or any of its subsidiaries or affiliates is
conducting or engaging in a Company Business during the Restriction Period.
(c) The term "carry on or participate in a business" shall include
engaging in any of the following activities, directly or indirectly, other than
carrying on or engaging in activities expressly permitted under this Agreement:
(i) Carrying on or engaging in a Competing Business as a
principal, or on his own account, or solely or jointly with others as a
director, officer, agent, employee, consultant or partner, or stockholder,
limited partner or other interest holder owning more than five (5) percent
of the stock or equity interests or securities convertible into more than
five (5) percent of the stock of or equity interests in any entity.
(ii) As agent or principal carrying on or engaging in any
activities or negotiations with respect to the acquisition or disposition
of a Competing Business.
(iii) Extending credit for the purpose of establishing or
operating a Competing Business.
(iv) Lending or allowing his name or reputation to be used in a
Competing Business.
(v) Giving advice to any other person or entity carrying on or
engaging in a Competing Business.
(vi) Otherwise allowing his skill, knowledge or experience to be
used in a Competing Business.
13
<PAGE>
(d) Anderson agrees that during the Restriction Period he will not, without
the written consent of Marriott, in each case directly or indirectly, solicit,
raid, entice, induce or offer any person who is employed by Marriott or any of
its subsidiaries or affiliates in a Company Business to become employed by any
person or entity in any business whether or not it is a Competing Business.
(e) Anderson agrees that during the Restriction Period he will not, without
the written consent of Marriott, in each case directly or indirectly, solicit
business for a Competing Business from any person or entity that is then a
customer of a Company Business or that is being solicited by a Company Business.
(f) Anderson agrees that during the Restriction Period he will not, without
the written consent of Marriott, in each case directly or indirectly, provide,
or arrange for or assist in the provision of services by a Competing Business to
any person or entity that is then a customer of a Company Business or that is
being solicited by a Company Business.
(g) Upon breach of this Section 17 by Anderson, Marriott shall be entitled
to injunctive relief, both pendente lite and permanently, against Anderson, as a
remedy at law would be inadequate. In addition, Marriott shall be entitled to
such damages as it can show it has sustained, directly or indirectly, by reason
of such a breach, and neither Marriott nor any of its subsidiaries or affiliates
shall be limited in such damages to the consideration Anderson pursuant to the
Merger Agreement. Nothing in this Agreement shall be construed as limiting
Marriott's remedies in any way.
(h) Except as permitted or directed by Marriott or in connection with his
employment by Marriott or one of its subsidiaries or affiliates, Anderson agrees
to keep confidential and not to divulge or use any information, materials,
methods or developments of any nature and in any form that at the time or times
concerned is not generally known to those persons engaged in a Competing
Business and that relates to any one or more aspects of a Company Business which
Anderson has acquired or become acquainted with prior to the termination of his
employment with the Company or Marriott or any of its subsidiaries or
affiliates, whether developed by Anderson or by others, including, without
limitation, internal business policies, processes, techniques, know-how,
development plans, financial matters, customers and customer lists, vendors and
vendor lists, leases and sub-leases or any other confidential information or
secret aspect of any Company Business. Anderson acknowledges that the above-
described knowledge or information constitutes a unique and valuable asset of
the Company and represents a substantial investment of time and expense by the
Company and that any disclosure or use of such knowledge or information other
than for the sole benefit of the Company or Marriott or any of its subsidiaries
or affiliates would be wrongful and would cause irreparable harm to Marriott and
its subsidiaries and affiliates. The terms of this paragraph shall survive the
Restriction Period.
(i) The validity, interpretation, performance, and enforcement of the
provisions of this Section 17 shall be governed by the laws of the State of
Maryland without reference to the conflict of laws provisions thereof. To the
extent that any provision of this Section 17 shall be determined to be invalid
or unenforceable, the invalid or unenforceable portion
14
<PAGE>
of such provision shall be deleted from this Agreement, and the validity and
enforceability of the remainder of such provision and of this Section 17 shall
be unaffected. In furtherance and not in limitation of the foregoing, it is
expressly agreed that, should the duration of, or geographical extent of, or
business activities covered by, the covenants contained in this Section 17 be
determined to be in excess of that which is valid or enforceable under
applicable law, then such covenants shall be construed to cover only that
duration or geographical extent or those activities that may be validly covered
and enforced; provided, however, that to the full extent that the provisions of
any applicable law may be waived by Anderson, they are hereby waived, such that
this Section 17 may be deemed to be valid and enforceable to the greatest
possible extent. Anderson acknowledges the uncertainty of the law in this
respect and expressly stipulates that this Section 17 shall be construed in a
manner that renders its provisions valid and enforceable to the maximum extent
possible under applicable law.
18. Miscellaneous.
-------------
(a) Certain Definitions. As used in this Agreement, the following
-------------------
capitalized terms shall have the following meanings:
(i) "Beneficially Own" or "Beneficial Ownership" with respect to
any securities shall mean having "beneficial ownership" of such securities (as
determined pursuant to Rule 13d-3 under the Exchange Act), including pursuant to
any agreement, arrangement or understanding, whether or not in writing. Without
duplicative counting of the same securities by the same holder, securities
Beneficially Owned by a Person shall include securities Beneficially Owned by
all other Persons with whom such Person would constitute a "group" as within the
meanings of Section 13(d)(3) of the Exchange Act.
(ii) "Misstatement" means an untrue statement of a material fact
or an omission to state a material fact required to be stated in a publicly-
filed document necessary to make the statements in such a document not
misleading; provided, however, that such term shall not apply to any statement
or omission based on information supplied by Anderson to Marriott or Acquisition
for inclusion in the publicly-filed document.
(iii) "Person" shall mean an individual, corporation, partnership,
joint venture, association, trust, unincorporated organization or other entity.
(iv) "register," "registered," and "registration" refer to a
registration effected by preparing and filing with the SEC a registration
statement in compliance with the Securities Act and the declaration or ordering
by the SEC of effectiveness of such registration statement.
(v) "Registrable Securities" refers to any and all of the shares
of Marriott Stock held by Anderson as of the Closing Time, except that any such
Marriott Stock shall cease to be Registrable Securities when and to the extent
(A) a Form S-3 with respect to the sale of such Marriott Stock has become
effective under the Securities Act and such Marriott Stock has been disposed of
in accordance with such Form S-3; (B) such Marriott Stock has been sold to the
public pursuant to Rule 144 or any successor provision under the Securities Act;
(C)
15
<PAGE>
such Marriott Stock shall have been otherwise transferred, new certificates
therefor not bearing a legend restricting further transfer shall have been
delivered by Marriott and subsequent disposition of such Marriott Stock does not
require registration or qualification under the Securities Act or any similar
state law then in force in the opinion of legal counsel for Marriott; or (D)
such Common Stock shall have ceased to be outstanding.
(vi) "subsidiary " or "subsidiaries " of Marriott, Acquisition,
ExecuStay or any other person means any corporation, partnership, limited
liability company, association, trust, unincorporated association or other legal
entity of which the Marriott, Acquisition, ExecuStay or any such other person,
as the case may be, (either alone or through or together with any other
subsidiary) owns, directly or indirectly, 50% or more of the capital stock the
holders of which are generally entitled to vote for the election of the board of
directors or other governing body of such corporation or other legal entity.
(b) Entire Agreement. This Agreement and the Merger Agreement
----------------
constitute the entire agreement between the parties with respect to the subject
matter hereof and supersede all other prior agreements and understandings, both
written and oral, between the parties with respect to the subject matter hereof.
(c) Certain Events. Anderson agrees that this Agreement, the Other
--------------
Stockholders Agreements and the obligations hereunder shall attach to Anderson's
Shares and shall be binding upon any person or entity to which legal or
beneficial ownership of such Shares shall pass, whether by operation of law or
otherwise, including, without limitation, Anderson's heirs, guardians,
administrators or successors. Notwithstanding any transfer of Shares, the
transferor shall remain liable for the performance of all obligations under this
Agreement of the transferor.
(d) Assignment. This Agreement shall not be assigned by operation of
----------
law or otherwise without the prior written consent of the other party, provided
that Marriott may assign, in its sole discretion, its rights and obligations
hereunder to any direct or indirect wholly-owned subsidiary of Marriott, but no
such assignment shall relieve Marriott of its obligations hereunder if such
assignee does not perform such obligations.
(e) Amendments, Waivers, Etc. This Agreement may not be amended,
-------------------------
changed, supplemented, waived or otherwise modified or terminated, with respect
to Anderson, except upon the execution and delivery of a written agreement
executed by the relevant parties hereto.
(f) Notices. All notices, requests, claims, demands and other
-------
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly received if so given) by hand delivery, telegram, telex
or telecopy, or by mail (registered or certified mail, postage prepaid, return
receipt requested) or by any courier service, such as Federal Express, providing
proof of delivery. All communications hereunder shall be addressed to the
respective parties at the following addresses:
If to Anderson: At the address set forth on Schedule A hereto.
16
<PAGE>
If to Marriott or Acquisition: MARRIOTT INTERNATIONAL, INC.
10400 Fernwood Road
Bethesda, Maryland 20857
Telecopier: (301) 380-6727
Attention: General Counsel, Dept. 52/923
with a copy to: Gibson, Dunn & Crutcher LLP
1050 Connecticut Avenue, N.W.
Washington, D.C. 20036
Telephone: (202) 955-8522
Facsimile: (202) 467-0539
Attention: John F. Olson, Esq.
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
(g) Severability. Whenever possible, each provision or portion of any
------------
provision of this Agreement will be interpreted in such manner as to be
effective and valid under applicable law, but if any provision or portion of any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability will not affect any other provision
or portion of any provision in such jurisdiction, and this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision or portion of any provision had never been
contained herein.
(h) Specific Performance. Each of the parties hereto recognizes and
--------------------
acknowledges that a breach by it of any covenants or agreements contained in
this Agreement will cause the other party to sustain damages for which it would
not have an adequate remedy at law for money damages, and therefore each of the
parties hereto agrees that in the event of any such breach the aggrieved party
shall be entitled to the remedy of specific performance of such covenants and
agreements and injunctive and other equitable relief in addition to any other
remedy to which it may be entitled, at law or in equity.
(i) Remedies Cumulative. All rights, powers and remedies provided under
-------------------
this Agreement or otherwise available in respect hereof at law or in equity
shall be cumulative and not alternative, and the exercise of any thereof by any
party shall not preclude the simultaneous or later exercise of any other such
right, power or remedy by such party.
(j) No Waiver. The failure of any party hereto to exercise any right,
---------
power or remedy provided under this Agreement or otherwise available in respect
hereof at law or in equity, or to insist upon compliance by any other party
hereto with its obligations hereunder, and any custom or practice of the parties
at variance with the terms hereof, shall not constitute a waiver by such party
of its right to exercise any such or other right, power or remedy or to demand
such compliance.
17
<PAGE>
(k) No Third Party Beneficiaries. This Agreement is not intended to be for
----------------------------
the benefit of, and shall not be enforceable by, any person or entity who or
which is not a party hereto.
(l) Governing Law. Except as to Section 17, which shall be governed by the
-------------
laws of the State of Maryland, without giving effect to the principles of
conflicts of laws thereof, this Agreement shall be governed and construed in
accordance with the laws of the State of New York, without giving effect to the
principles of conflicts and laws thereof.
(m) Descriptive Headings. The descriptive headings used herein are
--------------------
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.
18
<PAGE>
(n) Counterparts. This Agreement may be executed in counterparts,
------------
each of which shall be deemed to be an original, but all of which, taken
together, shall constitute one and the same Agreement.
IN WITNESS WHEREOF, Marriott and Acquisition have caused this Agreement to
be duly executed, and Anderson has duly executed this Agreement, as of the day
and year first above written.
MARRIOTT INTERNATIONAL, INC.
By: /s/ Joseph Ryan
------------------------------
Name: Joseph Ryan
Title: Executive Vice President and
General Counsel
MI SUBSIDIARY I, INC.
By: /s/ Joseph Ryan
------------------------------
Name: Joseph Ryan
Title: Vice President
/s/ Benny E. Anderson
- ----------------------------
Benny E. Anderson
19
<PAGE>
SCHEDULE A
----------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
NAME OF STOCKHOLDER ADDRESS NUMBER OF SHARES OWNED
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------
Benny E. Anderson c/o ExecuStay Corporation 157,500
7595 Rickenbacker Drive
Gaithersburg, Maryland 20879
- -----------------------------------------------------------------------------------------------------
</TABLE>
20
<PAGE>
Exhibit __
Form of Employment Agreement
Employment Agreement
This Employment Agreement (the "Agreement") is entered into this ____ day
of ___________, 1999 by and among Marriott International, Inc., a Delaware
corporation ("Marriott"), MI Subsidiary I, Inc. (to be renamed ExecuStay, Inc.),
a Delaware corporation and a direct, wholly-owned subsidiary of Marriott
("ExecuStay") and Benny Anderson, a resident of the state of California
("Employee").
WHEREAS, pursuant to the terms and conditions of the Merger Agreement Dated
as of _____________ __, 1999 Among Marriott, ExecuStay Corporation, a Maryland
Corporation ("Old ExecuStay") and ExecuStay (the "Merger Agreement"), Old
ExecuStay agreed to merge with and into ExecuStay (the "Merger"); and
WHEREAS, pursuant to the terms and conditions of the Stockholders Agreement
dated as of _____________ __, 1999 by and among Marriott, ExecuStay and
Employee, the parties agreed to enter into this Agreement; and
WHEREAS, contingent upon the consummation of the Merger, ExecuStay wishes
to employ Employee on the terms and conditions set forth in this Agreement, and
Employee wishes to be employed by ExecuStay on such terms and conditions;
NOW, THEREFORE, in consideration of the mutual promises of the parties and
for other good and valuable consideration the receipt and sufficiency of which
is acknowledged, Marriott, ExecuStay and Employee agree as follows:
1. Employment. Contingent upon consummation of the Merger, ExecuStay
----------
agrees to employ Employee, and Employee accepts such employment for the period
and upon the terms and conditions set forth in this Agreement. Marriott and
ExecuStay will recognize continuous service of Employee with ExecuStay prior to
the Merger as prior service with Marriott and its affiliates.
2. Term. Unless terminated earlier in accordance with the terms of this
----
Agreement, the term of Employee's employment shall be for a period of three (3)
years commencing on the date of the Closing (as defined in the Merger Agreement)
and ending on the third anniversary of the Closing (the "Term"), subject to
extension by mutual agreement of the parties.
3. Position and Duties. Employee will serve as [Title] of ExecuStay and
-------------------
perform such duties consistent with Employee's position and such other
reasonable duties as the Board of Directors of ExecuStay shall assign Employee
from time to time. Employee agrees to devote Employee's full time, attention and
efforts to the business and affairs of ExecuStay during the Term. Employee
agrees to comply with all practices, policies, standards, rules and regulations
of Marriott and ExecuStay that are established from time to time. Employee shall
not at any time
<PAGE>
during the Term render or perform any services for compensation to any other
person or entity other than ExecuStay and its related entities, unless given
express permission to do so by ExecuStay.
4. Location. The principal place of employment and the location of
--------
Employee's principal office and normal place of work shall be southern
California; provided, however, that Employee shall perform such temporary travel
away from that area as is reasonably required for the proper rendition of
services under this Agreement, subject to reimbursement for reasonable travel
expenses in accordance with Marriott policies and procedures.
5. Compensation.
------------
(a) Base Salary. During the Term, ExecuStay shall pay Employee
----------
an annual base salary ("Base Salary") of $[126,000], payable in biweekly
installments in accordance with Marriott's payroll practices
for managers less applicable withholding amounts.
(b) Annual Bonus. During the Term, Employee will participate
------------
in the Marriott bonus program during each fiscal year of Marriott. The
annual bonus ("Annual Bonus") will be awarded in cash in accordance with
Marriott policies; provided that the minimum bonus will be 25 percent of
Base Salary earned during the period and the maximum bonus will be 40
percent of Base Salary earned during the period, in each case less
applicable withholding amounts. If Employee's employment terminates at the
end of the Term without renewal or replacement of this Agreement or an
offer to continue employment in the same position with ExecuStay, a pro
rata Annual Bonus for the portion of the fiscal year in which termination
occurs will be paid to Employee.
(c) Deferred Bonus Stock. During the Term, Employee will
--------------------
participate in the Marriott deferred bonus stock program under the Marriott
1998 Comprehensive Stock and Cash Incentive Plan (the "Stock Plan"),
pursuant to which Employee will receive a deferred bonus stock award for
each fiscal year having a value of 20 percent of Employee's Annual Bonus
for that fiscal year. Employee must be employed on the last day of the
fiscal year in order to participate in the deferred bonus stock program for
that fiscal year. The deferred bonus stock award will be subject to the
terms of the Stock Plan, including those related to vesting.
(d) Stock Options. During the Term, Employee will participate
-------------
in the Marriott stock option program under the Stock Plan, pursuant to
which Employee will be eligible to receive an annual award of options to
purchase Marriott Common Stock in amounts determined by the Compensation
Policy Committee of the Marriott Board of Directors. The stock options will
be subject to the terms of the Stock Plan and the award agreement.
2
<PAGE>
(e) Other Benefits. Employee shall be entitled to participate
--------------
in such other benefits, including welfare benefit plans, executive deferred
compensation plans and fringe benefit policies as are generally applicable
to managers employed by ExecuStay. In the ordinary course of business,
benefit programs evolve as business needs and laws change. To the extent it
becomes necessary and desirable to change any of the plans in which
ExecuStay managers participate, such changes will apply to Employee as they
do to other ExecuStay managers.
6. Termination of Employment.
-------------------------
(a) Death and Disability. This Agreement and Employee's
employment shall terminate upon the date of Employee's death and upon the
date Employee is determined to be suffering from a Permanent Disability as
that term is defined in the Marriott International, Inc. Employees' Profit
Sharing, Retirement and Savings Plan. In either such event ExecuStay shall
be obligated to pay Employee, if living, or the Employee's estate, accrued
and unpaid Base Salary through the date of termination and a pro rata
maximum Annual Bonus (such bonus will be pro rated based on the number of
days in the fiscal year up to the date of termination divided by 360) and
shall have no further obligations under this Agreement; provided that the
terms of any award or employee benefit plan in which Employee participates
shall govern the rights of Employee, Employee's estate or Employee's
beneficiaries with respect to any such award or plan.
(b) Termination For Cause. This Agreement and Employee's
---------------------
employment shall terminate upon ExecuStay terminating Employee's employment
"for cause" during the Term. For purposes of this Agreement, "for cause"
shall mean (i) any fraud, misappropriation or embezzlement by Employee;
(ii) any conviction of or nolo contendere plea to a felony or gross
misdemeanor by Employee; (iii) any neglect by Employee to perform the
duties assigned to Employee hereunder, provided that Employee shall first
have received a written notice from ExecuStay which sets forth the manner
in which Employee has neglected Employee's duties and Employee shall have a
period of thirty days to cure unless a cure cannot be reasonably effected
within such period; (iv) any material breach by Employee of Employee's
obligations under this Agreement; and (v) any public conduct of Employee
that has or can reasonably be expected to have a detrimental effect on
ExecuStay. In the event Employee is terminated for cause, ExecuStay shall
be obligated to pay Employee accrued and unpaid Base Salary through the
date of termination and shall have no further obligation to Employee.
(c) Termination Other Than For Cause. This Agreement and
Employee's employment shall terminate upon ExecuStay terminating Employee's
employment other than "for cause" as defined in Section 6(b) above.
ExecuStay reserves the right to terminate Employee's employment for any
reason during or after the Term. In the event
3
<PAGE>
that ExecuStay terminates Employee's employment other than "for cause",
ExecuStay shall pay Employee the Base Salary and the maximum Annual Bonus
through the remainder of the Term and shall have no further obligations
under this Agreement; provided that the terms of any award or employee
benefit plan in which Employee participates shall govern the rights of
Employee with respect to such award or plan; and provided further that
Employee shall not be entitled to any benefits under the Marriott Severance
Plan or any other plan, policy or arrangement providing for severance or
similar pay or benefits following termination of employment. Following
termination other than "for cause," Employee shall not be entitled to any
further awards of deferred bonus stock or stock options.
(d) Resignation From Employment. This Agreement and Employee's
---------------------------
employment shall terminate if Employee voluntarily resigns from
employment with ExecuStay. In such event, ExecuStay shall be obligated
to pay Employee accrued and unpaid Base Salary through the date of
termination and shall have no further obligations under this Agreement;
provided that the terms of any award or employee benefit plan in which
Employee participates shall govern the rights of Employee, with respect
to any such award or plan.
(e) Return of Property. Upon termination of Employee's
-----------------
employment for any reason, Employee shall promptly deliver to ExecuStay
all records, manuals, books, blank forms, documents, letters, memoranda,
notes, notebooks, reports, data or copies thereof, and all other
tangible property of ExecuStay or Marriott, that are in Employee's
possession or under Employee's control.
7. Employment Covenants and Agreements.
-----------------------------------
(a) Non-Competition.
---------------
(1) While Employee is employed by ExecuStay or
another Marriott affiliate and for a period of three (3) years
following termination of employment (the "Restriction Period"),
Employee will not, without the written consent of ExecuStay, in
each instance directly or indirectly, carry on or participate
in a business that is the same as or is similar to or in
competition with a business (a "Competing Business") conducted
or engaged in by ExecuStay or any of its subsidiaries (a
"Company Business") within the Restricted Area (as defined
below). The "Restricted Area" shall mean the geographic area
that is within 100 miles of a location at which Marriott or any
of its subsidiaries or affiliates is conducting or engaging in
a Company Business during the Restriction Period.
4
<PAGE>
(2) The term "carry on or participate in a business"
shall include engaging in any of the following activities, directly or
indirectly, other than carrying on or engaging in activities expressly
permitted under this Agreement:
(i) Carrying on or engaging in a Competing Business as a
principal, or on his own account, or solely or jointly with
others as a director, officer, agent, employee, consultant or
partner, or stockholder, limited partner or other interest
holder owning more than five (5) percent of the stock or equity
interests or securities convertible into more than five (5)
percent of the stock of or equity interests in any entity.
(ii) As agent or principal carrying on or engaging in
any activities or negotiations with respect to the acquisition
or disposition of a Competing Business.
(iii) Extending credit for the purpose of establishing or
operating a Competing Business.
(iv) Lending or allowing his name or reputation to be
used in a Competing Business.
(v) Giving advice to any other person or entity carrying
on or engaging in a Competing Business.
(vi) Otherwise allowing his skill, knowledge or
experience to be used in a Competing Business.
(3) During the Restriction Period Employee will not,
without the written consent of ExecuStay, in each case directly or
indirectly, solicit, raid, entice, induce or offer any person who is
employed by Marriott or any of its subsidiaries or affiliates in a
Company Business to become employed by any person or entity in any
business whether or not it is a Competing Business.
(4) During the Restriction Period Employee will not,
without the written consent of ExecuStay, in each case directly or
indirectly, solicit business for a Competing Business from any person
or entity that is then a customer of a Company Business or that is
being solicited by a Company Business.
(5) During the Restriction Period Employee will not,
without the written consent of ExecuStay, in each case directly or
indirectly, provide, or arrange for or assist in the provision of
services by a Competing Business to any
5
<PAGE>
person or entity that is then a customer of a Company Business or
that is being solicited by a Company Business.
(6) Upon breach of this Section 7(a) by Employee,
ExecuStay shall be entitled to injunctive relief, both pendente lite
and permanently, against Employee, as a remedy at law would be
inadequate. In addition, ExecuStay shall be entitled to such damages
as it can show it has sustained, directly or indirectly, by reason of
such a breach, and neither ExecuStay nor any of its subsidiaries or
affiliates shall be limited in such damages to the consideration paid
to Employee pursuant to this Agreement. Nothing in this Agreement
shall be construed as limiting ExecuStay's remedies in any way.
(b) Confidential Information. Except as permitted or directed
------------------------
by ExecuStay or in connection with Employee's employment by ExecuStay or
one of its subsidiaries or affiliates, Employee agrees to keep
confidential and not to divulge or use any information, materials, methods
or developments of any nature and in any form that at the time or times
concerned is not generally known to those persons engaged in a Competing
Business and that relates to any one or more aspects of a Company Business
which Employee has acquired or become acquainted with prior to the
termination of employment with ExecuStay, Old ExecuStay or any of their
subsidiaries or affiliates, whether developed by Employee or by others,
including, without limitation, internal business policies, processes,
techniques, know-how, development plans, financial matters, customers and
customer lists, vendors and vendor lists, leases and sub-leases or any
other confidential information or secret aspect of any Company Business.
Employee acknowledges that the above-described knowledge or information
constitutes a unique and valuable asset of ExecuStay and represents a
substantial investment of time and expense by ExecuStay and that any
disclosure or use of such knowledge or information other than for the sole
benefit of ExecuStay or Marriott or any of its subsidiaries or affiliates
would be wrongful and would cause irreparable harm to ExecuStay and its
subsidiaries and affiliates. The terms of this paragraph shall survive the
Restriction Period.
(c) Employee's Knowledge. Employee agrees to make available to
ExecuStay all knowledge possessed by Employee relating to any methods,
developments, improvements, processes or other knowledge that concerns
Company Business in any way, whether acquired by Employee before or during
employment with ExecuStay.
8. Governing Law. The validity, interpretation, performance, and
-------------
enforcement of the provisions of this Agreement shall be governed by the laws
of the State of Maryland without reference to the conflict of laws principles
thereof.
6
<PAGE>
9. Severability. To the extent that any provision of this Agreement
------------
shall be determined to be invalid or unenforceable, the invalid or
unenforceable portion of such provision shall be deleted from this
Agreement, and the validity and enforceability of the remainder of such
provision and of this Agreement shall be unaffected. In furtherance and not
in limitation of the foregoing, it is expressly agreed that, should the
duration of, or geographical extent of, or business activities covered by,
the covenants contained in Section 7 be determined to be in excess of that
which is valid or enforceable under applicable law, then such covenants
shall be construed to cover only that duration or geographical extent or
those activities that may be validly covered and enforced; provided,
however, that to the full extent that the provisions of any applicable law
may be waived by Employee, they are hereby waived, such that Section 7 may
be deemed to be valid and enforceable to the greatest possible extent.
Employee acknowledges the uncertainty of the law in this respect and
expressly stipulates that Section 7 shall be construed in a manner that
renders its provisions valid and enforceable to the maximum extent possible
under applicable law.
10. Assignment. This Agreement shall be binding upon and inure to the
----------
benefit of ExecuStay and its successors and assigns. Employee may not
assign this Agreement or any of Employee's rights hereunder, including the
right to the payment of money or other property. Any purported or attempted
assignment or transfer by the Employee of this Agreement or any of the
Employee's duties, responsibilities or obligations hereunder shall be void.
11. Notices. All notices, requests, demands and other communications
-------
under this Agreement shall be in writing, and shall be deemed to have been
duly given on the date of service if personally served on the party to whom
notice is to be given, or on the second day after mailing if mailed to the
party to whom notice is to be given by first class mail, postage prepaid,
and properly addressed as follows:
If to Employee:
If to ExecuStay or Marriott:
or to such other address as either party shall have furnished to the
other in writing in accordance herewith.
12. Withholding. ExecuStay may withhold from any amounts payable
-----------
under this Agreement such Federal, state and local taxes as shall be
required to be withheld pursuant to any applicable law or regulation and
any
7
<PAGE>
amounts required to be withheld pursuant to court order or Employee's
election.
13. Entire Agreement and Amendments. This Agreement constitutes
-------------------------------
the entire agreement between Marriott, ExecuStay and Employee on the
subject of Employee's employment with ExecuStay, supersedes any and all
prior agreements among the parties with respect to the subject matter
hereof, shall be the only agreement among the parties with respect to the
subject matter hereof, and may be modified, amended or waived with respect
to any party only by written instrument executed by the parties.
14. Waiver. A party's failure to insist upon strict compliance
------
with any provision of this Agreement or the failure to assert any right a
party might have under this Agreement, shall not be deemed to be a waiver
of such provision or right and no waiver of any right or remedy in respect
of any occurrence or event on one or more occasions shall be deemed a
waiver of such right or remedy in respect of any other occurrence or event,
whether similar or dissimilar, on any other occasion.
15. Captions and Headings. The captions and paragraph headings
---------------------
used in this Agreement are for convenience of reference only, and
shall not affect the construction or interpretation of this Agreement.
8
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
executed by their signatures below.
MARRIOTT INTERNATIONAL, INC.
By: Date:
----------------------------- -----------
Name:
Title:
MI SUBSIDIARY I, INC.
By: Date:
----------------------------- -----------
Name:
Title:
EMPLOYEE
Date:
- -------------------------------- -----------
F:\GROUPS\CORPAFF\CORPTAX\EROSIC\ARMCHAIR\Execemp6.doc
9
<PAGE>
Exhibit A
SUPPLEMENTAL EXECUTIVE STOCK OPTION AGREEMENT
MARRIOTT INTERNATIONAL, INC.
1998 COMPREHENSIVE STOCK AND CASH INCENTIVE PLAN
This Agreement ("Agreement") is entered into as of ___________ __
1999 (the "Grant Date") by and between Marriott International, Inc. ("Company"),
and _____________________(the "Employee").
The award of this option is made pursuant to the Employment
Agreement (the "Employment Agreement") entered into on ___________, 1999 by and
among the Company, MI Subsidiary I, Inc. (to be renamed ExecuStay, Inc.), a
Delaware corporation and a direct, wholly-owned subsidiary of the Company
("ExecuStay") and _____________, a resident of the state of Maryland
("Employee"). This option award is made under the terms of the Company's 1998
Comprehensive Stock and Cash Incentive Plan (the "Plan") in accordance with the
terms of the Plan and this Agreement.
Now, THEREFORE, it is agreed as follows:
1. Prospectus. The Employee has been provided with, and hereby
acknowledges receipt of, a Prospectus for the Plan dated March 27, 1998, which
contains, among other things, a detailed description of the stock option
provisions of the Plan.
2. Interpretation. The provisions of the Plan are incorporated
herein by reference and form an integral part of this Agreement. Except as
otherwise set forth herein, capitalized terms used herein shall have the
meanings given to them in the Plan or the Employment Agreement. In the event of
any inconsistency between this Agreement or the Employment Agreement and the
Plan, the terms of the Plan shall govern. A copy of the Plan is available from
the Compensation Department of the Company upon request. All decisions and
interpretations made by the Compensation Policy Committee of the Company's Board
of Directors (the "Committee") or its delegate with regard to any question
arising hereunder or under the Plan shall be binding and conclusive. The options
granted pursuant to this Agreement are not intended to qualify as "incentive
stock options" within the meaning of Section 422 of the Internal Revenue Code.
3. Grant of Options and Option Prices. The Company hereby grants
to the Employee an option (the "Option") to acquire fifty thousand (50,000)
shares (the "Option Shares") of the Company's Class A Common Stock (the "Company
Stock") at $________ per share (the "Option Price").
4. Option Term. The Option has a term of 15 years, beginning on
the Grant Date and ending on the fifteenth anniversary of the Grant Date, unless
earlier terminated as provided herein (the "Term").
<PAGE>
5. Vesting.
(a) General. The Option granted hereunder shall vest and become exercisable
as to 100 percent of the Option Shares on March 1, 2007;
provided, however, that the Option may vest earlier as
provided in Section 5(b) below.
a. Early Vesting. The Option granted hereunder shall vest and become
exercisable as to one-third (1/3) of the Option Shares
on each of any three of the Potential Vesting Dates if
(i) EBITDA (as defined below) of ExecuStay grows at a
cumulative annual rate (but not compounded) of at least
thirty-five percent (35%) beginning with the 1999 Fiscal
Year of ExecuStay and (ii) EBITDA grows at least at the
Target Rate for a specified Fiscal Year of ExecuStay as
compared to the preceding fiscal year. The Target Rate
and Potential Vesting Dates are as follows:
Fiscal Year Target Rate Potential Vesting Date
----------- ----------- ----------------------
1999 35% March 1, 2000
2000 50% March 1, 2001
2001 50% March 1, 2002
2002 50% March 1, 2003
2003 50% March 1, 2004
2004 50% March 1, 2005
2005 50% March 1, 2006
For purposes of this Agreement, ?EBITDA? means earnings before
interest expense, income taxes, depreciation and amortization,
computed in accordance with generally accepted accounting
principles as reflected in or derived from ExecuStay?s audited
financial statements for the relevant fiscal year. EBITDA
shall be adjusted in a manner determined by the Committee to
reasonably reflect any capital or other investment in
ExecuStay by the Company other than in connection with the
acquisition of the outstanding common stock of ExecuStay. For
purposes of determining the growth in EBITDA for ExecuStay?s
Fiscal Year 1999, the EBITDA of ExecuStay Corporation for 1998
as reflected in or derived from its audited financial
statements shall be used; provided that for purposes of this
provision, EBITDA of ExecuStay Corporation for 1998 shall be
at least $12.7 million.
6. Method of Exercising Option. To the extent vested, the Option
may be exercised upon providing a signed written notice to the Company stating
the number of Option Shares with respect to which the Option is being exercised.
Upon receipt of such notice, the Company will advise the person exercising the
Option of the amount of withholding taxes to be paid under Federal and, where
applicable, state and local law resulting from such exercise. The Option may be
exercised by (a) payment of the Option Price for the Option Shares being
purchased in accordance with Section 6.6 of the Plan, (b) making provision for
the satisfaction of the applicable withholding taxes, and (c) an undertaking to
furnish and execute such documents as the Company deems necessary (i) to
evidence such exercise, and (ii) to determine whether registration is then
required to comply with the Securities Act of 1933 or any other law. Upon
payment of the Option Price and provision for the satisfaction of the
withholding taxes, the
2
<PAGE>
Company shall, without transfer or issue tax to the person exercising the
Option, either cause delivery to such person of a share certificate or other
evidence of the Option Shares purchased or provide confirmation from the
transfer agent for the Company Stock that said transfer agent is holding shares
for the account of such person in a certificateless account. Payment of the
purchase price may be made by delivery of shares of the Company's Common Stock
held by the Employee for at least six months prior to the delivery. Pursuant to
procedures, if any, that may be adopted by the Committee or its delegate, the
exercise of the Option may be by any other means that the Committee determines
to be consistent with the Plan's purpose and applicable law.
7. Rights as a Shareholder. The Employee shall have no rights as a
shareholder with respect to any Option Shares covered by the Option granted
hereby until the date of issuance of a stock certificate or confirmation of the
acquisition of such Option Shares. No adjustment shall be made for dividends or
other rights for which the record date is prior to the date of issuance of stock
upon exercise of the Option.
8. Non-Assignability. The Option shall not be assignable or
transferable by the Employee except by will or by the laws of descent and
distribution. During the Employee's lifetime, the Option may be exercised only
by the Employee or, in the event of incompetence, by the Employee's legally
appointed guardian.
9. Effect of Termination of Employment or Death. Pursuant to the
Committee's authority under Section 10.2 of the Plan to issue Other Share-Based
Awards, the Option shall be subject to a modified version of Section 6.9 of the
Plan as set forth herein. If Employee ceases employment by reason of death or
disability (in accordance with the terms of the Employment Agreement), the
Option will become fully vested and be exercisable by the Employee or his
personal representative until the earlier of (i) the expiration of the Option in
accordance with the term for which it was granted or (ii) one year from the date
of death or termination of employment by reason of disability. If Employee
voluntarily resigns, is involuntarily terminated for cause (in accordance with
the terms of the Employment Agreement) or goes on leave of absence for a period
of greater than twelve months (except a leave of absence approved by the Board
of Directors or the Committee), the unvested portion of the Option shall be
forfeited and the vested portion shall be exercisable until the earlier of (i)
the expiration of the Option in accordance with the term for which it was
granted or (ii) three months from the effective date of the resignation or
anniversary of the first day of the leave of absence. If Employee is
involuntarily terminated other than for cause (in accordance with the terms of
the Employment Agreement), Section 5(b) of this Agreement shall cease to apply,
Section 5(a) of this Agreement shall continue to apply and the Option shall
expire on December 31, 2007; provided, however, that, if earlier, the Option
shall expire at such time as Employee fails to comply with Section 7(a) of the
Employment Agreement. If Employee's employment with the Company and its
Subsidiaries is terminated at the end of the Term of the Employment Agreement
without renewal
3
<PAGE>
or replacement thereof or an offer for continued employment being made for the
same position with ExecuStay, the termination shall be treated as an involuntary
termination other than for cause for purposes of this Agreement. If Employee
terminates employment with the Company and its Subsidiaries as an Approved
Retiree (as defined in the Plan), then the Option shall expire at the sooner to
occur of (i) the expiration of such option in accordance with its original term
or (ii) the expiration of five years from the date of retirement. In the event
of the death of Employee without Approved Retiree status during the three month
period following termination of employment, the Option shall be exercisable by
the Employee's personal representative, heirs or legatees to the same extent and
during the same period that the Employee could have exercised the Option if the
Employee had not died. In the event of the death of Employee while an Approved
Retiree, the Option shall be exercisable in its entirety by the Employee's
personal representatives, heirs or legatees at any time prior to the expiration
of one year from the date of the death of the Employee, but in no event after
the term for which the Option was granted.
10. Recapitalization or Reorganization. Certain events affecting the
Common Stock of the Company and mergers, consolidations and reorganizations
affecting the Company may affect the number or type of securities deliverable
upon exercise of the Option or limit the remaining term over which this Option
may be exercised.
11. General Restriction. In accordance with the terms of the Plan, the
Company may limit or suspend the exercisability of the Option or the purchase or
issuance of Option Shares thereunder under certain circumstances.
12. Amendment of This Agreement. The Board of Directors may at any
time amend, suspend or terminate the Plan; provided, however, that no amendment,
suspension or termination of the Plan or the Option shall adversely affect in
any material way the Option without the written consent of the Employee.
13. Notices. Notices hereunder shall be in writing, and if to the
Company, may be delivered personally to the Compensation Department or such
other party as designated by the Company or mailed to its principal office at
10400 Fernwood Road, Bethesda, Maryland 20817, addressed to the attention of the
Stock Option Administrator (Department 935.40), and if to the Employee, may be
delivered personally or mailed to the Employee at his or her address on the
records of the Company.
14. Successors and Assigns. This Agreement shall bind and inure to
the benefit of the parties hereto and the successors and assigns of the Company
and, to the extent provided in Paragraph 9 above and Section 6.9 of the Plan, to
the personal representatives, legatees and heirs of the Employee.
4
<PAGE>
15. No Effect on Employment. Nothing contained in this Agreement shall
be construed to limit or restrict the right of the Company or of any subsidiary
to terminate the Employee's employment at any time, with or without cause, or to
increase or decrease the Employee's compensation from the rate of compensation
in existence at the time this Agreement is executed.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement to
be effective as of the Grant Date.
MARRIOTT INTERNATIONAL, INC. EMPLOYEE
-----------------------------------
Employee Name (Please Print)
By:
---------------------------------------
---------------------------------------
Senior Vice President, Human Resources
Employee Social Security Number
(Please Print)
------------------------------------
Employee Signature
5
<PAGE>
Exhibit (c)(4)
STOCKHOLDER AGREEMENT
THIS STOCKHOLDER AGREEMENT (the "Agreement") is dated as of January 6,
1999, by and among Marriott International, Inc., a Delaware corporation
("Marriott"), MI Subsidiary I, Inc., a Delaware corporation and a direct,
wholly-owned subsidiary of Marriott ("Acquisition") and Kelly J. Regan
("Regan").
WHEREAS, concurrently herewith, Marriott, Acquisition and ExecuStay
Corporation, a Maryland corporation ("ExecuStay"), are entering into a Merger
Agreement, a form of which is appended hereto as Exhibit I (as such agreement
may hereafter be amended from time to time, the "Merger Agreement"), pursuant to
which ExecuStay will be merged with and into Acquisition (the "Merger").
Capitalized terms used and not defined herein have the respective meanings
assigned to them in the Merger Agreement;
WHEREAS, concurrently herewith, certain other stockholders of ExecuStay are
entering into three agreements with Marriott and Acquisition (the "Other
Stockholders Agreements"), concerning certain matters connected with the Merger
and their ExecuStay Shares (defined below);
WHEREAS, Regan Beneficially Owns (as defined herein) the number of shares,
par value $0.01 per share, of common stock (the "Common Stock") of ExecuStay
(the "ExecuStay Shares") set forth opposite Regan's name on Schedule A hereto;
WHEREAS, the Merger Agreement contemplates that, in anticipation of
consummation of the Merger, one share of Class B Preferred Stock, par value
$0.01 per share, of ExecuStay ("Class B Shares") will be issued to Regan in
exchange (the "Exchange") for each ExecuStay Share held by Regan (as used
herein, the term "Shares" refers to the ExecuStay Shares prior to the Exchange
and the Class B Shares after the Exchange);
WHEREAS, Marriott has agreed that Regan shall receive shares of Marriott
common stock, par value $0.01 per share ("Marriott Stock"), in the Merger, in
respect of her Shares, and Regan desires to receive such Marriott Stock; and
WHEREAS, as an inducement and a condition to entering into the Merger
Agreement, Marriott has required that Regan agrees, and Regan has agreed, to
enter into this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual promises,
representations, warranties, covenants and agreements contained herein, the
parties hereby agree as follows:
1. Agreement to Vote; Irrevocable Proxy.
------------------------------------
(a) Regan hereby agrees that during the period commencing on the Tender
Offer Purchase Time and continuing until the first to occur of the Closing and
the termination of the Merger Agreement in accordance with its terms, at any
meeting of the holders of the Shares, however called, or in connection with any
written consent of the holders of Shares, Regan shall
<PAGE>
vote (or cause to be voted) the Shares held of record or Beneficially Owned (as
defined herein) by Regan, whether owned on the date hereof or hereafter
acquired, (i) in favor of approval of the Merger Agreement, all transactions
contemplated thereby, and any actions required in furtherance thereof and hereof
(including election of such directors of ExecuStay as Marriott is entitled to
designate pursuant to the Merger Agreement); (ii) against any action or
agreement that is intended, or could reasonably be expected, to impede,
interfere with, or prevent the Merger or result in a breach in any respect of
any covenant, representation or warranty or any other obligation or agreement of
ExecuStay or any of its subsidiaries under the Merger Agreement, the Other
Stockholders Agreements or this Agreement; and (iii) except as specifically
requested in writing in advance by Marriott or Acquisition, against the
following actions (other than the Exchange, the Merger and the transactions
contemplated by the Merger Agreement and this Agreement): (A) any extraordinary
corporate transaction, such as a merger, consolidation or other business
combination involving ExecuStay or any of its subsidiaries or affiliates; (B) a
sale, lease, transfer or disposition by ExecuStay or any of its subsidiaries of
any assets outside the ordinary course of business or any assets which in the
aggregate are material to ExecuStay and its subsidiaries taken as a whole, or a
reorganization, recapitalization, dissolution or liquidation of ExecuStay or any
of its subsidiaries or affiliates; (C)(1) any change in the management of
ExecuStay or in a majority of the persons who constitute the board of directors
of ExecuStay; (2) any change in the present capitalization of ExecuStay or any
amendment of ExecuStay's charter or By-Laws; (3) any other material change in
ExecuStay's or any of its subsidiaries' corporate structure or business; or (4)
any other action that, in the case of each of the matters referred to in clauses
(C)(1), (2) or (3), is intended, or could reasonably be expected, to impede,
interfere with, delay, postpone or materially adversely affect the Exchange, the
Merger or the transactions contemplated by this Agreement, the Other
Stockholders Agreements and the Merger Agreement. Regan shall not enter into any
agreement or understanding with any Person (as defined herein) the effect of
which would be inconsistent with or violative of the provisions and agreements
contained in Section 1 or 2 hereof.
(b) By her execution hereof and in order to secure her obligations
hereunder, Regan hereby grants to, and appoints, Acquisition and Kenneth R.
Rehmann and Joseph Ryan, in their respective capacities as officers of
Acquisition, and any individual who shall hereafter succeed to any such office
of Acquisition, and any other designee of Acquisition, and each of them
individually, Regan's true and lawful irrevocable (until the Termination Date)
proxy and attorney-in-fact (with full power of substitution) to vote the Shares,
or grant a consent or approval in respect of such Shares, as indicated in
Section 1(a) above, provided, however, that this proxy shall not take effect
until purchase of the Shares at the Tender Offer Purchase Time. Regan intends
this proxy to be irrevocable (from the Tender Offer Purchase Time until the
Termination Date) and coupled with an interest and will take such further action
and execute such other instruments as may be necessary to effectuate the intent
of this proxy and hereby represents that any proxy heretofore given in respect
of her Shares is not irrevocable, and hereby revokes any proxy previously
granted by Regan with respect to the Shares. Regan understands and acknowledges
that Acquisition is entering into the Merger Agreement in reliance on her
execution and delivery of this irrevocable proxy. Regan hereby affirms that
this irrevocable proxy is given in connection with the execution of this
Agreement and the Merger Agreement, and further affirms that this irrevocable
proxy is coupled with an interest in this Agreement for the term stated herein
2
<PAGE>
and may under no circumstances be revoked. Regan hereby ratifies and confirms
all that this irrevocable proxy may lawfully do or cause to be done by virtue
hereof. This proxy is executed and intended to be irrevocable in accordance
with the provisions of Section 2-507(d) of the Maryland General Corporation Law.
This proxy shall terminate automatically on the termination of the Merger
Agreement.
2. Other Covenants, Representations and Warranties. Regan hereby
-----------------------------------------------
represents and warrants to Marriott and Acquisition as of the date hereof and as
of the Closing as follows:
(a) Ownership of Shares. Regan is the record and Beneficial Owner of
-------------------
the number of Shares set forth opposite Regan's name on Schedule A hereto. On
the date hereof, the Shares set forth opposite Regan's name on Schedule A hereto
constitute all of the Shares owned of record or Beneficially Owned by Regan.
Regan owns such Shares free and clear of all liens, claims, charges, security
interests, mortgages or other encumbrances, and such Shares are subject to no
rights of first refusal, put rights, other rights to purchase or encumber such
Shares, or to any agreements other than this Agreement as to the encumbrance or
disposition of such Shares. Such Shares are duly and validly issued, fully paid
and non-assessable. Regan has sole voting power and sole power to issue
instruction with respect to the matters set forth in Section 1 hereof, sole
power of disposition, sole power of conversion, sole power to demand appraisal
rights and sole power to agree to all of the matters set forth in this
Agreement, in each case with respect to all of the Shares set forth opposite
Regan's name on Schedule A hereto, with no limitations, qualifications or
restrictions on such rights.
(b) Power; Binding Agreement. Regan has the legal capacity, power and
------------------------
authority to enter into and perform all of Regan's obligations under this
Agreement. The execution, delivery and performance of this Agreement by Regan
will not violate any other agreement to which Regan is a party including,
without limitation, any voting agreement, shareholder agreement or voting trust.
This Agreement has been duly and validly executed and delivered by Regan and
constitutes a valid and binding agreement of Regan, enforceable against Regan in
accordance with its terms, except as such enforceability may be limited by any
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting the enforcement of creditors' rights generally, and except as the
availability of equitable remedies may be limited by the application of general
principles of equity (regardless of whether such equitable principle are applied
in a proceeding at law or in equity). There is no beneficiary or holder of a
voting trust certificate or other interest of any trust of which Regan is
trustee who is not a party to this Agreement and whose consent is required for
the execution and delivery of this Agreement or the consummation by Regan of the
transactions contemplated hereby. If Regan is married and Regan's Shares
constitute community property, this Agreement has been duly authorized, executed
and delivered by, and constitute a valid and binding agreement of, Regan's
spouse, enforceable against such person in accordance with its terms, except as
such enforceability may be limited by any applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights generally, and except as the availability of equitable
remedies may be limited by the application of general principles of equity
(regardless of whether such equitable principle are applied in a proceeding at
law or in equity).
3
<PAGE>
(c) No Conflicts. (i) Except for filings, permits, authorizations,
------------
consents and approvals as may be required under and other applicable
requirements of the HSR Act, no filing with, and no permit, authorization,
consent or approval of, any state or federal public body or authority is
necessary for the execution of this Agreement by Regan and the consummation by
Regan of the transactions contemplated hereby and (ii) none of the execution or
delivery of this Agreement by Regan, the consummation by Regan of the
transactions contemplated hereby or compliance by Regan with any of the
provisions hereof shall (A) result in a violation or breach of, or constitute
(with or without notice or lapse of time or both) a default (or give rise to any
third party right of termination, cancellation, material modification or
acceleration) under any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, license, contract, commitment, arrangement,
understanding, agreement or other instrument or obligation of any kind to which
Regan is a party or by which Regan or, to the best of Regan's knowledge, any of
Regan's properties or assets may be bound, or (B) violate any order, writ,
injunction, decree, judgment, order, statute, rule or regulation applicable to
Regan or any of Regan's properties or assets. This Agreement hereby supersedes
all prior agreements to which Regan is a party with respect to Regan's Shares,
including without limitation any registration rights agreement with respect to
any of Regan's Shares.
(d) No Finder's Fees. No broker, investment banker, financial adviser
----------------
or other person is entitled to any broker's, finder's, financial adviser's or
other similar fee or commission in connection with the transactions contemplated
by the Merger Agreement based upon arrangements made by or on behalf of Regan.
(e) Other Potential Acquirors. Regan (i) shall immediately cease any
-------------------------
existing discussions or negotiations, if any, with any parties conducted
heretofore with respect to any acquisition of all or any material portion of the
assets of, or any equity interest in, ExecuStay or any of its subsidiaries or
any business combination with ExecuStay or any of its subsidiaries, in her
capacity as such, and (ii) from and after the date hereof until termination of
the Merger Agreement, unless and until ExecuStay is permitted to take such
actions under Section 5.4 of the Merger Agreement, shall not, in such capacity,
directly or indirectly, initiate, solicit or knowingly encourage (including by
way of furnishing non-public information or assistance), or take any other
action to facilitate knowingly, any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to, any such transaction or
acquisition, or agree to or endorse any such transaction or acquisition, or
authorize or permit any of Regan's agents to do so, and Regan shall promptly
notify Marriott or Acquisition of any proposal and shall provide a copy of any
such written proposal and a summary of any oral proposal to Marriott or
Acquisition immediately after receipt thereof (and shall specify the material
terms and conditions of such proposal and identify the person making such
proposal) and thereafter keep Marriott or Acquisition advised of any development
with respect thereto.
(f) Restriction on Transfer, Proxies and Non-Interference. Regan shall
-----------------------------------------------------
not, directly or indirectly: (i) tender her Shares in the Offer (as defined in
the preamble to the Merger Agreement) or any other tender offer for ExecuStay
Shares; (ii) except as contemplated by this Agreement, the Other Stockholders
Agreements or the Merger Agreement, otherwise offer for sale, sell, transfer,
tender, pledge, encumber, assign or otherwise dispose of, or enter into any
contract, option or other arrangement or understanding with respect to or
consent to the offer for
4
<PAGE>
sale, sale, transfer, tender, pledge, encumbrance, assignment or other
disposition of, any or all of Regan's Shares or any interest therein; (iii)
grant any proxies or powers of attorney, deposit any Shares into a voting trust
or enter into a voting agreement with respect to any Shares; or (iv) take any
action that would make any representation or warranty of Regan contained herein
untrue or incorrect or have the effect of preventing or disabling Regan from
performing Regan's obligations under this Agreement.
(g) Investment Intention.
---------------------
(i) Regan confirms that Marriott and Acquisition have made
available to Regan, and her representatives and agents, (A) information about
Marriott, (B) the opportunity to ask questions of the officers and employees of
Marriott and (C) the opportunity to acquire such additional information about
the business and financial condition of Marriott as Regan has requested, and
such information has been received.
(ii) The shares of Marriott Stock to be issued to Regan in
connection with the Merger will be acquired for investment and not with a view
to distribution of such shares within the meaning of Section 2(11) of the
Securities Act.
(iii) Regan does not have in mind the sale or other
disposition of shares of Marriott Stock at some fixed time in the future (such
as the expiration of the holding period for capital gains tax treatment) or upon
the occurrence or nonoccurrence of any particular events.
(iv) Except as to the persons listed on Schedule 2(g), Regan
is an "accredited investor" within the meaning of Section 2(a)(15) of the
Securities Act.
(h) Reliance by Marriott and Acquisition. Regan understands and
------------------------------------
acknowledges that Marriott and Acquisition are relying upon the foregoing
representations by Regan, and on Regan's execution and delivery of this
Agreement (i) in entering into the Merger Agreement and (ii) in issuing the
Marriott Stock in connection with the Merger without registration under the
Securities Act or qualification under any state securities laws (collectively,
"Blue Sky Laws"). Regan agrees that the Marriott Stock will not be transferred
unless in the opinion of Marriott's legal counsel such transfer will not violate
the registration requirements of the Securities Act or Blue Sky Laws.
3. Further Assurances; Merger Agreement Compliance. From time to time, at
-----------------------------------------------
Marriott's or Acquisition's request and without further consideration, Regan
agrees to execute and deliver such additional documents and take all such
further lawful action as may be necessary or desirable to consummate and make
effective, and to cause the Company to consummate and make effective, in the
most expeditious manner practicable, the transactions contemplated by this
Agreement, the Other Stockholders Agreements and the Merger Agreement. Regan
further agrees not to take any action, or omit to take any action, which would,
or would be reasonably likely to, result in a breach by the Company of any of
the provisions of the Merger Agreement.
5
<PAGE>
4. Stop Transfer; Form of Legend.
-----------------------------
(a) Regan agrees with, and covenants to, Marriott that Regan shall not
request that ExecuStay register the transfer (book-entry or otherwise) of any
certificate or uncertificated interest representing any of Regan's Shares,
unless such transfer is made in compliance with this Agreement. In the event of
a stock dividend or distribution, or any change in the Common Stock or the Class
B Shares by reason of any stock dividend, split-up, recapitalization,
combination, exchange of shares or the like, the term "Shares" shall be deemed
to refer to and include the Shares as well as all such stock dividends and
distributions and any shares into which or for which any or all of the Shares
may be changed or exchanged.
(b) All certificates representing any of Regan's Shares shall contain
the following legend:
"The securities represented by this certificate are subject to certain
restrictions on transfer and other terms of a Stockholder Agreement,
dated as of January 6, 1999, among Marriott International, Inc., MI
Subsidiary I, Inc. and Kelly J. Regan, a copy of which is on file in
the principal office of Marriott International, Inc."
5. Stock Issuance and Registration.
-------------------------------
(a) In accordance with the provisions of Section 2.1 of the Merger
Agreement, immediately prior to the Merger, ExecuStay will, in the Exchange,
issue to Regan on a share-for-share basis, Class B Shares in exchange for Common
Stock held of record or Beneficially Owned by them. In the Merger, Regan shall
receive, in respect of each Class B Share held of record or Beneficially Owned
by Regan, shares of Marriott Stock in an amount determined by the "Class B
Exchange Ratio" as defined in Section 2.9(b) of the Merger Agreement.
(b) Marriott shall, no later than the First Registration Date (as
defined below), file with the SEC and thereafter use its reasonable efforts to
cause to be declared effective, a registration statement on Form S-3 or an
equivalent successor form (the "Form S-3") relating to the offer and sale from
time to time by Regan of shares of Marriott Stock held by her that are
Registrable Securities. As used herein, the "First Registration Date" means the
later of (i) 30 days following the Closing Time, or (ii) April 30, 1999,
provided, however, that if on such date Marriott is not eligible to use Form S-3
for registration of the resale of Registrable Securities as provided herein,
then the First Registration Date shall be the earliest date after April 30, 1999
on which Marriott becomes eligible to use Form S-3 in connection with such
resale registration. Subject to the limitations contained herein, Marriott shall
use its reasonable efforts to keep the Form S-3 continuously effective in order
to permit the prospectus forming part thereof to be usable by Regan for a period
of one year from the Closing Time, or for such shorter period that will
terminate when all Registrable Securities covered by the Form S-3 have been sold
pursuant to the Form S-3 or cease to be outstanding or otherwise to be
Registrable Securities.
(c) Marriott further agrees, if necessary, to supplement or amend the
Form S-3, as required by Section 6 below, and to furnish to Regan, if she is
holding Registrable
6
<PAGE>
Securities copies of any such supplement or amendment promptly after its being
used or filed with the SEC.
(d) Marriott agrees to use its reasonable efforts to ensure that (i)
the Form S-3 and any amendments thereof, at the time each such Form S-3 or
amendment thereof becomes effective, and any prospectus forming a part thereof
and any supplement thereto complies in all material respects with the Securities
Act and the rules and regulations thereunder, (ii) the Form S-3 and any
amendment thereto does not, when it becomes effective, contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading and
(iii) any prospectus forming part of the Form S-3, and any supplement to such
prospectus (as amended or supplemented from time to time)(each, as of the date
thereof), does not include an untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements, in light of the
circumstances under which they were made, not misleading; provided that clauses
(ii) and (iii) of this paragraph shall not apply to any information provided by
Regan.
(e) Regan may not use the Form S-3 unless she provides Marriott with
the information required by Section 7 of this Agreement on a timely basis.
Notwithstanding any other provision herein or in the Merger Agreement, (i)
Marriott shall have no obligation under Sections 5 or 6 hereof with respect to
any shares of Marriott Stock that are (x) not Registrable Securities or (y) held
of record or Beneficially Owned by Regan if she has not performed her
obligations under, or otherwise has breached, violated or is in default under,
the Agreement or the Merger Agreement, and (ii) all obligations of Marriott
under Sections 5 and 6 hereof automatically shall terminate and be of no further
force or effect in the event that the Merger Agreement is terminated or the
Offer or the Merger is not consummated.
(f) Notwithstanding any other provision herein, Marriott may delay
filing the Form S-3, may withhold efforts to cause the Form S-3 to become
effective, and may advise holders of Registrable Securities to suspend use of
the prospectus that is part of the Form S-3, for limited periods of time if and
to the extent that Marriott reasonably determines in good faith that any such
action is necessary in order for Marriott to comply with its disclosure
obligations under Section 5(d) hereof. In the event that Marriott advises the
holders of registered Registrable Securities that Marriott considers it
appropriate to suspend the use of the prospectus, such holders shall suspend any
further sales of their registered securities until Marriott advises them that
the Form S-3 has been amended or that such sales may be resumed.
6. Registration Procedures.
-----------------------
(a) Marriott shall prepare and file a Form S-3, within the relevant time
period specified in Section 5(a), and use its reasonable efforts to cause such
Form S-3 to become effective and remain effective in accordance with Section 5
hereof.
(b) Marriott shall prepare and file such amendments and post-effective
amendments to the Form S-3 as may be necessary under applicable law to keep such
Form S-3 effective for the applicable period; and cause each prospectus that is
part of the Form S-3 to be supplemented by
7
<PAGE>
any required prospectus supplement, and as so supplemented to be filed with the
SEC pursuant to applicable requirements of the Securities Act and the rules and
regulations thereunder.
(c) Marriott shall use its reasonable efforts to register or qualify the
Registrable Securities under all applicable Blue Sky Laws as Regan, if she is
holding Registrable Securities covered by the Form S-3 shall reasonably request;
provided, however, that Marriott shall not be required to (i) qualify as a
foreign corporation or as a dealer in securities in any jurisdiction where it
would not otherwise be required to qualify but for this Section 6(c), or (ii)
take any action which would subject it to general service of process or taxation
in any such jurisdiction where it is not then so subject.
(d) Marriott shall furnish to Regan, if she is holding Registrable
Securities, without charge, as many copies of each prospectus and any amendment
thereof or supplement thereto as Regan may reasonably request.
(e) Marriott shall cooperate with Regan as a selling stockholder of
Registrable Securities to facilitate the timely preparation and delivery of
certificates representing Registrable Securities to be sold and not bearing any
restrictive legends.
(f) Marriott shall cause all Registrable Securities covered by the Form S-3
to be listed on the NYSE.
7. Condition Precedent. It shall be a condition precedent to the
-------------------
obligations of Marriott to take any action pursuant hereto that Regan shall
furnish to Marriott such information regarding her, the Registrable Securities
held by her and the intended method of disposition of such Registrable
Securities as Marriott shall reasonably request and as shall be required in
connection with the action to be taken by Marriott.
8. Expenses of Registration. All expenses incurred in connection with any
------------------------
registrations pursuant to Section 5 hereof, including without limitation all
registration and qualification fees, printers' and accounting fees, reasonable
fees and disbursements of counsel for Marriott, shall be borne by Marriott,
except for (a) fees and disbursements of counsel for Regan, and (b) any
underwriting or brokers' discounts or similar transaction fees, which shall be
borne by Regan.
9. Indemnification.
---------------
(a) Marriott agrees to indemnify and hold harmless Regan (as the
"Holder Indemnified Party"), against any losses, claims, damages or liabilities,
joint or several, to which the Holder Indemnified Party may become subject,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based on any Misstatement (defined below) in the
Form S-3 or any amendments thereof or supplements thereto. Marriott will
reimburse such Holder Indemnified Party for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability or action. Notwithstanding anything to the
contrary contained in this Section 9(a), the indemnity agreement contained in
this Section 9(a) shall not (i) apply to amounts paid in settlement of any
8
<PAGE>
such loss, claim, damage, liability or action if such settlement is effected
without the consent of Marriott (which consent shall not be unreasonably
withheld); (ii) apply to any such case for any such loss, claim, damage,
liability, or action to the extent that it arises out of or is based upon a
Misstatement made in reliance upon and in conformity with written information
furnished expressly for use in connection with such registration by such Holder
Indemnified Party.
(b) Regan agrees to indemnify and hold harmless Marriott, each of its
directors, each of its officers who have signed the Form S-3, and each person,
if any, who controls Marriott within the meaning of the Securities Act, and each
agent (the "Marriott Indemnified Parties") against any losses, claims, damages
or liabilities to which any Marriott Indemnified Party may become subject,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereto) (i) arise out of or are based upon any Misstatement in the Form S-3 and
any amendments thereof or supplements thereto made in reliance upon and in
conformity with written information furnished expressly for use in connection
with such registration by any such Holder Indemnified Party. Regan will
reimburse any legal or other expenses reasonably incurred by such Marriott
Indemnified Party in connection with investigating or defending any such loss,
claim, damage, liability or action. Notwithstanding anything to the contrary
contained in this Section 9(b), the indemnity agreement contained in this
Section 9(b) shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability or action if such settlement is effected without the
consent of Regan (which consent shall not be unreasonably withheld).
(c) If the indemnification provided for in this Section 9 is unavailable to
an indemnified party under Section 9(a) or Section 9(b) above (other than by
reason of exceptions provided in those Sections) in respect of any losses,
claims, damages or liabilities referred to in such Sections, then each
applicable indemnifying party, in lieu of indemnifying such indemnified party,
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages or liabilities in such proportion as is
appropriate to reflect the relative benefit and relative fault as well as any
other equitable considerations.. The amount paid or payable by a party as a
result of the losses, claims, damages, or liabilities referred to above shall be
deemed to include, subject to the limitations set forth in Section 9(d), any
legal or other fees or expenses reasonably incurred by such party in connection
with investigating or defending any action or claim. The relative benefit shall
be determined by the allocation of proceeds from such Form S-3. The relative
fault of the indemnified party on the one hand and of the indemnifying party on
the other shall be determined by reference to, among other things, whether the
Misstatement or alleged Misstatement relates to information supplied by the
indemnified party or the indemnifying party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
Misstatement or alleged Misstatement. Marriott and Regan agree that it would
not be just and equitable if contribution pursuant to this Section 9(c) were
determined by pro rata allocation or by any other method of allocation which
does not take account of the equitable considerations referred to above. No
person guilty of fraudulent misrepresentation (within the meaning of Section
9(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
(d) Any person entitled to indemnification hereunder will: (i) give prompt
notice to the indemnifying party of any claim with respect to which it seeks
indemnification; and (ii) unless in such indemnified party's reasonable judgment
a conflict of interest between such
9
<PAGE>
indemnified and indemnifying parties may exist with respect to such claim,
permit such indemnifying party to assume the defense of such claim with counsel
reasonably satisfactory to the indemnified party. If such defense is assumed,
the indemnifying party will not be subject to any liability for any settlement
made without its consent (but such consent will not be unreasonably withheld).
An indemnifying party who is not entitled or elects not to assume the defense of
a claim will not be obligated to pay the fees and expenses of more than one
counsel for all parties indemnified by such indemnifying party with respect to
such claim, unless in the reasonable judgment of any indemnified party a
conflict of interest may exist between such indemnified party and any other such
indemnified parties with respect to such claim. The failure to notify an
indemnifying party promptly of the commencement of any such action, if
prejudicial to her ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this
paragraph, but the omission so to notify the indemnifying party will not relieve
her of any liability that she may have to any indemnified party otherwise than
under this Section.
10. Termination of Marriott's Obligations. Marriott shall have no
-------------------------------------
obligations pursuant to Section 6 with respect to Registrable Securities more
than one year after the Closing.
11. Employment Agreement. Regan agrees to the assignment to and
--------------------
assumption by Acquisition at the Closing Time of her employment agreement with
the Company dated January 1, 1998.
12. The Options. Regan hereby agrees as follows:
-----------
(a) Grant of Options. Subject to the terms of this Section 12, Regan
----------------
hereby grants to Acquisition (or its designee), effective upon the purchase of
the shares by Acquisition at the Tender Offer Purchase Time, an irrevocable
option (each, an "Option") to purchase all Shares held of record or Beneficially
Owned by Regan at a purchase price per Share equal to $14.
(b) Exercise of Options. Acquisition may exercise the Options, in
-------------------
whole or in part, at any time and from time to time, following the occurrence of
a Purchase Event (as defined below); provided that any Options not theretofore
exercised shall expire and be of no further force and effect upon the earliest
to occur (the "Expiration Date") of (i) the Closing Time, (ii) 5 months after
the first occurrence of a Purchase Event, or (iii) termination of the Merger
Agreement in accordance with its terms. Notwithstanding anything herein to the
contrary, in the event of termination of the Merger Agreement, Marriott at its
option either may elect to exercise the Options, or may accept payment of the
Liquidated Damages Amount provided for in Section 9.3 of the Merger Agreement,
but shall not be entitled to exercise the Options and retain Liquidated Damages
Amount. In the event Marriott determines to exercise the Options, promptly upon
a termination of the Merger Agreement giving rise to payment of the Liquidated
Damages Amount, Marriott shall notify ExecuStay of its waiver of receipt of the
Liquidated Damages Amount pursuant to the Merger Agreement.
As used herein, a "Purchase Event" shall mean any of the following events that
occurs after the date hereof:
10
<PAGE>
(i) Beneficial Ownership of more than 20% of the outstanding capital
stock of ExecuStay (or rights to acquire such capital stock of ExecuStay) shall
have been acquired by any Person or "group" other than Acquisition, any
affiliate of Acquisition or Regan;
(ii) ExecuStay shall have entered into a definitive agreement or
approved or recommended any proposal which provides for the acquisition of 20%
or more of the outstanding capital stock of ExecuStay or substantially all of
the assets of ExecuStay by any Person or group other than Acquisition, an
affiliate of Acquisition or Regan;
(iii) (A) the failure of ExecuStay's stockholders to approve the
Merger Agreement or the transactions contemplated thereby at a meeting called to
consider such Merger Agreement, if such meeting shall have been preceded by (x)
the public announcement by any Person or group (other than Acquisition or an
affiliate of Acquisition) of an offer or proposal to acquire, merge or
consolidate with ExecuStay, or (y) the Board of Directors of ExecuStay's
publicly withdrawing or modifying, or publicly announcing its intent to withdraw
or modify, its recommendation that the stockholders of ExecuStay approve the
transactions contemplated by the Merger Agreement, as prohibited by Section
5.4(b) of the Merger Agreement; or (B) the acceptance by ExecuStay's Board of
Directors of, or the public recommendation by ExecuStay's Board of Directors
that the stockholders of ExecuStay accept, an offer or proposal from any Person
or group (other than Acquisition or an affiliate of Acquisition), to acquire 20%
or more of the outstanding capital stock of ExecuStay or for a merger or
consolidation or any similar transaction involving ExecuStay, as prohibited by
Section 5.4(b) of the Merger Agreement;
(iv) a proposal made by a third party to ExecuStay, its affiliates or
their respective officers, directors, employees, representatives or agents, as
described in Section 5.4 of the Merger Agreement, resulting in a breach by
ExecuStay of the covenant and obligation contained in that Section 5.4 and such
breach (x) would entitle Acquisition or Marriott to terminate the Merger
Agreement pursuant to Section 9.1(b) thereof and (y) shall not have been cured
prior to the date that Acquisition duly gives notices to Regan of its desire to
exercise an Option pursuant to Section 12 hereof; or
(v) any breach by Regan of this Agreement.
(c) Notice of Exercise. To exercise an Option, Acquisition shall, prior to
------------------
the Expiration Date, give written notice to Regan specifying the location in
Maryland or Washington, D.C. and time for the closing (the "Option Closing") of
such purchase. The Option Closing shall be held on the date that is no later
than three business days after the date on which each of the conditions set
forth in Section 12(d) below has been satisfied or waived by Acquisition.
(d) Conditions to Option Closing Following Exercise of Options. The
----------------------------------------------------------
occurrence of the Option Closing shall be subject to the satisfaction of each of
the following conditions:
(i) to the extent necessary, any applicable waiting periods (and any
extension thereof) under the HSR Act with respect to the purchase of the Shares
following the exercise of an Option shall have expired or been terminated; and
11
<PAGE>
(ii) no preliminary or permanent injunction or other order, decree or
ruling issued by any court of governmental or regulatory authority, domestic or
foreign, of competent jurisdiction prohibiting the exercise of an Option or the
delivery of Shares shall be in effect.
(e) Transferability of Options. Acquisition may sell or transfer the
---------------------------
Options and any Shares acquired upon exercise of an Option at any time, without
the written consent of Regan, to any affiliate or affiliates of Acquisition.
(f) Payment for and Delivery of Certificates. At the Option Closing, (i)
----------------------------------------
Acquisition (or its designee) shall pay, by check, an amount equal to the
product of (x) $14 and (y) the number of Shares owned by Regan; and (ii) Regan
shall deliver or shall cause to be delivered to Acquisition a certificate or
certificates evidencing Regan's Shares, and Regan agrees that such Shares shall
be transferred free and clear of all liens. All such certificates representing
Shares shall be duly endorsed in blank, or with appropriate stock powers, duly
executed in blank, attached thereto, in proper form for transfer, with the
signature of Regan thereon guaranteed, and with all applicable taxes paid or
provided for.
14. Termination. Except as otherwise provided herein, the covenants and
-----------
agreements contained herein with respect to the Shares shall terminate upon the
earliest of (a) termination of the Merger Agreement in accordance with its
terms, or (b) the Effective Time.
15. Regan's Capacity. To the extent that Regan is or becomes during the
----------------
term hereof a director or executive officer of ExecuStay makes any agreement or
understanding herein in her capacity as such director or executive officer.
Regan signs solely in her or her capacity as the record and/or beneficial owner
of her Shares.
16. Waiver of Appraisal and Dissenter's Rights. Regan hereby irrevocably
------------------------------------------
waives any rights of appraisal or rights to dissent from the Merger that she may
have.
17. Non-Competition Agreement. As of the Closing Time, Regan hereby
-------------------------
agrees to the assignment to, and assumption by, Acquisition of the Non-
Competition Agreement dated January 1, 1998 by and among ExecuStay, ExecuStay
Corporation of America, a Maryland corporation, and Regan.
18. Miscellaneous.
-------------
(a) Certain Definitions. As used in this Agreement, the following
-------------------
capitalized terms shall have the following meanings:
(i) "Beneficially Own" or "Beneficial Ownership" with respect to
any securities shall mean having "beneficial ownership" of such securities (as
determined pursuant to Rule 13d-3 under the Exchange Act), including pursuant to
any agreement, arrangement or understanding, whether or not in writing. Without
duplicative counting of the same securities by the same holder, securities
Beneficially Owned by a Person shall include securities Beneficially Owned by
all other Persons with whom such Person would constitute a "group" as within the
meanings of Section 13(d)(3) of the Exchange Act.
12
<PAGE>
(ii) "Misstatement" means an untrue statement of a material fact
or an omission to state a material fact required to be stated in a publicly-
filed document necessary to make the statements in such a document not
misleading; provided, however, that such term shall not apply to any statement
or omission based on information supplied by Regan to Marriott or Acquisition
for inclusion in the publicly-filed document.
(iii) "Person" shall mean an individual, corporation, partnership,
joint venture, association, trust, unincorporated organization or other entity.
(iv) "register," "registered," and "registration" refer to a
registration effected by preparing and filing with the SEC a registration
statement in compliance with the Securities Act and the declaration or ordering
by the SEC of effectiveness of such registration statement.
(v) "Registrable Securities" refers to any and all of the shares
of Marriott Stock held by Regan as of the Closing Time, except that any such
Marriott Stock shall cease to be Registrable Securities when and to the extent
(A) a Form S-3 with respect to the sale of such Marriott Stock has become
effective under the Securities Act and such Marriott Stock has been disposed of
in accordance with such Form S-3; (B) such Marriott Stock has been sold to the
public pursuant to Rule 144 or any successor provision under the Securities Act;
(C) such Marriott Stock shall have been otherwise transferred, new certificates
therefor not bearing a legend restricting further transfer shall have been
delivered by Marriott and subsequent disposition of such Marriott Stock does not
require registration or qualification under the Securities Act or any similar
state law then in force in the opinion of legal counsel for Marriott; or (D)
such Common Stock shall have ceased to be outstanding.
(vi) "subsidiary" or "subsidiaries" of Marriott, Acquisition,
ExecuStay or any other person means any corporation, partnership, limited
liability company, association, trust, unincorporated association or other legal
entity of which the Marriott, Acquisition, ExecuStay or any such other person,
as the case may be, (either alone or through or together with any other
subsidiary) owns, directly or indirectly, 50% or more of the capital stock the
holders of which are generally entitled to vote for the election of the board of
directors or other governing body of such corporation or other legal entity.
(b) Entire Agreement. This Agreement and the Merger Agreement
----------------
constitute the entire agreement between the parties with respect to the subject
matter hereof and supersede all other prior agreements and understandings, both
written and oral, between the parties with respect to the subject matter hereof.
(c) Certain Events. Regan agrees that this Agreement, the Other
--------------
Stockholders Agreements and the obligations hereunder shall attach to Regan's
Shares and shall be binding upon any person or entity to which legal or
beneficial ownership of such Shares shall pass, whether by operation of law or
otherwise, including, without limitation, Regan's heirs, guardians,
administrators or successors. Notwithstanding any transfer of Shares, the
transferor shall remain liable for the performance of all obligations under this
Agreement of the transferor.
13
<PAGE>
(d) Assignment. This Agreement shall not be assigned by operation of
----------
law or otherwise without the prior written consent of the other party, provided
that Marriott may assign, in its sole discretion, its rights and obligations
hereunder to any direct or indirect wholly-owned subsidiary of Marriott, but no
such assignment shall relieve Marriott of its obligations hereunder if such
assignee does not perform such obligations.
(e) Amendments, Waivers, Etc. This Agreement may not be amended,
------------------------
changed, supplemented, waived or otherwise modified or terminated, with respect
to Regan, except upon the execution and delivery of a written agreement executed
by the relevant parties hereto.
(f) Notices. All notices, requests, claims, demands and other
-------
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly received if so given) by hand delivery, telegram, telex
or telecopy, or by mail (registered or certified mail, postage prepaid, return
receipt requested) or by any courier service, such as Federal Express, providing
proof of delivery. All communications hereunder shall be addressed to the
respective parties at the following addresses:
<TABLE>
<S> <C>
If to Regan: At the address set forth on Schedule A hereto.
If to Marriott or Acquisition: MARRIOTT INTERNATIONAL, INC.
10400 Fernwood Road
Bethesda, Maryland 20857
Telecopier: (301) 380-6727
Attention: General Counsel, Dept. 52/923
with a copy to: Gibson, Dunn & Crutcher LLP
1050 Connecticut Avenue, N.W.
Washington, D.C. 20036
Telephone: (202) 955-8522
Facsimile: (202) 467-0539
Attention: John F. Olson, Esq.
</TABLE>
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
(g) Severability. Whenever possible, each provision or portion of any
------------
provision of this Agreement will be interpreted in such manner as to be
effective and valid under applicable law, but if any provision or portion of any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability will not affect any other provision
or portion of any provision in such jurisdiction, and this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision or portion of any provision had never been
contained herein.
14
<PAGE>
(h) Specific Performance. Each of the parties hereto recognizes and
--------------------
acknowledges that a breach by it of any covenants or agreements contained in
this Agreement will cause the other party to sustain damages for which it would
not have an adequate remedy at law for money damages, and therefore each of the
parties hereto agrees that in the event of any such breach the aggrieved party
shall be entitled to the remedy of specific performance of such covenants and
agreements and injunctive and other equitable relief in addition to any other
remedy to which it may be entitled, at law or in equity.
(i) Remedies Cumulative. All rights, powers and remedies provided under
-------------------
this Agreement or otherwise available in respect hereof at law or in equity
shall be cumulative and not alternative, and the exercise of any thereof by any
party shall not preclude the simultaneous or later exercise of any other such
right, power or remedy by such party.
(j) No Waiver. The failure of any party hereto to exercise any right,
---------
power or remedy provided under this Agreement or otherwise available in respect
hereof at law or in equity, or to insist upon compliance by any other party
hereto with its obligations hereunder, and any custom or practice of the parties
at variance with the terms hereof, shall not constitute a waiver by such party
of its right to exercise any such or other right, power or remedy or to demand
such compliance.
(k) No Third Party Beneficiaries. This Agreement is not intended to be
----------------------------
for the benefit of, and shall not be enforceable by, any person or entity who or
which is not a party hereto.
(l) Governing Law. Except as to Section 17, which shall be governed by
-------------
the laws of the State of Maryland, without giving effect to the principles of
conflicts of laws thereof, this Agreement shall be governed and construed in
accordance with the laws of the State of New York, without giving effect to the
principles of conflicts and laws thereof.
(m) Descriptive Headings. The descriptive headings used herein are
--------------------
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.
15
<PAGE>
(n) Counterparts. This Agreement may be executed in counterparts,
------------
each of which shall be deemed to be an original, but all of which, taken
together, shall constitute one and the same Agreement.
IN WITNESS WHEREOF, Marriott and Acquisition have caused this Agreement to
be duly executed, and Regan has duly executed this Agreement, as of the day and
year first above written.
MARRIOTT INTERNATIONAL, INC.
By: /s/ Joseph Ryan
------------------------------
Name: Joseph Ryan
Title: Executive Vice President and
General Counsel
MI SUBSIDIARY I, INC.
By: /s/ Joseph Ryan
------------------------------
Name: Joseph Ryan
Title: Vice President
/s/ Kelly J. Regan
- --------------------------
Kelly J. Regan
16
<PAGE>
SCHEDULE A
----------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
NAME OF STOCKHOLDER ADDRESS NUMBER OF SHARES OWNED
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Kelly J. Regan 7 Hanover Farms Road 45,455
Bolton, Connecticut 06043
- ------------------------------------------------------------------------------------------------
</TABLE>
17
<PAGE>
Exhibit (c)(5)
STOCKHOLDERS AGREEMENT
THIS STOCKHOLDERS AGREEMENT (the "Agreement") is dated as of January 6,
1999, by and among Marriott International, Inc., a Delaware corporation
("Marriott"), MI Subsidiary I, Inc., a Delaware corporation and a direct,
wholly-owned subsidiary of Marriott ("Acquisition") and each of the other
parties signatory hereto (individually, a "Stockholder" and collectively, the
"Stockholders").
WHEREAS, concurrently herewith, Marriott, Acquisition and ExecuStay
Corporation, a Maryland corporation ("ExecuStay"), are entering into a Merger
Agreement, a form of which is appended hereto as Exhibit I (as such agreement
may hereafter be amended from time to time, the "Merger Agreement"), pursuant to
which ExecuStay will be merged with and into Acquisition (the "Merger").
Capitalized terms used and not defined herein have the respective meanings
assigned to them in the Merger Agreement;
WHEREAS, concurrently herewith, certain other stockholders of ExecuStay are
entering into two agreements with Marriott and Acquisition (the "Other
Stockholders Agreements"), concerning certain matters connected with the Merger
and their ExecuStay Shares (defined below);
WHEREAS, each of the Stockholders wishes to make subject to this Agreement
the number of shares, par value $0.01 per share, of common stock (the "Common
Stock") of ExecuStay (the "ExecuStay Shares") set forth opposite such
Stockholder's name on Schedule A hereto (the "Exchange Shares");
WHEREAS, the Merger Agreement contemplates that, in anticipation of
consummation of the Merger, one share of Class B Preferred Stock, par value
$0.01 per share, of ExecuStay ("Class B Shares") will be issued to each
Stockholder in exchange (the "Exchange") for each Exchange Share held by such
Stockholder (as used herein, the term "Shares" refers to the Exchange Shares
prior to the Exchange and the Class B Shares after the Exchange);
WHEREAS, Marriott has agreed that each Stockholder shall receive shares of
Marriott common stock, par value $.01 per share ("Marriott Stock"), in the
Merger, in respect of their Exchange Shares, and each such Stockholder desires
to receive such Marriott Stock; and
WHEREAS, as an inducement and a condition to entering into the Merger
Agreement, Marriott has required that the Stockholders agree, and the
Stockholders have agreed, to enter into this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual promises,
representations, warranties, covenants and agreements contained herein, the
parties hereby agree as follows:
1. Agreement to Vote. Each Stockholder hereby agrees that during the
-----------------
period commencing on the Tender Offer Purchase Time and continuing until the
first to occur of the Closing and the termination of the Merger Agreement in
accordance with its terms, at any
<PAGE>
meeting of the holders of the Shares, however called, or in connection with any
written consent of the holders of Shares, such Stockholder shall vote (or cause
to be voted) the Exchange Shares held of record or Beneficially Owned (as
defined herein) by such Stockholder, whether owned on the date hereof or
hereafter acquired, (a) in favor of approval of the Merger Agreement, all
transactions contemplated thereby, and any actions required in furtherance
thereof and hereof (including election of such directors of ExecuStay as
Marriott is entitled to designate pursuant to the Merger Agreement); (b) against
any action or agreement that is intended, or could reasonably be expected, to
impede, interfere with, or prevent the Merger or result in a breach in any
respect of any covenant, representation or warranty or any other obligation or
agreement of ExecuStay or any of its subsidiaries under the Merger Agreement,
the Other Stockholders Agreements or this Agreement; and (c) except as
specifically requested in writing in advance by Marriott or Acquisition, against
the following actions (other than the Exchange, the Merger and the transactions
contemplated by the Merger Agreement and this Agreement): (i) any extraordinary
corporate transaction, such as a merger, consolidation or other business
combination involving ExecuStay or any of its subsidiaries or affiliates; (ii) a
sale, lease, transfer or disposition by ExecuStay or any of its subsidiaries of
any assets outside the ordinary course of business or any assets which in the
aggregate are material to ExecuStay and its subsidiaries taken as a whole, or a
reorganization, recapitalization, dissolution or liquidation of ExecuStay or any
of its subsidiaries or affiliates; (iii)(A) any change in the management of
ExecuStay or in a majority of the persons who constitute the board of directors
of ExecuStay; (B) any change in the present capitalization of ExecuStay or any
amendment of ExecuStay's charter or By-Laws; (C) any other material change in
ExecuStay's or any of its subsidiaries' corporate structure or business; or (D)
any other action that, in the case of each of the matters referred to in clauses
(iii)(A), (B) or (C), is intended, or could reasonably be expected, to impede,
interfere with, delay, postpone or materially adversely affect the Exchange, the
Merger or the transactions contemplated by this Agreement, the Other
Stockholders Agreements and the Merger Agreement. No Stockholder shall enter
into any agreement or understanding with any Person (as defined herein) the
effect of which would be inconsistent with or violative of the provisions and
agreements contained in Section 1 or 2 hereof.
2. Other Covenants, Representations and Warranties. Each Stockholder
-----------------------------------------------
hereby severally represents and warrants with respect to himself or itself to
Marriott and Acquisition as of the date hereof and as of the Closing as follows:
(a) Ownership of Exchange Shares. Such Stockholder is the record and
----------------------------
Beneficial Owner of the number of Exchange Shares set forth opposite such
Stockholder's name on Schedule A hereto. Such Stockholder owns such Exchange
Shares free and clear of all liens, claims, charges, security interests,
mortgages or other encumbrances, and such Exchange Shares are subject to no
rights of first refusal, put rights, other rights to purchase or encumber such
Exchange Shares, or to any agreements other than this Agreement as to the
encumbrance or disposition of such Exchange Shares. Such Stockholder has sole
voting power and sole power to issue instruction with respect to the matters set
forth in Section 1 hereof, sole power of disposition, sole power of conversion,
sole power to demand appraisal rights and sole power to agree to all of the
matters set forth in this Agreement, in each case with respect to all of the
Exchange Shares set forth opposite such Stockholder's name on Schedule A hereto,
with no limitations, qualifications or restrictions on such rights.
<PAGE>
(b) Power; Binding Agreement. Such Stockholder has the legal
------------------------
capacity, power and authority to enter into and perform all of such
Stockholder's obligations under this Agreement. The execution, delivery and
performance of this Agreement by such Stockholder will not violate any other
agreement to which such Stockholder is a party including, without limitation,
any voting agreement, shareholder agreement or voting trust. This Agreement has
been duly and validly executed and delivered by such Stockholder and constitutes
a valid and binding agreement of such Stockholder, enforceable against such
Stockholder in accordance with its terms, except as such enforceability may be
limited by any applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting the enforcement of creditors' rights generally, and
except as the availability of equitable remedies may be limited by the
application of general principles of equity (regardless of whether such
equitable principles are applied in a proceeding at law or in equity). There is
no beneficiary or holder of a voting trust certificate or other interest of any
trust of which such Stockholder is trustee who is not a party to this Agreement
and whose consent is required for the execution and delivery of this Agreement
or the consummation by such Stockholder of the transactions contemplated hereby.
(c) No Conflicts. (i) Except for filings, permits, authorizations,
------------
consents and approvals as may be required under and other applicable
requirements of the HSR Act, no filing with, and no permit, authorization,
consent or approval of , any state or federal public body or authority is
necessary for the execution of this Agreement by such Stockholder and the
consummation by such Stockholder of the transactions contemplated hereby and
(ii) none of the execution or delivery of this Agreement by such Stockholder,
the consummation by such Stockholder of the transactions contemplated hereby or
compliance by such Stockholder with any of the provisions hereof shall (A)
result in a violation or breach of, or constitute (with or without notice or
lapse of time or both) a default (or give rise to any third party right of
termination, cancellation, material modification or acceleration) under any of
the terms, conditions or provisions of any note, bond, mortgage, indenture,
license, contract, commitment, arrangement, understanding, agreement or other
instrument or obligation of any kind to which such Stockholder is a party or by
which such Stockholder or, to the best of such Stockholder's knowledge, any of
such Stockholder's properties or assets may be bound, or (B) violate any order,
writ, injunction, decree, judgment, order, statute, rule or regulation
applicable to such Stockholder or any of such Stockholder's properties or
assets. This Agreement hereby supersedes all prior agreements to which such
Stockholder is a party with respect to such Stockholder's Shares, including
without limitation any registration rights agreement with respect to any of such
Stockholder's Shares.
(d) No Finder's Fees. No broker, investment banker, financial adviser
----------------
or other person is entitled to any broker's, finder's, financial adviser's or
other similar fee or commission in connection with the transactions contemplated
by the Merger Agreement based upon arrangements made by or on behalf of such
Stockholder.
(e) Other Potential Acquirers. Such Stockholder (i) shall immediately
-------------------------
cease any existing discussions or negotiations, if any, with any parties
conducted heretofore with respect to any acquisition of all or any material
portion of the assets of, or any equity interest in, ExecuStay or any of its
subsidiaries or any business combination with ExecuStay or any of its
subsidiaries, in his or her capacity as such, and (ii) from and after the date
hereof until termination
<PAGE>
of the Merger Agreement, unless and until ExecuStay is permitted to take such
actions under Section 5.4 of the Merger Agreement, shall not, in such capacity,
directly or indirectly, initiate, solicit or knowingly encourage (including by
way of furnishing non-public information or assistance), or take any other
action to facilitate knowingly, any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to, any such transaction or
acquisition, or agree to or endorse any such transaction or acquisition, or
authorize or permit any of such Stockholder's agents to do so, and such
Stockholder shall promptly notify Marriott or Acquisition of any proposal and
shall provide a copy of any such written proposal and a summary of any oral
proposal to Marriott or Acquisition immediately after receipt thereof (and shall
specify the material terms and conditions of such proposal and identify the
person making such proposal) and thereafter keep Marriott or Acquisition advised
of any development with respect thereto.
(f) Restriction on Transfer, Proxies and Non-Interference. Such
-----------------------------------------------------
Stockholder shall not, directly or indirectly: (i) tender his Exchange Shares
in the Offer (as defined in the preamble to the Merger Agreement) or any other
tender offer for ExecuStay Shares; (ii) except as contemplated by this
Agreement, the Other Stockholders Agreements or the Merger Agreement, otherwise
offer for sale, sell, transfer, tender, pledge, encumber, assign or otherwise
dispose of, or enter into any contract, option or other arrangement or
understanding with respect to or consent to the offer for sale, sale, transfer,
tender, pledge, encumbrance, assignment or other disposition of, any or all of
such Stockholder's Exchange Shares or any interest therein; (iii) grant any
proxies or powers of attorney, deposit any Exchange Shares into a voting trust
or enter into a voting agreement with respect to any Exchange Shares; or (iv)
take any action that would make any representation or warranty of such
Stockholder contained herein untrue or incorrect or have the effect of
preventing or disabling such Stockholder from performing such Stockholder's
obligations under this Agreement.
(g) Investment Intention.
---------------------
(i) Such Stockholder confirms that Marriott and Acquisition
have made available to such Stockholder, and his representatives and agents, (A)
information about Marriott, (B) the opportunity to ask questions of the officers
and employees of Marriott and (C) the opportunity to acquire such additional
information about the business and financial condition of Marriott as such
Stockholder has requested, and such information has been received.
(ii) The shares of Marriott Stock to be issued to such
Stockholder in connection with the Merger will be acquired for investment and
not with a view to distribution of such shares within the meaning of Section
2(11) of the Securities Act.
(iii) Such Stockholder does not have in mind the sale or other
disposition of shares of Marriott Stock to be issued to such Stockholder in
connection with the Merger at some fixed time in the future (such as the
expiration of the holding period for capital gains tax treatment) or upon the
occurrence or nonoccurrence of any particular events.
(iv) Except as to the persons listed on Schedule 2(g), such
Stockholder is an "accredited investor" within the meaning of Section 2(a)(15)
of the Securities Act.
<PAGE>
(h) Reliance by Marriott and Acquisition. Such Stockholder understands
------------------------------------
and acknowledges that Marriott and Acquisition are relying upon the foregoing
representations by the Stockholder, and on the Stockholder's execution and
delivery of this Agreement (i) in entering into the Merger Agreement and (ii) in
issuing the Marriott Stock in connection with the Merger without registration
under the Securities Act or qualification under any state securities laws
(collectively, "Blue Sky Laws"). Until such time as the Form S-3 (defined below)
is declared effective by the SEC, each Stockholder agrees that the Marriott
Stock to be issued to such Stockholder in connection with the Merger will not be
transferred unless in the opinion of Marriott's legal counsel such transfer will
not violate the registration requirements of the Securities Act or Blue Sky
Laws.
3. Further Assurances; Merger Agreement Compliance. From time to time, at
-----------------------------------------------
Marriott's or Acquisition's request and without further consideration, each
Stockholder agrees to execute and deliver such additional documents and take all
such further lawful action as may be necessary or desirable to consummate and
make effective, and to cause the Company to consummate and make effective, in
the most expeditious manner practicable, the transactions contemplated by this
Agreement, the Other Stockholders Agreements and the Merger Agreement. Each
Stockholder further agrees not to take any action, or omit to take any action,
which would, or would be reasonably likely to, result in a breach by the Company
of any of the provisions of the Merger Agreement.
4. Stop Transfer; Form of Legend.
-----------------------------
(a) Each Stockholder agrees with, and covenants to, Marriott that such
Stockholder shall not request that ExecuStay register the transfer (book-entry
or otherwise) of any certificate or uncertificated interest representing any of
such Stockholder's Exchange Shares, unless such transfer is made in compliance
with this Agreement. In the event of a stock dividend or distribution, or any
change in the Common Stock, the Class A Shares or the Class B Shares by reason
of any stock dividend, split-up, recapitalization, combination, exchange of
shares or the like, the term "Shares" shall be deemed to refer to and include
the Shares as well as all such stock dividends and distributions and any shares
into which or for which any or all of the Shares may be changed or exchanged.
(b) All certificates representing any of such Stockholder's Shares to
be issued to such Stockholder in connection with the Merger shall contain the
following legend:
"The securities represented by this certificate are subject to certain
restrictions on transfer and other terms of a Stockholders Agreement,
dated as of January 6, 1999, among Marriott International, Inc., MI
Subsidiary I, Inc. and the parties listed on the signatures pages
thereto, a copy of which is on file in the principal office of Marriott
International, Inc."
<PAGE>
5. Stock Issuance and Registration.
-------------------------------
(a) In accordance with the provisions of Section 2.1 of the Merger
Agreement, immediately prior to the Merger, ExecuStay will, in the Exchange,
issue to the Stockholders on a share-for-share basis, Class B Shares in exchange
for the Exchange Shares. In the Merger, each Stockholder shall receive, in
respect of each Class B Share held of record or Beneficially Owned by such
Stockholder, shares of Marriott Stock in an amount determined by the "Class B
Exchange Ratio" as defined in Section 2.9(b) of the Merger Agreement. Neither
of Marriott or Acquisition will modify or amend in any manner the Merger
Agreement in any manner that adversely affects the rights of any Stockholder
(including, without limitation, any modification or amendment of the Class B
Exchange Ratio) without such Stockholder's prior written consent.
(b) Marriott shall, no later than the First Registration Date (as
defined below), file with the SEC and thereafter use its reasonable efforts to
cause to be declared effective, a registration statement on Form S-3 or an
equivalent successor form (the "Form S-3") relating to the offer and sale from
time to time by the Stockholders of shares of Marriott Stock held by them that
are Registrable Securities. As used herein, the "First Registration Date" means
the later of (i) 30 days following the Closing Time, or (ii) April 30, 1999,
provided, however, that if on such date Marriott is not eligible to use Form S-3
for registration of the resale of Registrable Securities as provided herein,
then the First Registration Date shall be the earliest date after April 30, 1999
on which Marriott becomes eligible to use Form S-3 in connection with such
resale registration. Marriott represents and warrants that as of the First
Registration Date, it will be eligible to use Form S-3 for registration of the
resale of the Registrable Securities. Subject to the limitations contained
herein, Marriott shall use its reasonable efforts to keep the Form S-3
continuously effective in order to permit the prospectus forming part thereof to
be usable by the Stockholders for a period of one year from the Closing Time, or
for such shorter period that will terminate when all Registrable Securities
covered by the Form S-3 have been sold pursuant to the Form S-3 or cease to be
outstanding or otherwise to be Registrable Securities.
(c) Marriott further agrees, if necessary, to supplement or amend the
Form S-3, as required by Section 6 below, and to furnish to Stockholders holding
Registrable Securities copies of any such supplement or amendment promptly after
its being used or filed with the SEC.
(d) Marriott agrees to use its reasonable efforts to ensure that (i)
the Form S-3 and any amendments thereof, at the time each such Form S-3 or
amendment thereof becomes effective, and any prospectus forming a part thereof
and any supplement thereto complies in all material respects with the Securities
Act and the rules and regulations thereunder, (ii) the Form S-3 and any
amendment thereto does not, when it becomes effective, contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading and
(iii) any prospectus forming part of the Form S-3, and any supplement to such
prospectus (as amended or supplemented from time to time)(each, as of the date
thereof), does not include an untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements, in light of the
circumstances under which they were made, not misleading; provided that clauses
(ii) and (iii) of this paragraph shall not apply to any information provided by
a Stockholder.
<PAGE>
(e) No Stockholder may use the Form S-3 until he provides Marriott with
the information required by Section 7 of this Agreement. Notwithstanding any
other provision herein or in the Merger Agreement, (i) Marriott shall have no
obligation under Sections 5(b), (c), (d), (e) or (f) or Section 6 hereof with
respect to any shares of Marriott Stock that are (x) not Registrable Securities
or (y) held of record or Beneficially Owned by a Stockholder who has not
performed his obligations under, or otherwise has breached, violated or is in
default under, the Agreement or the Merger Agreement, and (ii) all obligations
of Marriott under Sections 5 and 6 hereof automatically shall terminate and be
of no further force or effect in the event that the Merger Agreement is
terminated or the Offer or the Merger is not consummated.
(f) Notwithstanding any other provision herein, Marriott may delay
filing the Form S-3, may withhold efforts to cause the Form S-3 to become
effective, and may advise holders of Registrable Securities to suspend use of
the prospectus that is part of the Form S-3, for limited periods of time if and
to the extent that Marriott reasonably determines in good faith that any such
action is necessary in order for Marriott to comply with its disclosure
obligations under Section 5(d) hereof. In the event that Marriott advises the
holders of registered Registrable Securities that Marriott considers it
appropriate to suspend the use of the prospectus, such holders shall suspend any
further sales of their registered securities until Marriott advises them that
the Form S-3 has been amended or that such sales may be resumed.
6. Registration Procedures.
-----------------------
(a) Marriott shall prepare and file a Form S-3, within the relevant time
period specified in Section 5(a), and use its reasonable efforts to cause such
Form S-3 to become effective and remain effective in accordance with Section 5
hereof.
(b) Marriott shall prepare and file such amendments and post-effective
amendments to the Form S-3 as may be necessary under applicable law to keep such
Form S-3 effective for the applicable period; and cause each prospectus that is
part of the Form S-3 to be supplemented by any required prospectus supplement,
and as so supplemented to be filed with the SEC pursuant to applicable
requirements of the Securities Act and the rules and regulations thereunder.
(c) Marriott shall use its reasonable efforts to register or qualify the
Registrable Securities under all applicable Blue Sky Laws as any Stockholder
holding Registrable Securities covered by the Form S-3 shall reasonably request;
provided, however, that Marriott shall not be required to (i) qualify as a
foreign corporation or as a dealer in securities in any jurisdiction where it
would not otherwise be required to qualify but for this Section 6(c), or (ii)
take any action which would subject it to general service of process or taxation
in any such jurisdiction where it is not then so subject.
(d) Marriott shall furnish to each Stockholder of Registrable Securities,
without charge, as many copies of each prospectus and any amendment thereof or
supplement thereto as such Stockholder may reasonably request.
<PAGE>
(e) Marriott shall cooperate with the selling Stockholders of Registrable
Securities to facilitate the timely preparation and delivery of certificates
representing Registrable Securities to be sold and not bearing any restrictive
legends.
(f) Marriott shall cause all Registrable Securities covered by the Form S-3
to be listed on the NYSE.
7. Condition Precedent. It shall be a condition precedent to the
-------------------
obligations of Marriott to take any action pursuant hereto that the Stockholders
shall furnish to Marriott such information regarding them, the Registrable
Securities held by them and the intended method of disposition of such
Registrable Securities as Marriott shall reasonably request and as shall be
required in connection with the action to be taken by Marriott.
8. Expenses of Registration. All expenses incurred in connection with any
------------------------
registrations pursuant to Section 5 hereof, including without limitation all
registration and qualification fees, printers' and accounting fees, reasonable
fees and disbursements of counsel for Marriott, shall be borne by Marriott,
except for (a) fees and disbursements of counsel for the selling Stockholders,
and (b) any underwriting or brokers' discounts or similar transaction fees,
which shall be borne by the selling Stockholders.
9. Indemnification.
---------------
(a) Marriott agrees to indemnify and hold harmless each Stockholder and
each person, if any, who controls such Stockholder within the meaning of the
Securities Act (the "Holder Indemnified Parties"), against any losses, claims,
damages or liabilities, joint or several, to which any Holder Indemnified Party
may become subject, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based on any Misstatement
(defined below) in the Form S-3 or any amendments thereof or supplements
thereto. Marriott will reimburse each such Holder Indemnified Party for any
legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action.
Notwithstanding anything to the contrary contained in this Section 9(a), the
indemnity agreement contained in this Section 9(a) shall not (i) apply to
amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of Marriott (which consent
shall not be unreasonably withheld); (ii) apply to any such case for any such
loss, claim, damage, liability, or action to the extent that it arises out of or
is based upon a Misstatement made in reliance upon and in conformity with
written information furnished expressly for use in connection with such
registration by any such Holder Indemnified Party.
(b) Each Stockholder, severally and not jointly, agrees to indemnify
and hold harmless Marriott, each of its directors, each of its officers who have
signed the Form S-3, and each person, if any, who controls Marriott within the
meaning of the Securities Act, and each agent (the "Marriott Indemnified
Parties") against any losses, claims, damages or liabilities to which any
Marriott Indemnified Party may become subject, insofar as such losses, claims,
damages or liabilities (or actions in respect thereto) (i) arise out of or are
based upon any Misstatement in the Form S-3 and any amendments thereof or
supplements thereto made in reliance upon and in conformity with written
information furnished expressly for use in connection
<PAGE>
with such registration by any such Holder Indemnified Party. Each such
Stockholder will reimburse any legal or other expenses reasonably incurred by
such Marriott Indemnified Party in connection with investigating or defending
any such loss, claim, damage, liability or action. Notwithstanding anything to
the contrary contained in this Section 9(b), the indemnity agreement contained
in this Section 9(b) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is effected without
the consent of such Stockholder (which consent shall not be unreasonably
withheld).
(c) If the indemnification provided for in this Section 9 is
unavailable to an indemnified party under Section 9(a) or Section 9(b) above
(other than by reason of exceptions provided in those Sections) in respect of
any losses, claims, damages or liabilities referred to in such Sections, then
each applicable indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages or liabilities in such proportion as
is appropriate to reflect the relative benefit and relative fault as well as any
other equitable considerations.. The amount paid or payable by a party as a
result of the losses, claims, damages, or liabilities referred to above shall be
deemed to include, subject to the limitations set forth in Section 9(d), any
legal or other fees or expenses reasonably incurred by such party in connection
with investigating or defending any action or claim. The relative benefit shall
be determined by the allocation of proceeds from such Form S-3. The relative
fault of the indemnified party on the one hand and of the indemnifying party on
the other shall be determined by reference to, among other things, whether the
Misstatement or alleged Misstatement relates to information supplied by the
indemnified party or the indemnifying party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
Misstatement or alleged Misstatement. Marriott and the Stockholders agree that
it would not be just and equitable if contribution pursuant to this Section 9(c)
were determined by pro rata allocation or by any other method of allocation
which does not take account of the equitable considerations referred to above.
No person guilty of fraudulent misrepresentation (within the meaning of Section
9(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
(d) Any person entitled to indemnification hereunder will: (i) give
prompt notice to the indemnifying party of any claim with respect to which it
seeks indemnification; and (ii) unless in such indemnified party's reasonable
judgment a conflict of interest between such indemnified and indemnifying
parties may exist with respect to such claim, permit such indemnifying party to
assume the defense of such claim with counsel reasonably satisfactory to the
indemnified party. If such defense is assumed, the indemnifying party will not
be subject to any liability for any settlement made without its consent (but
such consent will not be unreasonably withheld). An indemnifying party who is
not entitled or elects not to assume the defense of a claim will not be
obligated to pay the fees and expenses of more than one counsel for all parties
indemnified by such indemnifying party with respect to such claim, unless in the
reasonable judgment of any indemnified party a conflict of interest may exist
between such indemnified party and any other such indemnified parties with
respect to such claim. The failure to notify an indemnifying party promptly of
the commencement of any such action, if prejudicial to his ability to defend
such action, shall relieve such indemnifying party of any liability to the
indemnified party under this paragraph, but the omission so to notify the
indemnifying party will not relieve him of any liability that he may have to any
indemnified party otherwise than under this Section.
<PAGE>
10. Termination of Marriott's Obligations. Marriott shall have no
-------------------------------------
obligations pursuant to Section 6 with respect to Registrable Securities on or
following the date on which such Securities become freely transferable under
Rule 144 of the Securities Act without regard to volume limitations.
11. Termination. Except as otherwise provided herein, the covenants and
-----------
agreements contained herein with respect to the Exchange Shares shall terminate
upon the earliest of (a) termination of the Merger Agreement in accordance with
its terms, or (b) the Closing Time.
12. Stockholder Capacity. No person executing this Agreement who is or
--------------------
becomes during the term hereof a director or executive officer of ExecuStay
makes any agreement or understanding herein in his or her capacity as such
director or executive officer. Each Stockholder signs solely in his or her
capacity as the record and/or beneficial owner of such Stockholder's Exchange
Shares.
13. Waiver of Appraisal and Dissenter's Rights. Each Stockholder hereby
------------------------------------------
irrevocably waives any rights of appraisal or rights to dissent from the Merger
that such Stockholder may have.
14. Tax Opinion. The respective obligations of each Stockholder hereunder
-----------
shall be subject to the receipt prior to the Exchange of an opinion of Dorsey &
Whitney LLP in substantially the form attached hereto.
15. Several Liability. The obligations of the Stockholders under this
-----------------
Agreement are several. No Stockholder shall have any liability for any breach
by any other Stockholder.
16. Miscellaneous.
-------------
(a) Certain Definitions. As used in this Agreement, the following
-------------------
capitalized terms shall have the following meanings:
(i) "Beneficially Own" or "Beneficial Ownership" with respect
to any securities shall mean having "beneficial ownership" of such securities
(as determined pursuant to Rule 13d-3 under the Exchange Act), including
pursuant to any agreement, arrangement or understanding, whether or not in
writing. Without duplicative counting of the same securities by the same holder,
securities Beneficially Owned by a Person shall include securities Beneficially
Owned by all other Persons with whom such Person would constitute a "group" as
within the meanings of Section 13(d)(3) of the Exchange Act.
(ii) "Misstatement" means an untrue statement of a material
fact or an omission to state a material fact required to be stated in a publicly
filed document necessary to make the statements in such a document not
misleading; provided, however, that such term shall not apply to any statement
or omission based on information supplied by an indemnified person to an
indemnifying person for inclusion in the publicly-filed document.
(iii) "Person" shall mean an individual, corporation,
partnership, joint venture, association, trust, unincorporated organization or
other entity.
<PAGE>
(iv) "register," "registered," and "registration" refer to a
registration effected by preparing and filing with the SEC a registration
statement in compliance with the Securities Act and the declaration or ordering
by the SEC of effectiveness of such registration statement.
(v) "Registrable Securities" refers to any and all of the
shares of Marriott Stock held by the Stockholders as of the Closing Time, except
that any such Marriott Stock shall cease to be Registrable Securities when and
to the extent (A) a Form S-3 with respect to the sale of such Marriott Stock has
become effective under the Securities Act and such Marriott Stock has been
disposed of in accordance with such Form S-3; (B) such Marriott Stock has been
sold to the public pursuant to Rule 144 or any successor provision under the
Securities Act; (C) such Marriott Stock shall have been otherwise transferred,
new certificates therefor not bearing a legend restricting further transfer
shall have been delivered by Marriott and subsequent disposition of such
Marriott Stock does not require registration or qualification under the
Securities Act or any similar state law then in force in the opinion of legal
counsel for Marriott; or (D) such Common Stock shall have ceased to be
outstanding.
(vi) "subsidiary" or "subsidiaries" of Marriott, Acquisition,
ExecuStay or any other person means any corporation, partnership, limited
liability company, association, trust, unincorporated association or other legal
entity of which the Marriott, Acquisition, ExecuStay or any such other person,
as the case may be, (either alone or through or together with any other
subsidiary) owns, directly or indirectly, 50% or more of the capital stock the
holders of which are generally entitled to vote for the election of the board of
directors or other governing body of such corporation or other legal entity.
(b) Entire Agreement. This Agreement and the Merger Agreement
----------------
constitute the entire agreement between the parties with respect to the subject
matter hereof and supersede all other prior agreements and understandings, both
written and oral, between the parties with respect to the subject matter hereof.
(c) Certain Events. Each Stockholder agrees that this Agreement,
--------------
the Other Stockholders Agreements and the obligations hereunder shall attach to
such Stockholder's Exchange Shares and shall be binding upon any person or
entity to which legal or beneficial ownership of such Exchange Shares shall
pass, whether by operation of law or otherwise, including, without limitation,
such Stockholder's heirs, guardians, administrators or successors.
Notwithstanding any transfer of Exchange Shares, the transferor shall remain
liable for the performance of all obligations under this Agreement of the
transferor.
(d) Assignment. This Agreement shall not be assigned by operation
----------
of law or otherwise without the prior written consent of the other party,
provided that Marriott may assign, in its sole discretion, its rights and
obligations hereunder to any direct or indirect wholly-owned subsidiary of
Marriott, but no such assignment shall relieve Marriott of its obligations
hereunder if such assignee does not perform such obligations.
(e) Amendments, Waivers, Etc. This Agreement may not be amended,
------------------------
changed, supplemented, waived or otherwise modified or terminated, with respect
to any one or
<PAGE>
more Stockholders, except upon the execution and delivery of a written agreement
executed by the relevant parties hereto; provided that Schedule A hereto may be
--------
supplemented by Marriott by adding the name and other relevant information
concerning any Stockholder of ExecuStay who agrees to be bound by the terms of
this Agreement (by executing a counterpart signature page hereof) without the
agreement of any other party hereto, and thereafter such added stockholder shall
be treated as a "Stockholder" for all purposes of this Agreement.
(f) Notices. All notices, requests, claims, demands and other
-------
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly received if so given) by hand delivery, telegram, telex
or telecopy, or by mail (registered or certified mail, postage prepaid, return
receipt requested) or by any courier service, such as Federal Express, providing
proof of delivery. All communications hereunder shall be addressed to the
respective parties at the following addresses:
If to any Stockholder: c/o Locke Liddell & Sapp LLP
2001 Ross Avenue, Suite 3000
Dallas, Texas 75201
Telephone: (214) 849-5500
Facsimile: (214) 849-5599
Attention: Toni Weinstein, Esq.
with a copy to: Locke Liddell & Sapp LLP
2001 Ross Avenue, Suite 3000
Dallas, Texas 75201
Telephone: (214) 849-5500
Facsimile: (214) 849-5599
Attention: Toni Weinstein, Esq.
If to Marriott or Acquisition: MARRIOTT INTERNATIONAL, INC.
10400 Fernwood Road
Bethesda, Maryland 20857
Telecopier: (301) 380-6727
Attention: General Counsel,
Dept. 52/923
with a copy to: Gibson, Dunn & Crutcher LLP
1050 Connecticut Avenue, N.W.
Washington, D.C. 20036
Telephone: (202) 955-8522
Facsimile: (202) 467-0539
Attention: John F. Olson, Esq.
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
<PAGE>
(g) Severability. Whenever possible, each provision or portion of
------------
any provision of this Agreement will be interpreted in such manner as to be
effective and valid under applicable law, but if any provision or portion of any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability will not affect any other provision
or portion of any provision in such jurisdiction, and this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision or portion of any provision had never been
contained herein.
(h) Specific Performance. Each of the parties hereto recognizes and
--------------------
acknowledges that a breach by it of any covenants or agreements contained in
this Agreement will cause the other party to sustain damages for which it would
not have an adequate remedy at law for money damages, and therefore each of the
parties hereto agrees that in the event of any such breach the aggrieved party
shall be entitled to the remedy of specific performance of such covenants and
agreements and injunctive and other equitable relief in addition to any other
remedy to which it may be entitled, at law or in equity.
(i) Remedies Cumulative. All rights, powers and remedies provided
-------------------
under this Agreement or otherwise available in respect hereof at law or in
equity shall be cumulative and not alternative, and the exercise of any thereof
by any party shall not preclude the simultaneous or later exercise of any other
such right, power or remedy by such party.
(j) No Waiver. The failure of any party hereto to exercise any
---------
right, power or remedy provided under this Agreement or otherwise available in
respect hereof at law or in equity, or to insist upon compliance by any other
party hereto with its obligations hereunder, and any custom or practice of the
parties at variance with the terms hereof, shall not constitute a waiver by such
party of its right to exercise any such or other right, power or remedy or to
demand such compliance.
(k) No Third Party Beneficiaries. This Agreement is not intended to
----------------------------
be for the benefit of, and shall not be enforceable by, any person or entity who
or which is not a party hereto, other than Section 9 (which is intended to be
for the benefit of the Holder Indemnified Parties and the Marriott Indemnified
Parties). Notwithstanding any provision to the contrary herein or in the Merger
Agreement, the provisions of the Merger Agreement relating to the Exchange and
the Class B Exchange Ratio are also made for the benefit of the Stockholders,
each of whom is intended to be, and hereby is expressly constituted, a third
party beneficiary of such provisions of the Merger Agreement.
(l) Governing Law. This Agreement shall be governed and construed
-------------
in accordance with the laws of the State of New York, without giving effect to
the principles of conflicts and laws thereof.
(m) Descriptive Headings; Gender. The descriptive headings used
----------------------------
herein are inserted for convenience of reference only and are not intended to be
part of or to affect the meaning or interpretation of this Agreement. References
herein to the masculine gender shall include the feminine and the neuter, as
required.
<PAGE>
(n) Counterparts. This Agreement may be executed in counterparts,
------------
each of which shall be deemed to be an original, but all of which, taken
together, shall constitute one and the same Agreement.
IN WITNESS WHEREOF, Marriott and Acquisition have caused this Agreement to
be duly executed, and each Stockholder has duly executed this Agreement, as of
the day and year first above written.
MARRIOTT INTERNATIONAL, INC.
By: /s/ Joseph Ryan
------------------------------
Name: Joseph Ryan
Title: Executive Vice President and
General Counsel
MI SUBSIDIARY I, INC.
By: /s/ Joseph Ryan
------------------------------
Name: Joseph Ryan
Title: Vice President
<PAGE>
STOCKHOLDER:
HARLAN R. CROW
IRREVOCABLE FAMILY BRANCH TRUST
By: /s/ Harlan R. Crow
-------------------------------
Harlan R. Crow
Trustee
<PAGE>
STOCKHOLDER:
TRAMMELL S. CROW
IRREVOCABLE FAMILY BRANCH TRUST
By: /s/ Trammell S. Crow
-------------------------------
Trammell S. Crow
Trustee
<PAGE>
STOCKHOLDER:
STUART M. CROW
IRREVOCABLE FAMILY BRANCH TRUST
By: /s/ Stuart M. Crow
-------------------------------
Stuart M. Crow
Trustee
<PAGE>
STOCKHOLDER:
/s/ J. Ronald Terwillinger
----------------------------------
J. Ronald Terwilliger
<PAGE>
STOCKHOLDER:
/s/ Paul Reeve
----------------------------------
Paul Reeve
<PAGE>
STOCKHOLDER:
/s/ Leonard W. Wood
----------------------------------
Leonard W. Wood
<PAGE>
STOCKHOLDER:
/s/ Bruce C. Ward
----------------------------------
Bruce C. Ward
<PAGE>
STOCKHOLDER:
/s/ Warren J. Durkin, Jr.
---------------------------------
Warren J. Durkin, Jr.
<PAGE>
STOCKHOLDER:
/s/ Randy J. Pace
---------------------------------
Randy J. Pace
<PAGE>
STOCKHOLDER:
/s/ Alan E. Kolar
---------------------------------
Alan E. Kolar
<PAGE>
STOCKHOLDER:
/s/ Kenneth J. Valach
---------------------------------
Kenneth J. Valach
<PAGE>
STOCKHOLDER:
/s/ Robert C. Talbott
----------------------------------
Robert C. Talbott
<PAGE>
STOCKHOLDER:
/s/ Clifford A. Breining
----------------------------------
Clifford A. Breining
<PAGE>
STOCKHOLDER:
/s/ Robert M. Hutt
----------------------------------
Robert M. Hutt
<PAGE>
STOCKHOLDER:
/s/ Jeffrey A. Duke
----------------------------------
Jeffrey A. Duke
<PAGE>
STOCKHOLDER:
/s/ E. Garth Erdossy
----------------------------------
E. Garth Erdossy
<PAGE>
STOCKHOLDER:
/s/ David J. Elwell
----------------------------------
David J. Elwell
<PAGE>
Schedule A
----------
Shareholder Shares
- --------------------------------------------------------------------------------
J. Ronald Terwilliger 224,006
- --------------------------------------------------------------------------------
Harlan R. Crow Irrevocable Family Branch Trust 74,668
- --------------------------------------------------------------------------------
Trammell S. Crow Irrevocable Family Branch Trust 74,668
- --------------------------------------------------------------------------------
Stuart M. Crow Irrevocable Family Branch Trust 74,668
- --------------------------------------------------------------------------------
Paul Reeve 107,585
- --------------------------------------------------------------------------------
Leonard W. Wood 70,820
- --------------------------------------------------------------------------------
Bruce C. Ward 54,179
- --------------------------------------------------------------------------------
Warren J. Durkin, Jr. 28,509
- --------------------------------------------------------------------------------
Randy J. Pace 26,703
- --------------------------------------------------------------------------------
Alan E. Kolar 18,962
- --------------------------------------------------------------------------------
Kenneth J. Valach 9,417
- --------------------------------------------------------------------------------
Robert C. Talbott 11,998
- --------------------------------------------------------------------------------
Clifford A. Breining 4,515
- --------------------------------------------------------------------------------
E. Garth Erdossy 7,740
- --------------------------------------------------------------------------------
Robert M. Hutt 4,386
- --------------------------------------------------------------------------------
Jeffrey A. Duke 4,386
- --------------------------------------------------------------------------------
David J. Elwell 3,225
- --------------------------------------------------------------------------------
Total 800,435
- --------------------------------------------------------------------------------
