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EXHIBIT 10.5
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (the "Agreement") dated as of March 31,
1997 is among BridgeStreet International Inc., a Delaware corporation
("BridgeStreet"), HAI Acquisition Corp., a Delaware corporation and a
wholly-owned subsidiary of BridgeStreet ("Acquisition") and Home Again, Inc.,
Home Again Amenities, Inc. and Home Again Corporate Housing, Inc., each a
Minnesota corporation (each individually, a "Company," and collectively, the
"Companies"), and Xxxxxx Xxxxx (the "Stockholder"), and provides for the merger
of the Companies with and into Acquisition (the "Merger"). The Boards of
Directors of BridgeStreet, Acquisition and the Companies have determined that
the Merger is in the best interests of their respective stockholders and the
Merger has been approved by the stockholders of the Companies and Acquisition.
Accordingly, the parties hereto, in consideration of the mutual
representations, warranties and covenants contained herein, agree as follows:
1. CERTAIN DEFINITIONS
As used in this Agreement, the following terms shall have the respective
meanings set forth below:
1.1 "Articles of Merger" has the meaning given to it in Section 2.2.
1.2 "Balance Sheet" means the balance sheet dated December 31, 1996
contained in the Financial Statements (as defined herein), and the accompanying
schedules thereto.
1.3 "Balance Sheet Date" means December 31, 1996.
1.4 "BridgeStreet Common Stock" means the shares of Common Stock, $0.01 par
value, of BridgeStreet.
1.5 "BridgeStreet Financial Statements" mean the financial statements of
the Operating Subsidiaries (as defined herein) attached hereto as Exhibit 1,
each of which (with the exception of Exclusive Interim Properties, Ltd.)
consists of the balance sheets as of December 31, 1995 and 1996 and the
statements of operations for each of the fiscal years ended on December 31, 1995
and 1996. With respect to Exclusive Interim Properties, Ltd., the financial
statements consist of the balance sheets as of March 31, 1996 and December 31,
1996, and the statements of operations for the fiscal year ended on March 31,
1996 and the nine months ended on December 31, 1996.
1.6 "Certificate of Merger" has the meaning given to it in Section 2.2.
1.7 "Closing" means the closing of this Agreement as provided in Section
2.2.
1.8 "Code" means the Internal Revenue Code of 1986, as amended to date.
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1.9 "Commission" means the Securities and Exchange Commission.
1.10 "DGCL" means the Delaware Business Corporation Law.
1.11 "Disclosure Schedule" means the Disclosure Schedule attached hereto as
Schedule 1.
1.12 "Effective Time" means the date on which the Articles of Merger (as
defined herein) are filed with the Secretary of State of the State of Minnesota
in accordance with Section 302A.615 of the MBCA (as defined herein), and the
Certificate of Merger is filed with the Secretary of State of the State of
Delaware in accordance with Section 252 of the DGCL, unless Acquisition and the
Companies agree that another time shall be the Effective Time, in which case
such time shall be specified in the Articles of Merger, and the Certificate of
Merger.
1.13 "Employment Agreement" means the employment agreement attached hereto
as Exhibit 2.
1.14 "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
1.15 "Financial Statements" means the combined financial statements of the
Companies attached hereto as Exhibit 3 consisting of the balance sheets as of
December 31, 1995 and 1996 and the statements of operations for each of the
fiscal years ended on December 31, 1995 and 1996.
1.16 "GAAP" means generally accepted accounting principles.
1.17 "MBCA" means the Minnesota Business Corporation Act.
1.18 "Merger Stock" means the shares of BridgeStreet Common Stock exchanged
for Shares pursuant to Section 2.7(c).
1.19 "Operating Subsidiaries" mean Corporate Lodgings, Inc., Exclusive
Interim Properties, Ltd., Temporary Corporate Housing, Inc. and Temporary
Housing Experts, Inc.
1.20 "Securities Act" means the Securities Act of 1933, as amended
1.21 "Share" means a share of Common Stock, $.01 par value per share, of
each of the Companies, and "Shares" means all of such shares of all of the
Companies.
1.22 "Surviving Corporation" means the corporation that survives the
Merger.
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1.23 References to the "knowledge" of any entity or to things which any
entity does or does not "know" or which are "known" by any entity refer to the
knowledge of any of the entity's officers or directors.
2. THE MERGER
2.1 THE MERGER. The Merger shall occur at the Effective Time upon the
terms and subject to the conditions hereof and in accordance with the MBCA and
the DGCL. Following the Merger, Acquisition shall continue as the Surviving
Corporation and a subsidiary of BridgeStreet, and the separate corporate
existences of the Companies shall cease.
2.2 EFFECTIVE TIME. As soon as practicable after satisfaction or waiver of
all conditions to the Merger, the parties (a) shall cause articles of merger
(the "Articles of Merger") with respect to the Merger to be filed and recorded
in accordance with Section 302A.615 of the MBCA and shall cause a certificate of
merger (the "Certificate of Merger") with respect to the Merger to be filed and
recorded in accordance with Section 252 of the DGCL and (b) shall take all such
further actions as may be required by law to make the Merger effective. The
Merger shall be effective at the Effective Time. Before the filing of the
Articles of Merger and the Certificate of Merger, a closing (the "Closing") will
be held at the offices of Xxxxxx, XxXxxxxxx & Fish, LLP, Xxx Xxxxxxxxxxxxx
Xxxxx, Xxxxxx, Xxxxxxxxxxxxx (or such other place as the parties may agree) for
the purpose of confirming all the foregoing.
2.3 EFFECTS OF THE MERGER. The Merger shall have the effects set forth in
Section 302A.641 of the MBCA and Sections 259, 260 and 261 of the DGCL.
2.4 TAX CONSEQUENCES. It is intended that the Merger shall constitute a
reorganization within the meaning of Section 368(a)(2)(D) of the Code and that
this Agreement shall constitute a "plan of reorganization" for the purposes of
Section 368 of the Code.
2.5 CERTIFICATE OF INCORPORATION AND BY-LAWS. The Certificate of
Incorporation and the By-Laws of Acquisition, in each case as in effect at the
Effective Time, shall be the Certificate of Incorporation and By-Laws of the
Surviving Corporation.
2.6 DIRECTORS AND OFFICERS. At the Effective Time, the directors and
officers of the Surviving Corporation shall be as set forth on Exhibit 4, and
each such person shall hold office until his or her respective successor is duly
elected or appointed and qualified.
2.7 CONVERSION OF STOCK.
At the Effective Time:
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(a) Each share of Acquisition that is issued and outstanding immediately
prior to the Effective Time shall remain issued and outstanding without change.
(b) All Shares held in the treasury of each Company immediately prior to the
Effective Time shall be cancelled, without the payment of any consideration
therefor.
(c) All other Shares which are outstanding immediately prior to the
Effective Time shall be converted without any action on the part of the holders
thereof into and be exchangeable for: (i) an aggregate of Four Hundred
Seventy-Five Thousand (475,000) shares of BridgeStreet Common Stock; and (ii) in
the event that the Companies' tangible net book value as of March 31, 1997
determined in accordance with GAAP and Section 2.10 herein exceeds Two Hundred
Thousand Dollars ($200,000.00) (the "Excess"), cash equal to the Excess.
2.8 EXCHANGE OF AND PAYMENT FOR SHARES.
(a) As soon as practicable after the Effective Time and after surrender to
BridgeStreet of the certificates which prior to the Effective Time shall have
represented the Shares, subject to the provisions of paragraph (c) of this
Section 2.8 and to the provisions of Article 8, BridgeStreet shall cause to be
distributed to the Stockholder (i) a certificate registered in the name of such
person representing the Merger Stock and (ii) the Excess as determined under and
in accordance with Section 2.10. Until surrendered as contemplated by the
preceding sentence, each certificate which immediately prior to the Effective
Time shall have represented any Shares shall be deemed at and after the
Effective Time to represent only the right to receive upon such surrender the
certificates and payment contemplated by the preceding sentence.
(b) No dividends or other distributions declared after the Effective Time
with respect to BridgeStreet Common Stock shall be paid to the holder of any
unsurrendered certificate representing Shares until the holder thereof shall
surrender such certificate in accordance with this Section 2.8. After the
surrender of such certificate in accordance with this Section 2.8, the record
holder thereof shall be entitled to receive any such dividends or other
distributions, without any interest thereon, which theretofore had become
payable with respect to shares of BridgeStreet Common Stock represented by such
certificate.
(c) If any cash or certificate representing shares of BridgeStreet Common
Stock is to be paid to or issued in a name other than that in which the
certificate surrendered in exchange therefor is registered, it shall be a
condition of the payment or issuance thereof that the certificate so surrendered
shall be properly endorsed and otherwise in proper form for transfer and that
the person requesting such exchange shall pay to BridgeStreet any transfer or
other taxes required by reason of the issuance of a certificate representing
shares of BridgeStreet Common Stock in any name other than that of the
registered holder of the certificate surrendered, or otherwise required, or
shall establish to the satisfaction of BridgeStreet that such tax has been paid
or is not payable.
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(d) All rights to receive BridgeStreet Common Stock and cash as described
above shall be deemed, when paid or issued hereunder, to have been paid or
issued, as the case may be, in full satisfaction of all rights pertaining to the
Shares.
(e) After the Effective Time, there shall be no further registration of
transfers on the stock transfer books of the Surviving Corporation of the Shares
which were outstanding immediately prior to the Effective Time. If, after the
Effective Time, certificates representing such Shares are presented to the
Surviving Corporation, they shall be cancelled and exchanged for cash or
certificates representing the shares of BridgeStreet Common Stock into which
they were converted, or both, as provided herein.
2.9 ADJUSTMENTS. If, between the date of this Agreement and the Effective
Time, the outstanding shares of BridgeStreet Common Stock shall have been
changed into a different number of shares or a different class by reason of any
reclassification, recapitalization, split-up, combination, exchange of shares or
readjustment, or a stock dividend thereon shall be declared with a record date
within said period, the number of shares of BridgeStreet Common Stock into which
the Shares are to be converted shall be correspondingly and appropriately
adjusted.
2.10 PAYMENT OF THE EXCESS. The determination of the Excess shall be made
by the mutual agreement of BridgeStreet and the Stockholder on or before April
15, 1997. BridgeStreet and the Stockholder acknowledge and agree that, in
determining the Excess, they shall use as a baseline the Companies' pre-Closing,
unaudited combined balance sheet as of March 31, 1997, subject to any
adjustments that typically would be made for purposes of interim financial
statement presentation on an accrual basis. The payment of the Excess shall be
made by check or wire transfer within 15 business days of such determination.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANIES
The Companies represent and warrant to BridgeStreet and Acquisition
that, except as expressly provided in the Disclosure Schedule by specific
reference to a Section of this Article 3, the following representations and
warranties are true and correct as of the date hereof:
3.1 ORGANIZATION AND AUTHORITY. Each Company is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Minnesota, and has full corporate power and authority to conduct its business
and own its property as now conducted and owned. Each Company is duly qualified
or licensed and in good standing as a foreign corporation in those states listed
on the Disclosure Schedule, which are the only jurisdictions in which the
property owned, leased or operated by it or the nature of the business conducted
by it makes such qualification or licensing necessary, and has been so qualified
or licensed during all times when such qualification and licensure was necessary
in the conduct of the Company's business. Each Company has full corporate power
and authority to execute and deliver this Agreement and to consummate the
transactions
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contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and validly
authorized by the Board of Directors and stockholder of each Company, and no
other corporate proceedings on the part of each Company are necessary to
authorize this Agreement or to consummate the transactions so contemplated. This
Agreement has been duly and validly executed and delivered by each Company and
constitutes a legal, valid and binding obligation of each Company enforceable
against it in accordance with its terms.
3.2 CAPITALIZATION OF EACH COMPANY; NO SUBSIDIARIES. The authorized capital
and number of issued and outstanding shares of capital stock of each Company are
set forth on the Disclosure Schedule. No Shares are held in any Company's
treasury. Collectively, the Shares held by the Stockholder comprise all of the
issued and outstanding shares of Common Stock of each Company, are duly
authorized, validly issued, fully paid and non-assessable and are owned of
record and beneficially by the Stockholder. No Company has any authorized class
of capital stock other than the Common Stock. No Company owns and no Company has
owned any shares of capital stock or other securities of, or any other interest
in, nor does any Company control or has it controlled, directly or indirectly,
any other corporation, association, joint venture, partnership, or other
business organization. The Shares have been issued and sold in full compliance
with all applicable Federal and state securities laws.
3.3 NO RIGHTS TO PURCHASE OR REGISTER STOCK. No person, firm, or
corporation has any written or oral agreement, option, warrant, call,
understanding, commitment, or any right or privilege capable of becoming a
binding agreement, for either the purchase of any of the Shares or the
acquisition of shares of any other class of capital stock of any Company, and no
Company has otherwise agreed to issue or sell any shares of its capital stock or
has any obligation to register any of the Shares under the Securities Act. No
Company is obligated directly, indirectly or contingently to purchase any
Shares.
3.4 NAME. No Company has had any other name or conducts or operates, or has
heretofore conducted or operated, its business under any name other than its
current name.
3.5 NO VIOLATION OF EXISTING AGREEMENTS. The execution and delivery of this
Agreement, together with all documents and instruments contemplated herein, the
consummation of the transactions contemplated hereby and thereby, and the
compliance with the terms, conditions and provisions hereof by each Company do
not (i) contravene any provisions of any Company's articles of incorporation or
By-Laws; (ii) conflict with or result in a breach of or constitute a default (or
an event that might, with the passage of time or the giving of notice or both,
constitute a default) or give rise to any right to terminate, cancel or
accelerate or to any loss of benefit under any of the terms, conditions, or
provisions of any lease, indenture, mortgage, loan, or credit agreement or any
other agreement or instrument to which any Company is a party or by which it or
its assets may be bound or affected; (iii) violate or constitute a breach of any
decision, judgment, or order of any court or arbitration board or of any
governmental department, commission, board, agency, or instrumentality,
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domestic or foreign, by which any Company is bound or to which it is subject; or
(iv) violate any applicable law, rule, or regulation to which any Company or any
of its property is bound.
3.6 NO CONSENTS OR APPROVALS OF GOVERNMENTAL AUTHORITIES. No consent or
approval of, or filing and expiration of a waiting period or a period for
disapproval by, any governmental authority is required for any Company to
consummate the transactions contemplated by this Agreement, except for filing
and acceptance of the Articles of Merger pursuant to the MBCA and the
Certificate of Merger pursuant to the DGCL.
3.7 FINANCIAL STATEMENTS.
(a) The Financial Statements fairly present the financial position of each
Company as of their respective dates, and the results of operations for the
periods presented therein, all in conformity with GAAP applied on a consistent
basis (i) except as otherwise noted therein and (ii) except that no
representations or warranties are being made with respect to the footnote
disclosures contained therein.
(b) Each Company maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (i) transactions are executed
in accordance with management's general or specific authorization; (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with GAAP and with statutory accounting principles and
to maintain accountability for assets; (iii) access to assets is permitted only
in accordance with management's general or specific authorization; and (iv) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
3.8 ABSENCE OF UNDISCLOSED LIABILITIES. Except as set forth or reserved
against in the most recent balance sheet in the Financial Statements, no Company
(a) had as of the Balance Sheet Date any liability or obligation of any nature,
whether accrued, absolute, contingent, or otherwise and whether due or to become
due, including without limitation liabilities that may become known or arise
after the date hereof and which relate to transactions entered into or any state
of facts existing on or before the Balance Sheet Date, which would be required
under GAAP to be shown in such balance sheet or referenced in the notes thereto,
and (b) has incurred since the Balance Sheet Date any such liability or
obligation except in the ordinary course of business.
3.9 CONDUCT OF BUSINESS SINCE THE BALANCE SHEET DATE. Since the Balance
Sheet Date, no Company has taken or agreed to take any action that would
obligate such Company to have:
(a) taken any action or entered into or agreed to enter into any
transaction, agreement, or commitment other than in the ordinary course of
business;
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(b) entered into or agreed to enter into any transaction, agreement, or
commitment, suffered the occurrence of any event or events, or experienced any
material change in financial condition, business, results of operations,
prospects, or otherwise, (i) that has interfered or is reasonably likely to
interfere with the normal and usual operations of such Company's business or its
business prospects or (ii) that, singly or in the aggregate, has resulted or is
reasonably likely to result in a material adverse change in the financial
condition, assets, liabilities, earnings, business, or business prospects of
such Company;
(c) incurred any indebtedness for borrowed money, or assumed, guaranteed,
endorsed, or otherwise become responsible for the obligations of any other
individual, partnership, firm, or corporation (except to endorse checks for
collection for deposit in the ordinary course of business), or made any loan or
advance to any individual, partnership, firm, or corporation (except for loans
to any employee of such Company in the ordinary course of business which in the
aggregate do not exceed $5,000.00);
(d) mortgaged, pledged, or otherwise encumbered, or, other than in the
ordinary course of business, sold, transferred, or otherwise disposed of, any of
the properties or assets of such Company, including any cancelled, released,
hypothecated, or assigned indebtedness owed to such Company, or any claims held
by such Company;
(e) made any investment of a capital nature or entered into a commitment for
such investment either by purchase of stock or securities, contributions to
capital, property transfer, or otherwise, or by the purchase of any property or
assets of any other individual, partnership, firm, or corporation, other than
capital expenditures in the ordinary course of business that individually do not
exceed $5,000.00 and in the aggregate do not exceed $20,000.00;
(f) declared, set aside, or paid any dividend or other distribution (whether
in cash, stock, property or any combination thereof) in respect of the capital
stock of such Company (other than distributions made to the Stockholder on or
prior to the Effective Time in amounts necessary to satisfy the Stockholder's
estimated individual tax liability for 1996 and the period of 1997 ending at
such Effective Time (using an estimated tax rate of 40%)), or redeemed or
otherwise acquired, directly or indirectly, any shares of capital stock of such
Company;
(g) paid any long-term liability, otherwise than in accordance with its
terms;
(h) paid any bonus compensation or fee to any officer, director,
shareholder, or employee of such Company or otherwise increased the compensation
paid or payable to any of the foregoing (except in the case of employees'
routine scheduled increases in salary);
(i) sold, assigned, or transferred any trademarks, trade names, logos,
copyrights, formulae, or other intangible assets;
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(j) contracted with or committed to any third party (i) to sell any capital
stock of such Company, (ii) to sell any material assets of such Company other
than in the ordinary course of business, (iii) to effect any merger,
consolidation, or other reorganization of such Company, or (iv) to enter into
any agreement with respect thereto;
(k) incurred any expenses or fees of counsel, accountants or consultants for
personal services rendered to the Stockholder after December 31, 1996, except in
preparation for or in connection with this Agreement and the transactions
contemplated hereunder; or
(l) issued any debt instruments, entered into any leases of more than one
year, amended any existing debt instruments or leases of more than one year or
increased borrowings (other than borrowings in the ordinary course of business
to finance working capital); and no indebtedness for borrowed money by such
Company will be outstanding as of the date of the Closing.
3.10 TITLE TO ASSETS. No Company owns real property. Each Company has good
and clear record and marketable title to all properties owned by it, including,
without limitation, all property reflected in the Balance Sheet, other than
property disposed of in the ordinary course of business subsequent to the
Balance Sheet Date (none of such dispositions being materially adverse), free
and clear of any mortgage, lien, pledge, charge, claim or encumbrance, or
rights, title and interest in others, except (a) as reflected in the Balance
Sheet, or as specified in the notes thereto, (b) the lien of taxes not yet due
or payable or being contested in good faith by appropriate proceedings and (c)
such imperfections of title and encumbrances, if any, as do not materially
detract from the value or interfere with the use of the properties subject
thereto or affected thereby, or otherwise materially impair business operations.
3.11 INTELLECTUAL PROPERTY. Each Company owns, or is licensed or otherwise
has the full and unrestricted right to use, all trademarks, trade names, service
marks, copyrights, technology, know-how, trade secrets and techniques used in
its business (collectively, the "Proprietary Information"). All such trademarks,
trade names, service marks and federally registered copyrights are listed on the
Disclosure Schedule. No Company has any obligation still outstanding to
compensate other persons for the use of any Proprietary Information or for the
sale of any service comprising or derived from Proprietary Information. No
Company has granted to any other person any license or other right to use in any
manner any of the Proprietary Information, whether or not requiring the payment
of royalties. To the knowledge of each Company (a) no other person has a right
or license granted directly or indirectly by or through any Company to use any
Proprietary Information; (b) none of the Proprietary Information is being
infringed by others, or is subject to any outstanding order, decree, judgment or
stipulation; (c) there are no claims or demands of any other person, and no
proceedings have been instituted, or are pending or threatened, relating to the
Proprietary Information; and (d) no proceeding has been filed or threatened
charging any Company with infringement of any patent, trademark, copyright, or
other proprietary right, nor is there any basis for any such proceeding.
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3.12 OBLIGATIONS TO OR FROM AFFILIATES.
(a) All transactions heretofore between each Company and its Stockholder,
officers or directors or any Affiliate (as defined below) of such Stockholder,
officer or director have been conducted on an arm's-length basis on terms no
different than would be obtained if the transaction had been between such
Company and an unrelated party. Except for debts or other outstanding
obligations reflected on the Balance Sheet, there are no debts or other
obligations of any Company to, or to any Company from, the Stockholder or any
officer or director, or any Affiliate of such Stockholder, officer or director
of such Company. As used herein, "Affiliate" of a Stockholder, officer or
director means any member of the immediate family of such person or any entity
in which such person or any such family member is an officer or owner of more
than five percent of the beneficial interest or outstanding equity securities of
such entity.
(b) The Disclosure Schedule contains a true and complete description of each
transaction conducted or completed, in whole or in part, since January 1, 1996,
or currently proposed, between each Company and any officer, director or
Stockholder thereof or any Affiliate of any such person. With respect to each of
the last three complete fiscal years, the Disclosure Schedule sets forth all
information that would be required to be provided under Items 402 and 404 of
Regulation S-K of the Commission under the Securities Act if a registration
statement on Form S-1 were filed by such Company with the Commission on the date
hereof.
3.13 MATERIAL CONTRACTS. The Disclosure Schedule lists all material leases,
contracts, instruments, agreements or commitments (whether written or oral)
relating to the conduct of the business of each Company (the "Material
Contracts"). Each Company has made available to BridgeStreet true and correct
copies of each Material Contract and a written description, accurate in all
material respects, of each oral arrangement so listed. Without limiting the
generality of the foregoing, the aforesaid list includes all contracts,
agreements and instruments of the following types to which each Company is a
party:
(a) labor union contracts, together with a list of all labor unions
representing or attempting to represent employees of each Company;
(b) pension, retirement, deferred compensation, death benefit, profit
sharing, bonus or other employee incentive, fringe benefit, stock purchase,
stock option, hospitalization or insurance plans or arrangements (and grant
certificates or other documents issued thereunder) or vacation pay, severance
pay and other similar benefit arrangements for officers, employees or agents,
together with a list of all pensioned employees or obligations to provide any
pensions hereafter other than pursuant to the plans hereinbefore in this item
described;
(c) employment contracts or agreements, consulting agreements, agreements
providing for termination or severance benefits, non-competition agreements,
non-disclosure
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agreements, contracts for professional personal services, contracts with other
persons engaged in sales or distributing activities, and advertising contracts;
(d) written or oral agreements, understandings and arrangements of any kind
with any officer, director, employee, shareholder or agent of each Company
relating to present or future compensation or other benefits available to such
person or otherwise, together with a list of the names and current annual salary
rates of all present officers and employees of each Company whose current salary
rate is $25,000.00 or more and any bonuses paid or payable to each such person
for the 1995 and 1996 fiscal years;
(e) indentures, loan agreements, notes, security agreements, mortgages,
conditional sales contracts, leases of personal property, contracts for the
purchase or sale of real or personal property, and agreements for financing;
(f) licenses and other contractual rights to any Proprietary Information,
including, without limitation, any copyright, trademark, service xxxx or trade
name, whether domestic or foreign, owned in whole or in part or used by each
Company;
(g) other license agreements (as licensor or licensee);
(h) property, casualty, crime, directors and officers, and other forms of
insurance;
(i) bank accounts and safety deposit boxes identifying all authorized
signatories, together with a list of all effective powers of attorney granted by
each Company to anyone;
(j) agreements, contracts or other arrangements to which each Company is a
guarantor, surety or endorser;
(k) contracts, agreements, commitments, arrangements or understandings
providing for the purchase or sale of all or substantially all of each Company's
requirements for a particular product from a single supplier or to a single
customer;
(l) contracts, agreements, commitments, arrangements or understandings
limiting the freedom of each Company from competing in any line of business or
with any person or entity;
(m) leases of real property with a term of more than one year (regardless of
whether each Company is the lessor or lessee); and
(n) contracts, agreements, instruments, arrangements or understandings which
have not been included in items (a) through (m) above involving payment by or to
each Company of more than $50,000.00 or not terminable without penalty or
otherwise materially affecting the assets, financial condition, properties or
business of each Company.
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All of the Material Contracts are in full force and effect. Except to the extent
that a material adverse effect on each Company's financial condition, assets,
liabilities, earnings, business or prospects would not result if the following
were not true: (A) Each Company and each other party to each of the Material
Contracts have performed all the obligations required to be performed by them to
date, have received no notice of default and are not in default (with due notice
or lapse of time or both) under any of the Material Contracts; (B) each Company
has no present expectation or intention of not fully performing all its
obligations under any of the Material Contracts, and each Company has no
knowledge of any breach or anticipated breach by any other party to any of the
Material Contracts; and (C) there exists no actual or, to the knowledge of each
Company, threatened termination, cancellation or limitation of the business
relationship of each Company with any party to any Material Contract.
3.14 LITIGATION. There are no actions, suits, causes of action, claims,
litigation, arbitration, administrative hearings, or other form of proceedings
or disputes of any kind pending or, to the knowledge of any Company, threatened
against any Company or its officers or directors (in their capacities as such)
in any court, at law or in equity, or before any arbitration board or any
governmental department, commission, board, bureau, agency, or instrumentality;
nor has any Company been, nor is it, subject to any orders, awards, fines,
judgments, decrees, or injunctions the effect of which in the aggregate would
have a material adverse effect on the business or financial position or
prospects of such Company. No Company knows or has grounds to know of any basis
for any such action, suits, or other form of proceeding or disputes or of any
governmental investigation relating to such Company or its business.
3.15 TAXES. Each Company has filed all tax returns, reports and information
filings that are required to be filed, including, without limitation, federal
(U.S.), state, and municipal income or franchise tax returns, and has paid all
taxes shown as due on such returns, together with any interest and penalties
accrued with respect thereto. No Company is required to pay or remit any other
taxes (including sales taxes) except as shown in such tax returns, reports and
information filings. All such returns, reports, and information filings required
to be filed, including any amendments to date, have been prepared in good faith
and without misrepresentation. Each Company has either paid or, in accordance
with GAAP applied consistently with prior periods, adequately provided for, by
reserves or other proper accounting treatment shown in the records and books of
account, its liability for all taxes of every kind, including without limitation
its liability for federal, state, and municipal income or franchise tax for the
current tax year and for all prior years. No Company has any knowledge of any
proposed or threatened assessment or reassessment of federal, state, or
municipal income or franchise taxes. In addition, at the date hereof all
withholding tax or source deductions have been deducted and remitted as due to
the appropriate governmental authority as required by law or each Company has
adequately provided for such deductions by reserves or other proper accounting
treatment in its books and records of account.
3.16 ABSENCE OF MATERIAL EVENTS. Since January 1, 1997 there has not been
(a) any material adverse change in the business, affairs or prospects of any
Company nor, to
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each Company's knowledge, are any such changes threatened, anticipated or
contemplated; (b) any actual or, to each Company's knowledge, threatened,
anticipated or contemplated damage, destruction, loss, conversion, termination,
cancellation, default or taking by eminent domain or other action by
governmental authority which has materially affected or may hereafter materially
affect the properties, assets, business, affairs or prospects of any Company;
(c) any material and adverse pending or, to each Company's knowledge,
threatened, anticipated or contemplated dispute of any kind with any material
customer, supplier, source of financing, employee, lessor, landlord, subtenant
or licensee of any Company, or any pending or, to each Company's knowledge,
threatened, anticipated or contemplated occurrence or situation of any kind,
nature or description which is reasonably likely to result in any reduction in
the amount, or any change in the terms or conditions, of business with any
material customer, lessor, supplier, or source of financing; or (d) any pending,
or, to each Company's knowledge, threatened, anticipated or contemplated
occurrence or situation of any kind, nature or description materially and
adversely affecting the properties, assets, business, affairs or prospects of
any Company.
3.17 ABSENCE OF IMPROPER PAYMENTS. Since January 1, 1992 no Company: (a)
has made any contributions, payments or gifts of its property to or for the
private use of any governmental official, employee or agent where either the
payment or the purpose of such contribution, payment or gift is illegal under
the laws of the United States, any state thereof or any other jurisdiction
(foreign or domestic); (b) has established or maintained any unrecorded fund or
asset for any purpose, or has made any false or artificial entries on its books
or records for any reason; (c) has made any payments to any person with the
intention or understanding that any part of such payment was to be used for any
other purpose other than that described in the documents supporting the payment;
or (d) has made any contribution, or has reimbursed any political gift or
contribution made by any other person, to candidates for public office, whether
Federal, state or local, where such contribution or reimbursement would be in
violation of applicable law.
3.18 ERISA.
(a) None of the employee benefit plans maintained at any time by any Company
or the trusts created thereunder has engaged in a prohibited transaction which
could subject any such employee benefit plan or trust to a material tax or
penalty on prohibited transactions imposed under Internal Revenue Code Section
4975 or ERISA.
(b) None of the employee benefit plans maintained at any time by any Company
which are employee pension benefit plans and which are subject to Title IV of
ERISA or the trusts created thereunder has been terminated so as to result in a
material liability of any Company under ERISA nor has any such employee benefit
plan of any Company incurred any material liability to the Pension Benefit
Guaranty Corporation established pursuant to ERISA, other than for required
insurance premiums which have been paid or are not yet due and payable; no
Company has withdrawn from or caused a partial withdrawal to occur with respect
to any Multi-employer Plan resulting in any assessed and unpaid withdrawal
liability;
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each Company has made or provided for all contributions to all such employee
pension benefit plans which it maintains and which are required as of the end of
the most recent fiscal year under each such plan; no Company has incurred any
accumulated funding deficiency with respect to any such plan, whether or not
waived; nor has there been any reportable event, or other event or condition,
which presents a material risk of termination of any such employee benefit plan
by the Pension Benefit Guaranty Corporation.
(c) The present value of all vested accrued benefits under the employee
pension benefit plans which are subject to Title IV or ERISA, maintained by each
Company, did not, as of the most recent valuation date for each such plan,
exceed the then current value of the assets of such employee benefit plans
allocable to such benefits.
(d) To each Company's knowledge, (i) each employee pension benefit plan
subject to Title IV of ERISA, maintained by each Company, has been administered
in accordance with its terms in all material respects and is in compliance in
all material respects with all applicable requirements of ERISA and other
applicable laws, regulations and rules, and (ii) each Company has filed in a
timely manner with respect to all such plans those actuarial reports, annual
reports and all other filings required by all such applicable requirements of
ERISA and other applicable laws, regulations and rules, and each Company has
delivered to BridgeStreet a copy of any such report filed since December 31,
1993.
(e) As used in this Agreement, the terms "employee benefit plan", "employee
pension benefit plan", "accumulated funding deficiency", "reportable event", and
"accrued benefits" shall have the respective meanings assigned to them in ERISA,
and the term "prohibited transactions" shall have the meaning assigned to it in
Code Section 4975 and ERISA.
(f) No Company has any liability not disclosed on any of the Financial
Statements, contingent or otherwise, under any plan or program or the equivalent
for unfunded post-retirement benefits, including pension, medical and death
benefits, which liability would have a material adverse effect on the financial
condition of any Company.
3.19 LABOR MATTERS. A true and complete list of all of each Company's
officers and employees (the "Employees") and their respective salaries, wages,
other compensation, dates of employment, date and amount of last salary
increase, and positions has been provided to BridgeStreet by each Company. There
are no material disputes, employee grievances, or disciplinary actions pending
or, to the knowledge of any Company, threatened by or between any Company and
any of the Employees. With respect to the Employees, each Company has complied
in all respects with all provisions of all laws relating to the employment of
labor and has no liability for any arrears of wages or taxes or penalties for
failure to comply with any such law or for any severance or termination payments
of any type. No election or proceedings relating to the labor relations of any
Company is pending or, to any Company's knowledge, threatened. No Company has
had any material union activity or had any material labor trouble of any kind,
nature or description at any time
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heretofore. All personnel policies and manuals of each Company are listed on the
Disclosure Schedule and true and complete copies thereof have been provided to
BridgeStreet. No Employee or consultant of any Company shall have the right to
receive from the Surviving Corporation or XxxxxxXxxxxx x xxxxxxxxx payment or
other payment in the nature thereof in the event his or her employment is
terminated by the Surviving Corporation following the Merger, whether such right
arises as a matter of contract, past policy or understanding, by operation of
law, or otherwise.
3.20 PERMITS; COMPLIANCE WITH LAW. Each Company possesses all franchises,
permits, licenses, certificates, approvals, and other authorizations ("Permits")
necessary to own or lease and operate its properties and to conduct its business
as now conducted, except for incidental Permits that would be readily obtainable
without undue burden in the event of any lapse, termination, cancellation, or
forfeiture or that if not obtained would not materially and adversely affect
each Company's business. All such material Permits are in full force and effect,
and, to the knowledge of each Company, no suspension or cancellation of any of
them is threatened, and no material Permits will be adversely affected by the
consummation of the Merger. No Company has failed nor is it failing to comply
with any applicable law, rule, regulation, or order, where such failure would
have a material adverse effect on any Company's business, and there are no
proceedings pending or, to each Company's knowledge, threatened, nor has any
Company received any notice, regarding any such failure.
3.21 ENVIRONMENTAL MATTERS. Each Company is in material compliance with all
applicable existing federal, state and local laws and regulations relating to
protection of human health or the environment or imposing liability or standards
of conduct concerning any Hazardous Material (as hereinafter defined)
("Environmental Laws"), except, in each case, where such noncompliance, singly
or in the aggregate, would not have a material adverse effect on the condition,
financial or otherwise, or the earnings, business, affairs or business prospects
of any Company. The term "Hazardous Material" means (a) any "hazardous
substance" as defined in the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended, (b) any "hazardous waste" as defined by
the Resource Conservation and Recovery Act, as amended, (c) any petroleum or
petroleum product, (d) any polychlorinated biphenyl and (e) any pollutant or
contaminant or hazardous, dangerous, or toxic chemical, material, waste or
substance regulated under or within the meaning of any other Environmental Law.
There is no alleged liability, or to each Company's knowledge, potential
liability (including, without limitation, alleged or potential liability for
investigatory costs, cleanup costs, governmental response costs, natural
resources damages, property damages, personal injuries or penalties) of such
Company arising out of, based on or resulting from (i) the presence or release
into the environment of any Hazardous Material at any location, whether or not
owned by any Company or (ii) any violation or alleged violation of any
Environmental Law, which alleged or potential liability, singly or in the
aggregate, would have a material and adverse effect on the condition, financial
or otherwise, or the earnings, business, affairs or business prospects of such
Company.
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3.22 LEASES. The Disclosure Schedule sets forth, as of January 31, 1997,
the number of units of real property leased by each Company (each a "Leased
Premises"). Except to the extent that a material adverse effect on the Company's
financial condition, assets, liabilities, earnings, business, affairs or
business prospects would not occur if the following, in the aggregate, were not
true: (a) each lease covering a Leased Premises is in full force and effect
(there existing no default under any such lease which, with the lapse of time or
notice or otherwise, would entitle the lessor or lessee to terminate the same);
(b) each Company has the right to use the Leased Premises in accordance with the
terms of the respective leases free and clear of all claims or other interests
or rights of third parties; (c) there is no violation of any covenant,
restriction or other agreement or understanding, oral or written, affecting or
relating to title or use of any Leased Premises; and (d) there is no pending or
threatened condemnation or similar proceedings or assessments affecting any of
the Leased Premises, nor to each Company's knowledge is any such condemnation or
assessment threatened or contemplated by any governmental authority.
3.23 CORPORATE RECORDS. The corporate record books of each Company are in
good order and complete (to the extent required by the laws of the State of
Minnesota), and are accurate, up to date, contain all necessary signatures, and
set forth all meetings and actions taken by the stockholders and directors, and
all votes of the stockholders or directors set forth in certificates furnished
to anyone at any time heretofore.
3.24 CONDITION OF ASSETS. All premises, fixtures and equipment owned or
used by each Company have been properly maintained and are in good operating
order and repair (ordinary wear and tear excepted), free from known defects in
construction or design, sound and properly functioning, usable and not obsolete,
and in compliance with all zoning, building and fire codes and all other laws,
rules, regulations and requirements of governmental authorities and the fire
insurance rating association having jurisdiction, except to the extent that the
failure to do so, in the aggregate, would not have a material adverse effect on
the financial condition, assets, liabilities, earnings, business, affairs or
business prospects of such Company.
3.25 ACCOUNTS RECEIVABLE. All of the accounts receivable of each Company
shown or reflected on the Balance Sheet, less the reserve for doubtful accounts
in the amount shown on such balance sheet, are valid and enforceable claims and
subject to no set off or counterclaim and will be collectible in the normal
course of business. No Company has accounts or loans receivable from any of its
directors, officers or employees (other than loans to any employee in the
ordinary course of business which in the aggregate do not exceed $5,000.00).
3.26 CHARTER DOCUMENTS. Each Company has heretofore delivered to
BridgeStreet copies of its articles of incorporation, as amended to date,
certified by the appropriate governmental authority, and copies of its by-laws,
as amended to date, and a list of the officers and directors of such Company in
office, all as certified by its Secretary.
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3.27 DISCLOSURE OF ALL MATERIAL MATTERS. No statement of fact set forth in
this Agreement (including without limitation all information in the Financial
Statements and the other Schedules, Exhibits, and attachments hereto, taken as a
whole) or otherwise provided by or on behalf of each Company to BridgeStreet is
false or misleading in any respect, nor does this Agreement (including, without
limitation all information in the Financial Statements and the other Schedules,
Exhibits, and attachments hereto, taken as a whole) or any information provided
to BridgeStreet by or on behalf of any Company omit to state a material fact
necessary in order to make the statements made or information disclosed, in the
light of the circumstances under which they were made or disclosed, not
misleading.
3.28 BROKERS. No broker, finder, or investment banker is entitled to any
brokerage, finder's, or other fee or commission in connection with the Merger or
the transactions contemplated by this Agreement based upon arrangements made by
or on behalf of the Company.
3.29 TAX-FREE REORGANIZATION. No Company has any reason to believe that the
Merger will not qualify as a reorganization within the meaning of Section 368 of
the Code.
3.30 TANGIBLE NET BOOK VALUE. The aggregate tangible net book value of the
Companies as of the date of the Closing will be at least Two Hundred Thousand
Dollars ($200,000.00).
4. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER
The Stockholder represents and warrants to BridgeStreet and Acquisition as
follows:
4.1 TITLE TO THE SHARES. The Stockholder owns all issued and outstanding
Shares free and clear of any claims, liens, charges, encumbrances, security
interests and rights of others whatsoever, and such Shares are not bound by or
subject to any proxy, agreement, voting trust or other restriction regarding the
voting thereof.
4.2 AUTHORITY. The Stockholder has full power, authority and capacity to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby, and no other action is necessary by the Stockholder to
consummate the transactions contemplated by the Agreement. This Agreement has
been duly and validly executed and delivered by the Stockholder and constitutes
a legal, valid and binding obligation of the Stockholder enforceable against her
in accordance with its terms.
4.3 ACCREDITED INVESTOR. The Stockholder is an "accredited investor" (as
such term is defined in Rule 501 promulgated under the Securities Act) because
either (i) her individual net worth or joint net worth with her spouse exceeds
One Million Dollars ($1,000,000), or (ii) her individual income was in excess of
Two Hundred Thousand Dollars ($200,000) (or her joint income with her spouse was
in excess of Three Hundred Thousand
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Dollars ($300,000)) in each of 1995 and 1996 and she has a reasonable
expectation that such income (whether individual or joint) will reach the same
level during 1997.
5. REPRESENTATIONS AND WARRANTIES OF BRIDGESTREET AND
ACQUISITION
BridgeStreet and Acquisition represent and warrant to the Companies and
the Stockholder as follows:
5.1 ORGANIZATION AND AUTHORITY. Each of BridgeStreet and Acquisition is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Delaware, and each has all requisite corporate power and
authority to conduct its business and own its properties as now conducted and
owned, and is qualified to do business as a foreign corporation in each
jurisdiction where the failure to be so qualified would, in the aggregate, have
a material adverse effect on the business or financial condition of
BridgeStreet. Each of BridgeStreet and Acquisition has full corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly and
validly authorized by the respective Boards of Directors of BridgeStreet and
Acquisition and the sole stockholder of Acquisition, and no other corporate
proceedings on the part of BridgeStreet or Acquisition are necessary to
authorize this Agreement or to consummate the transactions contemplated by this
Agreement. This Agreement has been duly and validly executed and delivered by
each of BridgeStreet and Acquisition and constitutes a valid and binding
agreement of each, enforceable against each in accordance with its terms.
5.2 CONSENTS AND APPROVALS; NO VIOLATION. Neither the execution and
delivery of this Agreement by BridgeStreet and Acquisition nor the consummation
of the transactions contemplated hereby will (i) conflict with or result in any
breach of any provision of the respective charter documents or By-Laws of
BridgeStreet or Acquisition; (ii) require any consent, approval, authorization,
or permit of, or filing with or notification to, any governmental or regulatory
authority, except (A) filing and acceptance of the Articles of Merger pursuant
to the MBCA and the Certificate of Merger pursuant to the DGCL and (B) filings
required under the Securities Act and the securities or blue sky laws of the
various states; (iii) result in a default (or an event that might, with the
passage of time or the giving of notice or both, constitute a default) or give
rise to any right to terminate, cancel or accelerate or to any loss of benefit
under any of the terms, conditions, or provisions of any note, license, lease,
agreement, or other instrument or obligation to which BridgeStreet or
Acquisition is a party or by which BridgeStreet or Acquisition or any of their
respective assets may be bound, other than as previously disclosed in writing to
the Companies; or (iv) violate any order, writ, injunction, decree, statute,
rule, or regulation applicable to BridgeStreet or Acquisition or any of their
respective assets.
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5.3 LITIGATION. There are no actions, suits, causes of action, claims,
litigation, arbitration, administrative hearings or other form of proceedings or
disputes pending, or, to the knowledge of BridgeStreet or Acquisition,
threatened, against, involving or affecting BridgeStreet, the Operating
Subsidiaries, or Acquisition, in any court, at law or in equity, or before any
arbitration board or any governmental department, commission, board, bureau,
agency, or instrumentality, that either singly or in the aggregate might prevent
BridgeStreet and Acquisition from consummating the transactions contemplated
hereby or that would have a material adverse effect on the business, operations,
or financial condition of BridgeStreet and the Operating Subsidiaries taken as a
whole.
5.4 MERGER STOCK. The Merger Stock has been duly authorized by all
necessary corporate action and, when issued and delivered by BridgeStreet
pursuant to this Agreement, will be validly issued, fully paid and
non-assessable.
5.5 CHARTER DOCUMENTS. BridgeStreet has heretofore delivered to the
Companies copies of its Articles of Incorporation, as amended to date, certified
by the appropriate governmental authority, and copies of its by-laws, as amended
to date, and a list of the officers and directors of BridgeStreet in office, all
as certified by its Secretary.
5.6 TAX-FREE REORGANIZATION. Neither BridgeStreet nor Acquisition has any
reason to believe that the Merger will not qualify as a reorganization within
the meaning of Section 368 of the Code.
5.7 CAPITALIZATION. The total number of issued and outstanding shares of
capital stock of BridgeStreet immediately prior to the Effective Time shall be
Five Million (5,000,000), all of which shall be BridgeStreet Common Stock.
Acquisition has (i) One Thousand (1,000) shares of common stock, par value $.01
per share, issued and outstanding, all of which is owned by BridgeStreet, and
(ii) no outstanding options or warrants to purchase such common stock.
BridgeStreeet owns all of the issued and outstanding capital stock of each of
the Operating Subsidiaries.
5.8 BRIDGESTREET FINANCIAL STATEMENTS. The BridgeStreet Financial
Statements fairly present the financial position of each Operating Subsidiary as
of their respective dates, and the results of operations for the periods
presented therein, all in conformity with GAAP applied on a consistent basis (i)
except as otherwise noted therein and (ii) except that no representations or
warranties are being made with respect to the footnote disclosures contained
therein.
6. COVENANTS
6.1 CONFIDENTIAL INFORMATION. BridgeStreet and its employees and agents
will, and BridgeStreet will cause the Operating Subsidiaries, Acquisition and
their its employees
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and agents to, hold in strict confidence, unless compelled to disclose by
judicial or administrative process or, in the opinion of its counsel, by other
requirements of law, all Confidential Information (as hereinafter defined) and
will not disclose the same to any person. If this Agreement is terminated,
BridgeStreet will promptly return to each Company or destroy all documents
(including all copies thereof) received by BridgeStreet containing such
Confidential Information. For purposes hereof, "Confidential Information" shall
mean all information of any kind concerning the Companies, except information
(i) ascertainable or obtained from public or published information, (ii)
received from a third party not known to BridgeStreet to be under an obligation
to the Companies to keep such information confidential, (iii) that is or becomes
known to the public (other than through a breach of this Agreement), (iv) that
was in BridgeStreet's possession before disclosure thereof to it in connection
with this Agreement or (v) that was independently developed by BridgeStreet.
6.2 BEST EFFORTS. Subject to the terms and conditions hereof each party to
this Agreement agrees to fully cooperate with the others and the others'
counsel, accountants and representatives in connection with any steps required
to be taken as part of its obligations under this Agreement. Each party to this
Agreement agrees that it will use its reasonable efforts to cause all conditions
to its obligations under this Agreement to be satisfied as promptly as possible,
and will not undertake a course of action inconsistent with this Agreement or
which would make any of its representations, warranties, agreements or covenants
in this Agreement untrue in any material respect or any conditions precedent to
its obligations under this Agreement unable to be satisfied at or prior to the
Closing.
6.3 PUBLIC ANNOUNCEMENTS. All public announcements, notices or other
communications regarding this Agreement and the transactions contemplated hereby
to third parties other than the parties hereto and their respective advisors
shall require the prior approval of both BridgeStreet and the Stockholder.
6.4 NOTIFICATION OF CERTAIN MATTERS. Each of the parties (the "Notifying
Party") shall give prompt notice to the other parties of (i) the occurrence or
non-occurrence of any event that would be likely to cause any representation or
warranty of the Notifying Party contained in this Agreement to be untrue or
inaccurate in any material respect at or prior to the Effective Time and (ii)
any material failure of the Notifying Party to comply with or satisfy any
covenant, condition, or agreement to be complied with or satisfied by it
hereunder. The delivery of any notice pursuant to this Section 6.4 shall not
limit or otherwise affect the remedies available hereunder to the party
receiving such notice.
6.5 COVENANTS OF THE STOCKHOLDER. The Stockholder hereby covenants and
agrees with BridgeStreet and Acquisition that she shall:
(a) use her best efforts to take whatever action may be reasonably
necessary or desirable to (i) effect, perfect or confirm of record or otherwise
in the Surviving Corporation full right, title and interest in and to the
business, properties and assets now conducted or owned by each Company, free and
clear of all restrictions, liens, encumbrances, rights, title
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and interests in others, or to collect, realize upon, gain possession of, or
otherwise acquire, full right, title and interest in and to such business,
properties and assets; (ii) carry out the intent and purposes of the
transactions contemplated hereby; and (iii) cause or permit BridgeStreet to
undertake and complete the initial public offering of BridgeStreet Common Stock
(the "IPO");
(b) provide to BridgeStreet the notifications required of each Company
under Section 6.4;
(c) deliver at the Closing the Employment Agreement;
(d) notify BridgeStreet in writing if at any time prior to a closing in
connection with the IPO she shall obtain knowledge of any facts that might make
it necessary or appropriate to amend or supplement the Prospectus used in the
registration statement filed in connection with the IPO in order to make the
statements contained therein not misleading or comply with applicable law (with
the delivery of any notice pursuant to this Section 6.5(d) not limiting or
otherwise affecting the remedies available hereunder to the party receiving such
notice); and
(e) execute and deliver such other instruments and take such other actions
as may be reasonably required in order to carry out the intent of this
Agreement.
6.6 TAX FREE REORGANIZATION. From and after the Effective Time, neither
BridgeStreet nor the Surviving Corporation nor the Stockholder shall take or
suffer to be taken any action which will cause the Merger not to constitute a
reorganization within the meaning of Section 368(a)(2)(D) of the Code.
6.7 NON-COMPETITION; NON-SOLICITATION. For a period of five (5) years from
the date hereof or for a period of three (3) years from the date the
Stockholder's employment by Acquisition subsequent to the Merger terminates
regardless of the reason therefor (or if there is no reason therefor), whichever
later occurs, the Stockholder will not engage or become interested, directly or
indirectly, as an owner, employee, director, partner, consultant, through stock
ownership, investment of capital, lending of money or property, rendering of
services, or otherwise, either alone or in association with others, in the
operation, management or supervision of any type of business or enterprise in
any way similar to or competitive with BridgeStreet and the Operating
Subsidiaries (including the Companies' business as conducted through Acquisition
following the Effective Time) (the "BridgeStreet Group"). In addition, during
such period the Stockholder will not, directly or indirectly, whether on behalf
of herself or anyone else: (i) solicit or accept orders from any present or past
customer of the BridgeStreet Group or Home Again for a product or service
offered or sold by, or competitive with a product or service offered or sold by,
the BridgeStreet Group; (ii) induce or attempt to induce any such customer to
reduce such customer's purchases from the BridgeStreet Group (including without
limitation leases of accommodations); (iii) use for her benefit or disclose the
name and/or requirements of any such customer to any other
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person or persons, natural or corporate; (iv) enter into any competitive leasing
arrangements relating to properties containing units leased by the BridgeStreet
Group as of the date of termination of the Stockholder's employment; or (v)
solicit any of the BridgeStreet Group's employees to leave the employ of the
BridgeStreet Group or hire anyone who (A) is an employee of the BridgeStreet
Group or (B) was an employee of the BridgeStreet Group within six months prior
to the date of hire by the Stockholder.
6.8 PROPRIETARY INFORMATION. The Stockholder will not at any time hereafter
knowingly disclose to or use for the benefit of anyone else any of the
Proprietary Information or the BridgeStreet Proprietary Information without
BridgeStreet's prior written authorization in each particular case. The
Stockholder also will at all times hereafter take all action and sign and
deliver all instruments BridgeStreet or Acquisition may require to vest or
perfect in BridgeStreet or Acquisition all right, title and interest in and to
the Proprietary Information or the BridgeStreet Proprietary Information, or to
assist BridgeStreet or Acquisition in filing or prosecuting any application, in
her name or any other name, in any country, for any patent, trademark, service
xxxx, copyright or other right therein, or any modification, reissue, division,
continuation, revival or extension thereof, or in conducting any legal or
administrative proceedings for securing, protecting or enforcing any of the
foregoing. The Stockholder further agrees that she has disclosed to BridgeStreet
in writing all proprietary information conceived or developed in whole or in
part by her relating to either the Companies or the BridgeStreet Group prior to
the date hereof. As used herein, "BridgeStreet Proprietary Information" means
(i) any and all inventions, discoveries, ideas, research, engineering methods,
practices, processes, systems (including, without limitation, reservation
systems), formulae, designs, products, projects, improvements and developments
which (a) have not been generally available, (b) relate to the BridgeStreet
Group or any subsequently-formed operating subsidiary of BridgeStreet, and (c)
are made, conceived or reduced to practice by the Stockholder subsequent to the
date hereof, or by any other employee or consultant of the BridgeStreet Group,
or in whole or in part at the expense of the BridgeStreet Group or on the
premises of the BridgeStreet Group or with the assistance of the BridgeStreet
Group's employees or consultants with the BridgeStreet Group's equipment or
supplies or those of the BridgeStreet Group's employees or consultants, and (ii)
any and all trade secrets, reservation systems, marketing plans, forecasts,
unpublished financial statements, budgets, licenses, prices and employee,
lessor, customer and supplier lists of the BridgeStreet Group.
7. CONDITIONS TO CONSUMMATION OF THE MERGER
7.1 The obligations of BridgeStreet and Acquisition to consummate the
Merger are subject to the satisfaction at the Closing, or waiver by BridgeStreet
in writing, in whole or in part, of each of the following conditions:
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(a) BridgeStreet and Acquisition shall have received the opinion of
counsel to each Company, dated the date of the Closing and in form and substance
satisfactory to the BridgeStreet and its counsel, substantially to the effect
set forth on Exhibit 5.
(b) All proceedings taken by each Company and all instruments executed and
delivered by the Company prior to the date of the Closing in connection with the
transactions herein contemplated shall be satisfactory in form and substance to
counsel for BridgeStreet acting reasonably.
(c) The Stockholder shall have delivered to BridgeStreet the Employment
Agreement executed by Xxxxxxx Xxxxx.
(d) The Stockholder shall have executed and delivered to BridgeStreet a
letter agreement substantially in the form attached hereto as Exhibit 6 (the
"Investment Representation Letter").
(e) Each Company shall have delivered to BridgeStreet and Acquisition a
certificate of its Secretary certifying as to requisite corporate or other
action authorizing the transactions contemplated by this Agreement, the
incumbency of officers and directors, and the status of record ownership of each
Company's stockholders.
(f) The Companies shall have delivered to BridgeStreet a combined balance
sheet prepared in accordance with GAAP which reflects that as of December 31,
1996, the Companies had an aggregate tangible net book value of at least One
Hundred Fifty Thousand Dollars ($150,000.00).
(g) The Companies shall have delivered to BridgeStreet a pro forma
combined income statement for the fiscal year ended December 31, 1997,
reasonably satisfactory to BridgeStreet in terms of form, assumptions and
substance, which projects that, for such fiscal year, the Companies will have
combined revenues of at least Six Million Dollars ($6,000,000.00) and net income
before taxes of at least Eight Hundred Thousand Dollars ($800,000.00).
(h) Each Company shall have delivered to BridgeStreet such other
certificates, documents and opinions as BridgeStreet and its counsel shall
reasonably require.
7.2 The obligation of each Company to consummate this Agreement is subject
to the satisfaction at the Closing, or waiver by each Company in writing, in
whole or in part, of each of the following conditions:
(a) The Companies shall have received the opinion, dated the date of the
Closing and in form and substance satisfactory to the Companies and its counsel,
of Xxxxxx, XxXxxxxxx & Fish, LLP, counsel to BridgeStreet, substantially to the
effect set forth on Exhibit 7.
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(b) All proceedings taken by BridgeStreet and Acquisition and all
instruments executed and delivered by BridgeStreet and Acquisition prior to the
date of the Closing in connection with the transactions herein contemplated
shall be satisfactory in form and substance to counsel for the Companies, acting
reasonably.
(c) BridgeStreet and Acquisition shall have delivered to the Companies a
certificate of its Secretary, certifying as to requisite corporate or other
action authorizing the transactions contemplated by this Agreement.
8. RESTRICTIONS ON SALE OR TRANSFER OF MERGER STOCK; LEGEND
The shares of Merger Stock will not have been registered under the
Securities Act or the blue sky laws of any state by reason of their contemplated
issuance in a transaction exempt from the registration and prospectus delivery
requirements of the Securities Act and of such state laws. Such shares may not
be sold, transferred, or otherwise disposed of without registration under the
Securities Act and such state laws or an exemption therefrom.
9. INDEMNIFICATION
9.1 AGREEMENTS TO INDEMNIFY.
(a) As used in this Article 9:
(i) "Damages" means claims, damages, liabilities, losses,
judgments, settlements, and expenses, including, without limitation,
all reasonable fees and disbursements of counsel incident to the
investigation or defense of any claim or proceeding or threatened
claim or proceeding.
(ii) "Indemnified Party" means each of BridgeStreet, the
Surviving Corporation, and their respective subsidiaries.
(b) On the terms and subject to the limitations set forth in this
Agreement, the Stockholder shall, from and after the Effective Time, indemnify,
defend, and hold each Indemnified Party harmless from, against and in respect of
any and all Damages incurred by any Indemnified Party arising from or in
connection with any actual or alleged breach of any representation, warranty,
covenant or agreement made by each Company or by the Stockholder in this
Agreement (collectively referred to herein as "Claims").
(c) The Companies' representations, warranties, covenants and agreements
set forth in Article 3 shall, for purposes of this Article 9, be deemed to have
survived the Effective Time notwithstanding any contrary terms of this
Agreement, and whenever such representations, warranties, covenants and
agreements are referred to in this Article 9, the
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text of the same as set forth in Article 3 shall be deemed to be set forth in
their entirety herein, and the same are hereby incorporated herein by such
references. Each such representation, warranty, covenant and agreement shall be
deemed to have been relied upon by the party or parties to which made,
notwithstanding any investigation or inspection made by or on behalf of such
party or parties and shall not be affected in any respect by any such
investigation or inspection.
9.2 LIMITATIONS OF INDEMNITY OBLIGATIONS. The indemnity obligations of the
Stockholder under this Agreement shall be subject to the following limitations:
(a) The indemnity obligations of the Stockholder shall expire on the third
anniversary of the Effective Time (the "Cut-off Date"); provided, however, that
such obligations with respect to (i) the representations and warranties
contained in Sections 3.1, 3.2, 3.18, 3.21 and 3.22 and Article 4 of this
Agreement shall continue forever without limitation, and (ii) the
representations and warranties regarding taxes, which are contained in Section
3.15, shall remain in effect until all claims for taxes due by or on account of
the Companies for any period up to and including the Effective Time have been
settled and any statute of limitations period with respect to such taxes has
expired; and provided further that the indemnity obligations of the Stockholder
for Claims timely asserted by an Indemnified Party in the manner provided in
this Agreement shall continue until such Claims are finally resolved and
discharged.
(b) The aggregate indemnity obligations of the Stockholder for any Damages
shall not in any event exceed Nine Hundred Fifty Thousand Dollars ($950,000) or,
in the event of an IPO, the greater of (i) such amount and (ii) the amount equal
to the number of shares of Merger Stock which the Stockholder is entitled to
receive by reason of the Merger (appropriately adjusted for stock dividends,
stock splits and the like) multiplied by the per share price at which the
BridgeStreet Common Stock is sold to the public in the IPO.
(c) The Indemnified Parties shall be entitled to indemnification only if
the aggregate and collective Damages incurred or suffered by them exceed Fifty
Thousand Dollars ($50,000.00), in which event they shall be entitled to
indemnification of the full amount of such Damages. Notwithstanding the
immediately preceding sentence, however, the Indemnified Parties shall be
entitled to indemnification for Damages incurred or suffered by them as a result
of the breach of Section 3.15 or Section 3.30 without regard to such Fifty
Thousand Dollar ($50,000.00) basket.
9.3 NOTICE OF CLAIM. An Indemnified Party shall promptly notify the
Stockholder in writing of any Claim asserted by a third person that might give
rise to any indemnity obligation of the Stockholder hereunder (a "Third Party
Claim"), specifying in reasonable detail the nature thereof and indicating the
amount (estimated if necessary) of the Damages that have been or may be
sustained by the Indemnified Party. Failure of any Indemnified Party to promptly
give such notice shall not relieve the Stockholder of her obligation to
indemnify under this Article 9, but as a result of any such failure, the
Stockholder shall not
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be liable to the Indemnified Parties for the amount of actual damages caused by
such failure. Together with or following such notice, the Indemnified Parties
shall deliver to the Stockholder copies of all notices and documents received by
the Indemnified Parties relating to the Third Party Claim (including court
papers).
9.4 DEFENSE AND SETTLEMENT OF THIRD PARTY CLAIMS. The Stockholder shall
have the right (without prejudice to the right of any Indemnified Party to
participate at her own expense through counsel of her own choosing) to defend
against any Third Party Claim at her expense and through counsel of her own
choosing and to control such defense if she gives written notice of her
intention to do so within 15 business days of her receipt of notice of Third
Party Claim. The Indemnified Parties shall cooperate fully in the defense of
such Third Party Claim and shall make available to the Stockholder or her
counsel all pertinent information under their control relating thereto. The
Indemnified Parties shall have the right to elect to settle any Third Party
Claim; provided, however, the Stockholder shall not have any indemnification
obligation with respect to any monetary payment to any third party required by
such settlement unless she shall have consented thereto. The Stockholder shall
have the right to elect to settle any Third Party Claim subject to the consent
of BridgeStreet; provided, however, that if BridgeStreet fails to give such
consent within 15 business days of being requested to do so, BridgeStreet shall,
at its expense, assume the defense of such Third Party Claim and regardless of
the outcome of such matter, the Stockholder's liability hereunder shall be
limited to the amount of any such proposed settlement. The foregoing provisions
notwithstanding, in no event may the Stockholder (a) adjust, compromise or
settle any Third Party Claim (i) unless such adjustment, compromise or
settlement unconditionally releases BridgeStreet or the Surviving Corporation
from all liability or (ii) if such adjustment, compromise or settlement affects
the absolute and sole right of BridgeStreet or the Surviving Corporation to own
or use any of any Company's assets or (b) defend any Third Party Claim which, if
adversely determined, would materially impair the financial condition, business
or prospects of BridgeStreet or the Surviving Corporation.
10. MISCELLANEOUS
10.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Except as provided in
Article 9 with respect to the representations and warranties contained in
Article 3 and 4 and except for the representations and warranties contained in
Article 5, the representations and warranties made in this Agreement shall not
survive beyond the Effective Time.
10.2 ENTIRE AGREEMENT; ASSIGNMENT. This Agreement (a) constitutes, with the
Disclosure Schedule and the Exhibits hereto, the entire agreement among the
parties with respect to the subject matter hereto and supersedes all other prior
agreements and understandings, both written and oral, among the parties or any
of them with respect to the subject matter hereof and (b) shall not be assigned
by operation of law or otherwise, provided that BridgeStreet or Acquisition may
assign its respective rights and obligations to
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any direct or indirect subsidiary of BridgeStreet, but no such assignment shall
relieve BridgeStreet of its obligations hereunder.
10.3 VALIDITY. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provisions of this Agreement, each of which shall remain in full force and
effect.
10.4 NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given when delivered in person or by electronic facsimile transmission,
cable, telegram, or telex, or when mailed by registered or certified mail
(postage prepaid, return receipt requested) or delivered to a courier of
national reputation to the respective parties as follows:
If to BridgeStreet or Acquisition, to it at:
BridgeStreet International Inc.
00 Xxxxxxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxx, Secretary
with a copy to:
Xxxxxx, XxXxxxxxx & Fish, LLP
Xxx Xxxxxxxxxxxxx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000-0000
Attention: Xxxxxxxxxxx Xxxxxxxxx, Esquire
If to any of the Companies or the Stockholder, to it or her at:
Home Again, Inc.
0000 Xxxxxxxxx Xxxx
Xxxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxx
with a copy to:
Fabyanske, Svoboda, Xxxxxx & Xxxx, P.A.
000 Xxxxxx Xxxxxx Xxxxx
Xxxxxxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxx, Esquire
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or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above
(provided that notice of any change of address shall be effective only upon
receipt thereof).
10.5 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of Delaware, regardless of the
laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
10.6 DESCRIPTIVE HEADINGS. The descriptive headings herein are inserted for
convenience of reference only and are not intended to be part of or to affect
the meaning or interpretation of this Agreement.
10.7 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same agreement.
10.8 EXPENSES. All costs and expenses incurred in connection with the
transactions contemplated by this Agreement shall be paid by the party incurring
such expenses.
10.9 PARTIES IN INTEREST. This Agreement shall be binding upon and inure
solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to confer upon any other person any rights or
remedies of any nature whatsoever under or by reason of this Agreement.
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IN WITNESS WHEREOF, each of the parties has caused this Agreement to
be executed on its behalf by its officers thereunto duly authorized, all as of
the day and year first above written.
BRIDGESTREET INTERNATIONAL INC.
By: /s/ Xxxx X. Xxxxx
-----------------------------------------
Title: Chief Financial Officer
HOME AGAIN, INC.
By: /s/ Xxxxxx X. Xxxxx
-----------------------------------------
Title: Chief Executive Officer and President
HOME AGAIN AMENITIES, INC.
By: /s/ Xxxxxx X. Xxxxx
-----------------------------------------
Title: Chairman
HOME AGAIN CORPORATE HOUSING, INC.
By: /s/ Xxxxxx X. Xxxxx
-----------------------------------------
Title: Vice President
/s/ Xxxxxx X. Xxxxx
-----------------------------------------
Xxxxxx X. Xxxxx,
Stockholder
HAI ACQUISITION CORP.
By: /s/ Xxxx X. Xxxxx
-----------------------------------------
Title: President
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