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EXHIBIT 10.1
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CANDLEWOOD HOTEL COMPANY, INC.
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SECURITIES PURCHASE AGREEMENT
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Dated as of June 30, 1998
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TABLE OF CONTENTS
(Not Part of Agreement)
ARTICLE I. DEFINITIONS............................................. 1
ARTICLE II. ISSUE, PURCHASE AND SALE OF THE SECURITIES.............. 2
ARTICLE III. CONDITIONS OF CLOSING................................... 7
ARTICLE IV. CERTAIN COVENANTS....................................... 12
ARTICLE V. REPRESENTATIONS, COVENANTS AND WARRANTIES............... 15
ARTICLE VI. REPRESENTATIONS OF THE PURCHASERS....................... 25
ARTICLE VII. RESTRICTIONS ON TRANSFER................................ 26
ARTICLE VIII. INDEMNIFICATION......................................... 27
ARTICLE IX. MISCELLANEOUS........................................... 30
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SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT, dated as of June 30, 1998 (as
the same may be amended or modified from time to time, this "Agreement"),
between CANDLEWOOD HOTEL COMPANY, INC., a Delaware corporation (the "Company"),
and the Purchasers listed on Schedule I (each, a "Purchaser" and collectively,
the "Purchasers").
W I T N E S S E T H :
WHEREAS, the Company desires to issue (i) 42,000 shares of its
Series B Cumulative Convertible Preferred Stock, $.01 par value per share (the
"Preferred Stock") and (ii) warrants (the "Warrants") exercisable to purchase
initially 336,000 shares of Common Stock (as defined herein) at an initial
exercise price of $12.00 per share; and
WHEREAS, the Company desires to sell the Preferred Stock and the
Warrants to the Purchasers, and the Purchasers desire, severally, to purchase
the Preferred Stock and the Warrants from the Company, on the terms and subject
to the conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements contained herein, the parties hereto hereby agree as follows:
ARTICLE I.
DEFINITIONS
For the purposes of this Agreement, the following terms shall
have the following respective meanings:
"Affiliate" shall mean, with respect to any Person, any person
that, directly or indirectly, controls, is controlled by or is under common
control with such Person. For the purposes of this definition, "control"
(including, with correlative meanings, the terms "controlled by" and "under
common control with"), as used with respect to any Person, shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities or by contract or otherwise.
"Business Day" means any day other than a Saturday, Sunday or
other day on which commercial banks in the City of New York are authorized or
required by law or executive order to close.
"Certificate of Designation" shall mean the Certificate of
Designation in the form set forth in Exhibit A with respect to the Preferred
Stock of the Company.
"Certificate of Incorporation" shall mean the Certificate of
Incorporation of the Company, as amended.
"Closing" shall have the meaning set forth in paragraph 2.B.
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"Closing Date" shall mean July 10, 1998.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Commission" shall mean the Securities and Exchange Commission or
any other governmental authority at the time administering the Securities Act or
the Exchange Act.
"Common Stock" shall mean and include the Company's currently
authorized common stock, $.01 par value per share, as constituted on the date
hereof (but without regard to the amount thereof authorized).
"Company IP" shall have the meaning set forth in paragraph 5.I.
"Company Personnel" shall have the meaning set forth in paragraph
5.O.
"Conversion Price" shall have the meaning set forth in the
Certificate of Designation.
"Employee Plans" shall have the meaning set forth in paragraph
5.O.
"Environmental Law" shall have the meaning set forth in paragraph
5.P.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any similar or successor Federal statute, and the rules and
regulations of the Commission thereunder, all as the same shall be in effect at
the time.
"First Purchased Securities" shall have the meaning set forth in
paragraph 2.B.
"Governmental Authority" means the government of any nation,
state or other political subdivision thereof, any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government, and any corporation or other entity owned or controlled, through
stock or capital ownership or otherwise, by any of the foregoing.
"Hazardous Substances" shall have the meaning set forth in
paragraph 5.P.
"Lien" shall mean any interest in property securing an obligation
owed to, or a claim by, a Person other than the owner of the property, whether
such interest is based on the common law, statute or contract, and including,
but not limited to, the security interest lien arising from a mortgage,
encumbrance, pledge, conditional sale or trust receipt or a lease, consignment
or bailment for security purposes. The term "Lien" shall include reservations,
exceptions, encroachments, easements, rights-of-way, covenants, conditions,
restrictions, leases and other title exceptions and encumbrances affecting real
property, except any such usual or normal reservations, exceptions,
encroachments, easements, rights-of-way, covenants, conditions, restrictions,
leases or other title exceptions or encumbrances affecting real property,
including encumbrances for taxes not yet due and payable, that are not
materially disruptive to the use of such property in the ordinary course of
business. For the purposes of this Agreement, the Company or a Subsidiary shall
be deemed to be the owner of any property which it has
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acquired or holds subject to a conditional sale agreement, financing lease or
other arrangement pursuant to which title to the property has been retained by
or vested in some other Person for security purposes.
"Liquidation Amount" shall have the meaning set forth in the
Certificate of Designation.
"Litigation" shall have the meaning set forth in paragraph
3.A(k).
"Market Price" shall have the meaning set forth in the
Certificate of Designation; provided that with respect to paragraph 4.E, the
Market Price shall be calculated without reference to the last sentence of the
definition as set forth in the Certificate of Designation.
"NASDAQ Letter" shall mean the letter from NASDAQ clarifying that
the approval of the stockholders of the Company is not required in connection
with the issuance of Preferred Stock and Warrants pursuant to this Agreement.
"Officers Certificate" shall mean a certificate of the Company
signed by the President, Chief Executive Officer or Chief Financial Officer.
"Person" shall mean and include an individual, a corporation, a
limited liability company, an association, a partnership, a trust or estate, a
government or any department or agency thereof.
"Preferred Stock" shall have the meaning set forth in the first
WHEREAS clause.
"Purchaser(s)" shall have the meaning set forth in the preamble.
"Purchase Price" shall have the meaning set forth in paragraph
2.B.
"Purchased Securities" means, collectively, the First Purchased
Securities and the Second Purchased Securities.
"Purchased Shares" shall have the meaning set forth in paragraph
2.B.
"Purchased Warrants" shall have the meaning set forth in
paragraph 2.B.
"Registration Rights Agreement" shall mean the Amended and
Restated Registration Rights Agreement, substantially in the form of Exhibit C,
with such changes therein as to which the Purchasers may agree, among the
Company, the Purchasers and the other parties thereto.
"Release" shall have the meaning set forth in paragraph 5.P.
"Restricted Action" shall have the meaning set forth in paragraph
7.A.
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"Restricted Securities" shall mean at any time (i) the Common
Stock previously issued or, unless the context otherwise requires, issuable upon
conversion of the Preferred Stock or exercise of the Warrants, (ii) any Common
Stock issued subsequent to the conversion of any of the Preferred Stock or
exercise of the Warrants as a dividend or other distribution with respect to, or
in exchange for or in replacement of, the Common Stock issued upon such
conversion or exercise, and (iii) any Common Stock otherwise issued with respect
to the Preferred Stock or Warrants; provided, however, that immediately after
and throughout the period during which the restrictions on the transferability
of such Common Stock shall have ceased and terminated in accordance with Article
VII hereof, the same shall cease to be Restricted Securities. Where the context
so requires, "holders of Restricted Securities" shall include holders of shares
of Preferred Stock convertible into Restricted Securities and holders of
Warrants exercisable for Restricted Securities.
"Second Closing Date" shall mean the date two Business Days
following the date on which any applicable waiting periods under the HSR Act in
connection with the purchase of the Preferred Stock and the Warrants or any
other transaction contemplated hereby shall have expired or been terminated.
"Second Purchase Price" shall have the meaning set forth in
paragraph 2.B.
"Second Purchased Securities" shall have the meaning set forth in
paragraph 2.B.
"Second Purchased Shares" shall have the meaning set forth in
paragraph 2.B.
"Second Purchased Warrants" shall have the meaning set forth in
paragraph 2.B.
"Securities Act" shall mean the Securities Act of 1933, as
amended, and any similar or successor Federal statute, and the rules and
regulations of the Commission thereunder, all as the same may be in effect at
the time.
"Series A Certificate of Designation" shall mean the Certificate
of Designation filed with the Secretary of State of the State of Delaware with
respect to the Series A Preferred Stock.
"Series A Preferred Stock" shall mean the Series A Cumulative
Convertible Preferred Stock, $.01 par value per share, of the Company.
"Series B Share Equivalents" shall mean, with respect to the
Preferred Stock and Warrants purchased by each Purchaser hereunder, the number
of shares of Common Stock which are issuable upon the conversion of such
Preferred Stock or exercise of such Warrants.
"Share Equivalents" of any Restricted Securities, Preferred Stock
or Warrants shall mean the number of shares of Common Stock included among such
Restricted Securities or that are issuable upon conversion of the Preferred
Stock or upon exercise of the Warrants.
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"Significant Subsidiary" shall mean a Subsidiary which holds
assets with a value in excess of $10,000 or maintains employees.
"Stated Value" of the Preferred Stock shall be $1,000.00 per
share.
"Stockholders Agreement" shall mean the Amended and Restated
Stockholders Agreement, substantially in the form of Exhibit B, with such
changes therein as to which the Purchasers may agree, among the Company,
Doubletree Corporation, the ▇▇▇▇▇▇ ▇. Fix Family Partnership, ▇▇▇▇ ▇. ▇▇▇▇▇▇,
the Purchasers and the other parties thereto.
"Subsidiary" of a Person means any corporation, association,
partnership, joint venture or other business entity of which more than fifty
percent (50%) of the voting stock or other equity interests (in the case of
Persons other than corporations), is owned or controlled directly or indirectly
by the Person, or one or more of the Subsidiaries of the Person, or a
combination thereof. Unless the context otherwise clearly requires, references
herein to a "Subsidiary" refer to a Subsidiary of the Company.
"Taxes" means any federal, state, county, local or foreign taxes,
charges, fees, levies, or other assessments, including, without limitation, all
net income, gross income, sales and use, 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, in the case
of the Company and each of its Subsidiaries, Taxes for which the Company or any
Subsidiary thereof 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 state or local law).
"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, combined, unitary, group or consolidated returns for any
group of entities that includes the Company or any of its Subsidiaries.
"Warrants" shall have the meaning set forth in the first WHEREAS
clause.
ARTICLE II.
ISSUE, PURCHASE AND SALE OF THE SECURITIES
2.A Authorization of Issue of Securities. The Company has
authorized the issue of (i) 42,000 shares of its Preferred Stock, having the
powers, designations, preferences and relative rights and the qualifications,
limitations and restrictions set forth in the form of the Certificate of
Designation attached as Exhibit A hereto and (ii) the Warrants, which Warrants
will be in the form of the Warrants attached as Exhibit D hereto.
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2.B Purchase and Sale of Preferred Stock and Warrants. Subject to
the terms and conditions herein set forth, (I) the Company hereby agrees to sell
to each Purchaser, and each Purchaser agrees that it will purchase from the
Company, at the Closing (as defined herein), for an aggregate purchase price to
be paid by such Purchaser to the Company as set forth opposite such Purchaser's
name in the column entitled "Purchase Price" on Schedule I (the "Purchase
Price"): (i) the number of shares of Preferred Stock set forth opposite such
Purchaser's name in the column entitled "Shares of Preferred Stock Purchased on
the Closing Date" on Schedule I (the "Purchased Shares") and (ii) the number of
Warrants set forth opposite such Purchaser's name in the column entitled
"Warrants Purchased on the Closing Date" on Schedule I (the "Purchased Warrants"
and, together with the Purchased Shares, the "First Purchased Securities"), and
(II) the Company hereby agrees to sell to each Purchaser listed on Schedule II
in the column entitled "Purchaser", and each such Purchaser agrees that it will
purchase from the Company, at the Second Closing (as defined herein), for an
aggregate purchase price to be paid by such Purchaser to the Company as set
forth opposite such Purchaser's name in the column entitled "Purchase Price" on
Schedule II (the "Second Purchase Price"): (i) the number of shares of Preferred
Stock set forth opposite such Purchaser's name in the column entitled "Shares of
Preferred Stock Purchased on the Second Closing Date" on Schedule II (the
"Second Purchased Shares") and (ii) the number of Warrants set forth opposite
such Purchaser's name in the column entitled "Warrants Purchased on the Second
Closing Date" on Schedule II (the "Second Purchased Warrants" and, together with
the Second Purchased Shares, the "Second Purchased Securities"). The issuance
and purchase of (i) the First Purchased Securities shall take place at the first
closing (the "Closing") on the Closing Date, or at such other time and on such
other date as the Purchasers and the Company may agree, and (ii) the Second
Purchased Securities shall take place at the second closing (the "Second
Closing") on the Second Closing Date, or at such other time and on such other
date as the Company and the Purchasers purchasing any Second Purchased
Securities may agree, and on each such date the Company will deliver to the
Purchasers at the offices of ▇▇▇▇, Weiss, Rifkind, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, 1285
Avenue of the Americas, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, or at such other location
as the Purchasers and the Company may agree, one or more stock certificates and
warrants certificates, as each Purchaser may request, registered in such
Purchaser's name or otherwise as such Purchaser may direct, evidencing such
securities to be purchased by the Purchasers, against payment of the purchase
price thereof by wire transfer of immediately available funds to or upon the
order of the Company. The Purchasers obligations under this Agreement
(including, without limitation, this paragraph 2.B) shall be several and not
joint.
2.C Fees.
(a) The Company hereby agrees that it will pay to each
Purchaser, at the Closing, a facility fee equal to one percent (1%) of the
Purchase Price paid by such Purchaser at the Closing pursuant to Section 2.B
hereof, payable in cash by wire transfer of immediately available funds to an
account designated by each Purchaser in a notice delivered to the Company not
later than one (1) Business Day prior to the Closing Date. At the option of each
Purchaser by notice to the Company at least one Business Day prior to the
Closing Date, such facility fee shall be paid by the Company to each Purchaser
that delivers such notice by deducting such amount from payment of such
Purchaser's respective Purchase Price.
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(b) The Company hereby agrees that it will pay to each
Purchaser purchasing any Second Purchased Securities, at the Second Closing, a
facility fee equal to one percent (1%) of the Purchase Price paid by such
Purchaser at the Second Closing pursuant to Section 2.B hereof, payable in cash
by wire transfer of immediately available funds to an account designated by each
such Purchaser in a notice delivered to the Company not later than one (1)
Business Day prior to the Second Closing Date. At the option of each such
Purchaser by notice to the Company at least one Business Day prior to the Second
Closing Date, such facility fee shall be paid by the Company to each Purchaser
that delivers such notice by deducting such amount from payment of such
Purchaser's respective Second Purchase Price.
ARTICLE III.
CONDITIONS OF CLOSING
3.A Purchaser Closing Conditions for Closing Date. Each
Purchaser's obligation to purchase and pay for the First Purchased Securities on
the Closing Date is subject to the satisfaction, on or before the Closing Date,
of the following conditions:
(a) Opinion of Company's Counsel. On the Closing Date the
Purchasers shall have received from ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, who are acting as special
counsel to the Company in connection with this transaction, an opinion, dated
the Closing Date, in form and substance reasonably satisfactory to the
Purchasers.
(b) Opinion of Purchaser's Counsel. On the Closing Date the
Purchasers shall have received from ▇▇▇▇, Weiss, Rifkind, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇,
who are acting as special counsel to the Purchasers in connection with this
transaction, an opinion, dated the Closing Date, in form and substance
reasonably satisfactory to the Purchasers.
(c) Opinion of Delaware Counsel. On the Closing Date the
Purchasers shall have received from ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & Finger, who are acting as
special counsel to the Company in connection with this transaction, an opinion,
dated the Closing Date, with respect to the enforceability of the Stockholders
Agreement and the Registration Rights Agreement, in form and substance
reasonably satisfactory to the Purchasers.
(d) Stockholders Agreement. The Stockholders Agreement shall
have been entered into by the parties thereto.
(e) Registration Rights Agreement. The Registration Rights
Agreement shall have been entered into by the parties thereto.
(f) By-laws; Board Designees. The By-laws of the Company
shall have been amended to increase the size of the Board of Directors of the
Company from ten (10) to twelve (12) members.
(g) Expenses. On the Closing Date, the Company shall have
paid (i) the reasonable out-of-pocket expenses of Purchasers incurred in
connection with this
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Agreement and (ii) the reasonable fees and expenses of ▇▇▇▇, Weiss, Rifkind,
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ as special counsel to the Purchasers incurred in connection
with this Agreement.
(h) Certificate of Designation. The Certificate of
Designation relating to the terms and conditions of the Preferred Stock shall
have been approved by the Board of Directors of the Company and filed with the
Secretary of State of the State of Delaware and shall be in full force and
effect.
(i) Purchase of Securities. The Purchasers severally shall
have purchased the First Purchased Securities in the amounts set forth opposite
their names on Schedule I under the columns "Shares of Preferred Stock Purchased
on the Closing Date" and "Warrants Purchased on the Closing Date."
(j) Issuance of Capital Stock. Neither the Company nor any
Subsidiary shall have issued any shares of capital stock or securities
exercisable for or convertible into shares of capital stock, or granted any
additional stock appreciation rights or altered the terms of any stock
appreciation rights existing on the date hereof, in either case subsequent to
the date hereof and prior to the Closing Date.
(k) No Litigation; No Order. No action, suit or proceeding
shall be pending or, to the knowledge of the Company, threatened, which seeks to
restrain or prevent, or seeks changes in connection with, or seeks to require a
vote of shareholders in connection with, the consummation of the transactions
contemplated by this Agreement and no order (including, without limitation, a
temporary restraining order), decree, writ, judgment or injunction shall be in
effect which restrains, enjoins or prevents the consummation of the transactions
contemplated by this Agreement (collectively, "Litigation"), and the Company has
delivered an Officer's Certificate dated the Closing Date to such effect.
(l) NASDAQ Letter. Prior to the Closing Date, (i) the Company
shall have delivered to each Purchaser a copy of the NASDAQ Letter and copies of
all items listed in such letter which have been delivered to the NASDAQ, which
letter shall be in form and substance reasonably acceptable to the Purchasers
and (ii) each of the Purchasers shall have received evidence of the satisfaction
of the conditions, if any, contained in the NASDAQ Letter.
(m) Proceedings. On or prior to the Closing Date, all
corporate and other proceedings taken or to be taken in connection with the
transactions contemplated hereby and all documents incident thereto shall be
reasonably satisfactory in form and substance to the Purchasers and their
special counsel, and the Purchasers and their special counsel shall have
received all such counterpart originals or certified or other copies of such
documents as they may reasonably request.
(n) Representations and Warranties True. The representations
and warranties of the Company contained in Article V hereof shall be true and
correct in all material respects on and as of the Closing Date with the same
effect as though made on and as of such date.
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(o) Compliance with this Agreement. The Company shall have
performed and complied with all of its agreements and conditions set forth or
contemplated herein that are required to be performed or complied with by the
Company on or before the Closing Date.
(p) Officer's Certificate. The Purchasers shall have received
a certificate, dated the Closing Date and signed by the President or a
Vice-President of the Company, certifying that the conditions set forth in
paragraphs (n) and (o) hereof have been satisfied on and as of such date.
(q) Secretary's Certificate. The Purchasers shall have
received a certificate, dated the Closing Date and signed by the Secretary or an
Assistant Secretary of the Company, attaching a good standing certificate from
the Delaware Secretary of State with respect to the Company and certifying the
authenticity of attached copies of (i) the Restated Certificate of Incorporation
and By-laws of the Company and resolutions of the Board of Directors of the
Company and (ii) evidence of the approval of at least 66_% of the holders of
Series A Preferred Stock of (x) this Agreement and the transactions contemplated
hereby, (y) the Certificate of Amendment to the Series A Certificate of
Designation attached as Exhibit F hereto and (z) the increase in the size of the
Board of Directors of the Company to twelve (12) members.
(r) Purchase Permitted by Applicable Laws; Legal Investment.
The acquisition of and payment for the Preferred Stock and the Warrants and the
consummation of the transactions contemplated hereby (a) shall not be prohibited
by any applicable law or governmental regulation, (b) shall not subject the
Purchasers to any penalty or, in their reasonable judgment, other onerous
condition under or pursuant to any applicable law or governmental regulation,
and (c) shall be permitted by the laws and regulations of the jurisdictions to
which each are subject.
(s) Consents and Approvals. All consents, waivers, approvals,
exemptions, authorizations, or other actions by, or notices to, or filings with,
Governmental Authorities and other Persons necessary or required in connection
with the execution, delivery or performance by the Company or enforcement
against the Company of this Agreement (including, without limitation, the
issuance of the Preferred Stock and the Warrants contemplated hereunder), the
Preferred Stock, the Warrants, the Registration Rights Agreement or any other
document executed in connection with the consummation of the transactions
contemplated by this Agreement shall have been obtained and be in full force and
effect, and the Purchaser shall have been furnished with appropriate evidence
thereof. The holders of the Series A Preferred Stock shall have approved of the
transactions contemplated by this Agreement, including, without limitation, the
issuance of the Preferred Stock and the Warrants, and the Company shall have
received, to the extent required, the waiver of the provisions of paragraph 4.D
of the Series A Cumulative Convertible Preferred Stock Purchase Agreement, dated
as of August 27, 1997, among the Company and the other parties thereto with
respect to the issuance of the Preferred Stock and the Warrants.
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(t) No Material Adverse Change. Since March 31, 1998, there
shall have been no material adverse change, nor shall any such change be
threatened, in the assets, business, properties, operations or financial or
other condition of the Company and its Significant Subsidiaries taken as a
whole.
(u) Due Diligence. The Purchasers shall have completed their
due diligence review of the assets, business, properties, operations and
financial and other condition of the Company and shall be reasonably satisfied
with the results of such review.
(v) Market Conditions. At any time after the date hereof and
prior to the Closing Date, (a) trading in securities generally on the Nasdaq
National Stock Market or any other U.S. securities exchange shall not have been
suspended or limited, or additional material governmental restrictions, not in
force on the date of this Agreement, shall not have been imposed upon trading in
securities generally or by order of the Commission or any court or other
Governmental Authority, (b) a general banking moratorium shall not have been
declared by either federal or New York State authorities and (c) any material
adverse change in the financial or securities markets in the United States or in
political, financial or economic conditions in the United States or any outbreak
or material escalation of hostilities or declaration by the United States of a
national emergency or war or other calamity or crisis shall not have occurred.
(w) HSR. Any applicable waiting periods under the HSR Act in
connection with purchase of the Preferred Stock and the Warrants in connection
with the Closing or any other transaction contemplated hereby shall have expired
or been terminated.
(x) Facilities Fee. The Company shall have paid to the
Purchasers the fees provided for in paragraph 2.C hereof or, upon notice from a
Purchaser under such paragraph, such amount shall have been subtracted from the
purchase price to be paid by such Purchaser on the Closing Date.
(y) Series A Preferred Stock Approval. At least 66_% of the
holders of Series A Preferred Stock shall have approved of (i) this Agreement
and the transactions contemplated hereby, (ii) the Certificate of Amendment to
the Series A Certificate of Designation attached as Exhibit F hereto and (iii)
the increase in the size of the Board of Directors of the Company to twelve (12)
members.
(z) Certificate of Amendment. The Certificate of Amendment to
the Series A Certificate of Designation attached as Exhibit F hereto shall have
been filed with the Secretary of State of the State of Delaware and shall be in
full force and effect.
3.B Company Closing Conditions for Closing Date. The Company's
obligation to sell the First Purchased Securities on the Closing Date is subject
to the satisfaction, on or before the Closing Date, of the following conditions:
(a) Receipt of Purchase Price. The Company shall have
received payment of the purchase price with respect to the First Purchased
Securities purchased hereunder.
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(b) Certificate of Designation. The Certificate of
Designation relating to the terms and conditions of the Preferred Stock shall
have been approved by the Board of Directors of the Company and filed with the
Secretary of State of the State of Delaware and shall be in full force and
effect.
(c) Representations and Warranties. The representations and
warranties contained in Article VI hereof shall be true and correct.
(d) HSR. Any applicable waiting periods under the HSR Act in
connection with purchase of the First Purchased Securities or any other
transaction contemplated hereby shall have expired or been terminated.
(e) The Purchasers shall have collectively purchased
hereunder Preferred Stock and Warrants having an aggregate purchase price of not
less than thirty eight million dollars ($38,000,000).
3.C Purchaser Closing Conditions for Second Closing Date. Each
Purchaser's obligation to purchase and pay for the Second Purchased Securities
on the Second Closing Date is subject to the satisfaction, on or before the
Second Closing Date, of the following conditions:
(a) HSR. Any applicable waiting periods under the HSR Act in
connection with purchase of the Second Purchased Securities or any other
transaction contemplated hereby shall have expired or been terminated.
(b) Facilities Fee. The Company shall have paid to the
Purchasers the fees provided for in paragraph 2.C hereof or, upon notice from a
Purchaser under such paragraph, such amount shall have been subtracted from the
purchase price to be paid by such Purchaser on the Second Closing Date.
(c) Closing. The purchase and sale of the First Purchased
Securities on the Closing Date shall have occurred.
(d) Expenses. On the Second Closing Date, the Company shall
have paid (without duplication of any amounts previously paid) (i) the
reasonable out-of-pocket expenses of Purchasers incurred in connection with this
Agreement and (ii) the reasonable fees and expenses of ▇▇▇▇, Weiss, Rifkind,
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ as special counsel to the Purchasers incurred in connection
with this Agreement.
3.D Company Closing Conditions for Second Closing Date. The
Company's obligation to sell the Second Purchased Securities on the Second
Closing Date is subject to the satisfaction, on or before the Second Closing
Date, of the following conditions:
(a) Receipt of Purchase Price. The Company shall have
received payment of the purchase price with respect to the Second Purchased
Securities purchased hereunder.
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(b) HSR. Any applicable waiting periods under the HSR Act in
connection with purchase of the Second Purchased Securities or any other
transaction contemplated hereby shall have expired or been terminated.
ARTICLE IV.
CERTAIN COVENANTS
4.A Financial Statements and Other Reports. After the Closing
Date, the Company agrees to send the following reports to each holder of
Preferred Stock and to each holder of at least 20% of the Series B Share
Equivalents (except with respect to any Purchaser that sends written notice to
the Company indicating that it does not wish to receive any such reports): (a)
so long as the Company is subject to the requirements of, or otherwise making
filings pursuant to, Section 13 or 15(d) of the Exchange Act, within three (3)
days after the filing with the Commission, a copy of its Annual Report on Form
10-K, its Quarterly Reports on Form 10-Q, any proxy statements and any Current
Reports on Form 8-K; (b) within one (1) day after release, copies of all press
releases issued by the Company or any of its Subsidiaries; (c) promptly upon
receipt thereof, copies of reports, if any, submitted to the Company by
independent accountants in connection with each annual or interim audit of the
books of the Company made by such accountants; (d) promptly upon transmission
thereof to the Board of Directors, copies of any material information prepared
in addition to that described in paragraph 4A(a) or (b); (e) if requested in
writing by such Purchaser, within 30 days of the month to which such report
relates, monthly financial forecasts for each hotel owned or operated by the
Company; (f) such additional financial and other information as any Purchaser
may from time to time reasonably request, promptly after such request; (g) to
all holders of Preferred Stock or at least 20% of the Series B Share Equivalents
of record on the books of the Company's transfer agent, all information sent to
holders of the Common Stock; and (h) if the Company is not subject to the
requirements of, or otherwise making filings pursuant to Section 13 or 15(d) of
the Exchange Act, the Company will deliver to each Purchaser until such
Purchaser transfers, assigns or sells all of its Preferred Stock or no longer
holds at least 20% of the Series B Share Equivalents: (1) as soon as practicable
and in any event within 45 days after the end of each fiscal quarter, the
following information: consolidated statements of income, stockholders' equity
and cash flows of the Company and its consolidated Subsidiaries for such fiscal
period and for the period from the beginning of the then current fiscal year to
the end of such fiscal period and a comparison of each such item to the then
current budget, and a consolidated balance sheet of the Company and its
consolidated Subsidiaries as at the end of such fiscal period, setting forth in
each case in comparative form consolidated figures for the corresponding periods
in the preceding fiscal year, all in reasonable detail, prepared in accordance
with generally accepted accounting principles consistently followed throughout
the periods involved, certified as to fair presentation by the principal
financial officer of the Company and accompanied by a written discussion of
operations in summary form; and (2) as soon as practicable and in any event
within 90 days after the end of each fiscal year of the Company, the following
information: consolidated statements of income, stockholders' equity and cash
flows of the Company and its consolidated Subsidiaries for such year, and a
consolidated balance sheet of the Company and its consolidated Subsidiaries as
at the end of such year, setting forth in each case in comparative
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form corresponding consolidated figures from the preceding fiscal year and to
the then current budget, prepared in accordance with generally accepted
accounting principles consistently followed throughout the periods involved, and
accompanied by an opinion of Ernst & Young LLP, or another firm among the six
largest independent public accountants of recognized national standing selected
by the Company, or another firm of independent public accountants of national
standing mutually agreeable to the Company and Purchasers holding a majority of
the Share Equivalents, to the effect that the consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
consistently applied (except for changes in application in which such
accountants concur and as are noted therein) and present fairly the financial
condition of the Company and its Subsidiaries and, unless independent public
accountants are not generally making statements substantially to the following
effect, that the examination of such accountants in connection with such
financial statements has been made in accordance with generally accepted
accounting standards and accordingly included such tests of the accounting
records and such other auditing procedures as were considered necessary in the
circumstances; and accompanied by a written discussion of operations in summary
form with respect to such fiscal year; provided, that any reports referenced in
(d), (e) and (f) above shall be provided only to the original Purchasers who are
institutions and who have entered into a confidentiality agreement with the
Company with respect to such reports, which agreement shall include such
reasonable terms as the Company and the Purchaser shall agree; and provided,
further, that the Company shall be obligated to provide the reports referenced
in (d), (e) and (f) above only to one Purchaser for each group of Purchasers
constituting Affiliates and any such right to receive such materials shall not
be transferable.
Each Purchaser is hereby authorized to deliver a copy of any
financial statement delivered to it pursuant to this paragraph 4A (other than
reports referenced in (d), (e) and (f) above) to any regulatory body having
jurisdiction over it which requests such information and the National
Association of Insurance Commissioners. Each Purchaser is further authorized to
request information from and to have access to, the Company's independent public
accountants, and the Company will request such accountants to make available to
any Purchaser such information as such Purchaser may reasonably request.
4.B Inspection of Property. So long as any Purchaser shall hold
any Preferred Stock or at least 20% of the Series B Share Equivalents, the
Company will permit any Person designated in writing by any Purchaser to visit
and inspect any of the properties of the Company and its Subsidiaries and to
discuss the affairs, finances and accounts of the Company and its Subsidiaries,
all upon reasonable notice, at such reasonable times (subject to the bona fide
schedule constraints of the relevant officers) and as often as such Purchaser
may reasonably request.
4.C Corporate Existence, Licenses and Permits: Maintenance of
Properties. So long as the Purchasers shall hold in excess of 20% of the
Preferred Stock purchased pursuant hereto or at least of 20% of the Series B
Share Equivalents, the Company will at all times use commercially reasonable
efforts to do or cause to be done all things necessary to maintain, preserve and
renew its existence as a corporation organized under the laws of a state of the
United States of America, preserve and keep in force and effect, and cause each
of its
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Subsidiaries to apply for on a timely basis, all licenses and permits necessary
and material to the conduct of the business of the Company and its consolidated
Subsidiaries, taken as a whole, and to maintain and keep, and cause each of its
Subsidiaries to maintain and keep, its and their respective properties in good
repair, working order and condition (except for normal wear and tear), and from
time to time to make all needful and proper repairs, renewals and replacements,
including, without limitation, all trade name and trademark registration
renewals, in each case so that any business material to the Company carried on
in connection therewith may be properly and advantageously conducted.
4.D Transactions with Affiliates. So long as the Purchasers shall
hold in excess of 20% of the Preferred Stock purchased pursuant hereto or at
least of 20% of the Series B Share Equivalents, the Company shall not directly
or indirectly enter into any transaction including, without limitation, the
purchase, sale, lease or exchange of any property or the rendering of any
service, with any Affiliate, except for transactions including any investments,
loans or advances by or to any Affiliates conducted in good faith, on terms no
less favorable to the Company than those that could be obtained in a comparable
arms-length transaction with a third-party (each an "Affiliated Transaction").
In no event shall the Company (i) enter into an Affiliated Transaction valued in
excess of $200,000.00 or (ii) enter into an Affiliated Transaction which, when
added to the transaction value of all other Affiliated Transactions, exceeds
$500,000, without the approval of the Board of Directors, including a majority
of the disinterested Directors. Notwithstanding the foregoing, any transactions
approved by the Board of Directors prior to the Closing Date and listed on
Exhibit IV-D shall be deemed to be arms-length transactions for purposes hereof;
provided that any modifications or amendments to any such transactions shall be
required to comply with the first two sentences of this paragraph 4.D.
4.E Options. The Company shall not issue any options, rights or
warrants to purchase Common Stock at a price less than 95% of the Market Price
as of the date of the issuance of such options, rights or warrants.
4.F Litigation. The Company covenants to use best efforts to
vigorously contest any Litigation and each Purchaser, severally, covenants to
use best efforts to cooperate with the Company in the Company's contest of any
such Litigation, provided, that such cooperation by each Purchaser shall not
require it to be in violation of any applicable law or regulation or require it
to retain counsel or to pay fees of any counsel associated with such Litigation
to bear any material expense, nor to agree to any settlement.
4.G Securities Exchange. The Company shall use its best efforts
to maintain its listing with the NASDAQ or other national securities exchange,
including the AMEX, so long as it is subject to Section 13 or 15(d) of the
Exchange Act.
4.H HSR Act Filing. Each Purchaser shall, if required pursuant to
the HSR Act in connection with the purchase of any Second Purchased Securities
or any other transaction contemplated hereby, use its best efforts to prepare
and file notification and report forms in compliance with the HSR Act, and shall
otherwise fully comply with the HSR Act. The Company shall use its best efforts
to prepare and file, and cooperate with each Purchaser so that
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it may prepare and file, notification and report forms in compliance with the
HSR Act, and shall otherwise comply with the HSR Act, in connection with the
purchase of the Second Purchased Securities or any other transaction
contemplated hereby. The Company shall bear all of its own expenses and all
out-of-pocket expenses (including reasonable attorney's fees, filing fees
payable to any governmental authority, charges and expenses) of the Purchasers
in connection with any such preparation and filing in compliance with the HSR
Act.
4.I NASDAQ Letter. If the Nasdaq Letter has not been obtained by
the Company prior to the Closing, the Company shall use its commercially
reasonable best efforts to obtain, promptly after the Closing Date, the Nasdaq
Letter, which letter shall be in form and substance reasonably acceptable to the
Purchasers.
ARTICLE V.
REPRESENTATIONS, COVENANTS AND WARRANTIES
The Company represents, covenants and warrants as follows:
5.A Organization, Standing and Qualification of Company and
Subsidiaries; Corporate Authority. (a) The Company and each Significant
Subsidiary, if any, is a corporation or limited liability company duly organized
and existing in good standing under the laws of the jurisdiction of its
organization, and has the corporate or limited liability company power to own
its respective property and to carry on its respective business as now being
conducted, is duly qualified and in good standing as a foreign corporation or
limited liability company to do business in every jurisdiction where the
character of the properties owned or leased by it or the nature of any business
transacted by it makes such qualification necessary except where such
nonqualification or lack of good standing would not have a material adverse
effect on the business of the Company and its Significant Subsidiaries taken as
a whole. On the date hereof the Company has only those Subsidiaries listed on
Exhibit V-A. The Company has delivered to the Purchasers true, complete and
correct copies of the Certificate of Incorporation and its By-laws, as amended
and in full force and effect on the date hereof.
(b) The execution and delivery by the Company of this
Agreement, Certificate of Designation, Warrants and the Registration Rights
Agreement and the performance by the Company of all transactions and obligations
contemplated hereby and thereby are within its corporate authority. The
execution, delivery and performance of this Agreement and the Registration
Rights Agreement and each other agreement contemplated by the terms hereof, and
the issuance of the Preferred Stock and the Warrants have been duly authorized
by all necessary corporate proceedings on the part of the Company. Each of this
Agreement, Certificate of Designation, Warrants and the Registration Rights
Agreement constitutes the legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium and similar laws
affecting creditors' rights and remedies generally or by equitable principles
relating to enforceability. The Preferred Stock and the Warrants will, on or
prior to the Closing Date, be duly authorized and, when issued, will be fully
paid and nonassessable and subject to no
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preemptive rights. The shares of Common Stock issuable upon the conversion of
the Preferred Stock will, on or prior to the Closing Date, be duly authorized
and reserved for issuance, will be subject to no preemptive rights and, when
issued upon such conversion, will be validly issued, fully paid and
nonassessable. The shares of Common Stock issuable upon the exercise of the
Warrants will, on or prior to the Closing Date, be duly authorized and reserved
for issuance, will be subject to no preemptive rights and, when issued upon such
exercise, will be validly issued, fully paid and nonassessable.
5.B Financial Statements. The Company has furnished the
Purchasers with balance sheets of the Company as at December 31, 1997 and the
related statements of income, stockholders' equity and cash flows of the Company
for the fiscal year ended December 31, 1997, all certified by Ernst & Young LLP,
including in each case the related schedules and notes, and an unaudited balance
sheet of the Company as at March 31, 1998 and statements of income,
stockholders' equity and cash flows of the Company for the period ended on such
date, prepared by the Company and certified by its principal financial officer.
All such financial statements (including any related schedules
and/or notes) have been prepared in accordance with generally accepted
accounting principles consistently applied, except to the extent set forth in
the notes to such financial statements and except for the absence of footnotes
to the interim financial statements and except that the interim financial
statements are subject to adjustment made in the course of an audit that would
not in the aggregate be material, throughout the periods involved and to the
extent required by such principles show all liabilities, direct and contingent,
of the Company required to be shown thereon in accordance with generally
accepted accounting principles. The balance sheets and the related schedules and
notes fairly present the financial condition of the Company as at the respective
dates thereof and there are no undisclosed material liabilities since March 31,
1998, other than those incurred in the ordinary course; and the net income and
stockholders' equity statements and the related schedules and notes fairly
present the results of the operations of the Company for the respective periods
indicated.
There has been no material adverse change in the condition,
financial or other, of the Company and its Significant Subsidiaries, on a
consolidated basis, since March 31, 1998.
5.C Actions Pending. There is no action, suit, investigation or
proceeding pending or, to the knowledge of the Company, threatened against the
Company or any of its Significant Subsidiaries before any court, arbitrator or
administrative or governmental body that (i) seeks to enjoin or otherwise
prevent the issuance of the Preferred Stock or the Warrants or the consummation
of the sale of stock or warrants contemplated hereby or (ii) materially and
adversely affects, or as to which there is a reasonable possibility of an
adverse decision that would materially and adversely affect, either individually
or collectively, the business or condition of the Company and its consolidated
Significant Subsidiaries taken as a whole. Neither the Company nor any
Significant Subsidiary is in violation of any judgment, order, writ, injunction,
decree, rule or regulation of any court or governmental department, commission,
board, bureau, agency or instrumentality, the violation of which reasonably
could be expected to, either individually or collectively, materially and
adversely affect the business, property, assets
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or financial position of the Company and its consolidated Significant
Subsidiaries taken as a whole.
5.D No Defaults. Neither the Company nor any of its Significant
Subsidiaries is in violation of, or in default under, nor has there been any
waiver given with respect to, any term or provision of any charter, by-law,
mortgage, indenture, agreement, instrument, statute, rule, regulation, judgment,
decree, order, writ, or injunction applicable to it, such that such violations
and defaults in the aggregate could reasonably be expected to result in any
material adverse change in the business, assets, condition (financial or
otherwise) or results of operations of the Company and its Significant
Subsidiaries taken as a whole, or materially adversely affect the ability of the
Company to perform in any material respect its obligations under this Agreement.
5.E Taxes. The Company and each of its Significant Subsidiaries
have timely filed (or caused to be filed) all Tax Returns which are required to
be filed by (or with respect to) it on or before the date hereof and have paid
all Taxes due on or before the date hereof whether or not reflected on such
returns, including pursuant to any assessment received by the Company or any
Significant Subsidiary consolidated with the Company for Tax reporting purposes.
All such Tax Returns were true, correct and complete in all material respects.
None of such Tax Returns has been audited by the relevant taxing authority, and
no taxing authority has notified (or threatened) the Company or any Significant
Subsidiary, orally or in writing, that such taxing authority will or may audit
any such return. The Company and each of its Significant Subsidiaries have
complied with all requirements of the Code, the Treasury Regulations and any
state, local or foreign law relating to the payment and withholding of Taxes
relating to the Company or such Significant Subsidiary, and the Company, and
each Significant Subsidiary thereof, have, within the time and in the manner
prescribed by applicable law, paid over to the proper taxing authorities all
amounts required to be so withheld and paid over relating to the Company or such
Significant Subsidiary. The charges, accruals and reserves on the books of the
Company and its Significant Subsidiaries in respect of Taxes or other
governmental charges are adequate to cover any liability of the Company and each
Significant Subsidiary thereof for Taxes through the date hereof. There are no
liens for Taxes with respect to any asset of the Company or any Significant
Subsidiary thereof, except for liens with respect to Taxes that are not yet due
and payable. No taxing authority in a jurisdiction where the Company or any
Significant Subsidiary thereof, as the case may be, does not file tax returns
has made a claim, assertion or threat that the Company or any such Significant
Subsidiary is or may be subject to taxation in such jurisdiction.
5.F Title, Liens. Except as set forth in Exhibit V-F, the Company
has, and each of its Significant Subsidiaries has, good and marketable title,
free and clear of all Liens, to its respective properties and assets reflected
in the consolidated balance sheet of the Company and its consolidated
Significant Subsidiaries as at March 31, 1998 (other than properties and assets
disposed of in the ordinary course of business).
5.G Burdensome and Conflicting Agreements and Charter Provisions.
Neither the execution nor delivery of this Agreement and the Registration Rights
Agreement by the
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Company, nor the offering, issuance and sale of the Preferred Stock and the
Warrants by the Company, nor fulfillment of nor compliance with the terms and
provisions of this Agreement, the Registration Rights Agreement, the Preferred
Stock or the Warrants by the Company, nor the issuance by the Company of shares
of Common Stock upon conversion of the Preferred Stock as provided in the
Certificate of Designation or upon exercise of the Warrants, will conflict with,
or result in a breach of the terms, conditions or provisions of, or constitute a
default under, or result in any violation of, or result in the creation of any
Lien upon any of the properties or assets of the Company or any Significant
Subsidiary, or require any consent, approval or other action by, or notice to,
or filing with, any court or administrative or governmental body or any other
Person or pursuant to the Certificate of Incorporation or By-laws of the Company
or any Significant Subsidiary, any award of any arbitrator or any material
agreement (including any agreement with stockholders), instrument, order,
judgment, decree, statute, law, rule or regulation any of which are material to
which the Company or any Significant Subsidiary is subject, except for such
approvals as may be required in connection with fulfillment of, or compliance
with, the Registration Rights Agreements and the approvals identified on Exhibit
V-G, which shall have been obtained by the Closing Date. The approval of the
stockholders of the Company is not required pursuant to the rules of Nasdaq in
connection with the transactions contemplated by this Agreement.
5.H Leases. The Company and each of its Significant Subsidiaries
enjoys peaceful and undisturbed possession of all leases material to the Company
or any of its Significant Subsidiaries and necessary for the operation of its
respective properties and assets, none of which contains any non-market,
unusually burdensome provisions which materially or adversely affects or impairs
the operation of such properties or assets. All such leases are valid and
subsisting and are in full force and effect.
5.I Intellectual Property. (a) The Company exclusively owns or
possesses the requisite licenses or rights (on reasonable commercial terms) to
use all trades secrets, trademarks, service marks, service names, trade names,
copyrights and other intellectual property rights necessary to enable it to
conduct its business as now operated (and, except as set forth in Exhibit V-I
hereof, to the best of the Company's knowledge, as presently contemplated to be
operated in the future) (collectively, the "Company IP"), and Exhibit V-I sets
forth a full and complete list of all such rights; there is no claim or action
by any person pertaining to, or proceeding pending, or to the Company's
knowledge threatened, which challenges the right of the Company or of a
Significant Subsidiary with respect to any Company IP; to the Company's
knowledge, the Company's or its Significant Subsidiaries' current and intended
products and services do not infringe on any licenses, trademarks, service
marks, service names, trade names, copyrights or other rights held by any
Person; and the Company is unaware of any facts or circumstances which might
give rise to any of the foregoing.
(b) Except as set forth in Exhibit V-I, no proceedings or
claims in which the Company alleges that any Person is infringing upon, or
otherwise violating, any Company IP are pending, and none have been served by,
instituted or asserted by the Company, nor are any proceedings threatened
alleging any such violation or infringement.
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(c) To the extent determined appropriate by the Company, the
Company has taken and will take all commercially reasonable actions which are
necessary or advisable in order to fully protect the Company IP, and the Company
will take all actions which are necessary or advisable in order to acquire
intellectual property rights, in each case in a manner consistent with prudent
commercial practice in the hotel business.
5.J Offering of Preferred Stock. Neither the Company, ▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ nor ▇▇▇▇▇▇▇▇ & Co., Inc. (the only agents authorized to act on
the Company's behalf) has, directly or indirectly, offered the Preferred Stock
or Warrants or any security of the Company similar to either of them for sale
to, or solicited any offers to buy the Preferred Stock or Warrants or any
security of the Company similar to either of them from, or otherwise approached
or negotiated with respect thereto with, more than 150 Persons including the
Purchasers (all of which Persons are "accredited investors" within the meaning
of Regulation D promulgated under the Securities Act), and neither the Company
nor any agent acting on the Company's behalf has taken or will take any action
which would subject the issuance or sale of the Preferred Stock or Warrants to
the provisions of Section 5 of the Securities Act. The Company has filed all
notices, or satisfied all registration or qualification requirements of any
state securities or Blue Sky law of any applicable jurisdiction with respect to
the offer, issuance and sale of the Preferred Stock and the Warrants.
5.K Broker's or Finder's Commissions. Other than the fee payable
to ▇▇▇▇▇▇▇▇▇, Lufkin & ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ & Co., Inc. (which will be paid by
the Company) no broker's or finder's or placement fee or commission will be
payable with respect to the issuance of the Preferred Stock or Warrants or the
sale of stock and warrants contemplated hereby as a result of any act or
omission by the Company, and the Company will hold the Purchasers harmless from
any claim, demand or liability for broker's or finder's or placement fees or
commissions alleged to have been incurred in connection with the issuance of the
Preferred Stock or Warrants or such sale of stock and warrants.
5.L Application of Proceeds. The net proceeds of the sale of the
Preferred Stock and Warrants will be used by the Company to finance the
Company's hotel development strategy and for general corporate purposes,
including the repayment, under certain circumstances, of outstanding debt.
5.M Disclosure. Neither this Agreement nor any other document,
certificate or statement prepared by or on behalf of the Company by its
authorized representatives or agents and furnished to or made available to the
Purchasers in writing by or on behalf of the Company by its authorized
representatives or agents in connection herewith, together with publicly
available information, including that filed with the Commission, considered
together, contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained herein and
therein, in the light of the circumstances under which made, not misleading.
5.N Capital Stock. Upon the Closing Date, the Company will have
authorized 100,000,000 shares of Common Stock and 5,000,000 shares of preferred
stock and will have
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issued 9,025,000 issued and outstanding shares of Common Stock, 42,000 shares of
Preferred Stock and 65,000 shares of Series A Preferred Stock convertible into
11,263,158 shares of Common Stock (calculated based on a Conversion Price of
$9.50 per share and subject to adjustment as provided in the Certificate of
Designation and the Series A Certificate of Designation) and options for 752,800
shares of Common Stock. All of such outstanding shares have been validly issued
and are fully paid and nonassessable. The Company has also authorized but has
not issued options exercisable for 923,910 shares of Common Stock. The Company
has reserved such number of shares of Common Stock for issuance pursuant to such
instruments or agreements as are set forth in Exhibit V-N.
Except as otherwise stated in this paragraph or in Exhibit V-N
and except for shares reserved for issuance in connection with this Agreement,
the Company has not granted or issued, or agreed to grant or issue, any options,
warrants or similar rights to acquire or receive any of the authorized but
unissued shares of its capital stock of any class or any securities convertible
into shares of its capital stock of any class or any stock appreciation rights.
Except as described above, the Company has not and will not have taken any
action after the date immediately preceding the date hereof and prior to the
Closing Date which, (i) would require an adjustment to the Conversion Price (as
defined in the Series A Certificate of Designation) of the Series A Preferred
Stock or (ii) had the provisions of Exhibit A been in effect on and after such
date and to and including the Closing Date, would have required an adjustment in
the Conversion Price in accordance with the provisions of Exhibit A. No
adjustment to the "Conversion Price" (as defined in the Series A Certificate of
Designation) of the Series A Preferred Stock will be required as a result of the
issuance of the Preferred Stock and the Warrants.
5.O ERISA. (a) Exhibit V-O sets forth each plan, 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, 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, any severance, holiday, vacation, Christmas or
other bonus plans (including, but not limited to, "employee benefit plans", as
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")), maintained by the Company or any Significant Subsidiary
for any present or former employees, officers or directors of the Company
("Company Personnel") or with respect to which the Company or any Significant
Subsidiary has liability or makes or has an obligation to make contributions
("Employee Plans").
(b) The Company has provided the Purchasers with access to
(i) copies of all Employee Plans or, in the case of an unwritten plan, a written
description thereof, (ii) copies of any annual, financial or actuarial reports
and Internal Revenue Service determination letters relating to such Employee
Plans and (iii) copies of all summary plan descriptions (whether or not required
to be furnished under ERISA) and employee communications relating to such
Employee Plans which materially modify an existing summary plan description and
distributed to Company Personnel, in each case under this subsection (iii),
existing or in effect during or within the past five years.
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(c) Except as set forth on Exhibit V-O, no Employee Plan
entitles Company Personnel to (x) any pension benefit that is unfunded or (y)
any pension or other benefit to be paid after termination of employment other
than required by Section 601 of ERISA or pursuant to plans intending to be
qualified under Section 401(a) of the Code and listed on the Exhibit V-O, and no
other benefits whatsoever are payable to any Company Personnel after termination
of employment (including retiree medical and death benefits).
(d) Each Employee Plan that is an employee welfare benefit
plan under Section 3(l) of ERISA is either (x) funded through an insurance
company contract and is not a "welfare benefit fund" within the meaning of
Section 419 of the Code or (y) is unfunded.
(e) Each 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
threatened against any Employee Plan or administrator or fiduciary of any such
Employee Plan (other than routine noncontested claims for benefits) nor, to
Company's knowledge, does any set of circumstances exist which may reasonably
give rise to such a claim. As to each 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 Employee Plan liabilities do not exceed assets, and
no material adverse change has occurred with respect to the financial materials
covered thereby.
(g) Neither the Company nor any entity that is or was at any
time treated as a single employer with the Company under Section 414(b), (c),
(m) or (o) of the Code has at any time (x) maintained, contributed to or been
required to contribute to any plan under which more than one employer makes
contributions (within the meaning of Section 4064(a) of ERISA) or any plan that
is a multiemployer plan, (y) incurred or expects to incur any liability to the
Pension Benefit Guaranty Corporation or otherwise under Title IV of ERISA or (z)
incurred or expects to incur liability in connection with an "accumulated
funding deficiency" within the meaning of Section 412 of the Code whether or not
waived.
(h) Each Employee Plan intended to be qualified under Section
401(a) of the Code and, if applicable, Section 401(k) of the Code has received a
favorable determination letter from the Internal Revenue Service stating that
such Employee Plan is qualified under Section 401(a) and, if applicable, Section
401(k) of the Code and the related trust is exempt from tax under Section 501(a)
and, to the knowledge of the Company, nothing has occurred since the date of
such letter to cause the letter to be no longer valid or effective.
(i) Neither the Company nor, to the best knowledge of the
Company, 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), which could subject any of the Employee Plans (or their trusts), the
Company, or any person who the Company has an obligation to indemnify, to any
tax or penalty imposed under Section 4975 of the Code or Section 502 of ERISA.
No "reportable event" (as such term is defined in Section 4043 of
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ERISA) for which the notice requirement has not been waived by the Pension
Benefit Guaranty Corporation has occurred or is expected to occur with respect
to any Employee Plan and the Company will provide any Purchaser notice of any
reportable events.
(j) Except as set forth on Exhibit V-O, the events
contemplated by this Agreement (either alone or together with any other event)
will not (w) entitle any Company Personnel to severance pay, unemployment
compensation, or other similar payments under any Employee Plan or law, (x)
accelerate the time of payment or vesting or increase the amount of benefits due
under any Employee Plan or compensation to any Company Personnel, (y) result in
any payments (including parachute payments) under any Employee Plan or law
becoming due to any Company Personnel, or (z) terminate or modify or give a
third party a right to terminate or modify the provisions or terms of any
Employee Plan.
5.P Environmental. (a) Except as set forth on Exhibit V-P, the
Company and the Subsidiaries comply, and the Company, the Subsidiaries and their
respective predecessors at all times during their existence have complied, with
all applicable Environmental Laws (as defined below).
(b) There is not now pending or, to the knowledge of the
Company or any Significant Subsidiary, threatened, any action, claim, proceeding
or investigation, nor has the Company, any Significant Subsidiary, or any of
their respective predecessors received any notice, claim, demand letter or
request for information at any time, alleging that the Company, any Significant
Subsidiary, or any of their respective predecessors may be in violation of, or
liable under, any Environmental Law, nor does there exist any basis for any such
action, claim, proceeding or investigation.
(c) There are no Hazardous Substances (as defined below)
located on any of the properties currently or formerly owned or operated by the
Company, the Significant Subsidiaries or any of their respective predecessors
(including soil, groundwater and surface features and buildings and structures
thereon) (the "Properties"), and none of the Properties contain, or has
contained, any underground improvements, including, but not limited to,
treatment or storage tanks, sumps, water, gas or oil ▇▇▇▇▇, or associated
piping.
(d) The Company and each Significant Subsidiary does not have
any contingent liability in connection with a Release (as defined below) or
threatened Release of any Hazardous Substance at any location.
(e) To the knowledge of the Company and each Significant
Subsidiary, there are no present or past Environmental Conditions (as defined
below) in any way related to the Company, any Significant Subsidiary, or any of
their respective predecessors which have, or may have, individually or in the
aggregate, a material adverse effect with respect to any Property or the
business or condition of the Company or the Significant Subsidiaries, taken as a
whole.
(f) As used herein, "Environmental Law" means any federal,
state, local or foreign law, regulation, order, decree, judgment, opinion,
common law or binding
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equitable principle or agency requirement relating to pollution, contamination,
wastes, hazardous material or the protection of the environment, human health or
safety.
(g) As used herein, "Hazardous Substance" means any substance
that is listed, classified under or regulated by any governmental authority
pursuant to any Environmental Law, including, without limitation, any petroleum
product or by-product, asbestos-containing material, lead-containing paint or
plumbing, polychlorinated biphenyls, radioactive material or radon.
(h) As used herein, "Release" means any release, spill,
emission, leaking, pumping, injection, deposit, discharge, dispersal, leaching
or migrating into the indoor or outdoor environment of any Hazardous Substance.
(i) As used herein, "Environmental Condition" means the
Release or threatened Release of any Hazardous Substance upon, under, in or
about any of the Properties, or any other circumstance involving any Property or
the Company, any Subsidiary, or any of their respective predecessors that could
be expected to result in any claim, liability, costs or losses, or any
restriction on the ownership, use or transfer of any Property pursuant to any
Environmental Law.
5.Q Insurance. The Company maintains and/or is covered by valid
policies of workers' compensation insurance and of insurance with respect to its
properties and business. The Company currently maintains in full force insurance
covering the respective risks of the Company and its Significant Subsidiaries of
such types and in such amounts, with such deductibles and with such insurance
companies as are customary for other companies engaged in similar lines of
business.
5.R Transactions with Affiliates. Except as set forth on Exhibit
IV-D, neither the Company nor any Subsidiary is directly or indirectly a party
to or otherwise involved in any transaction including, without limitation, the
purchase, sale, lease or exchange of any property or the rendering of any
service, with any Affiliate, and the Company has delivered to the Purchasers
copies of all agreements and documents related to all transactions listed on
Exhibit IV-D.
5.S Anti-Dilution Protection. Except as set forth in Exhibit 5.S
or as set forth in the Series A Certificate of Designation, no holder of shares
of Common Stock (or securities convertible into or exchangeable or exercisable
for any of the foregoing) has any rights to purchase or receive additional or
other securities upon the occurrence of an event that might dilute such holder's
percentage interest in the Company.
5.T Registration Rights Agreements. Upon execution of the
Registration Rights Agreement, the Company will not be a party to any agreement
granting any registration rights to any Person other than the Registration
Rights Agreement.
5.U Commission Documents. The Company has filed all registration
statements, proxy statements, reports and other documents required to be filed
by it under the Securities Act or the Exchange Act, and all amendments thereto
(collectively, the "Commission
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Documents"); and the Company has furnished the Purchaser copies of all
Commission Documents, each as filed with the Commission, since November 1996.
Each Commission Document when filed with the Commission was true and accurate in
all material respects and in compliance in all material respects with the
requirements of its respective report form.
5.V Projections. Prior to the date hereof, the Company and
▇▇▇▇▇▇▇▇▇, Lufkin & ▇▇▇▇▇▇▇▇ delivered to the Purchasers financial projections
relating to the Company and contained in that certain Private Placement Offering
Memorandum dated as of April 1, 1998 (the "Projections"). In the opinion of
management of the Company, the assumptions used in preparation of the
Projections were reasonable when made and, except as set forth on Exhibit 5.V,
continue to be reasonable as of the date hereof and as of the Closing Date. The
Projections have been prepared in good faith and, except as set forth on Exhibit
5.V, the Projections give effect to the transactions contemplated by this
Agreement.
5.W Option Contracts. Exhibit 5.W-1 sets forth a list of all of
the options or contracts (collectively, the "Option Contracts") for the purchase
of hotel sites to which the Company or any Subsidiary is directly or indirectly
a party. Assuming each was duly authorized, executed and delivered by the
parties thereto, each such Option Contract is in full force and effect and,
except as set forth on Exhibit 5.W-1, each such Option Contract conforms in all
material respects to the form of Option Contract attached as Exhibit 5.W-2.
Neither the Company, any Subsidiary nor any other party to the Option Contracts
is in default with respect to any of its obligations under any such Option
Contract and, except as set forth in Exhibit 5.W-1, each such Option Contract
can be terminated by the Company or any Subsidiary without incurring any
liability or suffering any loss or damage.
5.X Hotel Properties. Exhibit 5.X sets forth a true, correct and
complete list of each of the following (i) all of the hotel properties owned by
the Company and the Subsidiaries, (ii) all hotel properties leased by the
Company and the Subsidiaries, (iii) all hotels which are under development as of
the date hereof and (iv) all hotel properties for which the Company or any
Subsidiary is the contract vendee or optionee.
5.Y Contracts. There is no contract, agreement or understanding
required to be described in or filed as an exhibit to any Commission Documents
that is not described in or filed as required by the Securities Act or the
Exchange Act, as the case may be. Each such contract, agreement and
understanding is valid and binding and is in full force and effect and
enforceable in accordance with its terms (except as may be limited by equitable
principles relating to enforceability), except in the case of such contracts,
agreements or understandings which are by their terms no longer in force or
effect. Except as set forth on Exhibit V-G, (i) no approval or consent of, or
notice to, any Person is needed in order that such contract, agreement or
understanding shall continue in full force and effect in accordance with its
terms without penalty, acceleration or rights of early termination following the
consummation of the transactions contemplated by this Agreement other than such
notices, consents and approvals as have been obtained, and (ii) the Company and
its Subsidiaries is not in violation of, breach of, or default under any such
contract, agreement or understanding nor to the Company's knowledge is any other
party to any such contract, agreement or understanding.
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5.Z Agreements with Stockholders. Exhibit V-Z lists all
agreements, arrangements or understandings between the Company and one or more
stockholders of the Company relating to the transfer of any class of securities
of the Company (including, without limitation, tag-along rights, drag-along
rights, rights of first offer or any similar rights or obligations) or voting of
any class of securities of the Company, and the Company has delivered to the
Purchasers copies of all agreements and documents relating thereto.
ARTICLE VI.
REPRESENTATIONS OF THE PURCHASERS
Each Purchaser represents and warrants as to itself only as
follows:
6.A Investment Purpose. Purchaser is purchasing the Preferred
Stock and Warrants for Purchaser's own account for investment only and not with
a view toward or in connection with the public sale or distribution thereof.
Purchaser will not resell the Preferred Stock and Warrants or Restricted
Securities except pursuant to sales that are exempt from the registration
requirements of the Securities Act and all applicable state securities laws,
and/or sales registered under the Securities Act and all applicable state
securities laws. Purchaser understands that Purchaser may bear the economic risk
of this investment indefinitely, unless the Restricted Securities are registered
pursuant to the Securities Act and any applicable state securities laws or an
exemption from such registration is available, and that the Company has no
present intention of registering any Restricted Securities other than as
contemplated by the Registration Rights Agreement.
6.B Accredited Investor Status. Purchaser or its ultimate parent
is an "accredited investor" as that term is defined in Rule 501(a) of Regulation
D promulgated under the Securities Act. By reason of its business and financial
experience, sophistication and knowledge, Purchaser is capable of evaluating the
risks and merits of the investment made pursuant to this Agreement.
6.C Authorization; Enforcement. This Agreement and the
Registration Rights Agreement have been duly and validly authorized, executed
and delivered on behalf of Purchaser and are valid and binding agreements of
Purchaser enforceable in accordance with their terms, except as enforceability
may be limited by applicable bankruptcy, insolvency, or similar laws affecting
the enforcement of creditors' rights generally or by equitable principles
relating to enforceability.
6.D Group. As of the date hereof, Purchaser has not formed or
agreed to form nor, as of the Closing Date, does Purchaser intend to form, with
the other Purchasers or other holders of the Company's securities a group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) for the
purpose of effecting a "Change of Control" as defined in the Certificate of
Designation.
6.E HSR Compliance. (i) As of the Closing Date, the person, as
defined in Section 801.1(a)(1) of the Rules (the "Rules") promulgated under the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇
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Antitrust Improvements Act of ▇▇▇▇ (▇▇▇ "▇▇▇ ▇▇▇"), 16 C.F.R.
Section 801.1(a)(1), within which such Purchaser is included, shall not have
annual net sales or total assets of $10 million or more, as determined in
accordance with the HSR Act and the Rules; or (ii) as a result of the purchase
of the Preferred Stock and Warrants to be purchased by such Purchaser on the
Closing Date as set forth on Schedule I hereto, as of the Closing Date, the
person, as defined in Section 801.1(a)(1) of the Rules, within which such
Purchaser is included, will not hold voting securities of the Company with a
value in excess of $15 million, as determined in accordance with the HSR Act and
the Rules.
ARTICLE VII.
RESTRICTIONS ON TRANSFER
7.A Applicability of Restrictions. In addition to any
restrictions contained in this Agreement, any Restricted Securities or the
Company's Certificate of Incorporation, the provisions of this Article VII shall
apply to: (a) the transfer of any share of Preferred Stock and of the Warrants
and (b) the transfer of any Restricted Security (each such transfer being herein
called a "Restricted Action"); provided, however, that the transfer of any share
of Preferred Stock, any Warrants or any Restricted Security to a partner,
shareholder, equity holder or officer of any holder of Preferred Stock, Warrants
or Restricted Security or to an entity controlled by or under common control
with the transferor shall not be a Restricted Action. The holder of any
Preferred Stock, Warrants or Restricted Security, by its acceptance thereof,
agrees that, unless otherwise permitted hereunder, it will not take any
Restricted Action prior to the delivery to the Company, if requested, of the
opinion of counsel referred to in, and to the effect described in, clause (iii)
of paragraph 7C, or until registration of the Restricted Securities under the
Securities Act has become effective.
7.B Restrictive Legends. Each Warrant, share of Preferred Stock
and certificate for Restricted Securities and each certificate issued upon the
transfer, exchange or conversion of any such Warrant, Preferred Stock or
certificate for Restricted Securities (except as otherwise permitted by this
Article VII), shall bear a legend in substantially the following form:
The securities represented by this certificate have not been registered
under the Securities Act of 1933, as amended, and neither the securities
nor any interest therein may be sold, transferred, pledged or otherwise
disposed of in the absence of such registration or an exemption under
such Act and the rules and regulations thereunder. The transfer of such
securities is subject to the restrictions set forth in Article VII of
that certain Securities Purchase Agreement, dated as of June 30, 1998
between Candlewood Hotel Company, Inc. and certain Purchasers, copies of
which are available for inspection at the offices of Candlewood Hotel
Company, Inc., and such securities may be transferred only in compliance
with the terms and conditions of said Article VII of said Securities
Purchase Agreement.
7.C Notice of Proposed Transfer; Opinion of Counsel; Certain
Restrictions. Each holder of any Warrants, shares of Preferred Stock or of any
Restricted Securities, by its
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acceptance thereof, agrees that, except as otherwise expressly provided below in
this paragraph 7C, prior to the taking of any Restricted Action, such holder
will give written notice to the Company of such holder's intention to take such
Restricted Action and to comply in all other respects with this paragraph 7C.
Each such notice (i) shall describe the manner and circumstances of the proposed
Restricted Action in sufficient detail to enable counsel to render the opinion
referred to below, (ii) shall designate counsel for the holder giving such
notice (who may be house counsel for such holder) and (iii) if requested by the
Company, shall be promptly followed by an opinion of such counsel to the effect
that the proposed Restricted Action may be effected without registration under
the Securities Act or any applicable state securities or Blue Sky laws governing
such Restricted Action. The Company will promptly effect any transfer of any
shares of Preferred Stock, Warrants or Restricted Securities involved in such
Restricted Action and either deliver new shares of Preferred Stock or
certificates for Warrants or Restricted Securities bearing (or not bearing, if
in the opinion of such counsel such legend is no longer required to insure
compliance with the Securities Act) the legend set forth in paragraph 7B, or
both, as the case may be; provided, however, that (x) each such transferee shall
represent in writing that it is acquiring such Preferred Stock, Warrants or
Restricted Security for investment and not with a view to the distribution
thereof (subject, however, to any requirement of law that the disposition
thereof shall at all times be within the control of such transferee) and (y)
each such transferee shall agree in writing to be bound by all the restrictions
on transfer of such Warrants, shares of Preferred Stock or Restricted Securities
contained in this Article VII. The Company will pay the reasonable fees and
disbursements of counsel (other than house counsel) for any holder of Warrants,
shares of Preferred Stock or Restricted Securities in connection with any
opinion requested and rendered pursuant to this paragraph 7C.
7.D Termination of Restrictions. All restrictions imposed by this
Article VII upon the transferability of Warrants, Preferred Stock or Restricted
Securities shall cease and terminate as to any particular Warrants, shares of
Preferred Stock or Restricted Securities, (a) when the offer and sale of such
securities shall have been effectively registered under the Securities Act and
such securities disposed of in accordance with the registration statement
covering such securities, or (b) when, in the reasonable opinion of counsel for
the holder thereof or counsel for the Company, such restrictions are no longer
required in order to insure compliance with the Securities Act. Whenever such
restrictions shall terminate as to any Warrants, shares of Preferred Stock or
Restricted Securities, the holder thereof shall be entitled to receive from the
Company without expense a new certificate or certificates representing such
securities not bearing the legend set forth in paragraph 7B hereof.
ARTICLE VIII.
INDEMNIFICATION
8.A Indemnification by Company. In addition to all other sums due
hereunder or provided for in this Agreement, the Company agrees to indemnify and
hold harmless each Purchaser and its Affiliates and their respective officers,
directors, agents, employees and partners (each, an "indemnified party") to the
fullest extent permitted by law from and against any and all losses, claims,
damages, expenses (including reasonable fees, disbursements and
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other charges of counsel), damages or other liabilities ("Losses") resulting
from any breach of any representation or warranty, covenant or agreement of the
Company in this Agreement or any legal, administrative or other actions
(including actions brought by any equity holders of the Company or derivative
actions brought by any Person claiming through the Company or in the Company's
name), proceedings or investigations (whether formal or informal), or written
threats thereof, based upon, relating to or arising out of this Agreement, the
Preferred Stock, the Warrants, the Registration Rights Agreement, the
Stockholders Agreement, the transactions contemplated hereby, or any indemnified
person's role therein or in the transactions contemplated hereby; provided,
however, that the Company shall not be liable under this paragraph 8.A: (a) for
any amount paid in settlement of claims without the Company's consent (which
consent shall not be unreasonably withheld), (b) with respect to Losses arising
solely out of actions brought by one indemnified party against another or (c) to
the extent that it is finally judicially determined that such Losses resulted
primarily from the willful misconduct, bad faith or gross negligence of such
indemnified party or a breach of such Purchaser's representations in Article VI;
provided, further, that if and to the extent that such indemnification is
unenforceable for any reason, the Company shall make the maximum contribution to
the payment and satisfaction of such indemnified liability which shall be
permissible under applicable laws. In connection with the obligation of the
Company to indemnify for expenses as set forth above, the Company further agrees
to reimburse each indemnified party for all such expenses (including reasonable
fees, disbursements and other charges of counsel) as they are incurred by such
indemnified party; provided, however, that in no event shall the Company be
required to pay fees and expenses under this Article VIII for more than one firm
of attorneys in any jurisdiction in any one legal action or group of related
legal actions; provided, further, that if an indemnified party is reimbursed
hereunder for any expenses, such reimbursement of expenses shall be refunded to
the extent it is finally judicially determined that the Losses in question
resulted primarily from the willful misconduct, bad faith or gross negligence of
such indemnified party.
8.B Indemnification by the Purchasers. Each Purchaser agrees to
indemnify and hold harmless the Company and its officers, directors, agents and
employees (each a "Company Indemnified Party") to the fullest extent permitted
by law from and against any and all Losses resulting from any breach of any
representation or warranty of such Purchaser in this Agreement; provided,
however, that no such Purchaser shall be liable under this paragraph 8.B to the
extent that it is finally judicially determined that such Losses resulted
primarily from the willful misconduct, bad faith or gross negligence of such
Company Indemnified Party or a breach of the Company's representations in
Article V; provided, further, that if and to the extent that such
indemnification is unenforceable for any reason, such Purchaser shall make the
maximum contribution to the payment and satisfaction of such indemnified
liability which shall be permissible under applicable laws. In connection with
the obligation of each Purchaser to indemnify for expenses as set forth above,
each Purchaser further agrees to reimburse each Company Indemnified Party for
all such expenses (including reasonable fees, disbursements and other charges of
counsel) as they are incurred by such Company Indemnified Party; provided,
however, that in no event shall a Purchaser be required to pay fees and expenses
under this Article VIII for more than one firm of attorneys in any jurisdiction
in any one legal action or group of related legal actions; provided, further,
that if a Company Indemnified Party is reimbursed hereunder for any expenses,
such reimbursement of expenses shall be refunded to the
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extent it is finally judicially determined that the Losses in question resulted
primarily from the willful misconduct, bad faith or gross negligence of such
Company Indemnified Party. Notwithstanding anything to the contrary contained
herein, in no event shall the maximum aggregate liability of each Purchaser
under this Article VIII exceed an amount equal to the sum of (i) the Purchase
Price paid by such Purchaser on the Closing Date plus (ii) the Second Purchase
Price, if any, paid by such Purchaser on the Second Closing Date.
8.C Notification. Each indemnified party under this Article VIII
will, promptly (and in any event within twenty (20) days), after the receipt of
notice of the commencement of any action or other proceeding against such
indemnified party in respect of which indemnity may be sought from the Company
under this Article VIII, notify the Company in writing of the commencement
thereof. The failure of any indemnified party so to notify the Company of any
such action shall not relieve the Company from any liability which it may have
to such indemnified party other than pursuant to this Article VIII, except to
the extent that such failure causes actual damage to the Company. In case any
such action or other proceeding shall be brought against any indemnified party
and it shall notify the Company of the commencement thereof, the Company shall
be entitled to participate therein and, to the extent that it may wish, to
assume the defense thereof, with counsel reasonably satisfactory to such
indemnified party; provided, however, that any indemnified party may, at its own
expense, retain separate counsel to participate in such defense. Notwithstanding
the foregoing, in any action or proceeding in which both the Company and an
indemnified party is, or is reasonably likely to become, a party, such
indemnified party shall have the right to employ separate counsel at the
Company's expense and to control its own defense of such action or proceeding
if, in the reasonable written opinion of counsel to such indemnified party
(obtained at the expense of the Company), (a) there are or may be legal defenses
available to such indemnified party or to other indemnified parties that are
different from or additional to those available to the Company or (b) any
conflict or potential conflict exists between the Company and such indemnified
party that would make such separate representation advisable; provided, however,
that in no event shall the Company be required to pay fees and expenses under
this Article VIII for more than one firm of attorneys in any jurisdiction in any
one legal action or group of related legal actions. The Company shall not,
without the consent of the indemnified party (which consent shall not be
unreasonably withheld), consent to the entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such indemnified party of a release from all
liability in respect to such claim or litigation or which requires action other
than the payment of money by the Company. The rights accorded to indemnified
parties hereunder shall be in addition to any rights that any indemnified party
may have at common law, by separate agreement or otherwise.
8.D Registration Rights Agreement. Notwithstanding anything to
the contrary in this Article VIII, the indemnification and contribution
provisions of the Registration Rights Agreement shall govern any claim made with
respect to registration statements filed pursuant thereto or sales made
thereunder.
8.E Survival of Provisions of Article VIII. The obligations of
the Company under this Article VIII shall survive the transfer by any Purchaser
and payment, conversion or
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exercise of any Preferred Stock or any Warrants and transfer by any Purchaser of
any Common Stock issuable upon the conversion of any shares of Preferred Stock
or exercise of any Warrants.
ARTICLE IX.
MISCELLANEOUS
9.A Dividend Payments. The Company agrees that, so long as any
Purchaser shall hold any Preferred Stock, the Company will make payments with
respect thereto pursuant to the terms of the Certificate of Designation by wire
transfer of immediately available funds for credit to such Purchaser's account
set forth on Schedule I, or such other account in the United States of America
as such Purchaser may designate in writing, notwithstanding any contrary
provision herein or in any share of Preferred Stock with respect to the place of
payment. The Company agrees to afford the benefits of this paragraph to any
permitted transferee of any Preferred Stock purchased by any Purchaser
hereunder.
9.B Expenses. The Company agrees to pay, and save the Purchasers
harmless against liability for the payment of, all reasonable out-of-pocket
expenses arising in connection with (i) the negotiation and execution of this
Agreement and the issuance of the Preferred Stock and Warrants, including all
taxes (including any intangible personal property tax, together in each case
with interest and penalties, if any, and also including any filing fees payable
to any governmental authority, and any income tax payable by any Purchaser in
respect of any reimbursement for any such tax or fee) which may be payable in
respect of the execution and delivery of this Agreement or the issuance,
delivery or acquisition (but not the holding, ownership or transfer) of any
Preferred Stock or Warrants issued under or pursuant to this Agreement or any
Common Stock issuable upon conversion of any such Preferred Stock or exercise of
any Warrants, (ii) the reasonable fees and expenses of Purchasers' special
counsel in connection with this Agreement, any subsequent modification thereof
or consent thereunder (including any proposed modification or consent, whether
or not finalized) and (iii) the cost and expenses, including reasonable
attorney's fees, incurred by the Purchasers in enforcing any of their rights
hereunder, including, without limitation, costs and expenses incurred in any
bankruptcy case. The obligations of the Company under this paragraph shall
survive transfer by any Purchaser and payment or conversion of any Preferred
Stock or exercise of any Warrants and transfer by any Purchaser of any Common
Stock issuable upon the conversion of any shares thereof or exercise of any
Warrants.
9.C Consent to Amendments. This Agreement may be amended, and the
Company may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, if the Company shall obtain the written consent
to such amendment, action or omission to act given by the holder or holders of
at least 66_% of the shares of Preferred Stock at the time outstanding, except
that, without the written consent of the holder or holders of all the Preferred
Stock at the time outstanding, no amendment to this Agreement shall affect the
time or amount of any required payments, or adversely affect the conversion
rights or preference rights, or reduce the percentage of the aggregate number of
shares of the Preferred Stock required with respect to any consent or amendment.
Any consideration given to any holder to obtain his
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consent under this Agreement or the Registration Rights Agreement or with
respect to the Preferred Stock shall be given pro rata to all holders of shares
of Preferred Stock whether or not they give consent. Each holder of any shares
of Preferred Stock at the time or thereafter outstanding (or of shares of Common
Stock entitled to any rights hereunder) shall be bound by any consent authorized
by this paragraph, whether or not such shares of Preferred Stock shall have been
marked to indicate such consent, but any shares of Preferred Stock issued
thereafter may bear a notation referring to any such consent. No course of
dealing between the Company and the holder of any shares of Preferred Stock nor
any delay in exercising any rights hereunder or under any shares of Preferred
Stock shall operate as a waiver of any rights of any holder of such shares of
Preferred Stock. As used herein, the term "this Agreement" and references
thereto shall mean this Agreement as it may from time to time be amended or
supplemented.
9.D Notices to Subsequent Holder. Except as otherwise provided
herein, if any Warrants or shares of Preferred Stock shall have been transferred
to another holder and such holder shall have designated in writing the address
to which communications with respect to such Warrants or shares of Preferred
Stock shall be mailed, all notices, certificates, requests, statements and other
documents required to be delivered to the Purchaser by any provision hereof
shall also be delivered to each such holder.
9.E Survival of Representations, Warranties and Indemnities. All
representations and warranties contained herein or made in writing by the
Company in connection herewith shall survive the execution and delivery of this
Agreement, the Preferred Stock and of the Warrants, regardless of any
investigation made by any Purchaser or on such Purchaser's behalf.
9.F Successors and Assigns. Except as otherwise provided herein,
all covenants and agreements contained in this Agreement by or on behalf of any
of the parties hereto shall bind and inure to the benefit of the respective
successors and assigns of the parties hereto whether so expressed or not.
9.G Notices. All notices and other communications provided for or
given or made hereunder shall be effective upon receipt if delivered by hand or
if delivered by first class mail, registered mail return receipt requested or
overnight courier and, if to a Purchaser, at the address set forth on Schedule
III, and if to the Company, at Candlewood Hotel Company, Lakepoint Office Park,
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇, Attention: Chief Financial Officer, or
to such other address with respect to any party as such party shall notify the
other in writing.
9.H Accounting Terms. Unless otherwise set forth herein, all
accounting terms and provisions in this Agreement shall be construed to be as
determined in accordance with generally accepted accounting principles in the
United States then in effect.
9.I Satisfaction Requirement. If any agreement, certificate or
other writing, or any action taken or to be taken, is by the terms of this
Agreement required to be satisfactory to the Purchasers, the determination of
such satisfaction shall be made by the Purchasers in their reasonable judgment
exercised in good faith.
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9.J Governing Law. This Agreement shall be construed and enforced
in accordance with, and the rights of the parties shall be governed by, the laws
of the State of New York. This Agreement may not be changed orally, but (subject
to the provisions of paragraph 9C) only by an agreement in writing signed by the
party against whom enforcement is sought.
9.K Headings; Table of Contents. The descriptive headings of the
several paragraphs of this Agreement and the table of contents are inserted for
convenience only and do not constitute a part of this Agreement.
9.L Counterparts. This Agreement may be executed simultaneously
in two or more counterparts, all of which shall be deemed but one and the same
instrument and each of which shall be deemed an original, and it shall not be
necessary in making proof of this Agreement to produce or account for more than
one such counterpart.
9.M Non Business Days. If the date for making any payment or the
last date for performance of any act or the exercising of any right, as provided
in this Agreement, shall not be a Business Day, such payment may be made or act
performed or right exercised on the next succeeding Business Day, with the same
force and effect as if done on the nominal date provided in this Agreement.
9.N Further Assurances. The Company shall from time to time and
at all times hereafter make, do, execute or cause or procure to be made, done
and executed such further acts, deeds, conveyances, consents and assurances,
without further consideration, which may reasonably be required to effect the
transactions contemplated by this Agreement.
9.O Integration. This Agreement, together with the exhibits
hereto, the Stockholders Agreement and the Registration Rights Agreement embody
the entire agreement by and among the parties hereto with respect to the matters
set forth herein and supersede any and all previous agreements, whether oral or
written on the same subject matter.
9.P Termination. All of the provisions of this Agreement shall
terminate (i) with respect to each Purchaser upon the exercise, conversion,
redemption or liquidation of the Preferred Stock or Warrants held by such
Purchaser, unless the Agreement specifies otherwise and (ii) with respect to all
of the Purchasers upon the purchase or conversion of the Preferred Stock by the
Company pursuant to clause (vi)(r) of the Certificate of Designation.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed by their respective officers thereunto duly authorized as of the
day and year first above written.
CANDLEWOOD HOTEL COMPANY, INC.
By: /S/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chief Executive Officer
OLYMPUS GROWTH FUND II, L.P.
By: OGP II, L.P., its General Partner
By: RSM, L.L.C., its General Partner
By: /S/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Managing Member
OLYMPUS EXECUTIVE FUND, L.P.
By: OEF II, L.P., its General Partner
By: RSM, L.L.C., its General Partner
By: /S/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Managing Member
PRIVATE EQUITY INVESTORS III, L.P.
By: ▇▇▇▇▇ ▇. ▇▇▇▇▇ Associates III, LLC,
General Partner
By: /S/ ▇▇▇▇▇ ▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇
Title: Attorney-In-Fact
EQUITY-LINKED INVESTORS-II
By: ▇▇▇▇▇ ▇▇▇▇▇ Associates III, General Partner
By: /S/ ▇▇▇▇▇ ▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇
Title: Attorney-In-Fact
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DELAWARE STATE EMPLOYEES' RETIREMENT FUNDS
By: Pecks Management Partners Ltd., its
Investment Advisor
By: /S/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Managing Director
DECLARATION OF TRUST FOR THE DEFINED BENEFIT PLAN
OF ZENECA HOLDINGS INC.
By: Pecks Management Partners Ltd., its
Investment Advisor
By: /S/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Managing Director
DECLARATION OF TRUST FOR THE DEFINED BENEFIT PLAN
OF ICI AMERICAN HOLDINGS INC.
By: Pecks Management Partners Ltd., its
Investment Advisor
By: /S/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Managing Director
▇.▇. ▇▇▇▇▇▇▇▇▇ FAMILY TRUST
By: Pecks Management Partners Ltd., its
Investment Advisor
By: /S/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Managing Director
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ADVANCE CAPITAL PARTNERS, L.P.
By: Advance Capital Associates, L.P.
By: Advance Capital Management, LLC
By: /S/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-----------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Principal
ADVANCE CAPITAL OFFSHORE PARTNERS, L.P.
By: Advance Capital Offshore Associates, LDC
By: Advance Capital Associates, L.P.
By: Advance Capital Management,
LLC
By:/S/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
----------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Principal
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
By: /S/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Managing Director
/S/ ▇▇▇▇▇▇ ▇▇▇▇▇
--------------------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇
/S/ ▇▇▇▇▇ ▇▇▇▇▇▇
--------------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇
/S/ ▇▇▇▇▇▇▇ ▇▇▇▇
--------------------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇
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