<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of report (date of earliest event reported): July 13, 1998
CANDLEWOOD HOTEL COMPANY, INC.
(Exact name of Registrant as specified in charter)
DELAWARE 0-12708 48-1188025
(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation) Identification Number)
LAKEPOINT OFFICE PARK, 9342 EAST CENTRAL 67206
WICHITA, KANSAS (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (316) 631-1300
None
(Former name or former address, if changed since last report)
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ITEM 5. OTHER EVENTS
In two closings, on July 13, 1998 and August 3, 1998 Candlewood
Hotel Company, Inc., a Delaware corporation ("the Company") completed a private
placement (the "Private Placement") whereby the Company issued 42,000 shares of
its Series B Cumulative Convertible Preferred Stock, par value $0.01 per share
(the "Series B Preferred Stock"), at a price of $1,000 per share and warrants
exercisable for 336,000 shares of the Company's Common Stock, par value $.01 per
share (the "Warrants"). The Series B Preferred Stock and Warrants were issued
pursuant to a Securities Purchase Agreement dated as of June 30, 1998 (the
"Securities Purchase Agreement"). On July 13, 1998, the Company issued 39,210
shares of Series B Preferred Stock and 313,680 Warrants in return for proceeds
of $39,210,000, and on August 3, 1998, the Company issued 2,790 shares of Series
B Preferred Stock and 22,320 Warrants in return for proceeds of $2,790,000. The
purchasers of the Series B Preferred Stock (the "Purchasers") consisted of a
group of institutional investors and individuals who are "accredited investors"
within the meaning of Regulation D promulgated under the Securities Act of 1933,
as amended (the "Act"). In connection with the Private Placement, the Company
paid cash in the aggregate amount of $420,000 to the Purchasers as a financing
fee and a placement fee to Donaldson, Lufkin & Jenrette Securities Corporation.
The Company intends to use the net proceeds of the Private Placement, after the
payment of expenses, to support the Company's national expansion through the
development of Company-owned Candlewood hotels and for general working capital
purposes.
The rights of the Purchasers as holders of the Series B Preferred
Stock are set forth in the Company's Certificate of Incorporation, as amended by
the Certificate of Designations of Series B Cumulative Convertible Preferred
Stock which was filed with the Secretary of State of Delaware on July 13, 1998.
The holders of the Series B Preferred Stock are entitled to a preferential
quarterly dividend equal to 7.5% of the Stated Value (initially $1,000.00 per
share, subject to adjustment), payable quarterly beginning on August 31, 1998.
The Certificate of Designation provides for conversion of the Series B Preferred
Stock into Common Stock of the Company, upon the election of the holders, at a
price of $9.50 per share of Common Stock, subject to certain anti-dilution
adjustments (the "Conversion Price"). The Series B Preferred Stock will
automatically convert into Common Stock subsequent to March 31, 2000 at the then
applicable Conversion Price if the Common Stock has traded for 20 consecutive
days with an average trading volume of at least 300,000 shares per day at not
less than 200% of the Conversion Price or upon the effectiveness of a
registration statement for an underwritten offering at a per share price of not
less than 200% of the Conversion Price covering up to 50% of the shares of
common stock issuable upon conversion of the then outstanding Series B Preferred
Stock. Holders of Series B Preferred Stock have a liquidation preference equal
to $1,000.00 per share plus any accrued but unpaid dividends (the "Liquidation
Preference Price"). With certain limited exceptions, in the event of a change of
control of the Company, the Company shall offer to purchase all of the
outstanding shares of Series B Preferred Stock at the greater of (i) 175% of the
Stated Value or (ii) the Liquidation Preference Price. The Purchasers have
agreed that they will forfeit their preferential rights in certain cases if they
are a member of a group which causes a change of control of the Company prior to
August 27, 1999. The Company is required to
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redeem the Series B Preferred Stock on September 30, 2004 for the Liquidation
Preference Price and may redeem after September 30, 1999, at its election, for
200% of the Liquidation Preference Price.
Holders of Series B Preferred Stock have the right to vote with
the Common Stock and the Company's Series A Cumulative Convertible Preferred
Stock (the "Series A Preferred Stock") on an as-if-converted basis. Approval of
the majority of the outstanding Series B Preferred Stock will be required for
any change in the Company's Restated Certificate of Incorporation which would
(i) adversely affect the holders of the Series B Preferred Stock; (ii) create
any class or series of stock which is senior to or on parity with the Series B
Preferred Stock with respect to voting rights, dividends or liquidation
preference or (iii) affect any redemption or repurchase of any capital stock of
the Company junior to the Series B Preferred Stock. The Certificate of
Designation also provides the Holders of the Series B Preferred Stock with
protection from certain dilutive share issuances and other events.
In connection with the Private Placement, the Company entered
into an Amended and Restated Registration Rights Agreement dated as of July 10,
1998 with the holders of the Series B Preferred Stock and the Series A Preferred
Stock. Pursuant to the terms of this agreement the holders of the Series B
Preferred Stock and Series A Preferred Stock have certain rights in respect of
(i) demand registrations with net offering proceeds exceeding $20,000,000 per
demand registration, (ii) shelf registrations with net offering proceeds
exceeding $2,500,000 per shelf registration, and (iii) "piggyback" registration
rights in connection with certain public distributions.
The Warrants are exercisable into Common Stock at an exercise
price of $12.00 per share, subject to certain anti-dilution adjustments and
expire on July 13, 2005.
In accordance with the Securities Purchase Agreement, the Board
of Directors voted on June 30, 1998 to amend the Company's Bylaws to increase
the size of the Board of Directors from ten to twelve members. In connection
with the Private Placement, one nominee selected by certain of the Purchasers
and one additional independent director will be elected as new members of the
Board of Directors. The Purchasers of the Series B Preferred Stock shall
continue to be entitled to nominate one individual to serve on the Company's
Board of Directors. The Purchasers of the Series B Preferred Stock, the holders
of the Series A Preferred Stock, Doubletree Corporation and certain members of
management have agreed to vote for each other's nominees for the Board of
Directors pursuant to an Amended and Restated Stockholders Agreement dated as of
July 10, 1998.
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ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS.
(c) Exhibits
<TABLE>
<CAPTION>
Exhibit Number Description of Document
<S> <C>
3 Amended Bylaws of the Company
4.1 Certificate of Designations, Preferences and Relative,
Participating, Optional and Other Special Rights of Preferred
Stock and Qualifications, Limitations and Restrictions Thereof of
Series B Cumulative Convertible Preferred Stock
4.2 Certificate of Amendment of Certificate of Designations, Preferences
and Relative, Participating, Optional and Other Special Rights of
Preferred Stock and Qualifications, Limitations and Restrictions
Thereof of Series A Cumulative Convertible Preferred Stock
4.3 Form of Warrant
4.4 Amended and Restated Registration Rights Agreement dated as of
July 10, 1998
10.1 Securities Purchase Agreement dated as of June 30, 1998
10.3 Amended and Restated Stockholders Agreement dated as of
July 10, 1998
99.1 Press Release, dated July 15, 1998, announcing completion of the
first closing
99.2 Press Release, dated August 4, 1998, announcing completion of the
second closing
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
Dated: August 6, 1998 CANDLEWOOD HOTEL COMPANY, INC.
By: /S/ JACK P. DEBOER
----------------------------
Name: Jack P. DeBoer
Title: Chief Executive Officer
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EXHIBIT 3
CERTIFICATE OF AMENDMENT
OF THE BYLAWS
OF CANDLEWOOD HOTEL COMPANY, INC.,
A DELAWARE CORPORATION
The undersigned, Warren D. Fix, hereby certifies that he is the
duly elected and acting Executive Vice President, Chief Financial Officer,
Secretary and Treasurer of Candlewood Hotel Company, Inc., a Delaware
corporation (the "Company"), and that attached hereto as Exhibit A is a true,
correct and complete copy of the amendment to Section 3.1 of Article III of the
Bylaws of the Company as duly adopted by the Board of Directors on June 30,
1998.
IN WITNESS WHEREOF, the undersigned has executed this Certificate
as of June 30, 1998.
/s/ WARREN D. FIX
------------------------------------------
WARREN D. FIX
Executive Vice President, Chief Financial
Officer, Secretary and Treasurer
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EXHIBIT A
AMENDMENT TO SECTION 3.1 OF ARTICLE III
OF THE BYLAWS OF
CANDLEWOOD HOTEL COMPANY, INC.,
A DELAWARE CORPORATION
Section 3.1 of Article III of the Bylaws of the Company is hereby
amended to read in its entirety as follows:
Section 3.1 Number, Election and Tenure. The authorized number
of directors which shall constitute the Board shall not be less than
seven (7) nor more than twelve (12). The exact number shall be
determined from time to time by resolution of the Board. Directors shall
be elected at the annual meeting of stockholders and each director shall
serve until such person's successor is elected and qualified or until
such person's death, retirement, resignation or removal. The directors
need not be stockholders. Subject to the rights, if any, of the holders
of shares of Preferred Stock then outstanding, if any, any and all
directors of the corporation may be removed from office by the
stockholders only for cause and only by the affirmative vote of at least
sixty-six and two-thirds percent (66-2/3%) of the outstanding shares of
Common Stock of the corporation at any annual or special meeting of
stockholders of the corporation, the notice of which shall state that
the removal of a director or directors is among the purposes of the
meeting.
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CERTIFICATE OF AMENDMENT
OF THE BYLAWS
OF CANDLEWOOD HOTEL COMPANY, INC.,
A DELAWARE CORPORATION
The undersigned, Warren D. Fix, hereby certifies that he is the
duly elected and acting Vice President, Chief Financial Officer and Secretary of
Candlewood Hotel Company, Inc., a Delaware corporation (the "Company"), and that
(i) attached hereto as Exhibit A is a true, correct and complete copy of the
amendment to Section 3.1 of Article III of the Bylaws of the Company as duly
adopted by the Board of Directors at a Special Meeting on September 19, 1997;
and (ii) attached hereto as Exhibit B is a true, correct and complete copy of
the amendment to Section 4.7 of Article IV of the Bylaws of the Company as duly
adopted by the Board of Directors at a Special Meeting on September 19, 1997.
IN WITNESS WHEREOF, the undersigned has executed this Certificate
as of September 19, 1997.
/s/ WARREN D FIX
-----------------------------------------
WARREN D. FIX
Executive Vice President, Chief Financial
Officer and Secretary
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EXHIBIT A
AMENDMENT TO SECTION 3.1 OF ARTICLE III
OF THE BYLAWS
OF CANDLEWOOD HOTEL COMPANY, INC.,
A DELAWARE CORPORATION
Section 3.1 of Article III of the Bylaws of the Company is hereby
amended to read in its entirety as follows:
Section 3.1. Number, Election and Tenure. The authorized number
of directors which shall constitute the Board shall not be less than
seven (7) nor more than ten (10). The exact number shall be determined
from time to time by resolution of the Board. Until otherwise determined
by such resolution, the Board shall consist of ten (10) persons.
Directors shall be elected at the annual meeting of stockholders and
each director shall serve until such person's successor is elected and
qualified or until such person's death, retirement, resignation or
removal. The directors need not be stockholders. Subject to the rights,
if any, of the holders of shares of Preferred Stock then outstanding, if
any, any and all directors of the corporation may be removed from office
by the stockholders only for cause and only by the affirmative vote of
at least sixty-six and two-thirds percent (66-2/3%) of the outstanding
shares of Common Stock of the corporation at any annual or special
meeting of stockholders of the corporation, the notice of which shall
state that the removal of a director or directors is among the purposes
of the meeting.
A-1
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EXHIBIT B
AMENDMENT TO SECTION 4.7 OF ARTICLE IV
OF THE BYLAWS
OF CANDLEWOOD HOTEL COMPANY, INC.,
A DELAWARE CORPORATION
Section 4.7 of Article IV of the Bylaws of the Company is hereby amended
to read in its entirety as follows:
Section 4.7 President. Subject to such supervisory powers, if
any, as may be given by the Board of Directors to the Chairman of the
Board, if there be such an officer, the President shall be the Chief
Executive Officer of the corporation, unless such an officer is elected
separately by the Board of Directors, and shall, subject to the control
of the Board of Directors, have general supervision, direction and
control of the business and officers of the corporation. He shall
preside at all meetings of the stockholders and, in the absence of the
Chairman of the Board, or if there be none, at all meetings of the Board
of Directors. He shall be an ex-officio member of all committees and
shall have the general powers and duties of management usually vested in
the office of President and Chief Executive Officer of corporations, and
shall have such other powers and duties as may be prescribed by the
Board of Directors or these Bylaws.
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BYLAWS
OF
CANDLEWOOD HOTEL COMPANY, INC.,
A DELAWARE CORPORATION
<PAGE> 7
TABLE OF CONTENTS
<TABLE>
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PAGE
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ARTICLE I. - OFFICES.......................................................................1
Section 1.1. Registered Office...............................................1
Section 1.2. Other Offices...................................................1
ARTICLE II. - MEETINGS OF STOCKHOLDERS......................................................1
Section 2.1. Place of Meetings...............................................1
Section 2.2. Annual Meeting of Stockholders. ................................1
Section 2.3. Quorum; Adjourned Meetings and Notice Thereof. .................1
Section 2.4. Voting. ........................................................2
Section 2.5. Proxies. .......................................................2
Section 2.6. Special Meetings. ..............................................2
Section 2.7. Notice of Stockholder's Meetings. ..............................2
Section 2.8. Stockholder Proposals...........................................2
Section 2.9. Maintenance and Inspection of Stockholder List. ................3
Section 2.10. No Stockholder Action by Written Consent Without a Meeting......3
ARTICLE III. - DIRECTORS.....................................................................4
Section 3.1. Number, Election and Tenure.....................................4
Section 3.2. Vacancies. .....................................................4
Section 3.3. Notification of Nomination. ....................................4
Section 3.4. Powers. ........................................................5
Section 3.5. Directors' Meetings. ...........................................5
Section 3.6. Regular Meetings. ..............................................5
Section 3.7. Special Meetings. ..............................................5
Section 3.8. Quorum. ........................................................5
Section 3.9. Action Without Meeting. ........................................6
Section 3.10. Telephonic Meetings. ...........................................6
Section 3.11. Committees of Directors. .......................................6
Section 3.12. Minutes of Committee Meetings. .................................6
Section 3.13. Compensation of Directors. .....................................7
Section 3.14. Indemnification.................................................7
ARTICLE IV. - OFFICERS......................................................................9
Section 4.1. Officers........................................................9
Section 4.2. Election of Officers............................................9
Section 4.3. Subordinate Officers............................................9
Section 4.4. Compensation of Officers. .....................................10
Section 4.5. Term of Office; Removal and Vacancies..........................10
Section 4.6. Chairman of the Board. ........................................10
Section 4.7. President. ....................................................10
Section 4.8. Vice President. ...............................................10
</TABLE>
i
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<TABLE>
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PAGE
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Section 4.9. Secretary. ....................................................10
Section 4.10. Assistant Secretaries. ........................................11
Section 4.11. Chief Financial Officer. ......................................11
Section 4.12. Assistant Treasurer............................................11
ARTICLE V. - CERTIFICATES OF STOCK........................................................11
Section 5.1. Certificates...................................................11
Section 5.2. Signatures on Certificates.....................................11
Section 5.3. Statement of Stock Rights, Preferences, Privileges.............12
Section 5.4. Lost Certificates..............................................12
Section 5.5. Transfers of Stock. ...........................................12
Section 5.6. Fixing Record Date. ...........................................12
Section 5.7. Registered Stockholders........................................12
ARTICLE VI. - GENERAL PROVISIONS...........................................................13
Section 6.1. Dividends......................................................13
Section 6.2. Payment of Dividends...........................................13
Section 6.3. Checks.........................................................13
Section 6.4. Fiscal Year....................................................13
Section 6.5. Corporate Seal.................................................13
Section 6.6. Manner of Giving Notice........................................13
Section 6.7. Waiver of Notice...............................................13
Section 6.8. Annual Statement...............................................14
ARTICLE VII. - AMENDMENTS...................................................................14
Section 7.1. Amendment by Directors or Stockholders.........................14
</TABLE>
ii
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BYLAWS
OF
CANDLEWOOD HOTEL COMPANY, INC.,
A DELAWARE CORPORATION
ARTICLE I.
OFFICES
Section 1.1. Registered Office. The registered office shall be in
the City of Wilmington, County of New Castle, State of Delaware.
Section 1.2. Other Offices. The corporation may also have offices
at such other places both within and without the State of Delaware as the Board
of Directors may from time to time determine or the business of the corporation
may require.
ARTICLE II.
MEETINGS OF STOCKHOLDERS
Section 2.1. Place of Meetings. Meetings of stockholders shall be
held at any place within or without the State of Delaware designated by the
Board of Directors. In the absence of any such designation, stockholders'
meetings shall be held at the principal executive office of the corporation.
Section 2.2. Annual Meeting of Stockholders. The annual meeting
of stockholders shall be held each year on a date and a time designated by the
Board of Directors. At each annual meeting directors shall be elected and any
other proper business may be transacted.
Section 2.3. Quorum; Adjourned Meetings and Notice Thereof. A
majority of the stock issued and outstanding and entitled to vote at any meeting
of stockholders, the holders of which are present in person or represented by
proxy, shall constitute a quorum for the transaction of business except as
otherwise provided by law, by the Certificate of Incorporation, or by these
Bylaws. A quorum, once established, shall not be broken by the withdrawal of
enough votes to leave less than a quorum and the votes present may continue to
transact business until adjournment. If, however, such quorum shall not be
present or represented at any meeting of the stockholders, a majority of the
voting stock represented in person or by proxy may adjourn the meeting from time
to time, without notice other than announcement at the meeting, until a quorum
shall be present or represented. At such adjourned meeting at which a quorum
shall be present or represented, any business may be transacted which might have
been transacted at the meeting as originally notified. If the adjournment is for
more than thirty days, or if after the adjournment a new record date is fixed
for the adjourned meeting, a notice of the adjourned meeting shall be given to
each stockholder of record entitled to vote thereat.
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Section 2.4. Voting. When a quorum is present at any meeting, the
vote of the holders of a majority of the stock having voting power present in
person or represented by proxy shall decide any question brought before such
meeting, unless the question is one upon which by express provision of the
statutes, or the Certificate of Incorporation, or these Bylaws, a different vote
is required in which case such express provision shall govern and control the
decision of such question.
Section 2.5. Proxies. At each meeting of the stockholders, each
stockholder having the right to vote may vote in person or may authorize another
person or persons to act for him by proxy appointed by an instrument in writing
subscribed by such stockholder and bearing a date not more than three years
prior to said meeting, unless said instrument provides for a longer period. All
proxies must be filed with the Secretary of the corporation at the beginning of
each meeting in order to be counted in any vote at the meeting. Each stockholder
shall have one vote for each share of stock having voting power, registered in
his name on the books of the corporation on the record date set by the Board of
Directors as provided in Article V, Section 5.6 hereof. All elections shall be
had and all questions decided by a plurality vote.
Section 2.6. Special Meetings. Special meetings of the
stockholders, for any purpose, or purposes, unless otherwise prescribed by
statute or by the Certificate of Incorporation, may be called by the President
and shall be called by the President or the Secretary at the request in writing
of a majority of the Board of Directors, the Chairman or any Co-Chairman of the
Board of Directors and shall be held at such place, on such date, and at such
time as shall be fixed by the person or persons calling the meeting, but such
special meetings may not be called by any other person or persons. Such request
shall state the purpose or purposes of the proposed meeting. Business transacted
at any special meeting of stockholders shall be limited to the purposes stated
in the notice.
Section 2.7. Notice of Stockholder's Meetings. Whenever
stockholders are required or permitted to take any action at a meeting, a
written notice of the meeting shall be given which notice shall state the place,
date and hour of the meeting, and, in the case of a special meeting, the purpose
or purposes for which the meeting is called. The written notice of any meeting
shall be given to each stockholder entitled to vote at such meeting not less
than ten nor more than sixty days before the date of the meeting. If mailed,
notice is given when deposited in the United States mail, postage prepaid,
directed to the stockholder at his address as it appears on the records of the
corporation.
Section 2.8. Stockholder Proposals. At an annual meeting of
stockholders, only such business shall be conducted, and only such proposals
shall be acted upon, as shall have been brought before the annual meeting (a)
by, or at the direction of, a majority of the directors, or (b) by any
stockholder of the corporation who complies with the notice procedures set forth
in this Section 2.8. For a proposal to be properly brought before an annual
meeting by a stockholder, the stockholder must be given timely notice thereof in
writing to the Secretary of the corporation. To be timely, a stockholder's
notice must be delivered to, or mailed and received at, the principal executive
offices of the corporation not less than 60 days prior to the scheduled annual
meeting, regardless of any postponements, deferrals or adjournments of that
meeting to a later
2
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date; provided, however, that if less than 70 days' notice or prior public
disclosure of the date of the scheduled annual meeting is given or made, notice
by the stockholder, to be timely, must be so delivered or received not later
than the close of business on the tenth day following the earlier of the day on
which such notice of the date of the scheduled annual meeting was mailed or the
day on which such public disclosure was made. A stockholder's notice to the
Secretary shall set forth as to each matter the stockholder proposes to bring
before the annual meeting (a) a brief description of the proposal desired to be
brought before the annual meeting and the reasons for conducting such business
at the annual meeting, (b) the name and address, as they appear on the
corporation's books, of the stockholder proposing such business and any other
stockholders known by such stockholder to be supporting such proposal, (c) the
class and number of shares of the corporation's stock which are beneficially
owned by the stockholder on the date of such stockholder notice and by any other
stockholders known by such stockholder to be supporting such proposal on the
date of such stockholder notice, and (d) any financial interest of the
stockholder in such proposal.
The presiding officer of the annual meeting shall determine and
declare at the annual meeting whether the stockholder proposal was made in
accordance with the terms of this Section 2.8. If the presiding officer
determines that a stockholder proposal was not made in accordance with the terms
of this Section 2.8, he shall so declare at the annual meeting and any such
proposal shall not be acted upon at the annual meeting.
This provision shall not prevent the consideration and approval
or disapproval at the annual meeting of reports of officers, directors and
committees of the Board of Directors, but, in connection with such reports, no
new business shall be acted upon at such annual meeting unless stated, filed and
received as herein provided.
Section 2.9. Maintenance and Inspection of Stockholder List. The
officer who has charge of the stock ledger of the corporation shall prepare and
make, at least ten days before every meeting of stockholders, a complete list of
the stockholders entitled to vote at the meeting, arranged in alphabetical
order, and showing the address of each stockholder and the number of shares
registered in the name of each stockholder. Such list shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten days prior to the meeting,
either at a place within the city where the meeting is to be held, which place
shall be specified in the notice of the meeting, or, if not so specified, at the
place where the meeting is to be held. The list shall also be produced and kept
at the time and place of the meeting during the whole time thereof, and may be
inspected by any stockholder who is present.
Section 2.10. No Stockholder Action by Written Consent Without a
Meeting. Effective upon the closing of the corporation's initial sale of its
Common Stock in a firm commitment underwriting involving a public offering
pursuant to a Registration Statement on Form S-1 under the Securities Act of
1933, as amended, any action required or permitted to be taken at any annual or
special meeting of stockholders may be taken only upon the vote of the
stockholders at an annual or special meeting duly called and may not be taken by
written consent of the stockholders.
3
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ARTICLE III.
DIRECTORS
Section 3.1. Number, Election and Tenure. The authorized number
of directors which shall constitute the Board shall not be less than four (4)
nor more than seven (7). The exact number shall be determined from time to time
by resolution of the Board. Until otherwise determined by such resolution, the
Board shall consist of four (4) persons. Directors shall be elected at the
annual meeting of stockholders and each director shall serve until such person's
successor is elected and qualified or until such person's death, retirement,
resignation or removal. The directors need not be stockholders. Subject to the
rights, if any, of the holders of shares of Preferred Stock then outstanding, if
any, any and all directors of the corporation may be removed from office by the
stockholders only for cause and only by the affirmative vote of at least
sixty-six and two-thirds percent (66-2/3%) of the outstanding shares of Common
Stock of the corporation at any annual or special meeting of stockholders of the
corporation, the notice of which shall state that the removal of a director or
directors is among the purposes of the meeting.
Section 3.2. Vacancies. Vacancies on the Board of Directors by
reason of death, resignation, retirement, disqualification, removal from office,
or otherwise, and newly created directorships resulting from any increase in the
authorized number of directors shall be filled solely by the affirmative vote of
a majority of the remaining directors then in office, even though less than a
quorum, or by a sole remaining director. The directors so chosen shall hold
office until the next annual election of directors and until their successors
are duly elected and qualified, unless sooner displaced. If there are no
directors in office, then an election of directors may be held in the manner
provided by statute. If, at the time of filling any vacancy or any newly created
directorship, the directors then in office shall constitute less than a majority
of the whole Board (as constituted immediately prior to any such increase), the
Court of Chancery may, upon application of any stockholder or stockholders
holding at least ten percent of the total number of the shares at the time
outstanding having the right to vote for such directors, summarily order an
election to be held to fill any such vacancies or newly created directorships,
or to replace the directors chosen by the directors then in office. No decrease
in the number of directors constituting the Board of Directors shall shorten the
term of any incumbent director.
Section 3.3. Notification of Nomination. Subject to the rights,
if any, of the holders of shares of Preferred Stock then outstanding, if any,
only persons who are nominated in accordance with the following procedures shall
be eligible for election as directors. Nominations of persons for election to
the Board of Directors of the corporation may be made at a meeting of
stockholders by or at the direction of the Board of Directors, by any nominating
committee or person appointed by the Board, or by any stockholder of the
corporation entitled to vote for the election of directors at the meeting who
complies with the notice procedures set forth in this Section 3.3. Such
nominations, other than those made by or at the direction of the Board or by any
nominating committee or person appointed by the Board, shall be made pursuant to
timely notice in writing to the Secretary of the corporation. To be timely, a
stockholder's notice must be delivered to, or mailed and received at, the
principal executive offices of the corporation not less than 60 days prior to
the scheduled annual meeting, regardless of any postponements, deferrals or
adjournments of that meeting to a later date; provided, however, that if less
than 70
4
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days' notice or prior public disclosure of the date of the scheduled annual
meeting is given or made, notice by the stockholder, to be timely, must be so
delivered or received not later than the close of business on the tenth day
following the earlier of the day on which such notice of the date of the
scheduled annual meeting was mailed or the day on which such public disclosure
was made. A stockholder's notice to the Secretary shall set forth (a) as to each
person whom the stockholder proposes to nominate for election or reelection as a
director, (i) the name, age, business address and residence address of the
person, (ii) the principal number of shares of capital stock of the corporation
which are beneficially owned by the person and (iii) any other information
relating to the person that is required to be disclosed in solicitations for
proxies for election of directors pursuant to Rule 14a under the Securities
Exchange Act of 1934, as amended; and (b) as to the stockholder giving the
notice (i) the name and address, as they appear on the corporation's books, of
the stockholder and (ii) the class and number of shares of the corporation's
stock which are beneficially owned by the stockholder on the date of such
stockholder notice. The corporation may require any proposed nominee to furnish
such other information as may reasonably be required by the corporation to
determine the eligibility of such proposed nominee to serve as director of the
corporation.
The presiding officer of the annual meeting shall determine and
declare at the annual meeting whether the nomination was made in accordance with
the terms of this Section 3.3. If the presiding officer determines that a
nomination was not made in accordance with the terms of this Section 3.3, he
shall so declare at the annual meeting and any such defective nomination shall
be disregarded.
Section 3.4. Powers. The property and business of the corporation
shall be managed by or under the direction of its Board of Directors. In
addition to the powers and authorities by these Bylaws expressly conferred upon
them, the Board may exercise all such powers of the corporation and do all such
lawful acts and things as are not by statute or by the Certificate of
Incorporation or by these Bylaws directed or required to be exercised or done by
the stockholders.
Section 3.5. Directors' Meetings. The directors may hold their
meetings and have one or more offices, and keep the books of the corporation
outside of the State of Delaware.
Section 3.6. Regular Meetings. Regular meetings of the Board of
Directors may be held without notice at such time and place as shall from time
to time be determined by the Board.
Section 3.7. Special Meetings. Special meetings of the Board of
Directors may be called by the President on forty-eight hours' notice to each
director, either personally or by mail or by telegram; special meetings shall be
called by the President or the Secretary in like manner and on like notice on
the written request of two directors unless the Board consists of only one
director; in which case special meetings shall be called by the President or
Secretary in like manner or on like notice on the written request of the sole
director.
Section 3.8. Quorum. At all meetings of the Board of Directors a
majority of the authorized number of directors shall be necessary and sufficient
to constitute a quorum for
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the transaction of business, and the vote of a majority of the directors present
at any meeting at which there is a quorum, shall be the act of the Board of
Directors, except as may be otherwise specifically provided by statute, by the
Certificate of Incorporation or by these Bylaws. If a quorum shall not be
present at any meeting of the Board of Directors the directors present thereat
may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present. If only one
director is authorized, such sole director shall constitute a quorum.
Section 3.9. Action Without Meeting. Unless otherwise restricted
by the Certificate of Incorporation or these Bylaws, any action required or
permitted to be taken at any meeting of the Board of Directors or of any
committee thereof may be taken without a meeting, if all members of the Board or
committee, as the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the Board or committee.
Section 3.10. Telephonic Meetings. Unless otherwise restricted by
the Certificate of Incorporation or these Bylaws, members of the Board of
Directors, or any committee designated by the Board of Directors, may
participate in a meeting of the Board of Directors, or any committee, by means
of conference telephone or similar communications equipment by means of which
all persons participating in the meeting can hear each other, and such
participation in a meeting shall constitute presence in person at such meeting.
Section 3.11. Committees of Directors. The Board of Directors
may, by resolution passed by a majority of the whole Board, designate one or
more committees, each such committee to consist of one or more of the directors
of the corporation. The Board may designate one or more directors as alternate
members of any committee, who may replace any absent or disqualified member at
any meeting of the committee. In the absence or disqualification of a member of
a committee, the member or members thereof present at any meeting and not
disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member. Any such
committee, to the extent provided in the resolution of the Board of Directors,
shall have and may exercise all the powers and authority of the Board of
Directors in the management of the business and affairs of the corporation, and
may authorize the seal of the corporation to be affixed to all papers which may
require it; but no such committee shall have the power or authority in reference
to amending the Certificate of Incorporation, adopting an agreement of merger or
consolidation, recommending to the stockholders the sale, lease or exchange of
all or substantially all of the corporation's property and assets, recommending
to the stockholders a dissolution of the corporation or a revocation of a
dissolution, or amending the Bylaws of the corporation; and, unless the
resolution or the Certificate of Incorporation expressly so provide, no such
committee shall have the power or authority to declare a dividend or to
authorize the issuance of stock.
Section 3.12. Minutes of Committee Meetings. Each committee shall
keep regular minutes of its meetings and report the same to the Board of
Directors when required.
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Section 3.13. Compensation of Directors. Unless otherwise
restricted by the Certificate of Incorporation or these Bylaws, the Board of
Directors shall have the authority to fix the compensation of directors. The
directors may be paid their expenses, if any, of attendance at each meeting of
the Board of Directors and may be paid a fixed sum for attendance at each
meeting of the Board of Directors or a stated salary as director. No such
payment shall preclude any director from serving the corporation in any other
capacity and receiving compensation therefor. Members of special or standing
committees may be allowed like compensation for attending committee meetings.
Section 3.14. Indemnification.
(a) The corporation shall indemnify any person who
was or is made a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of the
corporation) by reason of the fact that he or she is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, limited liability company, trust or other
enterprise, against all expense, liability and loss (including attorneys' fees),
judgments, fines, ERISA excise taxes and amounts paid or to be paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
(b) The corporation shall indemnify any person who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that he is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, limited liability company, trust or
other enterprise against expenses, liability and loss (including attorneys'
fees) actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation and except that no such indemnification shall be made in respect of
any claim, issue or matter as to which such person shall have been adjudged to
be liable for negligence or misconduct in the performance of his duty to the
corporation unless and only to the extent that the Court of Chancery of Delaware
or the court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view of all the
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<PAGE> 16
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which such Court of Chancery or such other court
shall deem proper.
(c) To the extent that a director, officer,
employee or agent of the corporation shall be successful on the merits or
otherwise in defense of any action, suit or proceeding referred to in paragraphs
(a) and (b), or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith.
(d) Any indemnification under paragraphs (a) and
(b) (unless ordered by a court) shall be made by the corporation only as
authorized in the specific case upon a determination that indemnification of the
director, officer, employee or agent is proper in the circumstances because he
has met the applicable standard of conduct set forth in paragraphs (a) and (b).
Such determination shall be made (1) by the Board of Directors by a majority
vote of a quorum consisting of directors who were not parties to such action,
suit or proceeding, or (2) if such a quorum is not obtainable, or, even if
obtainable a quorum of disinterested directors so directs, by independent legal
counsel in a written opinion, or (3) by the stockholders.
(e) Expenses incurred in defending a civil or
criminal action, suit or proceeding may be paid by the corporation in advance of
the final disposition of such action, suit or proceeding as authorized by the
Board of Directors in the manner provided in paragraph (d) upon receipt of an
undertaking by or on behalf of the director, officer, employee or agent to repay
such amount unless it shall ultimately be determined that he is entitled to be
indemnified by the corporation as authorized in this Section 3.14.
(f) The indemnification provided by this Section
3.14 shall not be deemed exclusive of any other rights to which those
indemnified may be entitled under any bylaw, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in his official capacity
and as to action in another capacity while holding such office, and shall
continue as to a person who has ceased to be a director, officer, employee or
agent and shall inure to the benefit of the heirs, executors and administrators
of such a person.
(g) The Board of Directors may authorize, by a vote
of a majority of a quorum of the Board of Directors, the corporation to purchase
and maintain insurance on behalf of any person who is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against any
liability asserted against him and incurred by him in any such capacity, or
arising out of his status as such, whether or not the corporation would have the
power to indemnify him against such liability under the provisions of this
Section 3.14.
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(h) For the purposes of this Section 3.14,
references to "the corporation" shall include, in addition to the resulting
corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers, and employees or agents, so that any person who is or was a
director, officer, employee or agent of such constituent corporation, or is or
was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
limited liability company, trust or other enterprise, shall stand in the same
position under the provisions of this Section with respect to the resulting or
surviving corporation as he would have with respect to such constituent
corporation if its separate existence had continued.
(i) For purposes of this section, references to
"other enterprises" shall include employee benefit plans; references to "fines"
shall include any excise taxes assessed on a person with respect to an employee
benefit plan; and references to "serving at the request of the corporation"
shall include service as a director, officer, employee or agent of the
corporation which imposes duties on, or involves services by, such director,
officer, employee or agent with respect to an employee benefit plan, its
participants or beneficiaries; and a person who acted in good faith and in a
manner he reasonably believed to be in the interest of the participants and
beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of the corporation" as referred to in
this section.
ARTICLE IV.
OFFICERS
Section 4.1. Officers. The officers of this corporation shall be
chosen by the Board of Directors and shall include a Chairman of the Board, a
President, a Secretary, and a Chief Financial Officer. The corporation may also
have at the discretion of the Board of Directors such other officers as are
desired, including one or more Vice Presidents, one or more Assistant
Secretaries and Assistant Treasurers, and such other officers as may be
appointed in accordance with the provisions of Section 4.3 hereof. In the event
there are two or more Vice Presidents, then one or more may be designated as
Executive Vice President, Senior Vice President, or other similar or dissimilar
title. At the time of the election of officers, the directors may by resolution
determine the order of their rank. Any number of offices may be held by the same
person, unless the Certificate of Incorporation or these Bylaws otherwise
provide.
Section 4.2. Election of Officers. The Board of Directors, at its
first meeting after each annual meeting of stockholders, shall choose the
officers of the corporation.
Section 4.3. Subordinate Officers. The Board of Directors may
appoint such other officers and agents as it shall deem necessary who shall hold
their offices for such terms and shall exercise such powers and perform such
duties as shall be determined from time to time by the Board.
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Section 4.4. Compensation of Officers. The salaries of all
officers and agents of the corporation shall be fixed by the Board of Directors.
Section 4.5. Term of Office; Removal and Vacancies. The officers
of the corporation shall hold office until their successors are chosen and
qualify in their stead. Any officer elected or appointed by the Board of
Directors may be removed at any time by the affirmative vote of a majority of
the Board of Directors. If the office of any officer or officers becomes vacant
for any reason, the vacancy shall be filled by the Board of Directors.
Section 4.6. Chairman of the Board. The Chairman of the Board, if
such an officer be elected, shall, if present, preside at all meetings of the
Board of Directors and exercise and perform such other powers and duties as may
be from time to time assigned to him by the Board of Directors or prescribed by
these Bylaws. If there is no President, the Chairman of the Board shall in
addition be the Chief Executive Officer of the corporation and shall have the
powers and duties prescribed in Section 4.7 of this Article IV.
Section 4.7. President. Subject to such supervisory powers, if
any, as may be given by the Board of Directors to the Chairman of the Board, if
there be such an officer, the President shall be the Chief Executive Officer of
the corporation and shall, subject to the control of the Board of Directors,
have general supervision, direction and control of the business and officers of
the corporation. He shall preside at all meetings of the stockholders and, in
the absence of the Chairman of the Board, or if there be none, at all meetings
of the Board of Directors. He shall be an ex-officio member of all committees
and shall have the general powers and duties of management usually vested in the
office of President and Chief Executive Officer of corporations, and shall have
such other powers and duties as may be prescribed by the Board of Directors or
these Bylaws.
Section 4.8. Vice President. In the absence or disability of the
President, the Vice Presidents in order of their rank as fixed by the Board of
Directors, or if not ranked, the Vice President designated by the Board of
Directors, shall perform all the duties of the President, and when so acting
shall have all the powers of and be subject to all the restrictions upon the
President. The Vice Presidents shall have such other duties as from time to time
may be prescribed for them, respectively, by the Board of Directors.
Section 4.9. Secretary. The Secretary shall attend all sessions
of the Board of Directors and all meetings of the stockholders and record all
votes and the minutes of all proceedings in a book to be kept for that purpose;
and shall perform like duties for the standing committees when required by the
Board of Directors. He shall give, or cause to be given, notice of all meetings
of the stockholders and of the Board of Directors, and shall perform such other
duties as may be prescribed by the Board of Directors or these Bylaws. He shall
keep in safe custody the seal of the corporation, and when authorized by the
Board, affix the same to any instrument requiring it, and when so affixed it
shall be attested by his signature or by the signature of an Assistant
Secretary. The Board of Directors may give general authority to any other
officer to affix the seal of the corporation and to attest the affixing by his
signature.
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Section 4.10. Assistant Secretaries. The Assistant Secretary, or
if there be more than one, the Assistant Secretaries in the order determined by
the Board of Directors, or if there be no such determination, the Assistant
Secretary designated by the Board of Directors, shall, in the absence or
disability of the Secretary, perform the duties and exercise the powers of the
Secretary and shall perform such other duties and have such other powers as the
Board of Directors may from time to time prescribe.
Section 4.11. Chief Financial Officer. The Chief Financial
Officer shall have the custody of the corporate funds and securities and shall
keep full and accurate accounts of receipts and disbursements in books belonging
to the corporation and shall deposit all moneys, and other valuable effects in
the name and to the credit of the corporation, in such depositories as may be
designated by the Board of Directors. He shall disburse the funds of the
corporation as may be ordered by the Board of Directors, taking proper vouchers
for such disbursements, and shall render to the Board of Directors, at its
regular meetings, or when the Board of Directors so requires, an account of all
his transactions as Chief Financial Officer and of the financial condition of
the corporation. If required by the Board of Directors, he shall give the
corporation a bond, in such sum and with such surety or sureties as shall be
satisfactory to the Board of Directors, for the faithful performance of the
duties of his office and for the restoration to the corporation, in case of his
death, resignation, retirement or removal from office, of all books, papers,
vouchers, money and other property of whatever kind in his possession or under
his control belonging to the corporation.
Section 4.12. Assistant Treasurer. The Assistant Treasurer, or if
there shall be more than one, the Assistant Treasurers in the order determined
by the Board of Directors, or if there be no such determination, the Assistant
Treasurer designated by the Board of Directors, shall, in the absence or
disability of the Chief Financial Officer, perform the duties and exercise the
powers of the Chief Financial Officer and shall perform such other duties and
have such other powers as the Board of Directors may from time to time
prescribe.
ARTICLE V.
CERTIFICATES OF STOCK
Section 5.1. Certificates. Every holder of stock of the
corporation shall be entitled to have a certificate signed by, or in the name of
the corporation by, the Chairman or Vice Chairman of the Board of Directors, or
the President or a Vice President, and by the Secretary or an Assistant
Secretary, or the Chief Financial Officer or an Assistant Treasurer of the
corporation, certifying the number of shares represented by the certificate
owned by such stockholder in the corporation.
Section 5.2. Signatures on Certificates. Any or all of the
signatures on the certificate may be a facsimile. In case any officer, transfer
agent, or registrar who has signed or whose facsimile signature has been placed
upon a certificate shall have ceased to be such officer, transfer agent, or
registrar before such certificate is issued, it may be issued by the corporation
with the same effect as if he were such officer, transfer agent, or registrar at
the date of issue.
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Section 5.3. Statement of Stock Rights, Preferences, Privileges.
If the corporation shall be authorized to issue more than one class of stock or
more than one series of any class, the powers, designations, preferences and
relative, participating, optional or other special rights of each class of stock
or series thereof and the qualification, limitations or restrictions of such
preferences and/or rights shall be set forth in full or summarized on the face
or back of the certificate which the corporation shall issue to represent such
class or series of stock, provided that, except as otherwise provided in section
202 of the General Corporation Law of Delaware, in lieu of the foregoing
requirements, there may be set forth on the face or back of the certificate
which the corporation shall issue to represent such class or series of stock, a
statement that the corporation will furnish without charge to each stockholder
who so requests the powers, designations, preferences and relative,
participating, optional or other special rights of each class of stock or series
thereof and the qualifications, limitations or restrictions of such preferences
and/or rights.
Section 5.4. Lost Certificates. The Board of Directors may direct
a new certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the corporation alleged to have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate or certificates, the Board of
Directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificate or
certificates, or his legal representative, to advertise the same in such manner
as it shall require and/or to give the corporation a bond in such sum as it may
direct as indemnity against any claim that may be made against the corporation
with respect to the certificate alleged to have been lost, stolen or destroyed.
Section 5.5. Transfers of Stock. Upon surrender to the
corporation, or the transfer agent of the corporation, of a certificate for
shares duly endorsed or accompanied by proper evidence of succession,
assignation or authority to transfer, it shall be the duty of the corporation to
issue a new certificate to the person entitled thereto, cancel the old
certificate and record the transaction upon its books.
Section 5.6. Fixing Record Date. In order that the corporation
may determine the stockholders entitled to notice of or to vote at any meeting
of the stockholders, or any adjournment thereof, or to express consent to
corporate action in writing without a meeting, or entitled to receive payment of
any dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock or
for the purpose of any other lawful action, the Board of Directors may fix a
record date which shall not be more than sixty nor less than ten days before the
date of such meeting, nor more than sixty days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting.
Section 5.7. Registered Stockholders. The corporation shall be
entitled to treat the holder of record of any share or shares of stock as the
holder in fact thereof and accordingly shall not be bound to recognize any
equitable or other claim or interest in such share on the part
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of any other person, whether or not it shall have express or other notice
thereof, save as expressly provided by the laws of the State of Delaware.
ARTICLE VI.
GENERAL PROVISIONS
Section 6.1. Dividends. Dividends upon the capital stock of the
corporation, subject to the provisions of the Certificate of Incorporation, if
any, may be declared by the Board of Directors at any regular or special
meeting, pursuant to law. Dividends may be paid in cash, in property, or in
shares of the capital stock, subject to the provisions of the Certificate of
Incorporation.
Section 6.2. Payment of Dividends. Before payment of any dividend
there may be set aside out of any funds of the corporation available for
dividends such sum or sums as the directors from time to time, in their absolute
discretion, think proper as a reserve fund to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property of the
corporation, or for such other purpose as the directors shall think conducive to
the interests of the corporation, and the directors may abolish any such
reserve.
Section 6.3. Checks. All checks or demands for money and notes of
the corporation shall be signed by such officer or officers as the Board of
Directors may from time to time designate.
Section 6.4. Fiscal Year. The fiscal year of the corporation
shall be fixed by resolution of the Board of Directors.
Section 6.5. Corporate Seal. The corporate seal shall have
inscribed thereon the name of the corporation, the year of its organization and
the words "Corporate Seal, Delaware". Said seal may be used by causing it or a
facsimile thereof to be impressed or affixed or reproduced or otherwise.
Section 6.6. Manner of Giving Notice. Whenever, under the
provisions of the statutes or of the Certificate of Incorporation or of these
Bylaws, notice is required to be given to any director or stockholder, it shall
not be construed to mean personal notice, but such notice may be given in
writing, by mail, addressed to such director or stockholder, at his address as
it appears on the records of the corporation, with postage thereon prepaid, and
such notice shall be deemed to be given at the time when the same shall be
deposited in the United States mail. Notice to directors may also be given by
telegram.
Section 6.7. Waiver of Notice. Whenever any notice is required to
be given under the provisions of the statutes or of the Certificate of
Incorporation or of these Bylaws, a waiver thereof in writing, signed by the
person or persons entitled to said notice, whether before or after the time
stated therein, shall be deemed to be equivalent.
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Section 6.8. Annual Statement. The Board of Directors shall
present at each annual meeting, and at any special meeting of the stockholders
when called for by vote of the stockholders, a full and clear statement of the
business and condition of the corporation.
ARTICLE VII.
AMENDMENTS
Section 7.1. Amendment by Directors or Stockholders. The Board of
Directors is expressly empowered to adopt, amend or repeal bylaws of the
corporation, without the approval of the stockholders. Any adoption, amendment
or repeal of bylaws of the corporation by the Board of Directors shall require
the approval of a majority of the total number of authorized directors (whether
or not there exist any vacancies in previously authorized directorships at the
time any resolution providing for adoption, amendment or repeal is presented to
the Board). The stockholders shall also have power to adopt, amend or repeal the
bylaws of the corporation. In addition to any vote of the holders of any class
or series of stock of this corporation required by law or by the Certificate of
Incorporation, the affirmative vote of the holders of at least sixty-six and
two-thirds percent (66-2/3%) of the outstanding shares of Common Stock of the
corporation shall be required to adopt, amend or repeal any provisions of the
bylaws of the corporation.
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CERTIFICATE OF SECRETARY
OF
CANDLEWOOD HOTEL COMPANY, INC.,
A DELAWARE CORPORATION
I, the undersigned, do hereby certify:
(1) That I am the duly elected and acting Secretary of Candlewood
Hotel Company, Inc., a Delaware corporation; and
(2) That the foregoing bylaws, comprising fourteen (14) pages,
constitute the bylaws of said corporation as duly adopted by Unanimous Written
Consent of the Board of Directors of said corporation as of September 30, 1996.
IN WITNESS WHEREOF, I have hereunto subscribed my name this 14th
day of October, 1996.
/s/ Warren D. Fix
-------------------------------
Warren D. Fix
Secretary
<PAGE> 1
EXHIBIT 4.1
CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND RELATIVE, PARTICIPATING, OPTIONAL AND
OTHER SPECIAL RIGHTS OF PREFERRED STOCK
AND QUALIFICATIONS, LIMITATIONS
AND RESTRICTIONS THEREOF
OF
SERIES B CUMULATIVE CONVERTIBLE
PREFERRED STOCK
OF
CANDLEWOOD HOTEL COMPANY, INC.
---------------------
PURSUANT TO SECTION 151 OF THE
GENERAL CORPORATION LAW OF THE STATE OF DELAWARE
---------------------
Candlewood Hotel Company, Inc., a Delaware corporation (the
"Corporation"), certifies that pursuant to the authority contained in Article
Fourth of its Restated Certificate of Incorporation (the "Certificate of
Incorporation") and in accordance with the provisions of Section 151 of the
General Corporation Law of the State of Delaware, the Board of Directors of the
Corporation at a telephone meeting called and held on June 30, 1998 adopted the
following resolution, which resolution remains in full force and effect on the
date hereof;
RESOLVED, that there is hereby established a series of authorized
preferred stock having a par value of $.01 per share, which series shall
be designated as "Series B Cumulative Convertible Preferred Stock" (the
"Series B Preferred Stock"), shall consist of 42,000 shares and shall
have the following voting powers, preferences and relative,
participating, optional and other special rights, and qualifications,
limitations and restrictions thereof as follows:
(i) Designation and Amount. The designation of the series of the
Preferred Stock shall be "Series B Cumulative Convertible Preferred Stock," par
value $.01 per share (the "Series B Preferred Stock"). The number of shares of
Series B Preferred Stock shall be 42,000. The Series B Preferred Stock shall be
assigned a stated value of $1,000 per share (the "Stated Value").
(ii) Dividends. (a) Rate, etc. The holders of shares of Series B
Preferred Stock as of the related Dividend Record Date (as defined below) shall
be entitled to receive, when and if declared by the Board of Directors out of
funds legally available therefor, dividends from the date of issue thereof, at
an annual rate on the Stated Value equal to 7.5% (the "Dividend
<PAGE> 2
Rate"), calculated on the basis of a 360-day year consisting of twelve 30-day
months, accruing and payable quarterly, in arrears, on the last day in August,
November, February and May of each year (each a "Dividend Payment Date"),
commencing on August 31, 1998 until such time as the Series B Preferred Stock is
redeemed or retired in full; provided, that, if pursuant to paragraph (vi)(a)
the Dividend Rate is increased to 12.0% per annum, from and after the date of
such increase the Dividend Rate shall be 12.0% per annum. Upon conversion of any
shares of Series B Preferred Stock, dividends shall be paid as provided in
clause (vi); provided, however, that with respect to such first Dividend Payment
Date, the holders of shares of Series B Preferred Stock shall be entitled to
receive, when and if declared by the Board of Directors out of funds legally
available therefor, a cumulative cash dividend in respect of each share of
Series B Preferred Stock in the amount of (i) $18.75 multiplied by (ii) a
fraction equal to (A) the number of days from (and including) the date of issue
thereof to (but excluding) such Dividend Payment Date divided by (B) 90. If any
Dividend Payment Date occurs on a day that is not a Business Day, any accrued
dividends otherwise payable on such Dividend Payment Date shall be paid on the
next succeeding Business Day with the same effect as though made on such
Dividend Payment Date. The term "Business Day" shall mean a day other than a
Saturday or Sunday, any federal holiday or any day on which banks in the City of
New York are closed. Such dividends shall be payable in cash. Such dividends
shall accrue and be cumulative with respect to each share from the date of
original issuance and shall compound on each Dividend Payment Date, beginning
August 31, 1998, with respect to any accrued dividends not paid on any such
Dividend Payment Date, whether or not earned or declared. Except as otherwise
required by law, the "Dividend Record Date" with respect to the next succeeding
Dividend Payment Date shall be the date 10 Business Days prior to such Dividend
Payment Date.
(b) Rank, etc. Unless full dividends, if applicable, on
all outstanding shares of Series B Preferred Stock which have previously become
due and payable, have been paid or are contemporaneously declared and paid (or
declared and a sum sufficient for the payment thereof is set apart for such
payment), the Corporation shall not (1) declare or pay any dividend on (A) the
Series B Preferred Stock, except if such dividend is allocated pro rata on a
share-by-share basis among all shares of Series B Preferred Stock at that time
outstanding, (B) the Series A Preferred Stock (as defined below) or any other
class of Parity Stock (as defined below), except if such dividend is allocated
pro rata on a share-by-share basis among all shares of Series B Preferred Stock,
Series A Preferred Stock and any other class of Parity Stock at that time
outstanding taken together as a class, (C) the common stock, $.01 par value per
share (the "Common Stock"), of the Corporation or (D) on any other class or
series of stock ranking junior to the Series B Preferred Stock as to dividends
or upon liquidation (the Common Stock and any such junior class or series being
the "Junior Stock") or make any payment on account of, or set apart money for, a
sinking or other analogous fund for the purchase, redemption or other retirement
of, any Junior Stock or make any distribution in respect thereof, either
directly or indirectly and whether in cash or property or in obligations or
shares of the Corporation (other than in shares of Junior Stock) or (2) purchase
any shares of Series B Preferred Stock (except for consideration payable in
Junior Stock) or redeem fewer than all of the shares of Series B Preferred Stock
then outstanding.
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(i) Liquidation. (a) Preference Upon Liquidation, Dissolution or
Winding Up. In the event of any liquidation, dissolution or winding up of the
affairs of the Corporation (any or all of such events, a "liquidation"), whether
voluntary or involuntary, subject to the prior preferences and other rights of
any Senior Stock (as defined below), if any, as to liquidation preferences, the
holders of shares of Series B Preferred Stock then outstanding shall be entitled
pari passu as if members of a single class of securities with the holders of any
Parity Stock (as defined below), if any, to be paid out of the assets of the
Corporation before any payment shall be made to the holders of the Junior Stock,
an amount equal to the Stated Value plus any accrued but unpaid dividends (the
"Liquidation Amount"). Except as provided in this paragraph, holders of Series B
Preferred Stock shall not be entitled to any distribution in the event of
liquidation, dissolution or winding up of the affairs of the Corporation. The
term "Senior Stock" shall mean any class or series of stock of the Corporation
authorized after the date of issuance of the Series B Preferred Stock in
accordance with clause (v)(b) hereof ranking senior to the Series B Preferred
Stock in respect of the right to receive dividends or the right to participate
in any distribution upon liquidation and the term "Parity Stock" shall mean the
Series A Cumulative Convertible Preferred Stock, par value $.01 per share (the
"Series A Preferred Stock"), of the Corporation and any class or series of stock
of the Corporation authorized after the date of issuance of the Series B
Preferred Stock in accordance with clause (v)(b) hereof ranking on a parity with
the Series B Preferred Stock in respect of the right to receive dividends or the
right to participate in any distribution upon liquidation.
(b) Preference on Merger, Consolidation or Sale of Assets.
Alternatively, in the event of a liquidation pursuant to clause (iii)(e) of this
Certificate of Designation, a holder of shares of Series B Preferred Stock may
elect to convert any or all of such holder's shares of Series B Preferred Stock
into shares of Common Stock in accordance with clause (vi) of this Certificate
of Designation, in which event the holders electing to convert shall be entitled
to receive, together with the other holders of shares of Common Stock, pro rata
based on the number of shares of Common Stock then outstanding and the number of
shares of Common Stock into which the Series B Preferred Stock shall have been
converted pursuant to such election, the remaining cash and/or other property
distributable to holders of Common Stock if, as and when such remaining cash
and/or other properties is distributed by the Corporation.
(c) Insufficient Assets. If, upon any liquidation of the
Corporation, the assets of the Corporation are insufficient to pay the holders
of shares of the Series B Preferred Stock and any Parity Stock, if any, then
outstanding the full amount to which they shall be entitled, such assets shall
be distributed to each holder of the Series B Preferred Stock and Parity Stock,
if any, pro rata based on the number of shares of Series B Preferred Stock and
Parity Stock, if any, held by each.
(d) Rights of Other Holders. In the event of any
liquidation, after payment shall have been made to the holders of the Series B
Preferred Stock and Parity Stock, if any, of all preferential amounts to which
they shall be entitled, the holders of shares of Junior Stock and other capital
stock of the Corporation shall receive such amounts as to which they are
entitled by the terms thereof.
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(e) Consolidation, Merger or Sale of Assets. A
consolidation or merger of the Corporation with or into any other corporation
(excluding a merger in which the Corporation is the surviving entity or merger
into a wholly-owned subsidiary), or a sale or transfer of all or substantially
all of the Corporation's assets for cash or securities shall be considered a
liquidation within the meaning of this clause (iii). Nothing contained in this
paragraph (iii)(e) shall affect the rights of any holder of shares of Series B
Preferred Stock under paragraph (iv)(b) hereof.
(iv) Redemption. (a) (i) Optional Redemption. The Series B
Preferred Stock shall be subject to redemption, at the option of the
Corporation, in whole or from time to time in part, at any time subsequent to
September 30, 1999 at a per share redemption price equal to 200% of the Stated
Value plus accrued but unpaid dividends to the date of such redemption, payable
in cash or out of funds legally available therefor (an "Optional Redemption").
(i) Mandatory Redemption. All outstanding shares of
Series B Preferred Stock shall be redeemed by the Corporation on September 30,
2004 (the "Mandatory Redemption Date"), at a per share redemption price equal to
the Liquidation Amount, payable in cash out of funds legally available therefor
(the "Mandatory Redemption").
(b) Change of Control. Upon the occurrence of a Change of
Control Event (as hereafter defined), the Corporation shall offer to redeem all
outstanding shares of Series B Preferred Stock for a price per share equal to
the greater of (i) 175% of the Stated Value or (ii) the Liquidation Amount,
payable in cash. A "Change of Control Event" shall mean (x) the acquisition by
any Person or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the
Exchange Act) (other than a group comprised entirely of the Purchasers), of
beneficial ownership, direct or indirect, of securities of the Corporation
representing fifty percent (50%) or more of the combined voting power of the
Corporation's then outstanding equity securities or (y) the acquisition of the
Corporation, or all or substantially all of its assets, by, or the combination
of the Corporation or all or substantially all of its assets, with, another
Person, unless the acquiring or surviving Person shall be a corporation, limited
liability company, partnership or other entity more than 50% of the combined
voting power of which corporation's then outstanding equity securities, after
such acquisition or combination, are owned, immediately after such acquisition
or combination, by the owners of more than 50% of the voting securities of the
Corporation immediately prior to such acquisition or combination (the
"Significant Transaction"); provided, however, that the Corporation shall not be
required to redeem any shares of Series B Preferred Stock held by a member of a
group described in clause (x) above (but including a group comprised entirely of
the Purchasers) in connection with a Change in Control Event occurring prior to
August 27, 1999. When used herein the term "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.
(c) Notice of Redemption. The Corporation shall give each
holder of Series B Preferred Stock written notice of any Optional Redemption not
less than thirty (30) days nor more than forty-five (45) days prior to the
proposed redemption date, specifying such redemption date (each, an "Optional
Redemption Date"), the per share redemption price and the
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<PAGE> 5
number of such holder's shares to be redeemed on such date. The Corporation
shall give each holder of Series B Preferred Stock written notice (a "Notice of
Anticipated Change of Control Event") within twenty (20) days after the
Corporation or any of its executive officers or directors obtains knowledge that
a Change of Control Event is likely to occur and the material facts and
circumstances of such Change of Control Event; provided, that in the case of a
proposed Significant Transaction, the Corporation shall give each holder of
Series B Preferred Stock a Notice of Anticipated Change of Control not less than
forty-five (45) days prior to the date the Significant Transaction is scheduled
to occur. The Corporation shall give each holder of Series B Preferred Stock
written notice (a "Notice of Occurrence of Change of Control Event") within five
(5) days after the Corporation or any of its executive officers or directors
obtain knowledge of the occurrence of a Change of Control Event specifying that
a Change of Control Event has occurred, the material facts and circumstances of
such Change of Control Event, the redemption date, the per share redemption
price, and instructions that a holder of Series B Preferred Stock must follow in
order to have his shares redeemed. The redemption date for any Change of Control
Event (each a "Change of Control Redemption Date") shall be the twenty-fifth
date following such Change of Control Event; provided, that, if such redemption
date is not a Business Day, the redemption date shall be the first Business Day
thereafter. Upon receipt of a Notice of Change of Control Event, a holder of
shares of Series B Preferred Stock may, at his option, elect to have the
Corporation redeem all of such shares of Series B Preferred Stock by providing
written notice to the Corporation of such election not less than five (5) days
prior to the specified Change of Control Redemption Date. In the event some or
all of such shares of Preferred Stock are not tendered for redemption, the
holder of such shares not so tendered shall be deemed to have consented to the
redemption by the Corporation of any Junior Stock being prepaid, redeemed,
retired or exchanged pursuant to a Change of Control Event, notwithstanding any
approval rights of holders of Series B Preferred Stock pursuant to clause (v)
hereof. If the applicable redemption date is on or after a Dividend Record Date
and on or before the related Dividend Payment Date, the dividend payable shall
be paid to the holder in whose name the Series B Preferred Stock is registered
at the close of business on such record date. In the case of an Optional
Redemption of less than all shares of Series B Preferred Stock at the time
outstanding, the shares to be redeemed shall be selected pro rata, consistent
with Delaware law.
(d) Failure to Redeem. (A) If, upon the Mandatory
Redemption Date, the Corporation does not redeem all outstanding shares of
Series B Preferred Stock at the per share price specified in clause (iv)(a)(ii),
the Corporation shall issue to each holder of Series B Preferred Stock on such
Redemption Date and on each three month anniversary thereof (each a "Warrant
Payment Date"), warrants to purchase twenty-five percent (25%) of the number of
shares of Common Stock (rounded to the nearest whole share) into which such
holder's outstanding shares of Series B Preferred Stock would be convertible on
such Warrant Payment Date at the then current Conversion Price. Such warrants
shall be immediately exercisable with respect to each share of Common Stock for
$.01 and shall be in the form of the warrant attached as Exhibit E to the
Securities Purchase Agreement, dated as of June 30, 1998 (the "Securities
Purchase Agreement"), among the Corporation and the parties thereto. (B) If,
upon the Change of Control Redemption Date, the Corporation does not redeem all
shares of Series B Preferred Stock tendered for redemption pursuant to clause
(iv)(c) hereof, the Conversion Price (as defined below) shall be reduced to the
lower of (1) the then applicable Conversion Price or (2) the
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Market Price (as defined below) per share of Common Stock on the Redemption Date
divided by 1.75; provided, however, that under no circumstances shall the
Conversion Price be reduced to a level that is less than the par value of the
Common Stock.
(e) Effect of Redemption. On the date established for
redemption pursuant to clause (iv) hereof, all rights in respect of the shares
of Series B Preferred Stock to be redeemed, except the right to receive the
applicable redemption price, plus accrued dividends, if any, to the date of
redemption, shall cease and terminate (unless default shall be made by the
Corporation in the payment of the applicable redemption price, plus accrued
dividends, if any, in which event such rights shall be exercisable until such
default is cured), and such shares shall no longer be deemed to be outstanding,
notwithstanding that any certificates representing such shares shall not have
been surrendered to the Corporation. All shares of Series B Preferred Stock
redeemed pursuant to this clause (iv) shall be retired and shall be restored to
the status of authorized and unissued shares of preferred stock, without
designation as to series or class and may thereafter be reissued, subject to
compliance with the terms hereof, as shares of any series of preferred stock
other than shares of Series B Preferred Stock.
(f) Insolvency of Corporation. If, upon the Mandatory
Redemption Date or any Change of Control Redemption Date, the payment of the
full amount of redemption payments due on such date would render the Corporation
insolvent (as determined in accordance with either the then applicable
definition in the United States Bankruptcy Code or then applicable definition of
any state fraudulent conveyance or fraudulent transfer statute), any liquidation
of the Corporation in connection with such redemption shall require the consent
of the holders of 66-2/3% of the Series B Preferred Stock and no other consent
of any holder of any other equity securities of the Corporation, except as
otherwise required by Delaware law, and in the event of such consent the
Corporation shall be liquidated and the assets of the Corporation distributed in
accordance with the provisions of clause (iii) of this Certificate of
Designation.
(g) Conversion Prior to Redemption. Anything to the
contrary in this clause (iv) of this Certificate of Designation notwithstanding,
the holders of Series B Preferred Stock shall have the right, exercisable at any
time prior to the date set for redemption thereof, to convert all or any part of
such Series B Preferred Stock into shares of Common Stock pursuant to clause
(vi) hereof.
(h) Funds for Redemption. No share of Series B Preferred
Stock may be redeemed except with funds legally available therefor.
(v) Voting Rights. (a) Voting as a Class with the Common Stock.
The holders of the Series B Preferred Stock shall be entitled to vote together
with the holders of shares of Common Stock and any other class or series of
capital stock entitled to vote with the Common Stock as a single class on all
matters to be voted upon by the Common Stock, and shall not have any additional
voting rights other than the rights specified below in this clause (v) or
otherwise required by law. Each holder of Series B Preferred Stock shall be
entitled to such number (rounded to the nearest whole number) of votes as such
holder would be entitled if such
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<PAGE> 7
holder had converted the shares of Series B Preferred Stock held by such holder
into shares of Common Stock pursuant to clause (vi) hereof immediately prior to
such vote.
(b) Additional Capital Stock, etc. The Corporation shall
not, without the affirmative consent or approval of the holders of shares
representing 66-2/3% of the shares of Series B Preferred Stock then outstanding,
voting as a single class (such consent or approval to be given by written
consent in lieu of a meeting if allowable under the Corporation's Certificate of
Incorporation or by vote at a meeting called for such purpose for which notice
shall have been given to the holders of the Series B Preferred Stock): (i)
authorize the issuance of or issue any new, or increase the authorized number of
shares of any existing, class or series of capital stock of the Corporation
which would be senior or superior as to dividends or upon liquidation to the
Series B Preferred Stock, (ii) issue any shares of preferred stock authorized in
the Certificate of Incorporation or create any other class or series of stock
ranking on a parity with the Series B Preferred Stock as to dividends or upon
liquidation, (iii) authorize or issue shares of stock of any class or series or
any bonds, debentures, notes or other obligations convertible into or
exchangeable for, or having rights to purchase, any shares of stock of the
Corporation which would be senior or superior to, or rank on a parity with, the
Series B Preferred Stock as to dividends or upon liquidation, (iv) reissue any
shares of Series B Preferred Stock that have been redeemed or purchased by the
Corporation, (v) take any action, including, causing any amendment, alteration
or repeal of any of the provisions of the Corporation's Certificate of
Incorporation that may alter or change the powers, preferences or special rights
of (i) the shares of Series B Preferred Stock so as to affect the holders
thereof adversely, or (ii) shares of Parity Stock, (vi) effect any redemption or
repurchase of any Junior Stock other than in connection with the cashless
exercise of options, or upon the exercise by the Corporation of its repurchase
rights (up to a maximum of $250,000 in the aggregate) as to Common Stock issued
to employees of the Corporation upon a termination of such employment, (vii)
increase the number of members on the Board of Directors (except by one, in
connection with the election of the President of the Company to the Board of
Directors), (viii) file a voluntary petition seeking liquidation,
reorganization, arrangement or readjustment of its debts, make an assignment for
the benefit of creditors, permit an involuntary petition seeking liquidation,
reorganization, arrangement or readjustment of its debts or seeking appointment
of a receiver to remain unchallenged or otherwise seek or permit remedies for
insolvency or (ix) effect any redemption or repurchase of any Parity Stock other
than a redemption or repurchase which is pro rata among the Series B Preferred
Stock and all Parity Stock taken together as a class. Notwithstanding any other
provision in this Certificate of Designation, (1) upon the consent or approval
of holders of shares representing 66-2/3% of the shares of Series B Preferred
Stock then outstanding, voting as a single class and (2) with such other votes
or consents as may be required by Delaware law, the rules and regulations of the
Securities and Exchange Commission, the regulations of the NASDAQ or other
securities exchange applicable to the Corporation or pursuant to the Company's
Certificate of Incorporation, the Corporation may take any such action
referenced in the preceding clauses (i)-(ix).
(vi) Conversion Rights. (a) Optional Conversion of Series B
Preferred Stock. The holder of any shares of Series B Preferred Stock shall have
the right, at such holder's option, at any time or from time to time to convert
any or all of such holder's shares of Series B
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Preferred Stock into such number of fully paid and nonassessable shares of
Common Stock (the "Conversion Shares") as determined for each share of Series B
Preferred Stock by dividing the Stated Value by the "Conversion Price" in effect
at the time of such conversion. The "Conversion Price" shall be $9.50 per share
of Series B Preferred Stock, subject to the adjustments set forth herein;
provided, however, that if the Corporation fails to pay, in cash, any and all
dividends accrued, for any two Dividend Payment Dates, whether consecutive or
not (a "Dividend Default"), the Conversion Price shall be reduced by $.50 for
each such Dividend Default as of the date of the occurrence of each such
Dividend Default; and provided, further, that if the Corporation fails to pay
any and all accrued dividends on August 31, 1998, the Conversion Price shall be
reduced by $1.00; in each case subject to adjustment as otherwise provided
herein; provided, however, that a default in the payment of any dividends
accrued and unpaid as of August 31, 1998 shall not be combined with any other
default to constitute a Dividend Default; provided, that in no event shall the
Conversion Price be reduced pursuant to this paragraph (vi)(a) by an aggregate
amount in excess of $2.00 (the "Maximum Amount"). (A) If a Dividend Default
occurs at any time after the Conversion Price has been reduced pursuant to this
paragraph (vi)(a) by an aggregate amount equal to the Maximum Amount, then the
Dividend Rate shall be increased to 12.0% per annum, or, (B) if as a result of a
Dividend Default the Conversion Price would (were it not for the last proviso of
the immediately preceding sentence) be reduced pursuant to this paragraph
(vi)(a) by an aggregate amount in excess of the Maximum Amount, then the
Conversion Price shall be reduced by such additional amount so that the
aggregate amount by which the Conversion Price is reduced pursuant to this
paragraph (vi)(a) is equal to the Maximum Amount and the Dividend Rate shall be
increased to 12.0% per annum. The Conversion Shares and the Conversion Price are
subject to certain adjustments as set forth herein, and the terms Conversion
Shares and Conversion Price as used herein shall as of any time be deemed to
include all such adjustments to be given effect as of such time in accordance
with the terms hereof; provided, further, that under no circumstances shall the
Conversion Price be reduced to a level that is less than the par value of the
Common Stock.
Upon the exercise of the option of the holder of any shares of
Series B Preferred Stock to convert Series B Preferred Stock into Common Stock,
the holder of such shares of Series B Preferred Stock to be converted shall
surrender the certificates representing the shares of Series B Preferred Stock
so to be converted in the manner provided in clause (vi)(c) below. Immediately
following such conversion, the rights of the holders of converted Series B
Preferred Stock (other than the right to receive dividends accrued to the date
of such conversion) shall cease and the persons entitled to receive the Common
Stock upon the conversion of Series B Preferred Stock shall be treated for all
purposes (other than the right to receive dividends accrued to the date of such
conversion) as having become the owners of such Common Stock.
(b) Automatic Conversion. Subsequent to March 31, 2000,
each share of Series B Preferred Stock shall automatically be converted into
shares of Common Stock at the then applicable Conversion Price if (i) the Common
Stock has traded for a period of not less than twenty (20) consecutive days with
an average of not less than 300,000 shares per day and at a price per share of
not less than 200% of the then applicable Conversion Price and (ii) the
Corporation at its sole expense shall have caused to become effective within 90
days of such twenty (20) consecutive day period a registration statement under
the Securities Act with respect
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to at least the number of shares equal to a 50% of the shares of Common Stock
into which the Series B Preferred Stock then outstanding is convertible at the
then applicable Conversion Price (or such lesser number as shall have been
requested to be registered by the holders of the Series B Preferred Stock,
following notice from the Company) and shall have caused all such shares to be
sold (allocated pro rata among holders of such Series B Preferred Stock in
relation to the number of shares requested to be registered pursuant to an
underwritten public offering in accordance with the provisions of Section 5 of
the Amended and Restated Registration Rights Agreement (the "Registration Rights
Agreement") dated as of July 10, 1998 among the Corporation and the parties
thereto (or a registered but not underwritten sale to one or more nationally
recognized registered broker/dealers for resale through a public distribution)
at a per share price to each selling holder of not less than 200% of the
Conversion Price, less 1% of the then applicable Market Price.
(c) Delivery of Stock Certificates; No Fractional Shares.
The holder of any shares of Series B Preferred Stock may exercise the optional
conversion right pursuant to clause (vi)(a) above by delivering to the
Corporation or its duly authorized transfer agent during regular business hours
at the office of the Corporation the certificate or certificates for the shares
to be converted, duly endorsed or assigned either in blank or to the Corporation
(if required by it), accompanied by written notice stating that such holder
elects to convert such shares and shall provide a certificate to the Corporation
or its duly authorized transfer agent as to the date of such conversion. Upon
the occurrence of an automatic conversion pursuant to clause (vi)(b) above, the
Corporation shall deliver notice to each holder of Series B Preferred Stock and
the holder of any shares of Series B Preferred Stock shall deliver to the
Corporation at the office of the Corporation the certificate or certificates for
all shares of Series B Preferred Stock then held by such holder, duly endorsed
or assigned either in blank or to the Corporation (if requested by it).
Conversion shall be deemed to have been effected (1) in the case of an optional
conversion, on the date when the aforesaid delivery of stock certificates is
made if such day is a Business Day and otherwise on the Business Day following
the date of the aforesaid delivery, and (2) in the case of an automatic
conversion pursuant to clause (vi)(b), upon the effective date of the
registration statement (provided that if the shares registered thereunder are
not sold no Conversion Date shall be deemed to have occurred) and in each case
such date is referred to herein as the "Conversion Date." As promptly as
practicable thereafter, the Corporation, through its transfer agent, shall issue
and deliver to or upon the written order of such holder, to the place designated
by such holder, a certificate or certificates for the number of full shares of
Common Stock to which such holder is entitled and a check or cash in respect of
any fractional interest in a share of Common Stock, as provided below; provided,
however, that in the case of a conversion in connection with liquidation, no
such certificates need be issued. The person in whose name the certificate or
certificates for Common Stock are to be issued shall be deemed to have become
the stockholder of record in respect of such Common Stock on the applicable
Conversion Date unless the transfer books of the Corporation are closed on that
date, in which event such holder shall be deemed to have become the stockholder
of record in respect of such Common Stock on the next succeeding date on which
the transfer books are open, but the Conversion Price shall be that in effect on
the Conversion Date. Upon conversion of only a portion of the number of shares
covered by a stock certificate representing shares of Series B Preferred Stock
surrendered for conversion, the Corporation shall issue and deliver to or upon
the written order of the holder of
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the stock certificate so surrendered for conversion, at the expense of the
Corporation, a new stock certificate covering the number of shares of Series B
Preferred Stock representing the unconverted portion of the certificate so
surrendered. Any transfer taxes applicable to the above described transactions
shall be paid by such transferee. The Corporation shall not be required to pay
any tax which may be payable in respect of any transfer involved in the issuance
and delivery of Common Stock or the reissuance of the Preferred Stock in a name
other than that in which the shares of Series B Preferred Stock so converted
were registered, and no such issuance or delivery shall be made unless and until
the person requesting such issuance has paid to the Corporation the amount of
any such tax or has established to the satisfaction of the Corporation that such
tax has been paid.
(d) No Fractional Shares of Common Stock. (1) No
fractional shares of Common Stock shall be issued upon conversion of shares of
Series B Preferred Stock and in lieu thereof, the Corporation shall pay a cash
adjustment in respect of such fractional interest in an amount equal to the then
current Market Price (as defined in clause (vi)(e)(8) below) of a share of
Common Stock multiplied by such fractional interest. The holders of fractional
interests shall not be entitled to any rights as stockholders of the Corporation
in respect of such fractional interests. In determining the number of shares of
Common Stock and the payment, if any, in lieu of fractional shares that a holder
of Series B Preferred Stock shall receive, the total number of shares of Series
B Preferred Stock surrendered for conversion by such holder shall be aggregated.
(2) On the first Dividend Payment Date on which
accrued dividends are paid in full to all holders of Series B Preferred Stock
following the optional conversion pursuant to clause (vi)(a) of all or any
portion of the Series B Preferred Stock, the Corporation shall pay (i) any
dividends accrued on such converted Series B Preferred Stock to the date of such
conversion plus (ii) any dividends accrued on any accrued and unpaid dividends
(on which dividends shall accrue at a rate of 7.50% per annum, compounded
quarterly) other than dividends accruing as of the last Dividend Payment Date.
Accrued dividends with respect to all shares converted pursuant to clause
(vi)(b) hereof shall be paid in full on the Conversion Date out of funds legally
available therefor.
(e) Adjustment of Conversion Price Upon Issuance of Common
Stock. If and whenever after the date hereof the Corporation shall issue or sell
any shares of its Common Stock (except upon conversion of the Series B Preferred
Stock) for a consideration per share less than, under certain circumstances
including those in paragraphs (1) through (9) below, the Conversion Price in
effect immediately prior to the time of such issue or sale, then, forthwith upon
such issue or sale, the Conversion Price shall be reduced (but not increased,
except as otherwise specifically provided in paragraph (3) below) to the price
(calculated to the nearest cent) determined by dividing (i) an amount equal to
the sum of (A) the aggregate number of shares of Common Stock outstanding
immediately prior to such issue or sale multiplied by the then existing
Conversion Price and (B) the consideration, if any, received by the Corporation
upon such issue or sale, by (ii) the aggregate number of shares of Common Stock
of all classes outstanding immediately after such issue or sale.
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No adjustment of the Conversion Price, however, shall be made in
an amount less than $.05 per share, but any such lesser adjustment shall be
carried forward and shall be made upon the time of and together with the next
subsequent adjustment, if any.
For the purposes of this clause (vi)(e), the following paragraphs
(1) through (9) shall also be applicable:
(1) Issuance of Rights or Options - In case at any
time after the date hereof the Corporation shall in any manner grant (whether
directly or by assumption in a merger or otherwise, except in the circumstances
described in clause (vi)(f) below) any rights to subscribe for or to purchase,
or any options or warrants for the purchase of, Common Stock or any stock, notes
or securities convertible into or exchangeable for Common Stock (such
convertible or exchangeable stock, notes or securities being herein called
"Convertible Securities"), whether or not such rights, options or warrants or
the right to convert or exchange any such Convertible Securities are immediately
exercisable, and the price per share for which Common Stock is issuable upon the
exercise of such rights, options or warrants or upon conversion or exchange of
such Convertible Securities (determined by dividing (i) the total amount, if
any, received or receivable by the Corporation as consideration for the granting
of such rights, options or warrants, plus the minimum aggregate amount of
additional consideration, if any, payable to the Corporation upon the exercise
of such rights, options or warrants, plus, in the case of such rights, options
or warrants which relate to Convertible Securities, the minimum aggregate amount
of additional consideration, if any, payable upon the issue or sale of such
Convertible Securities and upon the conversion or exchange thereof, by (ii) the
total maximum number of shares of Common Stock issuable upon the exercise of
such rights, options or warrants or upon the conversion or exchange of all such
Convertible Securities issuable upon the exercise of such rights, options or
warrants) shall be less than the Conversion Price in effect immediately prior to
the time of the granting of such rights, options or warrants, then the total
maximum number of shares of Common Stock issuable upon the exercise of such
rights, options or warrants or upon conversion or exchange of all such
Convertible Securities issuable upon the exercise of such rights, options or
warrants shall (as of the date of granting of such rights or options) be deemed
to be outstanding and to have been issued for such price per share. Except as
provided in paragraph (3), no further adjustment of the Conversion Price shall
be made upon the actual issue of such Common Stock or of such Convertible
Securities upon exercise of such rights, options or warrants or upon the actual
issue of such Common Stock upon conversion or exchange of such Convertible
Securities.
(2) Issuance of Convertible Securities - In case at
any time after the date hereof the Corporation shall in any manner issue
(whether directly or by assumption in a merger or otherwise) or sell any
Convertible Securities, whether or not the rights to exchange or convert
thereunder are immediately exercisable, and the price per share for which Common
Stock is issuable upon such conversion or exchange (determined by dividing (i)
the total amount received or receivable by the Corporation as consideration for
the issue or sale of such Convertible Securities, plus the minimum aggregate
amount of additional consideration, if any, payable to the Corporation upon the
conversion or exchange thereof, by (ii) the total maximum number of shares of
Common Stock issuable upon the conversion or exchange of all
11
<PAGE> 12
such Convertible Securities) shall be less than the Conversion Price in effect
immediately prior to the time of such issue or sale, then the total maximum
number of shares of Common Stock issuable upon conversion or exchange of all
such Convertible Securities shall (as of the date of the issue or sale of such
Convertible Securities) be deemed to be outstanding and to have been issued for
such price per share; provided, however, that (a) except as otherwise provided
in paragraph (3), no further adjustment of the Conversion Price shall be made
upon the actual issue of such Common Stock upon conversion or exchange of such
Convertible Securities, and (b) if any such issue or sale of such Convertible
Securities is made upon exercise of any rights to subscribe for or to purchase
or any option to purchase any such Convertible Securities for which adjustments
of the Conversion Price have been or are to be made pursuant to other provisions
of this clause (vi)(e), no further adjustment of the Conversion Price shall be
made by reason of such issue or sale.
(3) Change in Option Price or Conversion Rate - If
the purchase price provided for in any right or option referred to in paragraph
(1), the additional consideration, if any, payable upon the conversion or
exchange of any Convertible Securities referred to in paragraph (1) or (2), or
the rate at which any Convertible Securities referred to in paragraph (1) or (2)
are convertible into or exchangeable for Common Stock shall change (other than
under or by reason of provisions designed to protect against dilution), the
Conversion Price then in effect hereunder shall forthwith be readjusted
(increased or decreased, as the case may be) to the Conversion Price which would
have been in effect at such time had such rights, options or Convertible
Securities still outstanding provided for such changed purchase price,
additional consideration or conversion rate, as the case may be, at the time
initially granted, issued or sold. On the expiration of any such option or right
referred to in paragraph (1) or the termination of any such right to convert or
exchange any such Convertible Securities referred to in paragraph (1) or (2),
the Conversion Price then in effect hereunder shall forthwith be readjusted
(increased or decreased, as the case may be) to the Conversion Price which would
have been in effect at the time of such expiration or termination had such
right, option or Convertible Securities, to the extent outstanding immediately
prior to such expiration or termination, never been granted, issued or sold, and
the Common Stock issuable thereunder shall no longer be deemed to be
outstanding. If the purchase price provided for in any such right or option
referred to in paragraph (1) or the rate at which any Convertible Securities
referred to in paragraph (1) or (2) are convertible into or exchangeable for
Common Stock shall be reduced at any time under or by reason of provisions with
respect thereto designed to protect against dilution, then in case of the
delivery of shares of Common Stock upon the exercise of any such right or option
or upon conversion or exchange of any such Convertible Securities, the
Conversion Price then in effect hereunder shall, if not already adjusted,
forthwith be adjusted to such amount as would have obtained had such right,
option or Convertible Securities never been issued as to such shares of Common
Stock and had adjustments been made upon the issuance of the shares of Common
Stock delivered as aforesaid, but only if as a result of such adjustment the
Conversion Price then in effect hereunder is thereby reduced.
(4) Stock Dividends - In case at any time (other
than with respect to the Series B Preferred Stock and, to the extent the holders
of shares of Series B Preferred Stock participate on an as-converted basis, the
Common Stock) the Corporation shall
12
<PAGE> 13
declare a dividend or make any other distribution upon any class or series of
stock of the Corporation payable in shares of Common Stock or Convertible
Securities, any shares of Common Stock or Convertible Securities, as the case
may be, issuable in payment of such dividend or distribution shall be deemed to
have been issued or sold without consideration.
(5) Consideration for Stock - Anything herein to
the contrary notwithstanding, in case at any time any shares of Common Stock or
Convertible Securities or any rights, options or warrants to purchase any such
Common Stock or Convertible Securities shall be issued or sold for cash, the
consideration received therefor shall be deemed to be the amount received by the
Corporation therefor, without deduction therefrom of any expenses incurred or
any underwriting commissions or concessions paid or allowed by the Corporation
in connection therewith.
In case at any time any shares of Common Stock or any class or
Convertible Securities or any rights or options to purchase any such shares of
Common Stock or Convertible Securities shall be issued or sold for a
consideration other than cash, in whole or in part, the amount of the
consideration other than cash received by the Corporation shall be deemed to be
the fair value of such consideration as determined reasonably and in good faith
by the Board of Directors of the Corporation, without deduction of any expenses
incurred or any underwriting commissions or concessions paid or allowed by the
Corporation in connection therewith. In case at any time any shares of Common
Stock or any class or Convertible Securities or any rights or options to
purchase such shares of Common Stock or Convertible Securities shall be issued
in connection with any merger or consolidation in which the Corporation is the
surviving corporation, the amount of consideration received therefor shall be
deemed to be the fair value as determined reasonably and in good faith by the
Board of Directors of the Corporation of such portion of the assets and business
of the nonsurviving corporation as such Board may determine to be attributable
to such shares of Common Stock, Convertible Securities, rights or options, as
the case may be. In case at any time any rights or options to purchase any
shares of Common Stock or Convertible Securities shall be issued in connection
with the issue and sale of other securities of the Corporation, together
comprising one integral transaction in which no consideration is allocated to
such rights or options by the parties thereto, such rights or options shall be
deemed to have been issued for an amount of consideration equal to the fair
value thereof as determined reasonably and in good faith by the Board of
Directors of the Corporation.
(6) Record Date - In case the Corporation shall
take a record of the holders of its Common Stock for the purpose of entitling
them (A) to receive a dividend or other distribution payable in shares of Common
Stock or in Convertible Securities, or (B) to subscribe for or purchase shares
of Common Stock or Convertible Securities, then such record date shall be deemed
to be the date of the issue or sale of the shares of Common Stock deemed to have
been issued or sold as a result of the declaration of such dividend or the
making or such other distribution or the date of the granting of such right of
subscription or purchase, as the case may be.
(7) Treasury Shares - The number of shares of
Common Stock outstanding at any given time shall not include shares owned or
held by or for the account of the
13
<PAGE> 14
Corporation, and the disposition of any such shares shall be considered an issue
or sale of Common Stock for the purposes of this clause (vi)(e).
(8) Definition of Market Price - Unless otherwise
set forth in this Certificate of Designation, "Market Price" shall mean the last
reported sale price of the applicable security as reported by the National
Association of Securities Dealers, Inc. Automatic Quotations System, National
Market System, or, if the applicable security is listed or admitted for trading
on a securities exchange, the last reported sales price of the applicable
security on the principal exchange on which the applicable security is listed or
admitted for trading (which shall be for consolidated trading if applicable to
such exchange), or if neither so reported or listed or admitted for trading, the
last reported bid price of the applicable security in the over-the-counter
market. In the event that the Market Price cannot be determined as aforesaid,
the Board of Directors of the Corporation shall determine the Market Price on
the basis of such quotations as it in good faith considers appropriate, in
consultation with a nationally recognized investment bank. The Market Price
shall be such price averaged over a period of 20 consecutive business days
ending 2 days prior to the day as of which "Market Price" is being determined.
(9) Adjustment to Determination of Market Price -
When making the calculations and determinations described in clause (vi)(e)
hereof, there shall not be taken into account (i) the issuance of Common Stock
upon the exercise of options outstanding on the date this Certificate of
Designation was filed with the State of Delaware for the purchase of up to
554,350 shares of Common Stock, (ii) the issuance of any rights to subscribe for
or to purchase, or any options for the purchase of, up to 1.5% of the fully
diluted shares of Common Stock of the Corporation as of the date of issuance of
all shares of Series A Preferred Stock or any stock or securities convertible
into or exchangeable for Common Stock to officers or directors
("Officers/Directors Securities") and (iii) the issuance of any options for the
purchase of Common Stock to employees of the Corporation other than officers or
directors pursuant to the standard option awards program adopted by the Board of
Directors of the Corporation, but excluding any discretionary awards outside of
such program ("Employee Securities" and, together with the Officers/Directors
Securities, the "Company Securities"); provided, that all Common Stock issuable
with respect to any such Company Securities be issuable at or above the Market
Price as of the date of the grant.
(f) Liquidating Dividends; Purchase Rights. (1) In case at
any time after the date hereof the Corporation shall declare a dividend upon the
shares of Common Stock of any class payable otherwise than in shares of Common
Stock or Convertible Securities, otherwise than out of funds legally available
therefor (determined in accordance with generally accepted accounting
principles, including the making of appropriate deductions for minority
interests, if any, in subsidiaries), and otherwise than in the securities to
which the provisions of clause (2) below apply, the corporation shall pay over
to each holder of Series B Preferred Stock, upon conversion thereof on or after
the dividend payment date, the securities and other property (including cash)
which such holder would have received (together with all distributions thereon)
if such holder had converted the Series B Preferred Stock held by it on the
record date fixed on connection with such dividend, and the Corporation shall
take whatever steps are necessary or appropriate to keep in reserve at all times
such securities and other property as shall be required
14
<PAGE> 15
to fulfill its obligations hereunder in respect of the shares issuable upon the
exercise or conversion of all the Series B Preferred Stock. For the purposes of
the foregoing, a dividend other than in cash shall be considered payable out of
funds legally available therefor, only to the extent that such earnings or
retained earnings are charged an amount equal to the fair value of such dividend
as determined by the Board of Directors of the Corporation.
(2) If at any time or from time to time on or after
the date hereof, the Corporation shall grant, issue or sell any options or
rights (other than Convertible Securities) to purchase stock, warrants,
securities or other property pro rata to the holders of Common Stock of all
classes ("Purchase Rights"), and if the holder shall be entitled to an
adjustment pursuant to clause (vi)(e) above, then in lieu of such adjustment,
each holder of Series B Preferred Stock shall be entitled, at such holder's
option, to acquire (whether or not such holder's Series B Preferred Stock shall
have been converted), upon the terms applicable to such Purchase Rights, the
aggregate Purchase Rights which such holder could have acquired if such holder
had held the number of shares of Common Stock issuable upon conversion of such
Series B Preferred Stock immediately prior to the time or times at which the
Corporation granted, issued or sold such Purchase Rights.
(g) Subdivision or Combination of Stock. In case the
Corporation shall at any time subdivide its outstanding shares of Common Stock
into a greater number of shares, the Conversion Price in effect immediately
prior to such subdivision shall be proportionately reduced and, conversely, in
case the outstanding shares of Common Stock of the Corporation shall be combined
into a smaller number of shares, the Conversion Price in effect immediately
prior to such combination shall be proportionately increased.
(h) Changes in Common Stock. If any capital reorganization
or reclassification of the capital stock of the Corporation, or consolidation or
merger of the Corporation with another corporation, or the sale, transfer or
other disposition of all or substantially all of its assets to another
corporation for cash or stock of such other corporation, shall be effected,
then, as a condition of such reorganization, reclassification, consolidation,
merger, sale transfer or other disposition, lawful and adequate provision shall
be made whereby each holder of Series B Preferred Stock shall thereafter have
the right to purchase and receive upon the basis and upon the terms and
conditions herein specified and in lieu of the shares of the Common Stock of the
Corporation immediately theretofore issuable upon conversion of the Series B
Preferred Stock, such shares of stock, securities or properties as may be
issuable or payable with respect to or in exchange for a number of outstanding
shares of such Common Stock equal to the number of shares of such Common Stock
immediately theretofore issuable upon conversion of the Series B Preferred Stock
had such reorganization, reclassification, consolidation, merger, sale, transfer
or other disposition not taken place, and in any such case appropriate
provisions shall be made with respect to the rights and interests of each holder
of Series B Preferred Stock to the end that the provision hereto (including
without limitation provisions for adjustment of the Conversion Price) shall
thereafter be applicable, as nearly equivalent as may be practicable in relation
to any shares of stock, securities or properties thereafter deliverable upon the
exercise thereof. The Corporation shall not effect any such consolidation,
merger, sale, transfer or other disposition, unless prior to or simultaneously
with
15
<PAGE> 16
the consummation thereof the successor corporation (if other than the
Corporation) resulting from such consolidation or merger or the corporation
purchasing or otherwise acquiring such properties shall assume, by written
instrument executed and mailed or delivered to the holders of Series B Preferred
Stock at the last address of such holders appearing on the books of the
Corporation, the obligation to deliver to such holders such shares of stock,
securities or properties as, in accordance with the foregoing provisions, such
holders may be entitled to acquire. The above provisions of this subparagraph
shall similarly apply to successive reorganizations, reclassifications,
consolidations, mergers, sales, transfers or other dispositions.
(i) Certain Events. If any event occurs as to which in the
opinion of the Board of Directors of the Corporation the other provisions of
this clause (vi) are not strictly applicable or if strictly applicable would not
fairly protect the conversion rights of the holders of the Series B Preferred
Stock in accordance with the essential intent and principles of such provisions,
then such Board of Directors, acting by a vote of at least 75% of the members
thereof, shall provide for the benefit of holders of shares of Series B
Preferred Stock an adjustment, if any, on a basis consistent with such essential
intent and principles, necessary to preserve, without dilution, the rights of
the holders of the Series B Preferred Stock. Upon such vote by the Board of
Directors, the Corporation shall forthwith make the adjustments described
therein; provided, however, that no such adjustments shall have the effect of
increasing the Conversion Price as otherwise determined pursuant to this clause
(vi) except in the event of a combination of shares of the type contemplated in
clause (vi)(g) and then in no event to an amount larger than the conversion
price as adjusted pursuant to clause (vi)(g).
(j) Prohibition of Certain Actions. The Corporation shall
not, without the affirmative consent or approval of the holders of shares
representing 66-2/3% of the shares of Series B Preferred Stock then outstanding,
voting as a single class (such consent or approval to be given by written
consent in lieu of a meeting (if allowable under the Corporation's Certificate
of Incorporation) or by vote at a meeting called for such purpose for which
notice shall have been given to the holders of the Series B Preferred Stock) (1)
authorize or issue, or agree to authorize or issue, any shares of its capital
stock of any class or series of preferred as to dividends or liquidation, unless
the rights of the holders thereof shall be limited to a fixed sum or percentage
of par value in respect of participation in dividends and in the distribution of
such assets or (2) authorize, issue or permit to remain outstanding any class or
series of its capital stock (including, without limitation, the Common Stock but
not including the Series A Preferred Stock and the Series B Preferred Stock)
having the right to vote for the election of directors or in respect of any
other matter, which class or series is entitled to more than one vote per share.
The Corporation will not take any action which would result in any adjustment of
the Conversion Price if the total number of shares of Common Stock issuable
after such action upon conversion of all the Series B Preferred Stock would
exceed the total number of shares of Common Stock then authorized by the
Corporation's Certificate of Incorporation.
(k) Stock to be Reserved. The Corporation will at all
times reserve and keep available out of its authorized Common Stock, solely for
the purpose of issue upon the conversion of Series B Preferred Stock as herein
provided, such number of shares of Common Stock as shall then be issuable upon
the conversion of all outstanding Series B Preferred Stock.
16
<PAGE> 17
The Corporation covenants that all shares of Common Stock which shall be so
issuable shall, upon issuance, be duly authorized, validly issued, fully paid
and nonassessable, free from preemptive or similarly rights on the part of the
holders of any shares of capital stock or securities of the Corporation, and
free from all liens and charges with respect to the issue thereof; and without
limiting the generality of the foregoing, the Corporation covenants that it will
from time to time take all such action as may be requisite to assure that the
par value, if any, per share of the Common Stock is at all times equal to or
less than the then effective Conversion Price. The Corporation will take all
such action as may be necessary to assure that such shares of Common Stock may
be so issued without violation by the Corporation of any applicable law or
regulation or agreement, or of any requirements of any domestic securities
exchange upon which the Common Stock may be listed. Without limiting the
foregoing, the Corporation will take all such action as may be necessary to
assure that, upon conversion of any of the Series B Preferred Stock, an amount
equal to the lesser of (1) the par value of each share of Common Stock
outstanding immediately prior to such conversion, or (2) the Conversion Price
shall be credited to the Corporation's stated capital account for each share of
Common Stock issued upon such conversion, and that, if clause (1) above is
applicable, the balance of the Conversion Price of Series B Preferred Stock
converted shall be credited to the Corporation's capital surplus account.
(l) Registration and Listing of Common Stock. If any
shares of Common Stock required to be reserved for purposes of conversion of
Series B Preferred Stock hereunder require registration with or approval of any
governmental authority under any Federal or state law (other than the Securities
Act) before such shares may be issued upon conversion, the Corporation will, at
its expense and as expeditiously as possible, use its best efforts to cause such
shares to be duly registered or approved, as the case may be. Shares of Common
Stock issuable upon conversion of the Series B Preferred Stock shall be
registered by the Corporation under the Securities Act or similar statute then
in force if required before such shares may be issued upon conversion. If and so
long as the Common Stock is listed on any national securities exchange, the
Corporation will, at its expense, obtain promptly and maintain the approval for
listing on each such exchange upon official notice of issuance, of shares of
Common Stock issuable upon conversion of the then outstanding Series B Preferred
Stock and maintain the listing of such shares after their issuance; and the
Corporation will also list on such national securities exchange, will register
under the Exchange Act and will maintain such listing of, any other securities
that at any time are issuable upon conversion of the Series B Preferred Stock,
if and at the time that any securities of the same class shall be listed on such
national securities exchange by the Corporation.
(m) Closing of Books. The Corporation will at no time
close its transfer books against the transfer of any Series B Preferred Stock or
of any shares of Common Stock issued or issuable upon the conversion of any
Series B Preferred Stock in any manner which interferes with the timely
conversion of such Series B Preferred Stock.
(n) Statement of Adjustment of Conversion Price. Whenever
the Conversion Price shall be adjusted as provided in clause (vi)(e) above, the
Corporation shall forthwith file at its office a statement, signed by its
independent certified public accounts, showing in detail the facts requiring
such adjustment and the Conversion Price that shall be in
17
<PAGE> 18
effect after such adjustment. The Corporation shall also cause a copy of such
statement to be sent by certified mail, return receipt requested, to each holder
of shares of Series B Preferred Stock to such holder's address appearing on the
Corporation's records. Where appropriate, such copy may be given in advance and
may be included as part of a notice required to be mailed under the provisions
of clause (vi)(o) below.
(o) Notice. In the event the Corporation shall propose to
take any action of the types described in clause (vi)(e) above, the Corporation
shall give notice to each holder of shares of Series B Preferred Stock which
notice shall specify the record date, if any, with respect to any such action
and the date on which such action is to take place. Such notice shall also set
forth such facts with respect thereto as shall be reasonable necessary to
indicate the effect of such action (to the extent such effect may be known at
the date of such notice) on the Conversion Price and the number, kind or class
of shares or other securities or property which shall be deliverable or
purchasable upon the occurrence of such action or deliverable upon conversion of
shares of Series B Preferred Stock. In the case of any action which would
require the fixing of a record date, such notice shall be given at least 20 days
prior to the date so fixed, and in case of all other action, such notice shall
be given at least 30 days prior to the taking of such proposed action.
(p) Taxes. The Corporation shall pay all documentary,
stamp or other transactional taxes attributable to the issuance or delivery of
shares of capital stock of the Corporation upon conversion of any shares of
Series B Preferred Stock. The Corporation shall not, however, be required to pay
any tax which may be payable in respect of any transfer involved in the issuance
and delivery of Common Stock or the reissuance of the Preferred Stock in a name
other than that in which the shares of Series B Preferred Stock so converted
were registered, and no such issuance or delivery shall be made unless and until
the person requesting such issuance has paid to the Corporation the amount of
any such tax or has established to the satisfaction of the Corporation that such
tax has been paid.
(q) Exclusion of Other Rights. Except as may otherwise be
required by law, the shares of Series B Preferred Stock shall not have any
voting powers, preferences and relative, participating, optional or other
special rights, other than those specifically set forth in this resolution and
in the Certificate of Incorporation. The shares of Series B Preferred Stock
shall have no preemptive or subscription rights.
18
<PAGE> 19
IN WITNESS WHEREOF, Candlewood Hotel Company, Inc. has caused
these presents to be signed in its name and on its behalf by its Chief Executive
Officer on July 13, 1998.
CANDLEWOOD HOTEL COMPANY, INC.
By: /S/ JACK P. DEBOER
-------------------------
Name: Jack P. DeBoer
Title: Chief Executive Officer
19
<PAGE> 1
EXHIBIT 4.2
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF DESIGNATIONS
OF
CANDLEWOOD HOTEL COMPANY, INC.,
A DELAWARE CORPORATION
Candlewood Hotel Company, Inc., a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware (this "Corporation"), DOES HEREBY CERTIFY:
1. That the Board of Directors of this Corporation, acting
pursuant to the authority of Section 141(f) of the General Corporation Law of
the State of Delaware, adopted a resolution setting forth a proposed amendment
of the Certificate of Designations, Preferences and Relative, Participating,
Optional and Other Special Rights of Preferred Stock and Qualifications,
Limitations and Restrictions Thereof of Series A Cumulative Convertible
Preferred Stock (the "Certificate of Designations") of this Corporation. The
resolution setting forth the proposed amendment is as follows:
"NOW, THEREFORE, BE IT RESOLVED, that the Restated Certificate
of Incorporation of this Corporation be amended by changing clause (vi)(e)(9) of
the Certificate of Designations so that, as amended, clause (vi)(e)(9) of the
Certificate of Designations shall read in its entirety as follows:
"(9) Adjustment to Determination of Market Price. When
making the calculations and determinations described in clause
(vi)(e) hereof, there shall not be taken into account (i) the
issuance of Common Stock upon the exercise of options outstanding
on the date this Certificate of Designation was filed with the
State of Delaware for the purchase of up to 554,350 shares of
Common Stock, (ii) the issuance of any rights to subscribe for or
to purchase, or any options for the purchase of, up to 1.5% of
the fully diluted shares of Common Stock of the Corporation as of
the date of issuance of all shares of Series A Preferred Stock
(subject to adjustment as set forth herein) or any stock or
securities convertible into or exchangeable for Common Stock to
officers or directors ("Officers/Directors Securities"), and
(iii) the issuance of any options for the purchase of Common
Stock to employees of the Company other than officers or
directors pursuant to the standard option awards program adopted
by the Board of Directors of the Company, but excluding any
discretionary awards outside of such program ("Employee
Securities" and, together with the Officers/Directors Securities,
the "Company Securities"); provided, that all Common Stock
issuable with respect to any such
<PAGE> 2
Company Securities be issuable at or above the Market Price as
of the date of the grant."
2. That in lieu of a meeting and vote of holders of this
Corporation's Series A Cumulative Convertible Preferred Stock, the holders of 66
2/3% of this Corporation's Series A Cumulative Convertible Preferred Stock
entitled to vote has given written consent to said amendment in accordance with
the Certificate of Designations and the provisions of Section 228 of the General
Corporation Law of the State of Delaware.
3. That the above amendment was duly adopted in accordance with
the applicable provisions of Sections 228 and 242 of the General Corporation Law
of the State of Delaware.
2
<PAGE> 3
IN WITNESS WHEREOF, the undersigned has caused this Certificate
of Amendment to be duly executed as of the 13th day of July, 1998.
CANDLEWOOD HOTEL COMPANY, INC.,
A DELAWARE CORPORATION
By: /s/ JACK P. DEBOER
------------------------------
Jack P. DeBoer
Chief Executive Officer
3
<PAGE> 1
EXHIBIT 4.3
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED,
QUALIFIED, APPROVED OR DISAPPROVED UNDER THE SECURITIES ACT OF 1933 OR THE
SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE
STATE SECURITIES LAWS OR AN APPLICABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF SUCH ACT OR SUCH LAWS AND NEITHER THE UNITED STATES SECURITIES
AND EXCHANGE COMMISSION NOR ANY OTHER FEDERAL OR STATE REGULATORY AUTHORITY HAS
PASSED ON OR ENDORSED THE MERITS OF THESE SECURITIES.
WARRANT NO. ___
WARRANT
TO PURCHASE SHARES OF COMMON STOCK,
PAR VALUE $.01 PER SHARE
OF
CANDLEWOOD HOTEL COMPANY, INC.
THIS IS TO CERTIFY THAT [ ] or its registered assigns (the
"HOLDER"), is the owner of [ ] Warrants (the "WARRANTS"), each of which entitles
the registered Holder thereof to purchase from CANDLEWOOD HOTEL COMPANY, INC., a
Delaware corporation (the "COMPANY"), one fully paid, duly authorized and
nonassessable share of Common Stock, par value $.01 per share (the "COMMON
STOCK"), of the Company at any time or from time to time on or before 5:00 p.m.,
New York City time, on the Warrant Expiration Date (which shall in no event be
later than July 10, 2005), at an exercise price of $12.00 per share (the
"EXERCISE PRICE"), subject to adjustment from time to time as set forth herein,
all on the terms and subject to the conditions hereinafter set forth.
The number of shares of Common Stock issuable upon exercise of
each Warrant (the "NUMBER ISSUABLE") shall be determined for each Warrant by
dividing $12.00 by the Exercise Price in effect at the time of such exercise,
and is initially one (1) share of Common Stock.
Capitalized terms used herein but not otherwise defined shall
have the meanings given them in Section 11 hereof or, if not therein defined, in
the Securities Purchase Agreement.
Section 1. Exercise of Warrant. Subject to the last paragraph of
this Section 1, the Warrants evidenced hereby may be exercised, in whole or in
part, by the registered Holder hereof at any time or from time to time on or
before 5:00 p.m., New York City time, on the Warrant Expiration Date, upon
delivery to the Company at the principal executive office of the Company in the
United States of America, of (a) this Warrant Certificate, (b) a written notice
<PAGE> 2
stating that such Holder elects to exercise the Warrants evidenced hereby in
accordance with the provisions of this Section 1 and specifying the number of
Warrants being exercised and the name or names in which such Holder wishes the
certificate or certificates for shares of Common Stock to be issued and (c)
payment of the Exercise Price for the shares of Common Stock issuable upon
exercise of such Warrants, which shall be payable by any one or any combination
of the following: (i) cash, (ii) certified or official bank check payable to the
order of the Company, (iii) by the surrender (which surrender shall be evidenced
by cancellation of the number of Warrants represented by any Warrant certificate
presented in connection with a Cashless Exercise (as defined below)) of a
Warrant or Warrants (represented by one or more relevant Warrant certificates),
and without the payment of the Exercise Price in cash, in return for the
delivery to the surrendering holder of such number of shares of Common Stock
equal to the number of shares of Common Stock for which such Warrant is
exercisable as of the date of exercise (if the Exercise Price were being paid in
cash) reduced by that number of shares of Common Stock equal to the quotient
obtained by dividing (x) the Exercise Price by (y) the Market Price of one share
of Common Stock on the Business Day which next precedes the day of exercise of
the Warrant or (iv) by the delivery of shares of Common Stock that are either
held by the Holder or are acquired in connection with such exercise, and without
payment of the Exercise Price in cash. Any share of Common Stock delivered as
payment of the Exercise Price in connection with an In-Kind Exercise (as defined
below) shall be deemed to have a value equal to the Market Price of one share of
Common Stock on the Business Day which next precedes the day of exercise of the
Warrant. An exercise of a Warrant in accordance with clause (iii) is herein
referred to as a "CASHLESS EXERCISE" and an exercise of a Warrant in accordance
with clause (iv) is herein referred to as an "IN-KIND EXERCISE." The
documentation and consideration, if any, delivered in accordance with
subsections (a), (b) and (c) are collectively referred to herein as the "WARRANT
EXERCISE DOCUMENTATION." For the purposes of this Section 1, Market Price shall
be calculated without reference to the last sentence of the definition thereof.
As promptly as practicable, and in any event within five (5)
Business Days after receipt of the Warrant Exercise Documentation, the Company
shall deliver or cause to be delivered (a) certificates representing the number
of validly issued, fully paid and nonassessable shares of Common Stock issuable
in connection with such exercise, (b) if applicable, cash in lieu of any
fraction of a share, as hereinafter provided and (c) if less than the full
number of Warrants evidenced hereby are being exercised, a new Warrant
Certificate or Certificates, of like tenor, for the number of Warrants evidenced
by this Warrant Certificate, less the number of Warrants then being exercised;
provided, however, that no new Warrant Certificate need be delivered if the
Warrant Expiration Date has occurred. Such exercise shall be deemed to have been
made at the close of business on the date of delivery of the Warrant Exercise
Documentation so that the Person entitled to receive shares of Common Stock upon
such exercise shall be treated for all purposes as having become the record
Holder of such shares of Common Stock at such time. No such surrender shall be
effective to constitute the person entitled to receive such shares as the record
Holder thereof while the transfer books of the Company for the Common Stock are
closed for any purpose (but not for any period in excess of five (5) days); but
any such surrender of this Warrant Certificate for exercise during any period
while such books are so closed shall become effective for exercise immediately
upon the reopening of such books, as if the exercise had been
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<PAGE> 3
made on the date this Warrant Certificate was surrendered and for the number of
shares of Common Stock specified in the Warrant Exercise Documentation and at
the Exercise Price.
The Company shall pay all expenses in connection with, and all
taxes and other governmental charges (other than income taxes of the Holder)
that may be imposed in respect of, the issue or delivery of any shares of Common
Stock issuable upon the exercise of the Warrants evidenced hereby. The Company
shall not be required, however, to pay any tax or other charge imposed in
connection with any transfer involved in the issue of any certificate for shares
of Common Stock in any name other than that of the registered Holder of the
Warrants evidenced hereby.
In connection with the exercise of any Warrants evidenced hereby,
no fractions of shares of Common Stock shall be issued, but in lieu thereof the
Company shall pay a cash adjustment in respect of such fractional interest in an
amount equal to such fractional interest multiplied by the current Market Price
per share of Common Stock on the Business Day which next precedes the day of
exercise. If more than one such Warrant shall be exercised by the Holder thereof
at the same time, the number of full shares of Common Stock issuable on such
exercise shall be computed on the basis of the total number of Warrants so
exercised.
Section 2. Adjustments.
(a) Adjustment of Exercise Price Upon Issuance of Common Stock.
If and whenever after the Issue Date the Company shall issue or sell any shares
of its Common Stock (except upon exercise of the Warrants and shares issued as a
result of adjustments made under the terms of the Warrants) for a consideration
per share less than, under certain circumstances including those in paragraphs
(i) through (ix) below, the Conversion Price then in effect at the time of such
issuance or sale (the "Date"), then, and in each such case, the Exercise Price
then in effect shall be adjusted by dividing the Exercise Price in effect on the
day immediately prior to the Date by a fraction (x) the numerator of which shall
be the aggregate number of shares of Common Stock of all classes outstanding
immediately after such issue or sale and (y) the denominator of which shall be
the sum of (A) the aggregate number of shares of Common Stock outstanding
immediately prior to such issue or sale plus (B) the aggregate number of shares
of Common Stock which would have been issued or sold in connection with such
issue or sale if such shares had been issued or sold at the then existing
Conversion Price.
No adjustment of the Exercise Price, however, shall be made in an
amount less than $.05 per share, but any such lesser adjustment shall be carried
forward and shall be made upon the time of and together with the next subsequent
adjustment, if any.
For the purposes of this Section 2(a), the following paragraphs
(i) through (ix) shall also be applicable:
(i) Issuance of Rights or Options - In case at any time
after the Issue Date the Company shall in any manner grant (whether directly or
by assumption in a merger or otherwise, except in the circumstances described in
Section 2(c) below) any rights to subscribe for or to purchase, or any options
or warrants for the purchase of, Common Stock or any stock,
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<PAGE> 4
notes or securities convertible into or exchangeable for Common Stock (such
convertible or exchangeable stock, notes or securities being herein called
"CONVERTIBLE SECURITIES"), whether or not such rights, options or warrants or
the right to convert or exchange any such Convertible Securities are immediately
exercisable, and the price per share for which Common Stock is issuable upon the
exercise of such rights, options or warrants or upon conversion or exchange of
such Convertible Securities (determined by dividing (i) the total amount, if
any, received or receivable by the Company as consideration for the granting of
such rights, options or warrants, plus the minimum aggregate amount of
additional consideration, if any, payable to the Company upon the exercise of
such rights, options or warrants, plus, in the case of such rights, options or
warrants which relate to Convertible Securities, the minimum aggregate amount of
additional consideration, if any, payable upon the issue or sale of such
Convertible Securities and upon the conversion or exchange thereof, by (ii) the
total maximum number of shares of Common Stock issuable upon the exercise of
such rights, options or warrants or upon the conversion or exchange of all such
Convertible Securities issuable upon the exercise of such rights, options or
warrants) shall be less than the Conversion Price in effect immediately prior to
the time of the granting of such rights, options or warrants, then the total
maximum number of shares of Common Stock issuable upon the exercise of such
rights, options or warrants or upon conversion or exchange of all such
Convertible Securities issuable upon the exercise of such rights, options or
warrants shall (as of the date of granting of such rights or options) be deemed
to be outstanding and to have been issued for such price per share. Except as
provided in paragraph (iii), no further adjustment of the Exercise Price shall
be made upon the actual issue of such Common Stock or of such Convertible
Securities upon exercise of such rights, options or warrants or upon the actual
issue of such Common Stock upon conversion or exchange of such Convertible
Securities.
(ii) Issuance of Convertible Securities - In case at any
time after the Issue Date the Company shall in any manner issue (whether
directly or by assumption in a merger or otherwise) or sell any Convertible
Securities, whether or not the rights to exchange or convert thereunder are
immediately exercisable, and the price per share for which Common Stock is
issuable upon such conversion or exchange (determined by dividing (i) the total
amount received or receivable by the Company as consideration for the issue or
sale of such Convertible Securities, plus the minimum aggregate amount of
additional consideration, if any, payable to the Company upon the conversion or
exchange thereof, by (ii) the total maximum number of shares of Common Stock
issuable upon the conversion or exchange of all such Convertible Securities)
shall be less than the Conversion Price in effect immediately prior to the time
of such issue or sale, then the total maximum number of shares of Common Stock
issuable upon conversion or exchange of all such Convertible Securities shall
(as of the date of the issue or sale of such Convertible Securities) be deemed
to be outstanding and to have been issued for such price per share; provided,
however, that (a) except as otherwise provided in paragraph (iii), no further
adjustment of the Exercise Price shall be made upon the actual issue of such
Common Stock upon conversion or exchange of such Convertible Securities, and (b)
if any such issue or sale of such Convertible Securities is made upon exercise
of any rights to subscribe for or to purchase or any option to purchase any such
Convertible Securities for which adjustments of the Exercise Price have been or
are to be made pursuant to other provisions of this Section 2(a), no further
adjustment of the Exercise Price shall be made by reason of such issue or sale.
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<PAGE> 5
(iii) Change in Option Price or Conversion Rate - If the
purchase price provided for in any right or option referred to in paragraph (i),
the additional consideration, if any, payable upon the conversion or exchange of
any Convertible Securities referred to in paragraph (i) or (ii), or the rate at
which any Convertible Securities referred to in paragraph (i) or (ii) are
convertible into or exchangeable for Common Stock shall change (other than under
or by reason of provisions designed to protect against dilution), the Exercise
Price then in effect hereunder shall forthwith be readjusted (increased or
decreased, as the case may be) to the Exercise Price which would have been in
effect at such time had such rights, options or Convertible Securities still
outstanding provided for such changed purchase price, additional consideration
or conversion rate, as the case may be, at the time initially granted, issued or
sold. On the expiration of any such option or right referred to in paragraph (i)
or the termination of any such right to convert or exchange any such Convertible
Securities referred to in paragraph (i) or (ii), the Exercise Price then in
effect hereunder shall forthwith be readjusted (increased or decreased, as the
case may be) to the Exercise Price which would have been in effect at the time
of such expiration or termination had such right, option or Convertible
Securities, to the extent outstanding immediately prior to such expiration or
termination, never been granted, issued or sold, and the Common Stock issuable
thereunder shall no longer be deemed to be outstanding. If the purchase price
provided for in any such right or option referred to in paragraph (i) or the
rate at which any Convertible Securities referred to in paragraph (i) or (ii)
are convertible into or exchangeable for Common Stock shall be reduced at any
time under or by reason of provisions with respect thereto designed to protect
against dilution, then in case of the delivery of shares of Common Stock upon
the exercise of any such right or option or upon conversion or exchange of any
such Convertible Securities, the Exercise Price then in effect hereunder shall,
if not already adjusted, forthwith be adjusted to such amount as would have
obtained had such right, option or Convertible Securities never been issued as
to such shares of Common Stock and had adjustments been made upon the issuance
of the shares of Common Stock delivered as aforesaid, but only if as a result of
such adjustment the Exercise Price then in effect hereunder is thereby reduced.
(iv) Stock Dividends - In case at any time the Company
shall declare a dividend or make any other distribution upon any class or series
of stock of the Company payable in shares of Common Stock or Convertible
Securities, any shares of Common Stock or Convertible Securities, as the case
may be, issuable in payment of such dividend or distribution shall be deemed to
have been issued or sold without consideration.
(v) Consideration for Stock - Anything herein to the
contrary notwithstanding, in case at any time any shares of Common Stock or
Convertible Securities or any rights, options or warrants to purchase any such
Common Stock or Convertible Securities shall be issued or sold for cash, the
consideration received therefor shall be deemed to be the amount received by the
Company therefor, without deduction therefrom of any expenses incurred or any
underwriting commissions or concessions paid or allowed by the Company in
connection therewith.
In case at any time any shares of Common Stock or any class or
Convertible Securities or any rights or options to purchase any such shares of
Common Stock or Convertible
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<PAGE> 6
Securities shall be issued or sold for a consideration other than cash, in whole
or in part, the amount of the consideration other than cash received by the
Company shall be deemed to be the fair value of such consideration as determined
reasonably and in good faith by the Board of Directors of the Company, without
deduction of any expenses incurred or any underwriting commissions or
concessions paid or allowed by the Company in connection therewith. In case at
any time any shares of Common Stock or any class or Convertible Securities or
any rights or options to purchase such shares of Common Stock or Convertible
Securities shall be issued in connection with any merger or consolidation in
which the Company is the surviving Company, the amount of consideration received
therefor shall be deemed to be the fair value as determined reasonably and in
good faith by the Board of Directors of the Company of such portion of the
assets and business of the nonsurviving Company as such Board may determine to
be attributable to such shares of Common Stock, Convertible Securities, rights
or options, as the case may be. In case at any time any rights or options to
purchase any shares of Common Stock or Convertible Securities shall be issued in
connection with the issue and sale of other securities of the Company, together
comprising one integral transaction in which no consideration is allocated to
such rights or options by the parties thereto, such rights or options shall be
deemed to have been issued for an amount of consideration equal to the fair
value thereof as determined reasonably and in good faith by the Board of
Directors of the Company.
(vi) Record Date - In case the Company shall take a record
of the holders of its Common Stock for the purpose of entitling them (A) to
receive a dividend or other distribution payable in shares of Common Stock or in
Convertible Securities, or (B) to subscribe for or purchase shares of Common
Stock or Convertible Securities, then such record date shall be deemed to be the
date of the issue or sale of the shares of Common Stock deemed to have been
issued or sold as a result of the declaration of such dividend or the making or
such other distribution or the date of the granting of such right of
subscription or purchase, as the case may be.
(vii) Treasury Shares - The number of shares of Common
Stock outstanding at any given time shall not include shares owned or held by or
for the account of the Company, and the disposition of any such shares shall be
considered an issue or sale of Common Stock for the purposes of this Section
2(a).
(viii) Adjustment to Determination of Exercise Price -
When making the calculations and determinations described in this Section 2(a),
there shall not be taken into account (i) the issuance of Common Stock upon the
exercise of options outstanding on the Issue Date for the purchase of up to
554,350 shares of Common Stock, (ii) the issuance of any rights to subscribe for
or to purchase, or any options for the purchase of, up to 1.5% of the fully
diluted shares of Common Stock of the Company as of the date of original
issuance of all shares of Series A Preferred Stock or any stock or securities
convertible into or exchangeable for Common Stock to officers or directors
("OFFICERS/DIRECTORS SECURITIES") and (iii) the issuance of any options for the
purchase of Common Stock to employees of the Company other than officers or
directors pursuant to the standard option awards program adopted by the Board of
Directors of the Company, but excluding any discretionary awards outside of such
program ("EMPLOYEE SECURITIES" and, together with the Officers/Directors
Securities, the "COMPANY SECURITIES");
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<PAGE> 7
provided, that all Common Stock issuable with respect to any such Company
Securities be issuable at or above the Market Price as of the date of the grant.
(ix) In case the Company at any time or from time to time
shall take any action which could have a dilutive effect on the number of shares
of Common Stock that may be issued upon exercise of the Warrants, other than an
action described in Section 2(a) or Section 2(b), then, the Exercise Price shall
be adjusted in such manner and at such time as the Board of Directors of the
Company reasonably determines to be equitable under the circumstances (such
determination to be evidenced in a resolution, a certified copy of which shall
be mailed to the Holder of the Warrants evidenced hereby).
(x) The Company promptly shall deliver to each registered
Holder of Warrants at least five (5) Business Days prior to effecting any
transaction which would result in an increase or decrease in the Exercise Price
pursuant to this Section 2, together with a certificate, signed by the Chief
Executive Officer, President or a Vice-President and by the Treasurer, an
Assistant Treasurer, the Secretary or an Assistant Secretary of the Company,
setting forth in reasonable detail the event requiring the adjustment and the
method by which such adjustment was calculated and specifying the increased or
decreased Exercise Price then in effect following such adjustment.
(xi) Notwithstanding anything contrary contained in this
Section 2(a), the Company shall be entitled to make such adjustments in the
Exercise Price, in addition to those otherwise required by this Section 2(a), as
the Board of Directors of the Company in its discretion shall determine to be
advisable in order that any stock dividend, subdivision or combination of
shares, distribution of rights or warrants to purchase stock or securities, or
distribution of securities convertible into or exchangeable for Common Stock,
hereafter made by the Company to its stockholders shall not be taxable;
provided, however, that any such adjustment shall be made, as nearly as
practicable, in a manner which treats all Holders of Warrants with similar
protections on an equal basis.
(b) Reorganization, Reclassification, Consolidation, Merger or
Sale of Assets. In case of any capital reorganization or reclassification or
other change of outstanding shares of Common Stock (other than a change in par
value, or from par value to no par value, or from no par value to par value, or
as a result of a subdivision or combination), or in case of any consolidation or
merger of the Company with or into another Person (other than a consolidation or
merger in which the Company is the resulting or surviving person and which does
not result in any reclassification or change of outstanding Common Stock) (any
of the foregoing, a "TRANSACTION"), the Company, or such successor or purchasing
Person, as the case may be, shall execute and deliver to each Holder of the
Warrants evidenced hereby, at least five (5) Business Days prior to effecting
any of the foregoing Transactions, a certificate that the Holder of each such
Warrant then outstanding shall have the right thereafter to exercise such
Warrant into the kind and amount of shares of stock or other securities (of the
Company or another issuer) or property or cash receivable upon such Transaction
by a holder of the number of shares of Common Stock into which such Warrant
could have been exercised immediately prior to such Transaction. Such
certificate shall provide for adjustments which shall be as nearly equivalent as
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<PAGE> 8
may be practicable to the adjustments provided for in this Section 2 and shall
contain other terms identical to the terms hereof. If, in the case of any such
Transaction, the stock, other securities, cash or property receivable thereupon
by a holder of Common Stock includes shares of stock or other securities of a
Person other than the successor or purchasing Persons and other than the
Company, which controls or is controlled by the successor or purchasing Person
or which, in connection with such Transaction, issues stock, securities, other
property or cash to holders of Common Stock, then such certificate also shall be
executed by such Person, and such Person shall, in such certificate,
specifically assume the obligations of such successor or purchasing Person and
acknowledge its obligations to issue such stock, securities, other property or
cash to Holders of the Warrants upon exercise thereof as provided above. The
provisions of this Section 2(b) similarly shall apply to successive
Transactions.
(c) Special Distributions. If the Holder so elects by sending a
Special Notice to the Company, in the event that the Company shall declare a
dividend or make any other distribution (including, without limitation, in cash,
in capital stock (which shall include, without limitation, any options, warrants
or other rights to acquire capital stock) of the Company, whether or not
pursuant to a stockholder rights plan, "poison pill" or similar arrangement (but
excluding any dividend or distribution which results in an adjustment to the
Exercise Price pursuant to Section 2(a)) in other property or assets, to holders
of Common Stock (a "SPECIAL DISTRIBUTION"), then the Board of Directors shall
set aside the amount of such dividend or distribution that any Holder of
Warrants would have been entitled to receive had it exercised such Warrants
prior to the record date for such dividend or distribution. Upon the exercise of
a Warrant evidenced hereby, the Holder shall be entitled to receive such
dividend or distribution that such Holder would have received had such Warrant
been exercised immediately prior to the record date for such dividend or
distribution. Prior to any Special Distribution described in this Section 2(c),
the Company shall as provided in Section 3 hereof notify each Holder (not less
than ten (10) Business Days prior to the occurrence of each Special
Distribution) of its intent to make such Special Distribution, and the Holder,
if it elects to have the amount of such distribution set aside rather than have
an adjustment to the Exercise Price as provided in Section 2(a), shall notify
the Company by sending a Special Notice prior to the date of any such Special
Distribution.
Section 3. Notice of Certain Events. In case at any time or from
time to time the Company shall declare any dividend or any other distribution to
the holders of its Common Stock, or shall authorize the granting to the holders
of its Common Stock of rights or warrants to subscribe for or purchase any
additional shares of stock of any class or any other right, or shall authorize
the issuance or sale of any other shares or rights which would result in an
adjustment to the Exercise Price pursuant to Section 2(a) or would result in a
Special Distribution pursuant to Section 2(c), or there shall be any capital
reorganization or reclassification of the Common Stock or consolidation or
merger of the Company with or into another Person, or any sale or other
disposition of all or substantially all the assets of the Company, or there
shall be a voluntary or involuntary dissolution, liquidation or winding up of
the Company, then, in any one or more of such cases the Company shall mail to
each Holder of the Warrants evidenced hereby at such Holder's address as it
appears on the transfer books of the Company, as promptly as practicable but in
any event at least ten (10) days prior to the applicable date hereinafter
specified, a notice
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<PAGE> 9
stating (a) the date on which a record is to be taken for the purpose of such
dividend, distribution, rights or warrants or, if a record is not to be taken,
the date as of which the holders of Common Stock of record to be entitled to
such dividend, distribution, rights or warrants are to be determined, (b) the
issue date of such dividend, distribution, rights or warrants or (c) the date on
which such reclassification, consolidation, merger, sale, conveyance,
dissolution, liquidation or winding up is expected to become effective; provided
that in the case of any event to which Section 2(c) applies, the Company shall
give at least ten (10) Business Days' prior written notice as aforesaid. Such
notice also shall specify the date as of which it is expected that the holders
of Common Stock of record shall be entitled to exchange their Common Stock for
shares of stock or other securities or property or cash deliverable upon such
reorganization, reclassification, consolidation, merger, sale, conveyance,
dissolution, liquidation or winding up.
Section 4. Certain Covenants. The Company covenants and agrees
that all shares of capital stock of the Company which may be issued upon the
exercise of the Warrants evidenced hereby will be duly authorized, validly
issued and fully paid and nonassessable. The Company shall at all times reserve
and keep available for issuance upon the exercise of the Warrants, such number
of its authorized but unissued shares of Common Stock as will from time to time
be sufficient to permit the exercise of all outstanding Warrants, and shall take
all action required to increase the authorized number of shares of Common Stock
if at any time there shall be insufficient authorized but unissued shares of
Common Stock to permit such reservation or to permit the exercise of all
outstanding Warrants. The Company shall prepare and file, and cooperate with the
Holder of this Warrant so that it may prepare and file, in each case within five
(5) Business Days of a request by such Holder, notification and report forms in
compliance with the HSR Act, and shall otherwise fully comply with the
requirements of the HSR Act, to the extent required in connection with the
exercise of the Warrant. The Company shall bear all of its own expenses and all
of its own out-of-pocket expenses (including reasonable attorneys' fees, charges
and expenses) and filing fees of such Holder in connection with any such
preparation and filing.
Section 5. Registered Holder. The person in whose name this
Warrant Certificate is registered shall be deemed the owner hereof and of the
Warrants evidenced hereby for all purposes. The registered Holder of this
Warrant Certificate, in its capacity as such, shall not be entitled to any
rights whatsoever as a stockholder of the Company, except as herein provided.
Section 6. Transfer of Warrants. Any transfer of the rights
represented by this Warrant Certificate shall be subject to the limitations
provided herein, and shall be effected by the surrender of this Warrant
Certificate, along with the form of assignment attached hereto, properly
completed and executed by the registered Holder hereof, at the principal
executive office of the Company in the United States of America, together with
an appropriate investment letter, if deemed reasonably necessary by counsel to
the Company to assure compliance with applicable securities laws. Thereupon, the
Company shall issue in the name or names specified by the registered Holder
hereof and, in the event of a partial transfer, in the name of the registered
Holder hereof, a new Warrant Certificate or Certificates evidencing the right to
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<PAGE> 10
purchase such number of shares of Common Stock as shall be equal to the number
of shares of Common Stock then purchasable hereunder.
Section 7. Denominations. The Company will, at its expense,
promptly upon surrender of this Warrant Certificate at the principal executive
office of the Company in the United States of America, execute and deliver to
the registered Holder hereof a new Warrant Certificate or Certificates in
denominations specified by such Holder for an aggregate number of Warrants equal
to the number of Warrants evidenced by this Warrant Certificate.
Section 8. Replacement of Warrants. Upon receipt of evidence
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant Certificate and, in the case of loss, theft or destruction, upon
delivery of an indemnity reasonably satisfactory to the Company (in the case of
an insurance company or other institutional investor, its own unsecured
indemnity agreement shall be deemed to be reasonably satisfactory), or, in the
case of mutilation, upon surrender and cancellation thereof, the Company will
issue a new Warrant Certificate of like tenor for a number of Warrants equal to
the number of Warrants evidenced by this Warrant Certificate.
Section 9. Governing Law. THIS WARRANT CERTIFICATE 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 APPLICABLE TO AGREEMENTS MADE
AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE.
Section 10. Rights Inure to Registered Holder. The Warrants
evidenced by this Warrant Certificate will inure to the benefit of and be
binding upon the registered Holder thereof and the Company and their respective
successors and permitted assigns. Nothing in this Warrant Certificate shall be
construed to give to any Person other than the Company and the registered Holder
thereof any legal or equitable right, remedy or claim under this Warrant
Certificate, and this Warrant Certificate shall be for the sole and exclusive
benefit of the Company and such registered Holder. Nothing in this Warrant
Certificate shall be construed to give the registered Holder hereof any rights
as a Holder of shares of Common Stock until such time, if any, as the Warrants
evidenced by this Warrant Certificate are exercised in accordance with the
provisions hereof.
Section 11. Definitions. Capitalized terms used herein but not
otherwise defined have the meanings given to them in the Securities Purchase
Agreement. For the purposes of this Warrant Certificate, the following terms
shall have the meanings indicated below:
"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.
"capital stock" of any Person means any and all shares,
interests, participations or other equivalents (however designated) of such
Person's capital stock (or equivalent ownership
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interests in a Person not a corporation) whether now outstanding or hereafter
issued, including, without limitation, all common stock and preferred stock and
any rights, warrants or options to purchase such Person's capital stock.
"Company Securities" has the meaning assigned such term in
Section 2(a).
"Conversion Price" shall have the meaning set forth in, and as
adjusted from time to time pursuant to the terms of, the Certificate of
Designation with respect to the Series B Preferred Stock as filed on July 10,
1998 with the Secretary of State of the State of Delaware.
"Convertible Securities" has the meaning assigned such term in
Section 2(a).
"Employee Securities" has the meaning assigned to such term in
Section 2(a).
"Exercise Price" has the meaning assigned to such term in the
Preamble.
"Fair Market Value" means the amount which a willing buyer, under
no compulsion to buy, would pay a willing seller, under no compulsion to sell,
in an arm's-length transaction.
"GAAP" means generally accepted United States accounting
principles in effect from time to time.
"Holder" has the meaning assigned to such term in the Preamble.
"HSR Act" means the Hart-Scott-Rodino Anti-Trust Improvements Act
of 1976, as amended and the rules and regulations of the Federal Trade
Commission promulgated thereunder.
"Issue Date" means July 10, 1998.
"Market Price" means the last reported sale price of the
applicable security as reported by the National Association of Securities
Dealers, Inc. Automatic Quotations System, National Market System, or, if the
applicable security is listed or admitted for trading on a securities exchange,
the last reported sales price of the applicable security on the principal
exchange on which the applicable security is listed or admitted for trading
(which shall be for consolidated trading if applicable to such exchange), or if
neither so reported or listed or admitted for trading, the last reported bid
price of the applicable security in the over-the-counter market. In the event
that the Market Price cannot be determined as aforesaid, the Board of Directors
of the Company shall determine the Market Price on the basis of such quotations
as it in good faith considers appropriate, in consultation with a nationally
recognized investment bank. The Market Price shall be such price averaged over a
period of 20 consecutive Business Days ending 2 days prior to the day as of
which "Market Price" is being determined.
"Number Issuable" has the meaning assigned to such term in the
Preamble.
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<PAGE> 12
"Officers/Directors Securities" has the meaning assigned to such
term in Section 2(a).
"Person" means any individual, corporation, limited liability
company, partnership, trust, incorporated or unincorporated association, joint
venture, joint stock company, government (or an agency or political subdivision
thereof) or other entity of any kind.
"Securities Purchase Agreement" shall mean that certain
Securities Purchase Agreement, dated as of June 30, 1998, among the Company, the
Holder and the other parties signatory thereto, as the same may be amended,
modified or otherwise supplemented from time to time in accordance with its
terms.
"Series A Preferred Stock" means the Series A Cumulative
Convertible Preferred Stock, par value $.01 per share, of the Company.
"Series B Preferred Stock" means the Series B Cumulative
Convertible Preferred Stock, par value $.01 per share, of the Company.
"Special Notice" means the notice sent by a Holder to the Company
indicating its preference to have any special distribution set aside for its
benefit upon exercise of the Warrant.
"Transaction" has the meaning assigned to such term in Section
2(b).
"Warrant Exercise Documentation" has the meaning assigned to such
term in Section 1 hereof.
"Warrant Expiration Date" means the seventh anniversary of the
Issue Date or such earlier date as may result from the provisions of this
Warrant Certificate.
Section 12. Notices. All notices, demands and other
communications provided for or permitted hereunder shall be made in writing and
shall be by registered or certified first-class mail, return receipt requested,
courier services or personal delivery, (a) if to the Holder of a Warrant, at
such Holder's last known address appearing on the books of the Company; and (b)
if to the Company, at its principal executive office in the United States
located at the address designated for notices in the Securities Purchase
Agreement, or such other address as shall have been furnished to the party given
or making such notice, demand or other communication. All such notices and
communications shall be deemed to have been duly given: when delivered by hand,
if personally delivered; when delivered to a courier if delivered by commercial
overnight courier service; and five (5) Business Days after being deposited in
the mail, postage prepaid, if mailed.
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<PAGE> 13
IN WITNESS WHEREOF, the Company has caused this Warrant
Certificate to be duly executed as of the Issue Date.
CANDLEWOOD HOTEL COMPANY, INC.
By: ___________________________________
Name: _________________________________
Title: ________________________________
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<PAGE> 14
Form of Assignment Form
[To be executed upon assignment of Warrants]
The undersigned hereby assigns and transfers this Warrant
Certificate to _______________ whose Social Security Number or Tax ID Number is
_______________ and whose record address is ___________________________________,
and irrevocably appoints _______________ as agent to transfer this security on
the books of the Company. Such agent may substitute another to act for such
agent.
Signature:
_______________________________________
Signature of Guarantee:
_______________________________________
Date: __________________________
<PAGE> 1
EXHIBIT 4.4
AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT
This Amended and Restated Registration Rights Agreement, dated as
of July 10, 1998 (this "Agreement"), is made by and among Candlewood Hotel
Company, Inc., a Delaware corporation ("Candlewood" or the "Company"),
Doubletree Corporation, a Delaware corporation ("Doubletree"), Mr. Jack P.
DeBoer ("DeBoer"), on behalf of himself and as representative of the Alexander
John DeBoer Trust dated March 14, 1995 and the Christopher Scott DeBoer Trust
dated March 14, 1995 (collectively, the "Trusts"), the Warren D. Fix Family
Partnership, L.P. (the "Fix Partnership") and each of the parties set forth on
Schedule A attached hereto (collectively, the "Investors" and, together with
Candlewood, Doubletree, DeBoer, the Trusts and the Fix Partnership, the
"Parties").
BACKGROUND
A. DeBoer, Doubletree and the Fix Partnership had previously
entered into that certain Incorporation and Registration Rights Agreement dated
September 1, 1996 (the "Original Agreement").
B. The Company completed an initial public offering of Common
Stock, par value $0.01 per share (the "Common Stock"), of the Company on
November 5, 1996 (the "Initial Public Offering").
C. In connection with the issuance and sale of shares of Series A
Cumulative Convertible Preferred Stock, par value $.01 per share (the "Series A
Preferred Stock"), of the Company pursuant to the Stock Purchase Agreement,
dated as of August 27, 1997, among the Company and the other parties signatory
thereto, the Original Agreement was terminated and the Company entered into the
Registration Rights Agreement, dated as of September 22, 1997 (the "Second
Registration Rights Agreement"), among the Company, DeBoer, the Trusts, the Fix
Partnership and the other parties signatory thereto.
D. In connection with the issuance and sale of (i) shares of
Series B Cumulative Convertible Preferred Stock, par value $.01 per share (the
"Series B Preferred Stock"), of the Company and (ii) warrants (the "Warrants")
exercisable to purchase initially 336,000 shares of Common Stock at an initial
exercise price of $12.00 per share pursuant to the Securities Purchase
Agreement, dated as of June 30, 1998 (the "Securities Purchase Agreement"),
among the Company and the other parties signatory thereto, the Company has
agreed to grant certain registration rights with respect to the shares of Common
Stock issuable upon the conversion of the Series B Preferred Stock and the
exercise of the Warrants.
E. The parties to the Second Registration Rights Agreement hereby
terminate the Second Registration Rights Agreement and enter into this Agreement
on the terms and subject to the conditions set forth below.
NOW, THEREFORE, in consideration of the foregoing and intending
to be legally bound, the Parties agree as follows:
<PAGE> 2
1. Certain Definitions. As used in this Agreement the
following terms shall have the following respective meanings:
"Commission" means the United States Securities and Exchange
Commission.
"Eligible Securities" means the shares of Common Stock (i) issued
to Doubletree, DeBoer, the Trusts and the Fix Partnership upon the
reorganization of the Company from Candlewood Hotel Company, LLC to a Delaware
corporation, (ii) to be issued upon the conversion of the Series A Preferred
Stock into Common Stock, stock dividends paid with respect to such shares or
issued in exchange for or in lieu of such shares, (iii) issued or issuable upon
exercise of any Series A Purchase Warrants, (iv) to be issued upon (x) the
conversion of the Series B Preferred Stock into Common Stock and (y) the
exercise of the Warrants into Common Stock, and stock dividends paid with
respect to such shares or issued in exchange for or in lieu of such shares and
(v) issued or issuable upon exercise of any Series B Purchase Warrants
("Eligible Securities" described in clause (ii) or (iii) being referred to
collectively as "Series A Preferred Eligible Securities" and "Eligible
Securities" described in clause (iv) or (v) being referred to collectively as
"Series B Preferred Eligible Securities").
"Holder" means a registered holder of outstanding Eligible
Securities or securities convertible into or exercisable for Eligible
Securities.
"Preferred Stock" means, collectively, the Series A Preferred
Stock and the Series B Preferred Stock.
"Purchase Warrants" means, collectively, the Series A Purchase
Warrants and the Series B Purchase Warrants.
"Securities Act" means the Securities Act of 1933 or any similar
Federal statute, and the rules and regulations of the Commission thereunder, all
as the same shall be in effect at the time.
"Series A Certificate of Designation" means the Certificate of
Designations, Preferences and Relative, Participating, Optional and Other
Special Rights of Preferred Stock and Qualifications, Limitations and
Restrictions Thereof, dated September 22, 1997, relating to the Series A
Preferred Stock.
"Series A Preferred Stock" has the meaning set forth in the
recitals to this Agreement.
"Series A Purchase Warrant" means any warrant for the purchase of
Common Stock issued to any holder of Series A Preferred Stock in accordance with
the terms of the Series A Certificate of Designation establishing the
preferences and rights of and the qualifications, limitations and restrictions
with respect to the Series A Preferred Stock.
"Series B Certificate of Designation" means the Certificate of
Designations, Preferences and Relative, Participating, Optional and Other
Special Rights of Preferred Stock
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<PAGE> 3
and Qualifications, Limitations and Restrictions Thereof, dated July 9, 1998,
relating to the Series B Preferred Stock.
"Series B Preferred Stock" has the meaning set forth in the
recitals to this Agreement.
"Series B Purchase Warrant" means any warrant for the purchase of
Common Stock issued to any holder of Series B Preferred Stock in accordance with
the terms of the Series B Certificate of Designation establishing the
preferences and rights of and the qualifications, limitations and restrictions
with respect to the Series B Preferred Stock.
"Warrants" has the meaning set forth in the recitals to this
Agreement.
2. Required Registration.
(a) At any time after 90 days from the date of the
issuance and sale of the Series B Preferred Stock (i) Doubletree, (ii) Investors
holding at least 50% of the shares of the Series A Preferred Eligible Securities
or (iii) Investors holding at least 50% of the shares of Series B Preferred
Eligible Securities may deliver to the Company a written request that the
Company file and use its best efforts to cause to become effective a
registration statement under the Securities Act with respect to such number of
the Eligible Securities owned by Doubletree or the Investors as shall be
specified in such request (a "Registration Request"); provided, however, that
the Company shall not be obligated to effect any such registration pursuant to
subsections (ii) or (iii) on behalf of the Investors unless the anticipated
aggregate offering price, net of underwriting discounts and commissions, would
exceed $20,000,000. Except as otherwise provided in Section 2(b)(iv), 2(b)(v)
and 2(b)(vi) hereof, the Company shall not be required to file and use its best
efforts to cause to become effective, pursuant to a Registration Request under
this Section 2, (a) more than two registration statements at the demand of
Doubletree, (b) more than two registration statements at the demand of the
Investors holding shares of Series A Preferred Eligible Securities or (c) more
than two registration statements at the demand of Investors holding shares of
Series B Preferred Eligible Securities. The party or parties delivering a
Registration Request is hereinafter referred to as the "Requesting Holder." The
second Registration Request made by the Investors holding shares of Series A
Preferred Eligible Securities may be identified by such Requesting Holders as a
"Series A Priority Demand." The second Registration Request made by Investors
holding shares of Series B Preferred Eligible Securities may be identified by
such Requesting Holders as a "Series B Priority Demand".
(b) As soon as practicable following the receipt of a
Registration Request, the Company will use its best efforts to register under
the Securities Act, for public sale in accordance with the method of disposition
specified in such Registration Request, the number of shares of Eligible
Securities specified in such Registration Request (and the number of Eligible
Securities specified in all notices received from Holders within 20 days after
their receipt of notice delivered pursuant to Section 4 hereof). The Company
will also be entitled to include in any registration statement filed pursuant to
a Registration Request, for sale in accordance with the method of disposition
specified in such Registration Request, such number of shares of Common Stock as
the Company shall desire to sell for its own account. If the
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<PAGE> 4
method of sale designated is an underwritten public offering, the managing
underwriter or underwriters must be reasonably acceptable to both the Requesting
Holder, or the holders of a majority of the Eligible Securities held by all
parties comprising the Requesting Holder if more than one party is the
Requesting Holder, and the Company, which acceptance shall not be unreasonably
withheld. Notwithstanding the foregoing provisions of this paragraph (b), to the
extent that, in the opinion of the underwriter or underwriters (if the method of
disposition shall be an underwritten public offering), marketing considerations
require the reduction of the number of shares of Common Stock covered by any
such registration, the number of shares of Common Stock to be registered and
sold pursuant to such registration shall be reduced as follows:
(i) The number of shares of Eligible Securities
to be registered on behalf of the Company shall be reduced (to zero, if
necessary);
(ii) The number of shares of Eligible Securities
to be registered on behalf of DeBoer, the Trusts and the Fix Partnership shall
be reduced (to zero, if necessary) pro rata according to the number of shares of
Eligible Securities held by each;
(iii) The number of shares of Eligible Securities
to be registered on behalf of Doubletree and the Investors shall be reduced pro
rata according to the number of shares of Eligible Securities held by each;
provided, however, that in connection with a Series A Priority Demand the number
of shares of Eligible Securities requested to be registered on behalf of the
Investors shall only be reduced after the number of shares requested to be
registered by Doubletree has been reduced to zero; and provided, further, that
in connection with a Series B Priority Demand the number of shares of Eligible
Securities requested to be registered on behalf of the Investors shall only be
reduced after the number of shares requested to be registered by Doubletree has
been reduced to zero;
(iv) Notwithstanding the foregoing, if in
connection with any Registration Request made by Doubletree, the number of
Eligible Securities requested to be registered by Doubletree shall have been
reduced, the number of Registration Requests granted to Doubletree pursuant to
clause 2(a) above shall be increased by one;
(v) Notwithstanding the foregoing, if in
connection with any Registration Request made by the Investors holding shares of
Series A Preferred Eligible Securities, such Investors requesting inclusion of
Eligible Securities in such registration shall experience a reduction in the
number of such Eligible Securities by 10% or more, the number of Registration
Requests granted to the Investors holding shares of Series A Preferred Eligible
Securities pursuant to clause 2(a) above shall be increased by one;
(vi) Notwithstanding the foregoing, if in
connection with any Registration Request made by the Investors holding shares of
Series B Preferred Eligible Securities, such Investors requesting inclusion of
Eligible Securities in such registration shall experience a reduction in the
number of such Eligible Securities by 10% or more, the number of Registration
Requests granted to the Investors holding shares of Series B Preferred Eligible
Securities pursuant to clause 2(a) above shall be increased by one; and
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<PAGE> 5
(vii) In no event shall any registration of Common
Stock by the Company pursuant to Section (vi)(b) of the Series A Certificate of
Designation or Section (vi)(b) of the Series B Certificate of Designation
constitute a Registration Request allowable to any Holder pursuant to clause
2(a) above.
(c) Notwithstanding the foregoing provisions of this
Section 2, the Company shall not be obligated to file a registration statement
at the demand of any Holder pursuant to this Section 2 within 180 days following
any underwritten public offering of Common Stock or of securities of the Company
convertible into or exercisable or exchangeable for Common Stock.
(d) Notwithstanding anything to the contrary contained
herein, the exercise by any Holder of any right hereunder with respect to shares
of Series A Preferred Eligible Securities or shares of Series B Preferred
Eligible Securities, as the case may be, shall not effect or diminish any other
rights of such Holder hereunder with respect to any other securities of the
Company held by such Holder.
3. Shelf Registration on Form S-3.
(a) At any time after 90 days from the date of the
issuance and sale of the Series B Preferred Stock any Holder or Holders may
deliver to the Company a written request (a "Form S-3 Request") that the Company
file and use its best efforts to cause to become effective a "shelf"
registration statement on Form S-3 (or such equivalent successor form) under the
Securities Act for an offering to be made on a delayed or continuous basis
pursuant to Rule 415 under the Securities Act (a "Shelf Registration Statement")
with respect to such number of Eligible Securities owned by the Holder or
Holders as shall be specified in such request; (and the number of Eligible
Securities specified in all notices received from Holders within 20 days after
their receipt of notice delivered pursuant to Section 4 hereof); provided,
however, that the Company shall not be obligated to effect any such registration
pursuant to this Section 3 unless the aggregate value of the securities to be
registered thereon would exceed $2,500,000. The Company shall not be required to
file and use its best efforts to cause to become effective, pursuant to a Form
S-3 Request under this Section 3, (a) more than two Shelf Registration
Statements at the request of Doubletree, (b) more than two Shelf Registrations
at the request of the Investors holding shares of Series A Preferred Eligible
Securities or (c) more than two Shelf Registrations at the request of Investors
holding shares of Series B Preferred Eligible Securities.
(b) As soon as practicable following the receipt of a
Form S-3 Request, the Company will use its best efforts to register under the
Securities Act, for an offering to be made on a delayed or continuous basis
pursuant to Rule 415 of the Securities Act, the number of shares of Eligible
Securities specified in such Form S-3 Request (and the number of Eligible
Securities specified in all notices received from Holders within 20 days after
their receipt of notice delivered pursuant to Section 4 hereof). The Company
will also be entitled to include in any Shelf Registration Statement filed
pursuant to this Section 3 such number of shares of Common Stock as the Company
shall desire to sell for its own account.
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<PAGE> 6
4. Piggyback Registration.
(a) If the Company at any time proposes to register
Common Stock under the Securities Act for sale to the public (including
registrations pursuant to Section 2 or 3 hereof), whether for its own account or
for the account of other security holders or both (except registration
statements on Form S-8, S-4 or another form not available for registering the
Eligible Securities for sale to the public), each such time it will give written
notice to all Holders of its intention to do so. Upon the written request of any
Holder (a "Piggyback Request"), given within 20 days after receipt of any such
notice, to register any of its Eligible Securities, the Company will use its
best efforts to cause the Eligible Securities as to which registration shall
have been so requested to be covered by the registration statement proposed to
be filed by the Company.
(b) In the event that any registration statement
described in this Section 4 shall relate, in whole or in part, to an
underwritten public offering of shares of Common Stock, the Eligible Securities
to be registered must be sold through the same underwriters as have been
selected by the Company or agreed to pursuant to Section 2(b) hereof. Otherwise,
the method of distribution of the Eligible Securities to be sold by any Holder
making a Piggyback Request shall be as specified therein. Except in the case of
a registration statement filed pursuant to a Registration Request under Section
2 hereof or a Form S-3 Request made under Section 3 hereof, the number of shares
of Common Stock to be included in such registration statement on account of any
person (other than the Company) may be reduced if and to the extent that the
underwriter or underwriters shall be of the opinion that such inclusion would
materially adversely affect the marketing of the total number of shares of
Common Stock proposed to be sold, and the number of shares to be registered and
sold by each person (other than the Company) shall be reduced pro rata according
to the relative number of fully diluted shares owned by such person.
Notwithstanding the foregoing provisions of this Section 4, the Company may
withdraw any registration statement referred to in this Section 4 without
thereby incurring any liability to any requesting Holder.
5. Registration Procedures. If and whenever the Company is
required by the provisions of Section 2, 3 or 4 to effect the registration of
any Eligible Securities under the Securities Act, the Company shall:
(a) prepare and file with the Commission a registration
statement with respect to such securities which will permit the public sale
thereof in accordance with the method of distribution specified in the
applicable Registration Request, and the Company shall use its best efforts (i)
to cause such registration statement to be filed within 60 days of receipt of
the Registration Request (ii) to cause such registration statement to be
declared effective as promptly as practicable and (iii) to maintain the
effectiveness of such registration statement for a period of not less than 90
days (or until such time as all securities sold thereunder shall have been sold,
in the case of a registration on Form S-3);
(b) promptly prepare and file with the Commission such
amendments and supplements to such registration statement and the prospectus
used in connection therewith
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<PAGE> 7
as may be necessary to effect and maintain the effectiveness of such
registration statement for the period specified in Section 5(a) and as to comply
with the provisions of the Securities Act with respect to the disposition of all
Eligible Securities covered by such registration statement in accordance with
the intended method of disposition set forth in such registration statement for
such period, including such amendments or supplements as are necessary to cure
any untrue statement or omission referred to in Section 5(e)(vi);
(c) provide to the managing underwriter or underwriters
and not more than one counsel for all underwriters and to the Holders of
Eligible Securities to be included in such registration statement and not more
than one counsel for all such Holders (such counsel to be reasonably acceptable
to the Company) the opportunity to participate in the preparation of (i) such
registration statement, (ii) each prospectus relating thereto and included
therein or filed with the Commission and (iii) each amendment or supplement
thereto;
(d) make available for inspection by the parties
referred to in Section 5(c) such financial and other information and books and
records of the Company, and cause the officers, directors and employees of the
Company, and counsel and independent certified public accountants of the
Company, to respond to such inquiries, as shall be reasonably necessary, in the
judgment of respective counsel to such Holders and such underwriter or
underwriters, to conduct a reasonable investigation within the meaning of the
Securities Act; provided, however, that each such person shall be required to
retain in confidence and not to disclose to any other person any information or
records reasonably designated by the Company in writing as being confidential
until such time as such information becomes a matter of public record (whether
by virtue of its inclusion in such registration statement or otherwise), unless
(i) such person shall be required to disclose such information pursuant to the
subpoena or order of any court or other governmental agency or body having
jurisdiction over the matter or to the National Association of Insurance
Commissioners or (ii) such information is required to be set forth in such
registration statement or the prospectus included therein or in an amendment to
such registration statement or an amendment or supplement to such prospectus in
order that such registration statement, prospectus, amendment or supplement, as
the case may be, shall not contain an untrue statement of a material fact or
omit to state therein a material fact required to be stated therein or necessary
to make the statements therein not misleading, and such information has not been
so set forth after the request by a Holder to such effect; and provided,
further, that the Company need not make such information available, nor need it
cause any officer, director or employee to respond to such inquiry, unless each
such Holder and such counsel, upon the Company's request, execute and deliver to
the Company an undertaking to substantially the same effect contained in the
immediately preceding proviso;
(e) immediately notify the persons referred to in
Section 5(c) and (if requested by any such person) confirm such advice in
writing, (i) when such registration statement or any prospectus included therein
or any amendment or supplement thereto has been filed and, with respect to such
registration statement or any such amendment, when the same has become
effective, (ii) of any material comments by the Commission with respect thereto
or any request by the Commission for amendments or supplements to such
registration statement or prospectus or for additional information, (iii) of the
issuance by the Commission of any stop
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<PAGE> 8
order suspending the effectiveness of such registration statement or the
initiation of any proceedings for that purpose, (iv) if at any time the
representations and warranties of the Company contemplated by Section 5(l)(i)
cease to be true and correct in all material respects, (v) of the receipt by the
Company of any notification with respect to the suspension of the qualification
of any Eligible Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose or (vi) at any time when a
prospectus is required to be delivered under the Securities Act, of the
occurrence or failure to occur of any event, or any other change in law, fact or
circumstance, as a result of which such registration statement, prospectus or
any amendment or supplement thereto, or any document incorporated by reference
in any of the foregoing, contains an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading in light of the circumstances then
existing;
(f) take reasonable efforts to obtain the withdrawal at
the earliest practicable date of any order suspending the effectiveness of such
registration statement or any post-effective amendment thereto;
(g) if requested by the managing underwriter or
underwriters or the Holders of at least a majority of the Eligible Securities
being sold in connection with an underwritten public offering, promptly
incorporate in a prospectus supplement or post-effective amendment such
information as such managing underwriter or underwriters or such Holders
reasonably specify should be included therein relating to the terms of the sale
of such Eligible Securities, including, without limitation, information with
respect to the number of Eligible Securities being sold to such underwriters,
the names and descriptions of such Holders, the purchase price being paid
therefor by such underwriters and any other terms of the underwritten (or best
efforts underwritten) offering of the Eligible Securities to be sold in such
offering, and make all required filings of such prospectus supplement or
post-effective amendment promptly after notification of the matters to be
incorporated in such prospectus supplement or post-effective amendment;
(h) furnish to each Holder of Eligible Securities
included in such registration and each underwriter and counsel for Holder, if
any, thereof an executed copy of such registration statement, each such
amendment and supplement thereto (in each case including all exhibits thereto,
whether or not such exhibits are incorporated by reference therein) and such
number of copies of the prospectus included in such registration statement
(including each preliminary prospectus and any summary prospectus) and each
amendment or supplement thereto, in conformity with the requirements of the
Securities Act, as such Holder and managing underwriter, if any, may reasonably
request in order to facilitate the disposition of such Eligible Securities by
such Holder or by the participating underwriters;
(i) use its best efforts to (i) register or qualify the
Eligible Securities to be included in such registration statement under such
other securities laws or blue sky laws of such jurisdictions as any Holder of
such Eligible Securities and each managing underwriter, if any, thereof shall
reasonably request, (ii) keep such registrations or qualifications in effect for
so long as is necessary to effect the disposition of such Eligible Securities in
the manner
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<PAGE> 9
contemplated by the registration statement, the prospectus included therein and
any amendment or supplement thereto and (iii) take any and all such actions as
may be reasonably necessary or advisable to enable such Holder and any
participating underwriter or underwriters to consummate the disposition in such
jurisdictions of such Eligible Securities; provided, however, that the Company
shall not be required for any such purpose to (A) qualify generally to do
business as a foreign corporation or a broker-dealer in any jurisdiction wherein
it would not otherwise be required to qualify but for the requirements of this
Section 5(i), (B) subject itself to taxation in any such jurisdiction or (C)
consent to general service of process in any such jurisdiction;
(j) cooperate with the Holders of the Eligible
Securities included in such registration and the managing underwriters, if any,
to facilitate the timely preparation and delivery of certificates representing
Eligible Securities to be sold, which certificates shall be printed,
lithographed or engraved, or produced by any combination of such methods, on
steel engraved borders and which shall not bear any restrictive legends; and, in
the case of an underwritten public offering, enable such Eligible Securities to
be registered in such names as the underwriter or underwriters may request at
least two business days prior to any sale of such Eligible Securities;
(k) provide not later than the effective date of the
registration statement a CUSIP number for all Eligible Securities;
(l) enter into an underwriting agreement, engagement
letter, agency agreement, "best efforts" underwriting agreement or similar
agreement, as appropriate, and take such other actions in connection therewith
as the Holders of at least a majority of the Eligible Securities to be included
in such registration shall reasonably request in order to expedite or facilitate
the disposition of such Eligible Securities, and in connection therewith,
whether or not an underwriting agreement is entered into and whether or not the
registration is an underwritten public offering,(i) make such representations
and warranties to the Holders of such Eligible Securities included in such
registration and the underwriters, if any, in form, substance and scope as are
customarily made in an underwritten public offering, (ii) obtain an opinion of
counsel to the Company in customary form and covering such matters as are
customarily covered by such an opinion as the Holder of at least a majority of
such Eligible Securities and the underwriters, if any, may reasonably request,
addressed to each participating Holder and the underwriters, if any, and dated
the effective date of such registration statement (or, if such registration
includes an underwritten public offering, dated the date of the closing under
the underwriting agreement); (iii) obtain a "cold comfort" letter from the
independent certified public accountants of the Company addressed to the Holders
of the Eligible Securities included in such registration and the underwriters,
if any, dated the effective date of such registration statement (and, if such
registration includes an underwritten public offering, also dated the date of
the closing under the underwriting agreement), such letter to be in customary
form and covering such matters as are customarily covered by such letters; (iv)
deliver such documents and certificates as may be reasonably requested by the
Holders of at least a majority of the Eligible Securities included in such
registration and the managing underwriter or underwriters, if any, to evidence
compliance with clause (i) above and with any customary conditions contained in
the underwriting
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<PAGE> 10
agreement or other agreement entered into by the Company, and (v) undertake such
obligations relating to expense reimbursement, indemnification and contribution
as are provided in Sections 6, 7 and 8 hereof; and
(m) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission.
Notwithstanding the provisions of Section 5(a), the Company's
obligation to file a registration statement, or cause such registration
statement to become effective, shall be suspended, without incurring any
liability to any Holder, for a period not to exceed 90 days if there exists at
the time material non-public information relating to the Company that, in the
reasonable opinion of the Company, should not be disclosed, provided that any
such suspension shall occur no more than once in any twelve (12)-month period.
In such an event, the Company shall promptly inform all Holders of the Company's
decision to defer filing of a registration statement and shall notify all
Holders promptly (but in any event not later than upon the expiration of the
90-day period specified in the immediately preceding sentence) of the
recommencement of the Company's efforts to file the registration statement and
to cause the registration statement to become effective.
In connection with each registration of Eligible Securities
hereunder, the Holders thereof will furnish to the Company in writing such
information with respect to themselves and the proposed distribution by them as
shall be reasonably necessary in order to assure compliance with applicable
federal and state securities laws. Each such Holder also agrees to notify the
Company as promptly as practicable of any inaccuracy or change in information
previously furnished by such Holder to the Company or of the occurrence of any
other event, in either case as a result of which any prospectus relating to such
registration contains an untrue statement of a material fact regarding such
Holder or the distribution of such Eligible Securities or omits to state any
material fact regarding such Holder or the distribution of such Eligible
Securities required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing, and promptly
to furnish to the Company any additional information required to correct and
update such previously furnished information or required so that such prospectus
shall not contain, with respect to such Holder or the distribution of such
Eligible Securities, an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading, in light of the circumstances then existing. Each such
Holder further agrees that upon giving any notice referred to in the immediately
preceding sentence, or upon receipt of any notice from the Company pursuant to
Section 5(e)(vi) hereof, such Holder shall forthwith discontinue the disposition
of Eligible Securities pursuant to the registration statement applicable to such
Eligible Securities until such Holder shall have received copies of an amended
or supplemented registration statement or prospectus, and if so directed by the
Company, such Holder shall deliver to the Company (at the Company's expense) all
copies, other than permanent file copies, then in such Holder's possession of
the prospectus covering such Eligible Securities at the time of receipt of such
notice.
10
<PAGE> 11
6. Expenses. The Company shall pay all expenses incurred in
complying with Sections 2, 3 and 4, including without limitation all
registration and filing fees, printing expenses, fees and disbursements of
counsel and independent public accountants for the Company, fees and expenses of
one counsel for the selling Holders, fees and expenses (including counsel fees)
incurred in connection with complying with state securities or "blue sky" laws
(other than those which by law must be paid by the selling security holders),
fees of the National Association of Securities Dealers, Inc., transfer taxes,
fees of transfer agents and registrars and stock exchange listing fees, but
excluding all underwriting discounts and selling commissions applicable to the
sale of Eligible Securities. All expenses of participating sellers other than
those assumed by the Company in this Agreement shall be borne by such sellers in
proportion to the number of shares sold by each seller or as they may otherwise
agree.
7. Indemnification.
(a) In the event of a registration of Eligible
Securities under the Securities Act pursuant to Section 2, 3 or 4, the Company
shall indemnify and hold harmless each selling Holder, each underwriter of such
Eligible Securities thereunder and each other person, if any, who controls such
selling Holder or underwriter within the meaning of the Securities Act, against
any losses, claims, damages or liabilities, joint or several, to which such
selling Holder, underwriter or controlling person may become subject under the
Securities Act or otherwise or in any action in respect thereof, and will
reimburse each such selling Holder, underwriter and controlling person for any
legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action, as
such expenses are incurred, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
any registration statement under which such Eligible Securities were registered
under the Securities Act pursuant to Section 2, 3 or 4, any preliminary
prospectus or final prospectus contained therein, or any amendment or supplement
thereof, 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 to make
the statements therein not misleading; provided, however, that the Company shall
not be liable to any such selling Holder, underwriter or controlling person in
any such case if and to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in conformity with information
furnished by such selling Holder, underwriter or controlling person in writing
specifically for use in such registration statement or prospectus.
(b) In the event of a registration of any of the
Eligible Securities under the Securities Act pursuant to Section 2, 3 or 4, each
selling Holder of such Eligible Securities, severally and not jointly, will
indemnify and hold harmless the Company, each underwriter and each person, if
any, who controls the Company or any underwriter within the meaning of the
Securities Act, each officer of the Company who signs the registration
statement, each director of the Company, each other seller of securities
registered by the registration statement covering such Eligible Securities and
each person, if any, who controls such seller, against all losses, claims,
damages or liabilities, joint or several, to which the Company or any such
officer, director, underwriter, other seller or controlling person may become
subject under the Securities
11
<PAGE> 12
Act or otherwise, and shall reimburse the Company and each such officer,
director, underwriter, other seller and controlling person for any legal or
other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action, but only to the
extent that any such loss, claim, damage or liability (or action in respect
thereof) arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in reliance upon and in
conformity with information pertaining to such Holder furnished in writing to
the Company by such Holder specifically for use in the registration statement or
prospectus relating to such Eligible Securities. Notwithstanding the immediately
preceding sentence, the liability of each such Holder hereunder shall not in any
event exceed the net proceeds received by such Holder from the sale of Eligible
Securities covered by such registration statement.
(c) Promptly after receipt by an indemnified party
hereunder of notice of the commencement of any action, such indemnified party,
if a claim in respect thereof is to be made against an indemnifying party
hereunder, shall notify such indemnifying party in writing thereof, but the
omission so to notify such indemnifying party shall not relieve such
indemnifying party from any liability that it may have to any indemnified party
other than under this Section 7 and, unless the failure to so provide notice
materially adversely affects or prejudices such indemnifying party's defense
against any action, shall not relieve such indemnifying party from any liability
that it may have to any indemnified party under this Section 7. In case any such
action shall be brought against any indemnified party and it shall notify an
indemnifying party of the commencement thereof, such indemnifying party shall be
entitled to participate in and, to the extent it shall wish, to assume and
undertake the defense thereof with counsel reasonably satisfactory to such
indemnified party, and, after notice from such indemnifying party to such
indemnified party of its election so to assume and undertake the defense
thereof, such indemnifying party shall not be liable to such indemnified party
under this Section 7 for any legal expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation and of liaison with counsel so selected; provided,
however, that, if the defendants in any such action include both the indemnified
party and the indemnifying party and the indemnified party shall have reasonably
concluded that there may be reasonable defenses available to it that are
different from or additional to those available to the indemnifying party or if
the interests of the indemnified party reasonably may be deemed to conflict with
the interests of the indemnifying party, the indemnified party shall have the
right to select a separate counsel and to assume and undertake the defense of
such action, with the expenses and fees of such separate counsel and other
expenses related to such defense to be reimbursed by the indemnifying party as
incurred.
(d) No indemnifying party shall be liable for any
amounts paid in a settlement effected without the consent of such indemnifying
party, which consent shall not be unreasonably withheld. No indemnifying party
shall consent to entry of any judgment or enter into any settlement which does
not include as an unconditional term thereof the giving by the plaintiff to the
indemnified party of a release from all liability in respect of such claim or
litigation.
12
<PAGE> 13
(e) The reimbursements required by this Section 7 shall
be made by periodic payment during the course of the investigation or defense,
as and when bills are received and expenses incurred.
8. Contribution. If for any reason the indemnity set forth in
Section 7 is unavailable or is insufficient to hold harmless an indemnified
party, then the indemnifying party shall contribute to the amount paid or
payable by such indemnified party as a result of the aggregate losses, claims,
damages, liabilities and expenses of the nature contemplated by said indemnity
(i) in such proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand and such indemnified party on the other
(determined by reference to, among other things, whether the untrue statement of
a material fact or omission to state a material fact relates to information
supplied by the indemnifying party or such indemnified party and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such untrue statement or omission), or (ii) if the allocation provided
by clause (i) above is not permitted by applicable law or provides a lesser sum
to such indemnified party than the amount hereinafter calculated, in such
proportion as is appropriate to reflect not only the relative fault of the
indemnifying party and such indemnified party but also the relative benefits
received by the indemnifying party on the one hand and such indemnified party on
the other, as well as any other relevant equitable considerations.
The Company and the Parties agree that it would not be just and
equitable if contribution pursuant to this Section 8 were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable consideration referred to in the immediately preceding paragraph.
The amount paid or payable by an indemnified party as a result of the losses,
claims, damages, liabilities or expenses referred to in such paragraph shall be
deemed to include, subject to the limitations set forth above, any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section, a Holder shall not be required to contribute any
amount in excess of the amount by which the net proceeds of the sale of Eligible
Securities sold by such Holder and distributed to the public exceeds the amount
of any damages which such Holder has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
which is not guilty of such fraudulent misrepresentation.
9. Underwriting Agreement. If Eligible Securities are to be
sold pursuant to a registration statement in an underwritten offering pursuant
to Section 2, 3 or 4, the Company and each selling Holder of Eligible Securities
agrees to enter into a written agreement with the managing underwriter or
underwriters selected in the manner herein provided in such form and containing
such provisions as are reasonably satisfactory to the Company and each such
selling Holder and as are customary in the securities business for such an
arrangement among such underwriter or underwriters, each such selling Holder and
companies of the Company's size and investment stature. No Holder of Eligible
Securities may participate in any underwritten sale of Eligible Securities
pursuant to Section 2, 3 or 4 hereof unless such Holder agrees to sell such
Holder's securities in accordance with any underwriting arrangements approved by
the persons
13
<PAGE> 14
entitled hereunder to specify the method of distribution of the securities being
registered and completes and executes all questionnaires, powers of attorney,
indemnities, underwriting agreements and other documents reasonably required
under the terms of such underwriting arrangements. Notwithstanding anything to
the contrary contained herein, no Holder of Eligible Securities shall be
required to make any representations and warranties to the Company or the
underwriters other than representations or warranties regarding the identity of
such Holder, such Holder's Eligible Securities, such Holder's ability to
transfer title to such Holder's Eligible Securities and such Holder's intended
method of distribution or any other representations required by applicable law.
10. Limitations on Subsequent Registration Rights. If,
subsequent to the date hereof, the Company grants to any holders or prospective
holders of the Company's securities the right to require that the Company
register any securities of the Company under the Securities Act, such
registration rights shall be granted subject to the rights of the Holders to
include all or part of their Eligible Securities in any such registration on the
terms and conditions set forth in Section 4.
11. Rule 144. The Company covenants with the Holders of
Eligible Securities that, if and to the extent the Company shall be required to
do so under the Securities Exchange Act of 1934, as amended, and the rules and
regulations thereunder, as the same may be amended and in effect at the time
(the "Exchange Act"), the Company shall timely file the reports required to be
filed by it under the Exchange Act or the Securities Act (including, but not
limited to, the reports under Sections 13 and 15(d) of the Exchange Act referred
to in subparagraph (c)(1) of Rule 144 adopted by the Commission under the
Securities Act), all to the extent required from time to time to enable such
Holder to sell Eligible Securities without registration under the Securities Act
within the limitations of the exemption provided by Rule 144 under the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission. Upon the request of any
Holder of Eligible Securities, the Company shall deliver to such Holder a
written statement as to whether it has complied with such requirements.
12. Miscellaneous.
(a) All covenants and agreements contained in this
Agreement by or on behalf of any of the signatories shall bind and inure to the
benefit of the respective successors and permitted assigns of the signatories,
whether so expressed or not. If any permitted transferee of any Holder of
Eligible Securities shall acquire Eligible Securities in any manner (other than
by way of a registered public offering), whether by operation of law of
otherwise, such Eligible Securities shall be held subject to all of the terms of
this Agreement, and by taking and holding such Eligible Securities such
transferee shall be entitled to receive the benefits of and be conclusively
deemed to have agreed to be bound by and to perform all of the terms and
provisions of this Agreement. The benefits to which any such permitted
transferee shall be entitled shall include, without limitation, the rights to
register Eligible Securities under Sections 2, 3 and 4 hereof; provided,
however, that any such permitted transferee shall not be entitled to deliver to
the Company a Registration Request or a Form S-3 Request pursuant to
14
<PAGE> 15
Section 2 or 3 hereof unless such permitted transferee acquired from its
transferor (i) with respect to Eligible Securities issued upon the conversion of
Preferred Stock, at least 100,000 Eligible Securities; provided, however, that
the transfer of registration rights held pursuant to this Agreement to a
partner, shareholder, equity holder or officer of any Investor shall be without
restriction as to minimum shareholding; or (ii) with respect to all other
Eligible Securities, at least a majority of the Eligible Securities owned by
such transferor at the time of transfer. If the Company shall so request, any
such successor or permitted assign shall agree in writing to acquire and hold
the Eligible Securities subject to all of the terms hereof. This Section 12(a)
shall not be deemed to create any right on the part of any Holder to transfer
Eligible Securities in contravention of any restriction thereon contained in any
other agreement to which such Holder is a party.
(b) All notices, consents and other communications
under this Agreement shall be in writing and shall be deemed to have been duly
given when (a) delivered by hand, (b) sent by telecopier (with receipt
confirmed), provided that a copy is mailed by registered mail, return receipt
requested, or (c) when received by the addressee, if sent by Express Mail,
Federal Express or other express delivery service (receipt requested), in each
case to the appropriate addresses and telecopier numbers set forth below (or to
such other addresses and telecopier numbers as a party may designate as to
itself by notice to the other parties):
(i) If to Doubletree: 755 Crossover Lane,
Memphis, TN, telecopier number (901) 374-5050, Attention: General Counsel.
(ii) If to the Company: Lakepoint Office Park,
9342 East Central, Wichita, Kansas 67206, telecopier number (316) 631-1333,
Attention: President.
(iii) If to DeBoer or the Trusts: Lakepoint Office
Park, 9342 East Central, Wichita, Kansas 67206, telecopier number (316)
631-1333, Attention: Jack DeBoer.
(iv) If to the Fix Partnership: Lakepoint Office
Park, 9342 East Central, Wichita, Kansas 67206, telecopier number (316)
631-1333, Attention: Warren Fix.
(v) If to an Investor: at the address set forth
on Schedule A attached hereto.
(c) This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware.
(d) This Agreement may not be amended or modified, and
no provision hereof may be waived, except in writing, and any such writing shall
only be effective with respect to a Party who has executed such writing. The
failure of any of the Parties to insist upon strict adherence to any term of
this Agreement on any occasion shall not be considered a
15
<PAGE> 16
waiver of that term or deprive such Party of the right thereafter to insist upon
strict adherence to that term or any other term of this Agreement.
(e) This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(f) The Parties acknowledge that there may be no
adequate remedy at law if any Party fails to perform any of its obligations
hereunder and that each Party may be irreparably harmed by any such failure, and
accordingly agree that each Party, in addition to any other remedy to which it
may be entitled in law or in equity, shall be entitled to compel specific
performance of the obligations of any other Party under this Agreement in
accordance with the terms and conditions of this Agreement in any court of the
United States or any state thereof having jurisdiction.
(g) The headings in this Agreement are for convenience
of reference only and shall not limit or otherwise affect the meaning hereof.
(h) In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstances, is held
invalid, illegal or unenforceable in any respect for any reason, the validity,
legality enforceability of any such provision in every other respect and of the
remaining provisions contained herein shall not be in any way impaired thereby,
it being intended that all of the rights and privileges of the Holders shall be
enforceable to the fullest extent permitted by law.
(i) This Agreement is intended by the Parties as a
final expression of their agreement and a complete and exclusive statement of
the agreement and understanding of the parties hereto in respect of the subject
matter contained herein. There are no restrictions, promises, warranties or
undertakings other than those set forth or referred to herein or therein. This
Agreement supersedes all prior agreements and understandings between the Parties
with respect to such subject matter. The Second Registration Rights Agreement,
as in existence prior to the execution hereof, is hereby terminated and is and
shall be after the date hereof null and void and of no further force and effect.
16
<PAGE> 17
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/ JACK P. DEBOER
--------------------------------------
Name: Jack P. DeBoer
Title: Chief Executive Officer
DOUBLETREE CORPORATION
By: /S/ PETER H. KESSER
--------------------------------------
Name: Peter H. Kesser
Title: Vice President
WARREN D. FIX FAMILY PARTNERSHIP, L.P.
By: /S/ WARREN D. FIX
--------------------------------------
Name: Warren D. Fix
Title: General Partner
/S/ WARREN D. FIX
---------------------------------------------
Warren D. Fix
JACK P. DeBOER, for himself and on behalf of
the ALEXANDER DeBOER TRUST DATED MARCH 14,
1995 and the CHRISTOPHER SCOTT DeBOER TRUST
DATED MARCH 14, 1995
/S/ JACK P. DEBOER
---------------------------------------------
Name: Jack P. DeBoer
17
<PAGE> 18
OLYMPUS GROWTH FUND II, L.P.
By: OGP II, L.P., its General Partner
By: RSM, L.L.C., its General Partner
By: /S/ ROBERT S. MORRIS
-------------------------
Name: Robert S. Morris
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/ ROBERT S. MORRIS
-------------------------
Name: Robert S. Morris
Title: Managing Member
MORGAN GUARANTY TRUST COMPANY OF NEW YORK, AS
TRUSTEE OF THE COMMINGLED PENSION TRUST FUND
(MULTI-MARKET SPECIAL INVESTMENT FUND II) OF
MORGAN GUARANTY TRUST COMPANY OF NEW YORK
By: /S/ KATHLEEN N. STARRS
--------------------------------------
Name: Kathleen N. Starrs
Title: Vice President
MORGAN GUARANTY TRUST COMPANY OF NEW YORK, AS
TRUSTEE OF THE MULTI-MARKET SPECIAL
INVESTMENT TRUST FUND OF MORGAN GUARANTY
TRUST COMPANY OF NEW YORK
By: /S/ KATHLEEN N. STARRS
--------------------------------------
Name: Kathleen N. Starrs
Title: Vice President
18
<PAGE> 19
MORGAN GUARANTY TRUST COMPANY OF NEW YORK, AS
INVESTMENT MANAGER AND AGENT FOR THE ALFRED
P. SOLAN FOUNDATION (MULTI-MARKET ACCOUNT)
By: /S/ KATHLEEN N. STARRS
--------------------------------------
Name: Kathleen N. Starrs
Title: Vice President
CHASE VENTURE CAPITAL ASSOCIATES, L.P.
By: Chase Capital Partners, its
General Partner
By: /S/ JAMES D. KALLMAN
-------------------------------
Name: James D. Kallman
Title: General Partner
PRIVATE EQUITY INVESTORS III, L.P.
By: Rohit M. Desai Associates III, LLC,
General Partner
By: /S/ FRANK PADOS
-------------------------------
Name: Frank Pados
Title: Attorney-In-Fact
EQUITY-LINKED INVESTORS-II
By: Rohit Desai Associates III,
General Partner
By: /S/ FRANK PADOS
-------------------------------
Name: Frank Pados
Title: Attorney-In-Fact
LNR CANDLEWOOD HOLDINGS, INC.
By: /S/ JEFFREY P. KRASNOFF
--------------------------------------
Name: Jeffrey P. Krasnoff
Title: President
19
<PAGE> 20
DELAWARE STATE EMPLOYEES' RETIREMENT FUNDS
By: Pecks Management Partners Ltd., its
Investment Advisor
By: /S/ ROBERT CRESCI
-------------------------------
Name: Robert Cresci
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/ ROBERT CRESCI
-------------------------------
Name: Robert Cresci
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/ ROBERT CRESCI
-------------------------------
Name: Robert Cresci
Title: Managing Director
J.W. McCONNELL FAMILY TRUST
By: Pecks Management Partners Ltd., its
Investment Advisor
By: /S/ ROBERT CRESCI
-------------------------------
Name: Robert Cresci
Title: Managing Director
20
<PAGE> 21
ADVANCE CAPITAL PARTNERS, L.P.
By: Advance Capital Associates, L.P.
By: Advance Capital Management, LLC
By: /S/ ROBERT A. BERNSTEIN
---------------------------
Name: Robert A. Bernstein
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/ ROBERT A. BERNSTEIN
------------------------
Name: Robert A. Bernstein
Title: Principal
ALLIED CAPITAL CORPORATION
By: /S/ G. CABELL WILLIAMS, III
--------------------------------------
Name: G. Cabell Williams, III
Title: Managing Director
ALLIED CAPITAL CORPORATION II
By: /S/ G. CABELL WILLIAMS, III
--------------------------------------
Name: G. Cabell Williams, III
Title: Managing Director
THE FFJ 1997 NOMINEE TRUST
By: /S/ SAMUEL T. BYRNE
--------------------------------------
Name: Samuel T. Byrne
Title: Trustee
21
<PAGE> 22
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
By: /S/ SUZANNE E. WALTON
--------------------------------------
Name: Suzanne E. Walton
Title: Managing Director
J. ROMEO & CO.
By: /S/ PETER COCCIA
--------------------------------------
Name: Peter Coccia
Title: Partner
HARBOR INVESTMENTS LTD.
By: Strong Capital Management, Inc., its
Investment Advisor
By: /S/ STEPHEN J. SHENKENBERG
-------------------------------
Name: Stephen J. Shenkenberg
Title: Vice President & Acting General
Counsel
STRONG SPECIAL INVESTMENT LIMITED PARTNERSHIP
By: Strong Capital Management, Inc., its
General Partner
By: /S/ STEPHEN J. SHENKENBERG
-------------------------------
Name: Stephen J. Shenkenberg
Title: Vice President & Acting General
Counsel
STRONG QUEST LIMITED PARTNERSHIP
By: Strong Capital Management, Inc., its
Investment Advisor
By: /S/ STEPHEN J. SHENKENBERG
-------------------------------
Name: Stephen J. Shenkenberg
Title: Vice President & Acting General
Counsel
22
<PAGE> 23
*
-----------------------------------------
William J. Abrams
*
-----------------------------------------
Joseph P. Adams, Jr.
*
-----------------------------------------
Eric Anderson
*
-----------------------------------------
Robert P. Brennan, Jr.
*
-----------------------------------------
Robert Brody
*
-----------------------------------------
Vanessa Burgess
*
-----------------------------------------
Craig Callen
*
-----------------------------------------
Michael Dana
/S/ PETER DEEKS
-----------------------------------------
Peter Deeks
*
-----------------------------------------
Robert E. Diemar, Jr.
*
-----------------------------------------
David Hurwitz
*
-----------------------------------------
Steve Kantor
*
-----------------------------------------
Louis Klevan
*
-----------------------------------------
Larry Lavine
23
<PAGE> 24
*
-----------------------------------------
Daniel J. Mackell
*
-----------------------------------------
Patrick McMullan
*
-----------------------------------------
Andrew J. McSpadden
*
-----------------------------------------
David R. Smith
*
-----------------------------------------
Phil Tager
*
-----------------------------------------
Douglas M. Weill
/S/ CHARLES RUCK
-----------------------------------------
Charles Ruck
*By: Peter Deeks
Attorney-in-Fact
/S/ PETER DEEKS
-----------------------------------------
Peter Deeks
24
<PAGE> 1
EXHIBIT 10.1
================================================================================
CANDLEWOOD HOTEL COMPANY, INC.
---------------
SECURITIES PURCHASE AGREEMENT
---------------
Dated as of June 30, 1998
================================================================================
<PAGE> 2
TABLE OF CONTENTS
(Not Part of Agreement)
<TABLE>
<S> <C>
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
</TABLE>
i
<PAGE> 3
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.
<PAGE> 4
"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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<PAGE> 7
"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 Warren D. Fix Family Partnership, Jack P. DeBoer,
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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<PAGE> 8
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 Paul, Weiss, Rifkind, Wharton & Garrison, 1285
Avenue of the Americas, New York, New York 10019-6064, 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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<PAGE> 9
(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 Latham & Watkins, 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 Paul, Weiss, Rifkind, Wharton & Garrison,
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 Richards, Layton & 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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<PAGE> 10
Agreement and (ii) the reasonable fees and expenses of Paul, Weiss, Rifkind,
Wharton & Garrison 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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<PAGE> 12
(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 Paul, Weiss, Rifkind,
Wharton & Garrison 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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<PAGE> 17
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, Donaldson,
Lufkin & Jenrette nor Schroder & 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 Donaldson, Lufkin & Jenrette and Schroder & 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 wells, 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
Donaldson, Lufkin & Jenrette 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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<PAGE> 27
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
Hart-Scott-Rodino
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Antitrust Improvements Act of 1976 (the "HSR Act"), 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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<PAGE> 33
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,
9342 East Central, Wichita, Kansas 67206, 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/ JACK P. DEBOER
-------------------------------------------
Name: Jack P. DeBoer
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/ ROBERT S. MORRIS
-----------------------------
Name: Robert S. Morris
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/ ROBERT S. MORRIS
-----------------------------
Name: Robert S. Morris
Title: Managing Member
PRIVATE EQUITY INVESTORS III, L.P.
By: Rohit M. Desai Associates III, LLC,
General Partner
By: /S/ FRANK PADOS
------------------------------------
Name: Frank Pados
Title: Attorney-In-Fact
EQUITY-LINKED INVESTORS-II
By: Rohit Desai Associates III, General Partner
By: /S/ FRANK PADOS
------------------------------------
Name: Frank Pados
Title: Attorney-In-Fact
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<PAGE> 36
DELAWARE STATE EMPLOYEES' RETIREMENT FUNDS
By: Pecks Management Partners Ltd., its
Investment Advisor
By: /S/ ROBERT CRESCI
------------------------------------
Name: Robert Cresci
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/ ROBERT CRESCI
------------------------------------
Name: Robert Cresci
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/ ROBERT CRESCI
------------------------------------
Name: Robert Cresci
Title: Managing Director
J.W. McCONNELL FAMILY TRUST
By: Pecks Management Partners Ltd., its
Investment Advisor
By: /S/ ROBERT CRESCI
------------------------------------
Name: Robert Cresci
Title: Managing Director
34
<PAGE> 37
ADVANCE CAPITAL PARTNERS, L.P.
By: Advance Capital Associates, L.P.
By: Advance Capital Management, LLC
By: /S/ ROBERT A. BERNSTEIN
-----------------------------
Name: Robert A. Bernstein
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/ ROBERT A. BERNSTEIN
----------------------
Name: Robert A. Bernstein
Title: Principal
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
By: /S/ SUZANNE E. WALTON
-------------------------------------------
Name: Suzanne E. Walton
Title: Managing Director
/S/ ROBERT BRODY
--------------------------------------------------
Robert Brody
/S/ STEVE KANTOR
--------------------------------------------------
Steve Kantor
/S/ CHARLES RUCK
--------------------------------------------------
Charles Ruck
35
<PAGE> 1
EXHIBIT 10.3
AMENDED AND RESTATED
STOCKHOLDERS AGREEMENT
This Amended and Restated Stockholders Agreement, dated as of
July 10, 1998 (this "Agreement"), by and among Candlewood Hotel Company, Inc., a
Delaware corporation (the "Company"), Doubletree Corporation, a Delaware
corporation (together with its subsidiaries, "Doubletree"), the Warren D. Fix
Family Partnership, L.P., a Kansas limited partnership (the "Fix Partnership"),
and Jack P. DeBoer ("DeBoer"), on behalf of himself and as representative of the
Alexander John DeBoer Trust dated March 14, 1995 and the Christopher Scott
DeBoer Trust dated March 14, 1995 (collectively, the "Trusts") (collectively,
the "Initial Holders"), and each of the other entities set forth on the
signature pages hereto (collectively, the parties to this Agreement other than
the Company are referred to as the "Holders").
WITNESSETH:
WHEREAS, the Initial Holders had previously entered into that
certain Stockholders Agreement, dated as of September 30, 1996 (the "Original
Stockholders Agreement"), relating to the governance of the Company, including
procedures for the election of directors, the approval of certain significant
corporate actions and rights relating to the purchase of capital stock of the
Company;
WHEREAS, in connection with the issuance and sale of shares of
Series A Cumulative Convertible Preferred Stock, par value $.01 per share (the
"Series A Preferred Stock"), of the Company (the "Purchased Shares") pursuant to
the Stock Purchase Agreement, dated as of August 27, 1997 (the "Stock Purchase
Agreement"), among the Company and the other parties signatory thereto, the
Original Stockholders Agreement was terminated and the Company entered into the
Stockholders Agreement, dated as of September 22, 1997 (the "Second Stockholders
Agreement"), among the Company, the Initial Holders and the parties listed on
Schedule A thereto;
WHEREAS, the Company has agreed to issue and sell, and the
Purchasers (as defined in the Securities Purchase Agreement referred to below)
have severally agreed to purchase (i) shares of Series B Cumulative Convertible
Preferred Stock, par value $.01 per share (the "Series B Preferred Stock"), of
the Company and (ii) warrants exercisable to purchase initially 336,000 shares
of Common Stock at an initial exercise price of $12.00 per share (the
"Warrants," and, together with the Series B Preferred Stock, the "Series B
Securities") pursuant to the Securities Purchase Agreement, dated as of June 30,
1998 (the "Securities Purchase Agreement"), among the Company and the
Purchasers;
WHEREAS, it is a condition precedent to the obligation of the
Purchasers to purchase the Series B Securities pursuant to the Securities
Purchase Agreement that the parties hereto enter into this Agreement;
WHEREAS, the Second Stockholders Agreement is being terminated
simultaneously with the execution of this Agreement and the parties hereto
hereby enter into this Agreement on the terms and subject to the conditions set
forth below;
<PAGE> 2
NOW, THEREFORE, in consideration of the agreement of the
Purchasers to purchase the Series B Securities and for other good and valuable
consideration the receipt and adequacy of which are hereby acknowledged, the
parties hereto agree as follows:
ARTICLE I.
DEFINITIONS
1.1. Defined Terms. All terms capitalized but not defined herein
shall have the meaning attributable to such terms in the Securities Purchase
Agreement, except where the context otherwise requires. The following additional
terms when used in this Agreement, including its preamble and recitals, shall,
except where the context otherwise requires, have the following meanings, such
meanings to be equally applicable to the singular and plural forms thereof:
"Affiliate" of a Holder means any Person, other than the Company,
controlling, controlled by or under common control with such Holder.
"Board" means the Board of Directors of the Company.
"Common Stock" means and includes the Company's currently
authorized common stock, par value $.01 per share.
"DeBoer/Fix Holders" means DeBoer, the Trusts and the Fix
Partnership (so long as each is a Holder) and each Permitted Transferee, other
than the Company, who becomes a Holder.
"DeBoer/Fix Shares" means the shares of Common Stock owned of
record or beneficially by DeBoer, the Trusts and the Fix Partnership on the
Effective Date.
"DeBoer Holders" means DeBoer and the Trusts (so long as each is
a Holder) and each Permitted Transferee of DeBoer, other than the Company, who
becomes a Holder.
"DeBoer Shares" means the shares of Common Stock owned of record
or beneficially by DeBoer and the Trusts on the Effective Date.
"Director" means a director of the Company.
"Doubletree Holders" means Doubletree (so long as it is a Holder)
and each Permitted Transferee of Doubletree, other than the Company, who becomes
a Holder.
"Doubletree Shares" means the Shares of Common Stock owned of
record or beneficially by Doubletree on the Effective Date.
"Effective Date" means the date on which the Doubletree Shares,
the DeBoer Shares and the Fix Partnership Shares were issued to Doubletree,
DeBoer, the Trusts and the Fix Partnership.
2
<PAGE> 3
"Fix Partnership Holders" means the Fix Partnership (so long as
it is a Holder) and each Permitted Transferee of the Fix Partnership, other than
the Company, who becomes a Holder.
"Fix Partnership Shares" means the shares of Common Stock owned
of record or beneficially by the Fix Partnership on the Effective Date.
"Holder" shall have the meaning set forth in the preamble hereto.
"Initial Holder" means a record or beneficial owner of any
Subject Shares.
"Permitted Transferee" of a Holder means (i) a successor to such
Holder by operation of law pursuant to a statutory merger, consolidation,
dissolution or liquidation, (ii) a purchaser of all or substantially all of such
Holder's assets, (iii) a Person owning, directly or indirectly, a majority of
the voting interests or other comparable equity interests of such Holder, a
Person under common control with such Person (including, in the case of an
individual, a family member or a trust controlled by a family member) or a
Person of which such Holder owns, directly or indirectly, a majority of the
outstanding voting securities or other comparable equity interests, (iv) a
successor to such Holder by will or through the laws of descent, or through a
gift or other contribution made in anticipation of the death of such Holder or
(v) as to any Series A Preferred Stock or Series A Share Equivalent, any
transferee permitted by the terms of the Stock Purchase Agreement and as to any
Series B Preferred Stock or Series B Share Equivalent, any transferee permitted
by the terms of the Securities Purchase Agreement, in each case other than (x) a
competitor in the extended stay hotel business or (y) an entity owning more than
20% of the equity securities of such competitor or represented on the board of
directors of such competitor, including in each case in connection with this
clause (y), Affiliates of such competitor; provided, however, that in each case
the successor, purchaser or Person referred to in clauses (i), (ii) or (iii) of
this definition was an Affiliate of such Holder prior to such merger,
consolidation, dissolution, liquidation, purchase of assets or acquisition of
voting securities or other comparable equity interests and, in each case
referred to in clauses (i), (ii), (iii), (iv) or (v) of this definition, the
Permitted Transferee has become a party to and agreed to be bound by this
Agreement as to all Subject Shares, shares of Series A Preferred Stock, shares
of Series A Share Equivalents, shares of Series B Preferred Stock or shares of
Series B Share Equivalents then being transferred to it. "Permitted Transferee"
includes successive transferee in transactions described in the preceding
sentence.
"Person" means and includes an individual, a corporation, a
limited liability company, an association, a partnership, a trust or estate, a
government or any department or agency thereof.
"Public Sale" means a sale of Subject Shares, Series A Share
Equivalents or Series B Share Equivalents pursuant to an effective registration
statement in accordance with the rules and regulations of the Securities and
Exchange Commission (the "Commission") or a sale pursuant to Rule 144 thereof.
3
<PAGE> 4
"Securities Purchase Agreement" shall have the meaning set forth
in the third WHEREAS clause.
"Series A Preferred Holder" means each of the parties listed on
Schedule A-1 hereto (so long as it is a Holder) and each Permitted Transferee of
such Series A Preferred Holder, other than the Company, who becomes a Holder.
"Series A Preferred Stock" shall have the meaning set forth in
the second WHEREAS clause.
"Series A Purchaser Group" means (i) Olympus Growth Fund II, L.P.
with respect to one nominee for director of the Company, (ii) Desai Capital with
respect to one nominee for director of the Company and (iii) Pecks Management
with respect to one nominee for director of the Company (each a "Significant
Purchaser"), so long as such Significant Purchaser shall hold at least 20% of
the shares of Series A Preferred Stock or Series A Share Equivalents purchased
by such Significant Purchaser pursuant to the Stock Purchase Agreement, and, if
at any time such Significant Purchaser shall waive its rights hereunder or shall
hold less than 20% of the shares of Series A Preferred Stock or Series A Share
Equivalents purchased by such Significant Purchaser pursuant to the Stock
Purchase Agreement, the designee formerly designated by such Significant
Purchaser shall henceforth be designated by all of the Series A Preferred
Holders holding shares of Series A Preferred Stock or Series A Share
Equivalents.
"Series A Share Equivalents" of the Series A Preferred Stock
means the number of shares of Common Stock that are issued or issuable upon
conversion of the Series A Preferred Stock but excluding any shares sold in a
Public Sale.
"Series B Purchaser Group" means the holders of at least a
majority of shares of Series B Preferred Stock or Series B Share Equivalents.
"Series B Preferred Holder" means each of the parties listed on
Schedule A-2 hereto (so long as a Holder) and each Permitted Transferee of such
Series B Preferred Holder, other than the Company, who becomes a Holder.
"Series B Share Equivalents" of the Series B Preferred Stock or
Warrants means the number of shares of Common Stock that are issuable upon the
conversion of the Series B Preferred Stock or exercise of the Warrants but
excluding any shares sold in a Public Sale.
"Stock Purchase Agreement" shall have the meaning set forth in
the second WHEREAS clause.
"Subject Shares" means the Doubletree Shares, the DeBoer Shares
and the Fix Partnership Shares; provided, however, that at all times, such term
shall include all Subject Shares that have been transferred by a Holder to a
Permitted Transferee of such Holder. Notwithstanding the foregoing, upon (A) the
disposition of any Subject Shares pursuant to a Public Sale to any Person, or
(B) the disposition of any Subject Shares other than pursuant to a Public Sale
to any Person other than a Permitted Transferee of the Holder thereof, the
shares so
4
<PAGE> 5
canceled or disposed of shall cease to be Subject Shares and thereafter shall
not be subject to any of the terms and conditions of this Agreement.
ARTICLE II.
VOTING AGREEMENT
2.1. Board Nominations. The Board of the Company shall be
composed of at least twelve (12) members plus, pursuant to clause (v) below, the
President of the Company; provided, that the Company and the Holders have agreed
(i) that the Series A Purchaser Group shall be entitled, through a nominating
committee or other procedure adopted by the Board, to designate for nomination
by the Board three (3) nominees for election to the Board, (ii) that the Series
B Purchaser Group shall be entitled, through a nominating committee or other
procedure adopted by the Board, to designate for nomination by the Board one (1)
nominee for election to the Board, (iii) that the Doubletree Holders shall be
entitled, through a nominating committee or other procedure adopted by the
Board, to designate for nomination by the Board two (2) nominees for election to
the Board, (iv) that the DeBoer/Fix Holders shall be entitled, through a
nominating committee or other procedure adopted by the Board, to designate for
nomination by the Board two (2) nominees for election to the Board and (v) that
the Doubletree Holders together with the DeBoer/Fix Holders shall be entitled,
through a nominating committee or other procedure adopted by the Board, to
designate for nomination by the Board the President of the Company and/or such
number of independent directors for election to the Board as shall constitute
the remainder of the Board.
2.2. Board of Directors of the Company. (a) So long as it shall
hold any shares of Series A Preferred Stock, Series A Share Equivalents, Series
B Preferred Stock, Series B Share Equivalents or Subject Shares, each Holder
agrees to vote all of its shares of Series A Preferred Stock, Series A Share
Equivalents, Series B Preferred Stock, Series B Share Equivalents or Subject
Shares, as applicable, as to which it has voting rights for the election of all
directors nominated pursuant to the immediately preceding paragraph hereof. The
nominees designated by the Series A Preferred Holders and Series B Preferred
Holders shall be identified in a proxy statement delivered to the Company
stockholders in connection with an annual or special meeting.
(b) The Holders shall appear in person or by proxy at
any annual or special meeting of stockholders for the purpose of obtaining a
quorum and shall vote or cause the vote of the Series A Preferred Stock, Series
A Share Equivalents, Series B Preferred Stock, Series B Share Equivalents or
Subject Shares, as applicable, owned by such Holder or by any Affiliate of such
Holder, either in person or by proxy, to be cast in accordance with the
provisions of this Article 2.
(c) Each Holder further agrees to vote all the Series A
Preferred Stock, Series A Share Equivalents, Series B Preferred Stock, Series B
Share Equivalents or Subject Shares, as applicable, with respect to which it has
direct or indirect voting rights, in favor of removal from the Board, upon
notice by the DeBoer/Fix Holders, the Series A Purchaser Group, the Series B
Purchaser Group or the Doubletree Holders that an individual designated by them
5
<PAGE> 6
pursuant to Section 2.1 should be removed, and to use its best efforts to cause
the Board to fill the vacancy so vacated with another person designated by the
party providing such notice. Each Holder further agrees to cooperate fully in
connection with the nomination of Directors, the voting of its shares of Series
A Preferred Stock, Series A Share Equivalents, Series B Preferred Stock, Series
B Share Equivalents or Subject Shares, as applicable, the execution of written
consents (if then permissible under the Certificate of Incorporation of the
Company), the calling of meetings and other stockholder matters to effect the
provisions of this Article.
(d) If any director is unable to serve, or once having
commenced to serve, is removed or withdraws from the Board, the party or parties
who designated such director will be entitled to designate a person to fill the
vacancy on the Board so created and each Holder will use its best efforts to
cause the Board to fill the vacancy so created with the person so designated, in
accordance with the Company's By-laws.
(e) Each Holder agrees not to and not to permit any
Affiliate to grant any proxy or enter into or be bound by any voting trust with
respect to its Series A Preferred Stock, Series A Share Equivalents, Series B
Preferred Stock, Series B Share Equivalents or Subject Shares, as applicable, or
enter into any arrangements of any kind with any person with respect to its
Series A Preferred Stock, Series A Share Equivalents, Series B Preferred Stock,
Series B Share Equivalents or Subject Shares, as applicable, in any such case in
a manner that is inconsistent with the provisions of this Agreement.
(f) The Company shall use its best efforts to cause the
nominees (unless, after customary investigation of such person's qualifications,
the Board of Directors reasonably determines in good faith that such person is
not qualified or acceptable under standards applied fairly and equally to all
nominees) of each of the Holders pursuant to the provisions of this Article 2 to
be included in the slate of nominees recommended by the Board to the Company's
stockholders for election as directors, and the Company shall use its best
efforts to cause the election of such nominees, including voting all shares for
which the Company holds proxies (unless otherwise directed by the stockholder
submitting such proxy) or is otherwise entitled to vote, in favor of the
election of such person.
(g) In the event that the Board establishes committees
from time to time, at least one of the nominees of the Series B Purchaser Group
shall have the right, upon the request of the Series B Purchaser Group, to serve
on each such committee, including, without limitation, on any audit committee or
on any compensation committee.
2.3. Holder Representation. Each Holder represents and warrants
as to itself that as of the date hereof (after giving effect to all transactions
occurring in connection with the sale of the Series B Preferred Stock and
Warrants pursuant to the Securities Purchase Agreement) such Holder is not a
party with any other Person to any agreement other than this Agreement and the
Registration Rights Agreement with respect to the holding, voting, acquisition
or disposition of shares of Series A Preferred Stock, Series A Share
Equivalents, Series B Preferred Stock, Series B Share Equivalents or Subject
Shares, as applicable.
6
<PAGE> 7
2.4. Agent for Affiliated Holders. If a portion or all of the
Subject Shares held by Doubletree, DeBoer, the Trusts or the Fix Partnership
shall be transferred to one or more Permitted Transferees, resulting in the
Subject Shares which were theretofore held by such Holder being held by more
than one Holder, then Doubletree, DeBoer, the Trusts or the Fix Partnership, as
the case may be, shall: (i) act, or shall cause one of such Holders, to act, as
agent and proxy for all purposes of this Agreement (including without limitation
the voting of Subject Shares, the nomination of Directors, the giving of
consents, the approval of amendments, the receipt of notices, etc.) for all of
the Doubletree Holders, DeBoer Holders or the Fix Partnership Holders, as the
case may be, and (ii) specify in writing to the other parties that it (or such
other Holder) is to act as such agent and proxy, and thereafter the other
parties shall be entitled to look solely to, and to deal solely with, the person
so specified for all purposes of this Agreement as if such Holder held all the
Subject Shares held by the party providing such notice and its Permitted
Transferees.
2.5. Irrevocable Proxy. The Fix Partnership Holders and the
Trusts hereby appoint DeBoer as its and their proxy to exercise in DeBoer's sole
discretion all rights of the Fix Partnership Holders and the Trusts to designate
persons for nomination, removal or the filling of vacancies and to exercise all
rights pursuant to Article 2 hereof. This proxy is coupled with an interest in
the Company and shall be irrevocable. Except as set forth below in this
paragraph, this proxy may be invoked by DeBoer at any time by notice to the
other Holders but, unless and until invoked, such rights may be exercised by the
Fix Partnership Holders and the Trusts; provided, however, that upon the death
of Warren D. Fix all such rights shall automatically vest in DeBoer which shall
thereafter have the sole right to exercise all such rights of the Fix
Partnership Holders. Notwithstanding the foregoing, this proxy may not be
invoked or exercised after the death of Jack DeBoer.
2.6. Termination. (a) The rights and obligations of any holder
of Series A Preferred Stock, Series A Share Equivalents, Series B Preferred
Stock, Series B Share Equivalents or Subject Shares pursuant to this Agreement
shall terminate (i) as to any Significant Purchaser, if such Significant
Purchaser shall hold, beneficially or of record, less than 20% of the shares of
Series A Preferred Stock or Series A Share Equivalents purchased by such
Significant Purchaser pursuant to the Stock Purchase Agreement, (ii) as to any
rights (but not any obligations) of any holder of Series A Preferred Stock or
Series A Share Equivalents, upon waiver of such rights in writing, (iii) as to
any holder of Series A Share Equivalents, upon transfer of such Series A Share
Equivalents pursuant to a Public Sale, (iv) as to all holders of Series A
Preferred Stock or Series A Share Equivalents, upon failure of such holders or
their Permitted Transferees, collectively, to hold, beneficially or of record,
at least 20% of the shares of Series A Preferred Stock or Series A Share
Equivalents purchased pursuant to the Stock Purchase Agreement, (v) as to any
rights of any holder of Series B Preferred Stock or Series B Share Equivalents,
upon waiver of such rights in writing, (vi) as to any holder of Series B Share
Equivalents, upon transfer of such Series B Share Equivalents pursuant to a
Public Sale, (vii) as to all holders of Series B Preferred Stock or Series B
Share Equivalents, upon failure of such holders or their Permitted Transferees,
collectively, to hold, beneficially or of record, at least 20% of the shares of
Series B Preferred Stock or Series B Share Equivalents purchased pursuant to the
Securities Purchase Agreement and (viii) as to the holders of the Doubletree
Shares or the
7
<PAGE> 8
DeBoer/Fix Shares, upon both the failure of such holders or their Permitted
Transferees, collectively, to hold, beneficially or of record, at least 20% of
the outstanding voting interests of the Company and the termination of the
rights of the Series A Preferred Holders and Series B Preferred Holders pursuant
to subsections (iv) and (vii) hereof.
(b) Each of the parties hereto hereby acknowledge and
agree that, as of the date hereof, the rights and obligations of those
individuals listed on Schedule A-3 hereto (the "Individual Investor Holders")
under the Second Stockholders Agreement shall be terminated and, except to the
extent that any such Individual Investor Holder is a Permitted Transferee of any
other party hereto, the Individual Investor Holders shall have no rights or
obligations under this Agreement.
ARTICLE III.
GENERAL PROVISIONS
3.1. Legend on Share Certificates. (a) All certificates for
shares of Series A Preferred Stock, Series A Share Equivalents, Series B
Preferred Stock, Series B Share Equivalents or Subject Shares which are subject
to the terms and provisions of Article 2, in addition to such other legends as
may be required by law, shall bear the legend set forth in Article VII of the
Stock Purchase Agreement or Article VII of the Securities Purchase Agreement, as
applicable, and the following legend:
The shares represented by this certificate are also subject to certain
requirements as to voting contained in the Amended and Restated
Stockholders Agreement, dated July 10, 1998, among the Company, and
certain stockholders, a copy of which is on file with the Secretary of
the Company.
(b) Upon the termination of this Agreement with respect
to any shares of Series A Preferred Stock, Series A Share Equivalents, Series B
Preferred Stock, Series B Share Equivalents or Subject Shares pursuant to
Section 2.6, each Holder shall be entitled to receive, in exchange for any
certificate bearing the legend described in subsection (a) of this Section 3.1,
a certificate only bearing the legend set forth in Article VII of the Stock
Purchase Agreement or Article VII of the Securities Purchase Agreement, as
applicable, unless the Company shall have determined (based upon advice of legal
counsel) that such legend is no longer required by law.
ARTICLE IV.
MISCELLANEOUS
4.1. Injunctive Relief. It is acknowledged that it will be
impossible to measure in money the damages that would be suffered if the parties
fail to comply with certain of the obligations imposed on them by this Agreement
and that, in the event of any such failure, an aggrieved Person will be
irreparably damaged and will not have an adequate remedy at law. Any such Person
shall, therefore, be entitled to injunctive relief and/or specific performance
to enforce such obligations, and if any action should be brought in equity to
enforce any of such
8
<PAGE> 9
provisions of this Agreement, none of the parties hereto shall raise the defense
that there is an adequate remedy at law.
4.2. Further Assurances. Each party hereto shall do and perform
or cause to be done and performed all such further acts and things and shall
execute and deliver all such other agreements, certificates, instruments and
documents as any other party hereto reasonably may request in order to carry out
the intent and accomplish the purposes of this Agreement and the consummation of
the transactions contemplated hereby.
4.3. 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 Delaware.
4.4. Entire Agreement; Amendment; Waiver. This Agreement (i)
contains the entire agreement among the parties hereto with respect to the
subject matter hereof, (ii) may not be amended or supplemented except by an
instrument or counterparts thereof in writing signed by at least 66-2/3% of the
Holders or their Agent or Proxy and, if such amendment or supplement adversely
affects (x) any holder of Series A Preferred Stock or Series A Share
Equivalents, 100% of the Series A Preferred Holders or (y) any holder of Series
B Preferred Stock or Series B Shares Equivalents, 100% of the Series B Preferred
Holders and (iii) may not be discharged except by such written instrument or by
performance. Any such amendment so approved shall be binding on all Holders. No
waiver of any term or provision shall be effective unless in writing signed by
the party to be charged. The Second Stockholders Agreement, as in existence
prior to the execution hereof, among the Initial Holders and the parties listed
on Schedule A thereto, is hereby terminated and shall be after the date hereof
null and void and of no further force and effect.
4.5. Binding Effect. This Agreement shall be binding on and
inure to the benefit of the parties hereto and, subject to the terms and
provisions hereof, their respective legal representatives, successors and
assigns.
4.6. Invalidity of Provision. The invalidity or
unenforceability of any provision of this Agreement in any jurisdiction shall
not affect the validity or enforceability of the remainder of this Agreement in
that jurisdiction or the validity or enforceability of this Agreement, including
that provision, in any other jurisdiction.
4.7. 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.
4.8. Notices. All notices and other communications provided for
or given or made hereunder shall be in writing (including delivery by facsimile
transmission) and, unless otherwise provided herein, shall be deemed to have
been given when received by the party to whom such notice is to be given at its
address set forth in the Stock Purchase Agreement with respect
9
<PAGE> 10
to the Series A Preferred Holders and in the Securities Purchase Agreement with
respect to the Series B Preferred Holders, or such other address for the party
as shall be specified by notice given pursuant hereto.
4.9. Headings. The descriptive headings of the several
paragraphs of this Agreement are inserted for convenience only and do not
constitute part of this Agreement.
10
<PAGE> 11
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/ JACK P. DEBOER
---------------------------------
Name: Jack P. DeBoer
Title: Chief Executive Officer
DOUBLETREE CORPORATION
By: /S/ PETER H. KESSER
---------------------------------
Name: Peter H. Kesser
Title: Vice President
WARREN D. FIX FAMILY PARTNERSHIP, L.P.
By: /S/ WARREN D. FIX
---------------------------------
Name: Warren D. Fix
Title: General Partner
/S/ WARREN D. FIX
----------------------------------------
Warren D. Fix
JACK P. DeBOER, for himself and on
behalf of the ALEXANDER DeBOER TRUST
DATED MARCH 14, 1995 and the CHRISTOPHER
SCOTT DeBOER TRUST DATED MARCH 14, 1995
/S/ JACK P. DEBOER
----------------------------------------
Name: Jack P. DeBoer
11
<PAGE> 12
OLYMPUS GROWTH FUND II, L.P.
By: OGP II, L.P., its General Partner
By: RSM, L.L.C., its General
Partner
By: /S/ ROBERT S. MORRIS
--------------------
Name: Robert S. Morris
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/ ROBERT S. MORRIS
--------------------
Name: Robert S. Morris
Title: Managing Member
MORGAN GUARANTY TRUST COMPANY OF NEW
YORK, AS TRUSTEE OF THE COMMINGLED
PENSION TRUST FUND (MULTI-MARKET SPECIAL
INVESTMENT FUND II) OF MORGAN GUARANTY
TRUST COMPANY OF NEW YORK
By: /S/ KATHLEEN N. STARRS
---------------------------------
Name: Kathleen N. Starrs
Title: Vice President
MORGAN GUARANTY TRUST COMPANY OF NEW
YORK, AS TRUSTEE OF THE MULTI-MARKET
SPECIAL INVESTMENT TRUST FUND OF MORGAN
GUARANTY TRUST COMPANY OF NEW YORK
By: /S/ KATHLEEN N. STARRS
---------------------------------
Name: Kathleen N. Starrs
Title: Vice President
12
<PAGE> 13
MORGAN GUARANTY TRUST COMPANY OF NEW
YORK, AS INVESTMENT MANAGER AND AGENT
FOR THE ALFRED P. SOLAN FOUNDATION
(MULTI-MARKET ACCOUNT)
By: /S/ KATHLEEN N. STARRS
---------------------------------
Name: Kathleen N. Starrs
Title: Vice President
CHASE VENTURE CAPITAL ASSOCIATES, L.P.
By: Chase Capital Partners, its
General Partner
By: /S/ JAMES D. KALLMAN
--------------------------
Name: James D. Kallman
Title: General Partner
PRIVATE EQUITY INVESTORS III, L.P.
By: Rohit M. Desai Associates III,
LLC, General Partner
By: /S/ FRANK PADOS
--------------------------
Name: Frank Pados
Title: Attorney-In-Fact
EQUITY-LINKED INVESTORS-II
By: Rohit Desai Associates III,
General Partner
By: /S/ FRANK PADOS
--------------------------
Name: Frank Pados
Title: Attorney-In-Fact
LNR CANDLEWOOD HOLDINGS, INC.
By: /S/ JEFFREY P. KRASNOFF
---------------------------------
Name: Jeffrey P. Krasnoff
Title: President
13
<PAGE> 14
DELAWARE STATE EMPLOYEES' RETIREMENT
FUNDS
By: Pecks Management Partners Ltd.,
its Investment Advisor
By: /S/ ROBERT CRESCI
--------------------------
Name: Robert Cresci
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/ ROBERT CRESCI
--------------------------
Name: Robert Cresci
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/ ROBERT CRESCI
--------------------------
Name: Robert Cresci
Title: Managing Director
J.W. McCONNELL FAMILY TRUST
By: Pecks Management Partners Ltd.,
its Investment Advisor
By: /S/ ROBERT CRESCI
--------------------------
Name: Robert Cresci
Title: Managing Director
14
<PAGE> 15
ADVANCE CAPITAL PARTNERS, L.P.
By: Advance Capital Associates, L.P.
By: Advance Capital Management,
LLC
By: /S/ ROBERT A. BERNSTEIN
--------------------------
Name: Robert A. Bernstein
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/ ROBERT A. BERNSTEIN
---------------------
Name: Robert A. Bernstein
Title: Principal
ALLIED CAPITAL CORPORATION
By: /S/ G. CABELL WILLIAMS, III
------------------------------------
Name: G. Cabell Williams, III
Title: Managing Director
ALLIED CAPITAL CORPORATION II
By: /S/ G. CABELL WILLIAMS, III
------------------------------------
Name: G. Cabell Williams, III
Title: Managing Director
THE FFJ 1997 NOMINEE TRUST
By: /S/ SAMUEL T. BYRNE
------------------------------------
Name: Samuel T. Byrne
Title: Trustee
15
<PAGE> 16
THE MUTUAL LIFE INSURANCE COMPANY OF NEW
YORK
By: /S/ SUZANNE E. WALTON
------------------------------------
Name: Suzanne E. Walton
Title: Managing Director
J. ROMEO & CO.
By: /S/ PETER COCCIA
------------------------------------
Name: Peter Coccia
Title: Partner
HARBOR INVESTMENTS LTD.
By: Strong Capital Management, Inc., its
Investment Advisor
By: /S/ STEPHEN J. SHENKENBERG
-------------------------------
Name: Stephen J. Shenkenberg
Title: Vice President & Acting General
Counsel
STRONG SPECIAL INVESTMENT LIMITED
PARTNERSHIP
By: Strong Capital Management, Inc., its
General Partner
By: /S/ STEPHEN J. SHENKENBERG
-------------------------------
Name: Stephen J. Shenkenberg
Title: Vice President & Acting General
Counsel
STRONG QUEST LIMITED PARTNERSHIP
By: Strong Capital Management, Inc., its
Investment Advisor
By: /S/ STEPHEN J. SHENKENBERG
-------------------------------
Name: Stephen J. Shenkenberg
Title: Vice President & Acting General
Counsel
16
<PAGE> 17
Acknowledgment and Agreement:
Each of the undersigned acknowledges and agrees to the termination of the Second
Stockholders Agreement as of the date hereof.
*
-----------------------------------
William J. Abrams
*
-----------------------------------
Joseph P. Adams, Jr.
*
-----------------------------------
Eric Anderson
*
-----------------------------------
Robert P. Brennan, Jr.
*
-----------------------------------
Robert Brody
*
-----------------------------------
Vanessa Burgess
*
-----------------------------------
Craig Callen
*
-----------------------------------
Michael Dana
/S/ PETER DEEKS
-----------------------------------
Peter Deeks
*
-----------------------------------
Robert E. Diemar, Jr.
*
-----------------------------------
David Hurwitz
*
-----------------------------------
Steve Kantor
*
-----------------------------------
Louis Klevan
17
<PAGE> 18
*
-----------------------------------
Larry Lavine
*
-----------------------------------
Daniel J. Mackell
*
-----------------------------------
Patrick McMullan
*
-----------------------------------
Andrew J. McSpadden
*
-----------------------------------
David R. Smith
*
-----------------------------------
Phil Tager
*
-----------------------------------
Douglas M. Weill
/S/ CHARLES RUCK
-----------------------------------
Charles Ruck
*By: Peter Deeks
Attorney-in-Fact
/S/ PETER DEEKS
-----------------------------------
Peter Deeks
18
<PAGE> 1
EXHIBIT 99.1
COMPANY PRESS RELEASE
CANDLEWOOD HOTEL COMPANY CLOSES INITIAL TRANCHE OF CONVERTIBLE PREFERRED STOCK
WICHITA, Kan.--(BUSINESS WIRE)--July 15, 1998-- Candlewood Hotel Company, Inc
(Nasdaq NM: CNDL - news), the Wichita, Kan.-based owner, developer, manager and
franchisor of value-oriented, business extended-stay hotels, today announced
that it has completed an initial closing of approximately $39 million of its
private placement of Series B Cumulative Convertible Preferred Stock and
warrants to purchase its common stock.
The remainder of the $42 million offering is expected to close following
completion of certain regulatory waiting periods. The proceeds of the offering,
reduced from that originally announced due to regulatory requirements, will be
used for the continued development of the Company's extended-stay hotels and
other general corporate purposes.
The Preferred Stock is entitled to a 7.5 percent annual dividend and to convert
into common stock of the Company at $9.50 per share, which represents a 27
percent premium over the closing price of Candlewood's common stock as of the
commitment date, June 30, 1998. The Company will be able to redeem the preferred
stock after September 30, 1999, and will be required to redeem the preferred
stock on September 30, 2004. The warrants are exercisable into common stock at
$12.00 per share and expire on July 13, 2005.
The securities have not been registered under the Securities Act of 1933, as
amended, or applicable state securities laws, and may not be offered or sold in
the United States absent registration under such Act or an applicable exemption
from the registration requirements. This announcement does not constitute an
offer to sell or the solicitation of orders to buy any of the Series B Preferred
Stock.
<PAGE> 1
EXHIBIT 99.2
COMPANY PRESS RELEASE
CANDLEWOOD HOTEL COMPANY CLOSES SECOND TRANCHE OF CONVERTIBLE PREFERRED STOCK
WICHITA, Kan.--(BUSINESS WIRE)--August 4, 1998-- Candlewood Hotel Company, Inc
(Nasdaq NM: CNDL - news), the Wichita, Kan.-based owner, developer, manager and
franchisor of value-oriented, business extended-stay hotels, today announced
that it has completed the private placement $42 million of its Series B
Cumulative Convertible Preferred Stock and warrants to purchase its common
stock; the first closing of approximately $39 million was completed on July 13,
1998 and the second closing of approximately $3 million was completed on August
3, 1998.
The proceeds of the offering will be used for the continued development of the
Company's hotels and other general corporate purposes.
The Preferred Stock is entitled to a 7.5 percent annual dividend and to convert
into common stock of the Company at $9.50 per share, which represents a 27
percent premium over the closing price of Candlewood's common stock as of the
commitment date, June 30, 1998. The Company will be able to redeem the preferred
stock after September 30, 1999, and will be required to redeem the preferred
stock on September 30, 2004. The warrants are exercisable into common stock at
$12.00 per share and expire on July 13, 2005.
The securities have not been registered under the Securities Act of 1933, as
amended, or applicable state securities laws, and may not be offered or sold in
the United States absent registration under such Act or an applicable exemption
from the registration requirements. This announcement does not constitute an
offer to sell or the solicitation of orders to buy any of the Series B Preferred
Stock.
