EXHIBIT 10.40
AGREEMENT AND WARRANT TO PURCHASE 5,000,000 COMMON SHARES
Agreement and Warrant to Purchase 5,000,000 Common Shares
▇▇▇▇▇▇ HOTELS CORPORATION
This certifies that, for value received, RHD Capital Ventures LLC, the
registered holder hereof (the "Warrantholder") is entitled to purchase from
Hudson Hotels Corporation, a New York corporation with its principal office at
▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ (the "Company") Five Million
(5,000,000) shares of common stock of the Company (the "Shares") at or before
5:00 p.m. Eastern Standard Time on May 23, 2005 at the purchase price per share
of $1.00 per share (the "Warrant Price"), subject to the following terms and
conditions. The number of Shares purchasable upon exercise of this Warrant and
the Warrant Price per Share shall be subject to adjustment from time to time as
set forth herein.
1. CONSIDERATION FOR WARRANT.
This Warrant is granted in consideration of the payment of $1,000,000
to the Company by the Warrantholder, of which $250,000 has been paid in cash and
the balance of $750,000 by execution and delivery of the Warrantholder's
Promissory Note in the form attached hereto as Exhibit A.
2. EXERCISE.
This Warrant may be exercised in whole or in part at any time by
presentation of this Warrant with the Purchase Form as attached hereto duly
completed and executed, together with payment of the Warrant Price at the
principal office of the Company. Payment of the Warrant Price may be made in
cash, by wire transfer or by check. Upon surrender of the Warrant and payment of
such Warrant Price as aforesaid, the Company shall issue and cause to be
delivered with all reasonable dispatch to or upon the written order of the
Warrantholder and in such name or names as the Warrantholder may designate a
certificate or certificates for the number of full Shares so purchased upon the
exercise of the Warrant, together with Fractional Warrants, as provided in
Section 8 hereof, in respect of any fractional Shares otherwise issuable upon
such surrender. Such certificate or certificates shall be deemed to have been
issued and any person so designated to be named therein shall be deemed to have
become a holder of record of such Shares as of the date of the surrender of the
Warrant and the payment of the Warrant Price, as aforesaid, notwithstanding that
the certificates representing the Shares shall not actually have been delivered
or that the stock transfer books of the Company shall then be closed. The
Warrant shall be exercisable, at the election of the Warrantholder, either in
full or from time to time in part and, in the event that a certificate
evidencing the Warrant is exercised in respect of less than all of the Shares
specified therein at any time prior to the Termination Date, a new certificate
evidencing the remaining Warrant will be issued by the Company.
1
3. RESERVATION OF SHARES.
There has been reserved, and the Company shall at all times keep
reserved so long as the Warrant remains outstanding, out of its authorized
Common Shares, such number of Shares as shall be subject to purchase under the
Warrant. Every transfer agent for the Common Shares and other securities of the
Company issuable upon the exercise of the Warrant will be irrevocably authorized
and directed at all times to reserve such number of authorized Shares and other
securities as shall be requisite for such purpose. The Company will keep a copy
of this Warrant on file with every transfer agent for the Common Shares and
other securities of the Company issuable upon the exercise of the Warrant. The
Company will supply such transfer agent with duly executed stock and other
certificates for such purpose.
4. FURTHER OBLIGATIONS OF COMPANY.
4.1 The Company covenants and agrees that all Shares which may be
delivered upon exercise of this Warrant shall, upon delivery,
be fully paid and non-assessable, and be free from all taxes,
liens and charges with respect to the purchase thereof
hereunder, and without limiting the generality of the
foregoing, the Company covenants and agrees that it shall from
time to time take all such action as may be necessary to
assure that the par value per share of the Common Shares is at
all times equal to or less than the then current Warrant Price
per share of the Common Shares issuable pursuant to this
Warrant.
1.2 If the Warrantholder claims that this Warrant has been
mutilated, lost, destroyed or wrongfully taken, the Company
shall issue and deliver to the Warrantholder a replacement
Warrant provided that the requirements of Section 8-405 of
the New York Uniform Commercial Code has been met and, if
this Warrant has been mutilated, that it is surrendered to
the Company.
5. REGISTRATION AND TRANSFER.
The Warrant shall be registered on the books of the Company when issued
and shall be transferable only on the books of the Company maintained at its
principal office in Rochester, New York, or wherever its principal executive
offices may then be located, upon delivery thereof duly endorsed by the
Warrantholder or its duly authorized attorney or representative, or accompanied
by proper evidence of succession, assignment or authority to transfer. Upon any
registration or transfer, the Company shall execute and deliver a new Warrant to
the person entitled thereto.
6. EXCHANGE OF WARRANT CERTIFICATE.
This Warrant certificate may be exchanged for another certificate or
certificates entitling the Warrantholder to purchase a like aggregate number of
Shares as the certificate or certificates surrendered then entitled the
Warrantholder to purchase. The Warrantholder desiring to exchange
2
a Warrant certificate shall make such request in writing delivered to the
Company, and shall surrender, properly endorsed, the certificate evidencing the
Warrant to be so exchanged. Thereupon, the Company shall execute and deliver to
the person entitled thereto a new Warrant certificate as so requested.
7. ADJUSTMENT OF WARRANT PRICE AND NUMBER OF SHARES.
7.1. GENERAL. The number of Shares purchasable upon the exercise
of the Warrant and the Warrant Price shall be subject to
adjustment from time to time upon the happening of certain
events, as follows:
7.1.1. In case the Company shall, with regard to its
Common Shares (or securities convertible into
or exchangeable for Common Shares) (A) pay a
dividend in Common Shares or make a
distribution in Common Shares, (B) subdivide
its outstanding Common Shares into a greater
number of Shares, (C) combine its outstanding
Common Shares into a smaller number of Common
Shares, or (D) issue by reclassification of its
Common Shares other securities of the Company,
the number of Shares purchasable upon exercise
of the Warrant immediately prior thereto shall
be adjusted so that the Warrantholder shall be
entitled to receive the kind and number of
Shares or other securities of the Company which
it would have owned or would have been entitled
to receive after the happening of any of the
events described above, had the Warrant been
exercised immediately prior to the happening of
such event or any record date with respect
thereto. Any adjustment made pursuant to this
subsection shall become effective immediately
after the effective date of such event
retroactive to the record date, if any, for
such event.
7.1.2. No adjustment in the number of Shares
purchasable hereunder shall be required unless
such adjustment would require an increase or
decrease of at least one percent in the
aggregate number of Shares then purchasable
upon the exercise of the Warrant; provided
however, that any adjustments which by reason
of this Section 7.1.2 are not required to be
made immediately shall be carried forward and
taken into account in any subsequent
adjustment.
7.1.3. Whenever the number of Shares purchasable upon
the exercise of the Warrant is adjusted as
herein provided, the Warrant Price payable upon
exercise of the Warrant shall be adjusted by
multiplying such Warrant Price immediately
prior to such adjustment by a fraction, of
which the numerator shall be the number of
Shares purchasable upon the exercise of the
Warrant immediately prior to such adjustment,
and of which the denominator shall be the
number of shares so purchasable immediately
thereafter.
3
7.1.4. Whenever the number of Shares purchasable upon
the exercise of this Warrant or the Warrant
Price is adjusted as herein provided, the
Company shall cause to be promptly mailed to
the Warrantholder in accordance with the
provisions of Section 11 hereof, notice of such
adjustment or adjustments and a certificate of
a firm of independent public accountants
selected by the Board of Directors of the
Company (who may be the regular accountants
employed by the Company) setting forth the
number of Shares purchasable upon the exercise
of the Warrant and the Warrant Price after such
adjustment, a brief statement of the facts
requiring such adjustment, and the computation
by which such adjustment was made.
7.1.5. For the purpose of this Section 7.1, the term
"Common Shares" shall mean (A) the class of
shares designated as the Common Shares of the
Company at the date of this Agreement, or (B)
any other class of shares resulting from
successive changes or reclassifications of such
Common Shares including changes in par value,
or from par value to no par value, or from no
par value to par value. In the event that at
any time, as a result of an adjustment made
pursuant to this Section 7, the Warrantholder
shall become entitled to purchase any shares of
the Company other than Common Shares,
thereafter the number of such other shares so
purchasable upon exercise of the Warrant and
the Warrant Price of such shares shall be
subject to adjustment from time to time in a
manner and on terms as nearly equivalent as
practicable to the provisions with respect to
the Shares contained in this Section 7.
7.2. NO ADJUSTMENT OF DIVIDENDS. Except as provided in Section
7.1, no adjustment in respect of dividends shall be made
during the term of the Warrant or upon the exercise of the
Warrant.
7.3. PRESERVATION OF PURCHASE RIGHTS UPON REORGANIZATION,
RECLASSIFICATION, CONSOLIDATION, MERGER, etc. In case of any
capital reorganization or reclassification of the Common
Shares of the Company, or in case of any consolidation of
the Company with or merger of the Company into another
corporation or in case of any sale or conveyance to another
person of the property, assets or business of the Company as
an entirety or substantially as an entirety, the Company or
such successor or purchaser, as the case may be, shall
execute with the Warrantholder an agreement that the
Warrantholder shall have the right thereafter upon payment
of the Warrant Price in effect immediately prior to such
action to purchase upon exercise of the Warrant the kind and
amount of shares and other securities and property which it
would have owned or have been entitled to receive after the
happening of such reorganization or reclassification,
consolidation, merger, sale or conveyance had the Warrant
been
4
exercised immediately prior to such action. In the event of
a merger described in Section 368(a)(2)(E) of the Internal
Revenue Code of 1986, as amended, in which the Company is
the surviving corporation, the right to purchase Shares
under the Warrant shall terminate on the date of such merger
and thereupon the Warrant shall become null and void but
only if the controlling corporation shall agree to
substitute for the Warrant its warrant which entitles the
holder thereof to purchase upon its exercise the kind and
amount of shares and other securities and property which it
would have owned or had been entitled to receive had the
Warrant been exercised immediately prior to such merger. The
adjustments required by this Section 7.3 shall be effected
in a manner which shall be as nearly equivalent as may be
practicable to the adjustments provided for elsewhere in
this Section 7. The provisions of this Section 7.3 shall
similarly apply to successive consolidations, mergers, sales
or conveyances.
7.4. STATEMENT ON WARRANTS. Irrespective of any adjustments in
the Warrant Price or the number or kind of Shares
purchasable upon the exercise of the Warrant, the Warrant
certificate or certificates theretofore or thereafter issued
may continue to express the same price and number and kind
of Shares as are stated in this initially issued Warrant.
8. FRACTIONAL SHARES.
The Company shall not be required to issue fractional Shares on the
exercise of the Warrant. If any fraction of a Share would, except for the
provisions of this Section 8, be issuable on the exercise of the Warrant (or
specified portion thereof), the Company shall issue to the Warrantholder a
fractional Warrant entitling Warrantholder, upon surrender with other fractional
Warrants aggregating one or more full Shares, to purchase such full Shares. If
fractional Warrants do not aggregate a full Share, their value (over and above
their exercise price) shall be paid in full in cash upon exercise to the
exercising Warrantholder.
9. REGISTRATION.
9.1. The Company agrees that, upon exercise of the Warrant by the
Warrantholder, the Company will prepare and file a
registration statement under the Securities Act of 1933 (the
"Act") covering all or any of the Shares and will use its
best efforts to cause such registration statement to become
effective as soon as practicable and to remain effective and
current, and take all other action necessary under any
Federal or state law or regulation of any governmental
authority to permit all Warrant Shares to be sold or
otherwise disposed of and will maintain such compliance with
each such Federal and state law and regulation of any
governmental authority for the period necessary for the
Holder and such Holders to effect the proposed sale or other
disposition.
9.2. To the extent not registered under Section 9.1 above, if at
any time before June 1, 2005, the Company proposes to
register or qualify any of its securities under the Act or
any other applicable federal or state law or regulation of
governmental authority, it will each such time give written
notice to all the then holders of this Warrant, if this
5
Warrant has not yet expired, and to all holders of Shares
acquired by reason of exercise of this Warrant, of its
intention to do so and, upon the written request of any such
holder given within thirty (30) days after receipt of any
such notice (which request shall specify the number of
Shares intended to be sold or disposed of and describe the
nature of any proposed sale or other disposition thereof),
the Company will use its best efforts to cause such Shares
so specified (up to 50% of total number of Shares) to be
registered or qualified under such laws or regulations, to
the extent requisite to permit the sale or other disposition
thereof (in accordance with the method described by such
holder, provided such method is in accordance with law). The
Company will keep effective and maintain any registration or
qualification specified in this Section 9.2 for a period of
not less than six months.
9.3. Whenever the Company is required by the provisions of
Section 9.1 or 9.2 of this Section 9 to effect a
registration or qualification of any Shares, the Company
will furnish to each holder whose Shares are the subject of
such registration or qualification such number of copies of
any prospectus (including any preliminary or summary
prospectus) or other like document as such holder may
reasonably request in order to effect the sale of the
securities to be sold by such holder, and will use its best
efforts to qualify such securities under such state
securities or Blue Sky laws as may be requisite for such
purpose. All expenses incurred by the Company in connection
with any registration or qualification, including
registration or filing fees, printing expenses and fees,
compensation of regular employees of the Company and
disbursements of counsel and of independent accountants of
the Company shall be borne by the Company. Underwriters'
commissions (if any) and the fees of counsel for any holder
of Shares subject to such registration or qualification
shall be borne (in such respective amounts as shall be
determined by them) by the person or persons requesting such
registration or qualification pursuant to this Section 9.
9.4. Each holder whose securities are the subject of registration
or qualification under this Section 9 agrees to furnish to
the Company such information concerning such holder as may
be requested by the Company which is necessary in connection
with any such registration or qualification.
9.5. In the event that the Company shall be obligated to use its
best efforts to effect any registration or qualification
under either Section 9.1 or 9.2:
9.5.1. The Company will indemnify and hold harmless
each holder whose securities are the subject of
a registration or qualification under this
Section 9 and each underwriter of the
securities so registered or qualified
(including any broker or dealer through whom
such securities may be sold) and each person,
if any, who controls any such holder or any
such underwriter within the meaning of Section
15 of the Act, from and against any and all
losses, claims, damages,
6
expenses or liabilities, joint or several, to
which they or any of them may become subject
under the Act or under any other statute or at
common law or otherwise, and except as
hereinafter provided, will reimburse each such
holder and each of the underwriters and each
such controlling person, if any, for any legal
or other expenses reasonably incurred by them
or any of them in connection with investigating
or defending any actions, whether or not
resulting in any liability, insofar as such
losses, claims, damages, expenses, liabilities
or actions arise out of or are based upon any
untrue statement or alleged untrue statement of
a material fact contained in the registration
statement, in any preliminary or amended
preliminary prospectus or in the prospectus (or
the registration statement or prospectus as
from time to time amended or supplemented by
the Company), or arise out of or are based upon
the omission or alleged omission to state
therein a material fact required to be stated
therein or necessary in order to make the
statements therein not misleading, unless such
untrue statement or omission was made in such
registration statement, preliminary or amended
preliminary prospectus or prospectus in
reliance upon and in conformity with
information furnished in writing to the Company
in connection therewith by such holder or any
underwriter expressly for use therein. Promptly
after receipt by any holder or any underwriter
or any person controlling such holder or such
underwriter of notice of the commencement of
any action in respect of which indemnity may be
sought against the Company, such holder or such
underwriter, as the case may be, will notify
the Company in writing of the commencement
thereof, and subject to the provisions
hereinafter stated, the Company shall assume
the defense of such action (including the
employment of counsel, who shall be counsel
satisfactory to such holder or such underwriter
or such person, as the case may be), and the
payment of expenses insofar as such action
shall relate to any alleged liability in
respect of which indemnity may be sought
against the Company. Each holder or any
underwriter or any such controlling person
shall have the right to employ separate counsel
in any such action and to participate in the
defense thereof but the fees and expenses of
such counsel shall not be at the expense of the
Company unless the employment of such counsel
has been specifically authorized by the
Company. The Company shall not be liable to
indemnify any person for any settlement of any
such action effected without the Company's
consent; and
9.5.2. each holder will indemnify and hold harmless
the Company, each of its directors, each of its
officers who has signed the registration
statement and each person, if any, who controls
the Company within the meaning of Section 15 of
the Act from and against any and all
7
losses, claims, damages, expenses or
liabilities, joint or several, to which they or
any of them may become subject under the Act or
under any other statute or at common law or
otherwise, and except as hereinafter provided,
will reimburse the Company and each such
director, officer or controlling person for any
legal or other expenses reasonably incurred by
them or any of them in connection with
investigating or defending any actions whether
or not resulting in any liability, insofar as
such losses, claims, damages, expenses,
liabilities or actions arise out of or are
based upon any untrue statement or alleged
untrue statement of a material fact contained
in the registration statement, in any
preliminary or amended preliminary prospectus
or in the prospectus (or the registration
statement or prospectus as from time to time
amended or supplemented) or arise out of or are
based upon the omission or alleged omission to
state therein a material fact required to be
stated therein or necessary in order to make
the statements therein not misleading, but only
insofar as any such statement or omission was
made in reliance upon and in conformity with
information furnished in writing to the Company
in connection therewith by such holder
expressly for use therein. Promptly after
receipt of notice of the commencement of any
action in respect of which indemnity may be
sought against any holder, the Company will
notify such holder in writing of the
commencement thereof, and such holder, the
Company will notify such holder in writing of
the commencement thereof, and such holder
shall, subject to the provisions hereinafter
stated, assume the defense of such action
(including the employment of counsel, who shall
be counsel satisfactory to the Company) and the
payment of expenses insofar as such action
shall relate to an alleged liability in respect
of which indemnity may be sought against such
holder. The Company and each such director,
officer or controlling person shall have the
right to employ separate counsel in any such
action and to participate in the defense
thereof but the fees and expenses of such
counsel shall not be at such holder's expense
unless the employment of such counsel has been
specifically authorized by such holder. Such
holder shall not be liable to indemnify any
person for any settlement of any such action
effected without such holder's consent.
10. NO RIGHTS AS SHAREHOLDER; NOTICES TO WARRANTHOLDER.
Nothing contained in this Agreement or in any of the Warrants shall be
construed as conferring upon the Warrantholder or its transferees any rights as
a shareholder of the Company, including the right to vote, receive dividends, or
consent as a shareholder in respect of any meeting of shareholders for the
election of directors of the Company or any other matter. However, the Company
shall be required to give notice in writing to the Warrantholder of any
8
meeting of shareholders of the Company or any proposed consent of the
shareholders as provided in Section 11 hereof at least twenty (20) days prior to
the date fixed as a record date or the date of closing the transfer books for
the determination of the shareholders entitled to any relevant dividend,
distribution, subscription rights or other rights or for the determination of
shareholders entitled to vote at any such meeting or as to which any consent is
requested. Such notice shall specify such record date or the date of closing the
transfer books, as the case may be.
11. NOTICES.
Any notice pursuant to this Agreement by the Company or by the
Warrantholder shall be in writing and shall be deemed to have been duly given if
delivered by hand or if mailed by certified mail, return receipt requested,
postage prepaid, addressed as follows:
11.1. If to the Warrantholder - addressed to RHD Capital Ventures
LLC, ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇,
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇.
11.2. If to the Company - addressed to ▇▇▇▇▇▇ Hotels Corporation,
▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, Attn: E.
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Chairman or to such other address as any
such party may designate by notice to the other party.
Notices shall be deemed given at the time they are delivered
personally or three days after they are mailed in the manner
set forth above.
12. SUCCESSORS.
All the covenants and provisions of this Agreement by or for the
benefit of the Company or the Warrantholder shall bind and inure to the benefit
of their respective successors and assigns hereunder.
13. MERGER OR CONSOLIDATION OF THE COMPANY.
The Company will not merge or consolidate with or into any other
corporation or sell all or substantially all of its property to another person,
unless the provisions of Section 7.3 are complied with.
14. APPLICABLE LAW.
This Agreement shall be deemed to be a contract made under the laws of
the State of New York and for all purposes shall be construed in accordance with
the laws of said State applicable to contracts made and to be performed entirely
within such State.
15. COUNTERPARTS.
This Agreement may be executed in counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument.
16. HEADINGS.
The headings in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this Agreement.
9
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
on this 24th day of May, 2000 by its duly authorized officers and the corporate
seal hereunto fixed.
▇▇▇▇▇▇ HOTELS CORPORATION
(corporate seal)
By: ____________________________
Attest: E. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
President
-------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Secretary
10