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) December 22, 1999
Host Funding, Inc.
(Exact name of registrant as specified in its charter)
Maryland 1-14280 52-1907962
(State or other jurisdiction) (Commission (IRS Employer
of incorporation) File Number) Identification No.)
6116 N. Central Expressway, Suite 1313, Dallas, Texas 75206
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 214-750-0760
N/A
(Former name or former address, if changed since last report)
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Item 1. Change in Control of Registrant
Description of Transaction
On December 22, 1999, Host Funding, Inc., a Maryland corporation (the
"Company"), completed a transaction pursuant to which the Company sold to
MacKenzie Patterson, Inc., a California real estate venture capitalist ("MPI"),
500,000 shares of the Company's newly issued Series "A" Convertible Preferred
Stock, $0.01 par value per share (the Series "A" Preferred"), for a purchase
price of $3.00 per share. By purchasing the Series "A" Preferred Stock, MPI
increased ownership of the outstanding voting stock of the Company by MPI and
certain of its affiliates from approximately 7% to approximately 36.2%. In
exchange for the shares of Series "A" Preferred, the Company received $1,500,000
in cash which will be used by the Company to pay current obligations and for
working capital. The Company also issued to MPI warrants to purchase 500,000
shares of the Class "A" Common Stock of the Company for an exercise price of
$3.00 per share, exercisable at any time for a period of six years from the date
of issuance (the "Warrants"). Concurrently with the purchase of the shares of
Series "A" Preferred and the issuance of the Warrants, the Company and MPI
entered into an Advisory Agreement dated effective as of January 1, 2000
pursuant to which MPI will assume the day-to-day operations of the Company and
direct new investments.
Description of Acquiring Group
MPI is a California corporation based in Moraga, California. Established
in 1981, MPI performs administration, management and related services for a
number of entities. The controlling interest in MPI is owned equally by C.E.
Patterson and his wife Berniece A. Patterson. C.E. Patterson is president and a
director of MPI; Berniece Patterson is a director of MPI; and Glen W. Fuller is
a director and assistant vice president of MPI. Robert E. Dixon, a director of
the Company and beneficial owner, through entities under his management, of
approximately 11.5% of the Company's outstanding voting stock after the
transaction described herein, is married to the daughter of Berniece Patterson.
Mr. Fuller is the son of Berniece Patterson.
MPI financed the transaction partially out of its working capital and
partially out of the proceeds of an unsecured demand loan from Cal Kan, Inc., a
corporation formed to make real estate and other investments owned 50% by C.E.
Patterson and 50% by Thomas A. Frame.
Description of Series "A" Preferred and Warrants
Series "A" Preferred
On December 20, 1999, the Company filed Articles Supplementary with the
Maryland State Department of Taxation designating 2,000,000 shares of the
authorized but unissued shares of Preferred Stock of the Company as Series "A"
Convertible Preferred Stock, $0.01 par value per share (the "Series 'A'
Preferred"). Of the 2,000,000 shares of the Series "A" Preferred designated by
the Company, MPI purchased 500,000 shares for a purchase price of $3.00 per
share. The holders of the Series "A" Preferred are entitled to participate pro
rata with the holders of shares of the Class "A" Common Stock of the Company
(the "Class 'A' Common") with respect to dividend distributions and are
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entitled to a liquidation preference of $4.00 per share over the holders of
shares of Series "A" Common, upon the voluntary or involuntary dissolution,
liquidation or winding up of the affairs of the Company. The holders of shares
of Series "A" Preferred also have the right, exercisable at any time after
December 23, 2002, to convert such shares into shares of Class "A" Common on a
one-for-one basis (the "Conversion Ratio"), or to require the Company to redeem
all or any part of the shares of Series "A" Preferred at the redemption price of
$4.00 per share plus any accrued and unpaid cash dividends thereon. The
Conversion Ratio is subject to adjustment upon the occurrence of certain events,
including, without limitation, issuance of additional shares of Class "A"
Common, stock dividends, stock splits, mergers, reclassifications of stock, or a
recapitalization of the Company. The holders of shares of Series "A" Preferred
are entitled to the number of votes equal to the number of shares of Class "A"
Common into which a share of Series "A" Preferred is convertible and are further
entitled to vote together as a single group with the holders of Class "A" Common
on all matters submitted or required to be submitted to the Company's common
stockholders for approval. The holders of Series "A" Preferred, voting together
as a single voting group have the right to elect, at each annual stockholders
meeting of the Company, two (2) of the five (5) members of the Board of
Directors of the Company.
Warrants
The Company issued Warrants to MPI to purchase 500,000 shares of Class
"A" Common for an exercise price of $3.00 per share (the "Warrants"). The
Warrants are exercisable at any time after the date of issuance with an
expiration date of December 21, 2005. The Warrants are subject to exercise price
adjustments upon the occurrence of certain events, including, without
limitation, stock dividends, stock splits, mergers, reclassifications of stock,
or a recapitalization of the Company.
Registration Rights to Holders of Series "A" Preferred and Warrants
Pursuant to the terms and conditions of a Registration Rights Agreement
(the "Registration Agreement") between the Company and MPI, the holders of the
Series "A" Preferred and the Warrants are entitled to certain demand and
"piggy-back" registration rights relating to the shares of Class "A" Common
issuable upon conversion of the Series "A" Preferred or upon exercise of the
Warrants (the "Underlying Common Stock"). The Registration Agreement provides
that at any time after the date of issuance the holders of at least twenty-five
percent (25%) of the Series "A" Preferred and the Warrants may make in the
aggregate, up to four (4) written requests to register the number of shares of
Underlying Common Stock set forth in each written request. In addition, if the
Company proposes to fill a registration statement under the Securities Act of
1933 with respect to an offering by the Company for its own account (other than
a registration statement on Form S-4 or Form S-8), the holders of Series "A"
Preferred and the Warrants shall be entitled to participate in the Company
registration, subject to the approval of the Company underwriter.
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Description of Advisory Agreement
Pursuant to the terms and conditions of an Advisory Agreement (the
"Advisory Agreement") between the Company and MPI, the Company engaged MPI
as the external advisor of the Company. Under the Advisory Agreement, the
Company appointed MPI as the Company's exclusive agent to supervise the
day-to-day operations of the Company, including, overseeing the current lessees
of the Company's existing hotel properties, serving as the Company's advisor and
consultant in connection with the administrative, policy and investment
decisions made by the Board of Directors of the Company, and performing or
supervising the various administrative and accounting functions necessary for
the management of the Company. The Company will pay MPI an advisory fee of
$350,000 per year for the advisory and administrative services provided to MPI
under the Advisory Agreement. In order to implement the responsibilities of MPI
under the Advisory Agreement, the Company's principal offices will be relocated
to Moraga, California.
Resignation of Director and President
Effective as of December 21, 1999, Michael S. McNulty resigned as a
director of the Company and was replaced by Mr. Glen W. Fuller, an officer and
director of MPI. Effective as of December 31, 1999, Mr. McNulty also resigned as
the President and Chief Executive Officer of the Company and was replaced by Mr.
C. E. ("Pat") Patterson, a principal and majority owner of MPI. Pursuant to the
terms of the Series "A" Preferred, MPI, as the holder of all of the outstanding
shares of the Series "A" Preferred, is entitled to elect two (2) of the five (5)
directors of the Company at each annual meeting of the stockholders of the
Company.
Item 2. Acquisition or Disposition of Assets
Not Applicable.
Item 3. Bankruptcy or Receivership
Not Applicable.
Item 4. Changes in Registrant's Certifying Accountant
Not Applicable.
Item 5. Other Events
Not Applicable.
Item 6. Resignations of Registrant's Directors
Not Applicable.
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Item 7. Financial Statements and Exhibits
(a) Financial Statements of Business Acquired
Not Applicable.
(b) Pro Forma Financial Information
Not Applicable.
(c) Exhibits
2.1 Stock Purchase Agreement dated effective as of December 21, 1999
by and between Host Funding, Inc. and MacKenzie Patterson, Inc.
2.2 Advisory Agreement dated effective as of January 1, 2000 by and
between Host Funding, Inc. and MacKenzie Patterson, Inc.
2.3 Articles Supplementary filed with the State Department of
Assessments and Taxation of the State of Maryland on December
20, 1999.
2.4 Warrant Agreement dated effective as of December 21, 1999 by and
between Host Funding, Inc. and MacKenzie Patterson, Inc.
2.5 Registration Rights Agreement dated effective as of December
21, 1999 by and between Host Funding, Inc. and MacKenzie
Patterson, Inc.
Item 8. Change in Fiscal Year
Not Applicable
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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.
Host Funding, Inc.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first written above.
COMPANY:
HOST FUNDING, INC.
By: /s/ Michael S. McNulty, President
Michael S. McNulty, President
MACKENZIE PATTERSON, INC.
By: /s/ C.E. Patterson
Name: C.E. Patterson
Title: President
By:
Date January 6, 2000
STOCK PURCHASE AGREEMENT
BETWEEN
MACKENZIE PATTERSON, INC.
AND
HOST FUNDING, INC.
-----------------------------
Dated effective as of December 22, 1999
-----------------------------
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STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT, dated effective as of December 22, 1999, by
and among MACKENZIE PATTERSON, INC., a California corporation ("Acquiror") and
HOST FUNDING, INC., a Maryland corporation ("Issuer").
RECITALS
WHEREAS, the respective Boards of Directors of Acquiror and Issuer each
has determined that it is in the best interests of their respective shareholders
that Issuer shall issue and sell to Acquiror 500,000 shares of Series A
Convertible Preferred Stock of Issuer (the "Series A Preferred Stock") all
subject to the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants, agreements and conditions set forth herein and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1. Acquiror.
"Acquiror" shall mean MacKenzie Patterson, Inc., a California
corporation, or its permitted assignee or designee.
Section 1.2. Acquiror Compliance Documents
"Acquiror Compliance Documents" shall have the meaning given in Section
3.11 hereof.
Section 1.3. Advisory Agreement.
"Advisory Agreement" shall mean the Advisory Agreement of even date
herewith, between Acquiror and Issuer and in the form attached hereto as
Schedule 1.3.
Section 1.4. Affiliate.
"Affiliate" shall mean, with respect to any Person, any other Person
who controls, is controlled by or is under common control with such Person.
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Section 1.5. Agreement.
"Agreement" shall mean this Stock Purchase Agreement, as amended from
time to time in accordance with the terms hereof.
Section 1.6 Articles Supplementary.
"Articles Supplementary" shall mean the Articles Supplementary in the
form attached hereto as Schedule 1.6.
Section 1.7. Charter.
"Charter" shall mean the Articles of Amendment and Restatement of Host
Funding, Inc., filed with the Maryland State Department of Assessment and
Taxation on November 28, 1995, as amended.
Section 1.8. Closing; Closing Date.
"Closing" shall mean the closing held pursuant to Section 2.3 hereof ,
and "Closing Date" shall mean the date on which the Closing occurs, but, in no
event effective later than December 22, 1999.
Section 1.9. Code
"Code" shall mean the Internal Revenue Code of 1986, as amended, and
the regulations thereunder.
Section 1.10. Consideration.
"Consideration" shall mean $1,500,000.00 in cash or other immediately
available funds, of which $500,000.00, plus accrued interest thereon, shall be
paid from the funds escrowed by MPI pursuant to that certain Escrow Agreement
dated November __, 1999, between Acquiror and
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Section 1.11. Contracts.
"Contracts" shall mean contracts, agreements, leases, licenses, notes,
indentures, reinsurance treaties, bonds, mortgages, instruments, and other
binding commitments, arrangements and understandings of a material nature,
written or oral.
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Section 1.12. Current Hotels.
"Current Hotels" shall mean all of the hotel properties owned or
operated by the Issuer Companies as of the date of this Agreement, such hotel
properties listed on Schedule 1.12 attached hereto.
Section 1.13. INTENTIONALLY OMITTED
Section 1.14. Employee Benefit Plan.
"Employee Benefit Plan" shall have the meaning given in Section 4.15(a)
hereof.
Section 1.15. Environmental Law.
"Environmental Law" shall mean any federal, state, local or foreign
law, statute, code, ordinance, rule, regulation or other requirement relating to
the environment, natural resources or public or employee health and safety.
Section 1.16. ERISA.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
Section 1.17. Exchange Act.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended and the rules and regulations thereunder.
Section 1.18. GAAP.
"GAAP" shall mean generally accepted accounting principles as in effect
in the United States of America at the time of the preparation of the subject
financial statement, consistently applied throughout the specified period and in
the immediately prior comparable period.
Section 1.19. Governmental Authority.
"Governmental Authority" shall mean any local, federal, state,
provincial, municipal or other governmental department, commission, board,
bureau, agency or instrumentality, or any court, in each case whether of the
United States, any of its possessions or territories, or of any foreign nation.
Section 1.20. IRS.
"IRS" shall mean the Internal Revenue Service of the United States of
America.
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Section 1.21. Issuer.
"Issuer" shall mean Host Funding, Inc., a Maryland corporation.
Section 1.22. Issuer Common Stock,.
"Issuer Common Stock" shall mean the Class A Common Stock, $.01 par
value per share of Issuer.
Section 1.23. Issuer Companies.
"Issuer Companies" shall mean Issuer and all of its Subsidiaries,
collectively.
Section 1.24. Issuer SEC Reports.
"Issuer SEC Reports" shall mean all documents filed by Issuer with the
SEC pursuant to the Securities Act or the Exchange Act.
Section 1.25. Issuer Stock.
"Issuer Stock" shall mean all shares of all outstanding classes of
common stock and preferred stock of Issuer.
Section 1.26. Issuer Stock Options.
"Issuer Stock Options" shall mean all outstanding options, warrants,
stock appreciation rights or rights of any kind to purchase Issuer Stock.
Section 1.27. Knowledge of Acquiror.
"Knowledge of Acquiror" shall mean the actual knowledge of all
directors, shareholders, officers and senior employees of Acquiror, including
but not limited to, Glen W. Fuller.
Section 1.28. Knowledge of Issuer.
"Knowledge of Issuer" shall mean the actual knowledge of all officers
and senior employees of Issuer, including but not limited to, Michael McNulty
and Bona Allen.
Section 1.29. Law.
"Law" shall mean any federal, state, provincial, local, municipal,
foreign or other law or governmental requirement of any kind, and the rules,
regulations and orders promulgated thereunder, including, without limitation,
any Environmental Law.
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Section 1.30. Liens.
"Liens" shall mean any lien, mortgage, security interest, tax lien,
levy, option, right of first refusal, easement, charge, debenture, deed of
trust, right-of-way, restriction, agreement, encroachment, license, lease,
permit, security agreement or any other encumbrance, any restriction or
limitation on the use of real or personal property, or any irregularity in title
thereto.
Section 1.31. Maryland Code.
"Maryland Code" shall mean the Maryland General Corporation Law, as
amended.
Section 1.32. Material Adverse Effect.
"Material Adverse Effect" shall mean, with respect to any entity or
group of entities, a material adverse effect, individually or in the aggregate,
on the business, assets, liabilities, financial condition, results of
operations, value or prospects of such entity or group of entities taken as a
whole.
Section 1.33. Memorandum.
"Memorandum" shall mean the Private Placement Memorandum dated December
__, 1999 prepared by Issuer, delivered to Acquiror and in form attached hereto
as Schedule 1.33.
Section 1.34. Multiemployer Plans.
"Multiemployer Plans" shall have the meaning given in Section 4.15(a)
hereof.
Section 1.35. Operators.
"Operators" shall have the meaning given in Section 4.2(b) hereof.
Section 1.36. Parties.
"Parties" shall mean Issuer and Acquiror.
Section 1.37. Pension Plans.
"Pension Plans" shall have the meaning given in Section 4.15(a) hereof.
Section 1.38. Person.
"Person" shall mean any individual, firm, corporation, partnership,
limited liability company, trust, incorporated or unincorporated association,
joint venture, joint stock company, government (or an agency or political
subdivision thereof) or other entity of any kind, and shall include any
successor (by merger or otherwise) of such entity.
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Section 1.39. Registration Rights Agreement.
"Registration Rights Agreement" shall mean the Registration Rights
Agreement of even date herewith, between Acquiror and Issuer and in the form
attached hereto as Schedule 1.39.
Section 1.40. SEC.
"SEC" shall mean the Securities and Exchange Commission.
Section 1.41. Securities Act.
"Securities Act" shall mean the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
Section 1.42. Selling Entities.
"Selling Entities" shall have the meaning given in Section 4.26(b)
hereof.
Section 1.43. Series A Preferred Stock.
"Series A Preferred Stock" shall mean the 500,000 shares of Series A
Convertible Preferred Stock issued by Issuer to Acquiror pursuant to this
Agreement.
Section 1.44. Subsidiary; Subsidiaries.
"Subsidiary" shall mean each entity with respect to which the specified
Person (a) has the right to vote (directly or indirectly through one or more
other entities or otherwise) shares or other ownership interests representing
50% or more of the votes eligible to be cast in the election of directors of
such entity or (b) owns a majority of the outstanding beneficial interests, or a
majority of the capital or profits (collectively, "Subsidiaries").
Section 1.45. Taxes.
"Taxes" shall mean any and all taxes, levies, imposts, duties,
assessments, charges and withholdings imposed or required to be collected by or
paid over to any federal, state, local or foreign Governmental Authority or any
political subdivision thereof, including, without limitation, income, premium,
gross receipts, ad valorem, value added, minimum tax, franchise, sales, use,
excise, license, real or personal property, unemployment, disability, stock
transfer, mortgage recording, estimated, withholding or other tax, governmental
fee or other like assessment or charge of any kind whatsoever, and including any
interest, penalties, fines, assessments or additions to tax imposed in respect
of the foregoing, or in respect of any failure to comply with any requirement
regarding Tax Returns.
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Section 1.46. Tax Returns.
"Tax Returns" shall mean any report, return, information statement,
payee statement or other information required to be provided to any federal,
state, local or foreign Governmental Authority or otherwise retained, with
respect to Taxes.
Section 1.47. Underlying Common Stock.
"Underlying Common Stock" shall mean the shares of Issuer Common Stock
issuable upon conversion of the Series A Preferred Stock.
Section 1.48. Warrants.
"Warrants" shall mean the warrants issued to Acquiror pursuant to the
Warrant Agreement.
Section 1.49. Warrant Agreement.
"Warrant Agreement" shall mean the Warrant Agreement of even date
herewith, between Acquiror and Issuer and in the form attached hereto as
Schedule 1.49.
Section 1.50. Welfare Plans.
"Welfare Plans" shall have the meaning given in Section 4.15(a) hereof.
ARTICLE II
PURCHASE AND SALE AND CLOSING
Section 2.1. Purchase and Sale of the Series A Preferred Stock.
(a) At the Closing, and upon all of the terms and subject to the
fulfillment or waiver by the party benefitting therefrom of all of the
conditions of this Agreement, Issuer shall issue, sell and deliver to Acquiror,
and Acquiror shall purchase and accept from Issuer, all of the right, title and
interest in and to the Series A Preferred Stock, free and clear of any and all
Liens.
(b) Notwithstanding anything to the contrary contained in this
Agreement, the transfer of title to the Series A Preferred Stock shall become
effective only upon receipt by Issuer of the Consideration.
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Section 2.2. Consideration.
At the Closing, and in consideration for the Series A Preferred Stock,
Acquiror shall pay Issuer the Consideration by wire transfer(s) of immediately
available funds in accordance with instructions to be provided by Issuer to
Acquiror not less than two business days prior to the Closing Date.
Section 2.3. Closing.
The Closing will take place at the office of James M. Duncan, P.C.,
6116 N. Central Expressway, Suite 1313, Dallas, Texas 75206 or at such other
places as the Parties mutually agree.
Section 2.4. Issuer's Deliveries at Closing.
At the Closing, and except as otherwise set forth below, Issuer shall
deliver, or cause to be delivered, to Acquiror:
(a) a stock certificate representing 500,000 shares of Series A
Preferred Stock, such stock certificate to be in a form reasonably satisfactory
to Acquiror;
(b) evidence of the filing of the Articles Supplementary for the Series
A Preferred Stock with the Maryland State Department of Assessments and
Taxation;
(c) a duly executed original of the Advisory Agreement;
(d) a duly executed original of the Warrant Agreement;
(e) a duly executed original of the Registration Rights Agreement;
(f) the legal opinion of Issuer's counsel in the form attached hereto
as Schedule 2.4; and
(g) a copy of the resolution, duly certified by a qualified officer of
Issuer, authorizing the execution, delivery and performance of this Agreement by
Issuer.
Section 2.5. Acquiror's Deliveries at Closing.
At the Closing, Acquiror shall, in addition to the Consideration,
deliver, or cause to be delivered, to Issuer:
(a) a duly executed original of the Advisory Agreement;
(b) a duly executed original of the Warrant Agreement;
(c) a duly executed original of the Registration Rights Agreement;
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(d) the legal opinion of Acquiror's counsel in the form attached hereto
as Schedule 2.5; and
(e) a copy of the resolution or other authorization document, duly
certified by a qualified officer or representative of Acquiror, authorizing the
execution, delivery and performance of this Agreement by Acquiror.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF ACQUIROR
Acquiror represents and warrants to Issuer as follows:
Section 3.1. Organization and Authority.
Acquiror is duly incorporated, organized or formed, as the case may be,
validly existing and in good standing under the laws of its jurisdiction of
incorporation, organization or formation. Acquiror has full corporate,
partnership or limited liability company power and authority to carry on its
business as it is now being conducted and to own, operate and hold its assets
and properties as, and in the places where, such properties and assets now are
owned, operated or held. Acquiror is duly qualified or registered as a foreign
entity to do business, and is in good standing, in each jurisdiction where the
nature of properties or the conduct of its business requires such registration
or qualification. The copies of the organizational documents of Acquiror that
have been delivered to Issuer are complete and correct and in full force and
effect on the date hereof.
Section 3.2. Compliance with Law and Governing Documents.
Acquiror is not in violation or default of any provisions of its
organizational documents. Acquiror is in compliance with all applicable
statutes, laws, regulations and executive orders of the United States of America
and all states, foreign countries or other governmental bodies and agencies
having jurisdiction over Acquiror's business or properties. Advisor has not
received any notice of any such violation of such statutes, laws, regulations or
orders which has not been remedied prior to the date hereof.
Section 3.3. Authority Relative to this Agreement.
The execution, delivery and performance of this Agreement, and of all
of the other documents and instruments required hereby, by Acquiror are within
the corporate power of Acquiror. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by the appropriate officers and directors of Acquiror and no other
proceedings on the part of Acquiror are necessary to authorize the execution,
delivery and performance of this Agreement or to consummate the transactions
contemplated hereby. This Agreement and all of the other documents and
instruments required hereby have been or will be duly and validly executed and
delivered by Acquiror and (assuming the due authorization, execution and
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delivery hereof and thereof by Issuer) constitute or will constitute valid and
binding agreements of Acquiror, enforceable against Acquiror in accordance with
their respective terms, except to the extent that their enforceability may be
limited by applicable bankruptcy, insolvency, reorganization or other Laws
affecting the enforcement of creditors' rights generally or by equitable
principles.
Section 3.4. Consents and Approvals; No Violations.
Except for statements of beneficial ownership required by Section 16(a)
of the Exchange Act and filings on Schedule 13D required under Regulation 13D of
the Exchange Act, if any, no filing or registration with, and no permit,
authorization, consent from or notice to, or approval of, any Governmental
Authority or any third party is necessary or required in connection with the
execution and delivery of this Agreement by Acquiror or for the consummation by
Acquiror of the transactions contemplated by this Agreement. The execution,
delivery and performance of this Agreement by Acquiror and the transactions
contemplated hereby do not and will not: (i) violate or conflict with the
organizational documents of Acquiror; or (ii) conflict with or violate any Laws
of any Governmental Authority applicable to Acquiror or any of its properties or
assets.
Section 3.5. Purchase for Own Account.
The shares of the Series A Preferred Stock and Warrants to be purchased
or acquired by Acquiror hereunder will be acquired for investment for Acquiror's
own account, not as a nominee or agent, and not with a view to the public resale
or distribution thereof within the meaning of the Securities Act, and Acquiror
has no present intention of selling, granting any participation in, or otherwise
distributing the same; provided, Issuer acknowledges that Acquiror may transfer
shares of Preferred Stock or Warrants to its Affiliates, if, and only if, such
transfer or transfers do not disqualify Issuer from the exempt offering
provisions of Regulation D under the Securities Act relating to the sale or
issuance of the Series A Preferred Stock or Warrants by Issuer. Acquiror also
represents that it has not been formed for the specific purpose of acquiring the
Series A Preferred Stock or the Warrants.
Section 3.6. Investment Experience.
Acquiror understands that the purchase of the shares of the Series A
Preferred Stock involves substantial risk. Acquiror has experience in the hotel
industry and acknowledges that it can bear the economic risk of its investment
in the shares of the Series A Preferred Stock and has such knowledge and
experience in financial or business matters that it is capable of evaluating the
merits and risks of this investment in the shares of the Series A Preferred
Stock.
Section 3.7. Accredited Investor Status.
Acquiror is an "accredited investor" within the meaning of Regulation D
promulgated under the Securities Act.
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Section 3.8. Restricted Securities.
Acquiror understands that the shares of the Series A Preferred Stock
and Warrants are characterized as "restricted securities" under the Securities
Act inasmuch as they are being acquired from Issuer in a transaction not
involving a public offering and that under the Securities Act and applicable
rules and regulations thereunder such securities may be resold without
registration under the Securities Act only in certain limited circumstances. In
this connection, Acquiror represents that it is familiar with Rule 144
promulgated under the Securities Act, and understands the resale limitations
imposed thereby and by the Securities Act.
Section 3.9. Legends.
It is understood that the stock certificate(s) evidencing the shares of
the Series A Preferred Stock will bear the legends set forth below together with
any legends required by the Charter of Issuer or the laws of the State of
Maryland:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE SECURITIES LAWS OF
ANY STATE. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND
RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE
SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR
EXEMPTION THEREFROM. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF
COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY
PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE SECURITIES ACT AND ANY
APPLICABLE STATE SECURITIES LAWS.
The legend set forth above shall be removed by Issuer from any stock
certificate(s) evidencing the shares of the Series A Preferred Stock as soon as
a registration statement under the Securities Act is in effect with respect to
the Series A Preferred Stock or at such time as the Series A Preferred Stock can
be freely transferred in a public sale without such a registration statement
being in effect.
Section 3.10. Information Concerning Issuer.
(a) Acquiror has received a copy of the Memorandum. Representatives of
Acquiror have read carefully and understand the Memorandum.
(b) Acquiror is familiar generally with the business and financial
condition, properties, operations and prospects of the Issuer Companies, as
described in the Memorandum, and, prior to the execution of this Agreement,
representatives of Acquiror have been afforded the opportunity to ask questions
of and received answers from Issuer's officers and directors, concerning the
business and financial condition, properties, operations and prospects of the
Issuer Companies. All documents, records and books pertaining to the acquisition
of the Series A Preferred Stock which Acquiror has requested have been made
available to Acquiror.
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(c) No representations or warranties have been made to Acquiror by
Issuer as to profits, losses, dividends or cash flow which may be received or
sustained as a result of this investment, other than those contained in the
Issuer SEC Reports and the Memorandum.
(d) Acquiror recognizes that no assurances are or have been made
regarding the tax consequences which may inure to Acquiror as a result of
investment in the Series A Preferred Stock, nor has any assurance been made that
existing tax laws, and regulations and judicial and administrative
interpretations thereof, will not be modified in the future, thus changing the
tax consequences under existing tax laws and regulations and judicial and
administrative interpretations thereof.
(e) Acquiror recognizes that no assurance are or have been made
regarding the approximate or exact length of time that Acquiror will be required
to remain as owner of the Series A Preferred Stock or regarding the dividends,
type or amount of consideration to be realized, if any, by investing in Issuer.
(f) Notwithstanding the foregoing, and irrespective of any due
diligence conducted by Acquiror, Acquiror, in entering into this Agreement and
purchasing the Series A Preferred Stock, is relying on the representations,
warranties and covenants made by Issuer in this Agreement and the exhibits and
schedules hereto, the Issuer SEC Reports and the Memorandum.
Section 3.11. Acquiror Compliance Documents. Acquiror has filed, or
will timely file, all reports, schedules, forms, statements, officers and
directors questionnaires, and other documents relating to the acquisition of the
Series A Preferred Stock and required to be filed by Acquiror, or delivered to
Issuer, pursuant to applicable state and federal securities laws (all of the
foregoing being hereinafter referred to as the "Acquiror Compliance Documents").
Acquiror has delivered to Issuer, or will deliver when filed, true and complete
copies of the Acquiror Compliance Documents. As of their respective dates, the
Acquiror Compliance Documents complied, or will comply, in all material
respects, with the requirements of the Exchange Act, and all state securities
laws applicable to the Acquiror Compliance Documents, and none of the Acquiror
Compliance Documents, at the time of filing with the SEC or the appropriate
state agency, contained or will contain, any untrue statement of a material fact
or omitted to state a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading. No other information provided by or on
behalf of Acquiror to Issuer which is not included in the Acquiror Compliance
Documents, including, without limitation, information relating to the ownership
and organizational structure of Acquiror, contains any untrue statement of a
material fact or omits to state any material fact necessary in order to make the
statements therein, in the light of the circumstance under which they are or
were made, not misleading. Acquiror has complied, or will timely comply, in all
material respects with all Laws of any Governmental Authority pertaining to the
purchase by Acquiror of the Series A Preferred Stock, including, without
limitation, the Securities Act, the Exchange Act and the Investment Company Act
of 1940.
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Section 3.12. Investment Company. Acquiror is not an "investment
company," or a company "controlled" by an "investment company" as such terms are
defined in the Investment Company Act of 1940, as amended.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF ISSUER
Issuer represents and warrants to Acquiror as follows:
Section 4.1. Organization and Authority.
Each of the Issuer Companies is duly incorporated, organized or formed,
as the case may be, validly existing and in good standing under the laws of its
respective jurisdiction of incorporation, organization or formation. Each of the
Issuer Companies has full corporate, partnership or limited liability company
power and authority to carry on its respective business as it is now being
conducted and to own, operate and hold under lease its assets and properties as,
and in the places where, such properties and assets now are owned, operated or
held. Each of the Issuer Companies is duly qualified or registered as a foreign
entity to do business, and is in good standing, in each jurisdiction where the
nature of properties or the conduct of its business requires such registration
or qualification. Schedule 4.1 attached hereto contains a true and complete list
of all of the Issuer Companies, together with the jurisdiction of incorporation,
organization or formation of each such Company. The copies of the organizational
documents of each of the Issuer Companies that have been delivered to Acquiror
are complete and correct and in full force and effect on the date hereof.
Section 4.2. Compliance with Law and Governing Documents.
(a) None of the Issuer Companies is in violation or default of any
provisions of its articles of incorporation, bylaws, partnership agreement,
limited liability company agreements, or other organizational documents. The
Issuer Companies have received no notice of non-compliance with any Laws of any
Governmental Authority applicable to the Issuer Companies' business or
properties which has not been remedied prior to the date hereof.
(b) To the Knowledge of Issuer, and except as otherwise described in
Schedule 4.12 attached hereto, none of the Issuer Companies are, and the Issuer
Companies have received no notice that, any past or present lessor, sublessor,
lessee, sublessee, owner, occupant, manager or operator of the Current Hotels
for which any of the Issuer Companies is presently responsible as a matter of
law (such persons or entities, being referred to in this Agreement as
"Operators"), are, in any material respect, out of lawful compliance with, or
are in default under, any Laws applicable to the Current Hotels or business
operations, now or previously conducted thereon.
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(c) To the Knowledge of Issuer, the Issuer Companies have complied in
all material respects with all, and are not in default under any Law of any
Governmental Authority applicable to such entity or to its business operations.
Section 4.3. Capitalization.
Issuer's authorized equity capitalization consists of 50,000,000 shares
of Class A Common Stock, 4,000,000 shares of Class B Common Stock, 1,000,000
shares of Class C Common Stock, and 20,000,000 shares of Preferred Stock, all
$.01 par value per share. As of the close of business on November 30, 1999:
1,719,700 shares of Issuer Common Stock were issued and outstanding; no shares
of Class B Common Stock were issued and outstanding; no shares of Class C Common
Stock were issued and outstanding; and no shares of Preferred Stock were issued
and outstanding. Such shares of Issuer Stock constitute all of the issued and
outstanding shares of capital stock of Issuer as of the date of this Agreement.
As of the date of this Agreement, the Issuer has reserved for issuance the
number of shares of Class A Common Stock set forth on Schedule 4.3 attached
hereto and such reserves are sufficient for the issuance of Issuer Common Stock
upon the conversion of all outstanding Issuer Stock Options. No Subsidiary of
Issuer owns, of record or beneficially, any shares of Issuer Stock. All issued
and outstanding shares of Issuer Stock have been duly authorized and validly
issued and are fully paid and nonassessable and are not subject to and have not
been issued in violation of any preemptive rights. All of the outstanding shares
of capital stock of the Subsidiaries of Issuer have been duly authorized and are
validly issued, fully paid and nonassessable and owned of record and
beneficially by Issuer, directly or indirectly, free and clear of all Liens,
except as otherwise reflected on Schedule 4.3. Issuer has not, subsequent to
November 30, 1999, declared or paid any dividend on, or declared or made any
distribution with respect to, or authorized or effected any split-up or any
other recapitalization of, any of the Issuer Stock, or directly or indirectly
redeemed, purchased or otherwise acquired any of the Issuer Stock or agreed to
take any such action. Except as set forth on Schedule 4.3 or the Memorandum,
there are (a) no outstanding options, warrants, subscriptions or other rights to
purchase or acquire any capital stock of any of the Issuer Companies, (b) no
Contracts or agreements (oral or written) pursuant to which any of the Issuer
Companies is bound to sell or issue any shares of its capital stock or
securities convertible into or exchangeable for such shares of capital stock and
(c) no Contracts to which any of the Issuer Companies is a party with respect to
the voting or registration of any shares of capital stock of any of the Issuer
Companies. Schedule 4.3 sets forth the ownership of Issuer Stock as of the date
hereof, by the executive officers and directors of Issuer, and by each Person
known by Issuer to own more than 5% of Issuer's Stock and the ownership by any
other party of any equity interest in any Subsidiary of Issuer.
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Section 4.4. Authority Relative to this Agreement.
The execution, delivery and performance of this Agreement, and of all
of the other documents and instruments required hereby, by Issuer are
within the corporate power of Issuer. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have been
duly authorized by the Board of Directors of Issuer and no other corporate
proceedings on the part of Issuer are necessary to authorize the execution,
delivery and performance of this Agreement or to consummate the transactions
contemplated hereby. This Agreement and all of the other documents and
instruments required hereby have been or will be duly and validly executed and
delivered by Issuer and (assuming the due authorization, execution and delivery
hereof and thereof by Acquiror) constitute or will constitute valid and binding
agreements of Issuer, enforceable against Issuer in accordance with their
respective terms, except to the extent that their enforceability may be limited
by applicable bankruptcy, insolvency, reorganization or other Laws affecting the
enforcement of creditors' rights generally or by equitable principles.
Section 4.5. Subsidiaries.
Except as otherwise reflected on Schedule 4.3, Issuer owns, directly or
indirectly, all the outstanding capital stock or other ownership interest of
each of its Subsidiaries, free and clear of all Liens and all such capital stock
or other ownership interest is duly authorized, validly issued and outstanding,
fully paid and nonassessable. Neither Issuer nor any of its Subsidiaries has
made any material investment in, or material advance of cash or other extension
of credit to, any Person other than its Subsidiaries. Except as otherwise
reflected in the Memorandum, none of such Subsidiaries has any commitment to
issue or sell any shares of its capital stock or any securities or obligations
convertible into or exchangeable for, or giving any Person (other than Issuer)
any right to acquire from such Subsidiary, any shares of its capital stock, and
no such securities or obligations are outstanding. Other than its interests in
the Subsidiaries, Issuer does not own, directly or indirectly, securities of any
Person.
Section 4.6. Valid Issuance of Series A Preferred Stock.
(a) The shares of Series A Preferred Stock, when issued, sold and
delivered in accordance with the terms of this Agreement for the Consideration,
will be duly and validly issued, fully paid and nonassessable.
(b) The outstanding shares of Issuer Stock are duly and validly issued,
fully paid and nonassessable, and such shares, and all Issuer Stock Options,
have been issued in full compliance with the registration and prospectus
delivery requirements of the Securities Act or in compliance with applicable
exemptions therefrom, the registration and qualification requirements of all
applicable securities laws of States of the United States and all other
provisions of applicable state securities laws, including, without limitation,
anti-fraud provisions.
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Section 4.7. Consents and Approvals; No Violations.
To the Knowledge of Issuer, no filing or registration with, and no
permit, authorization, consent from or notice to, or approval of, any
Governmental Authority or any other third party is necessary or required in
connection with the execution and delivery of this Agreement by Issuer or for
the consummation by Issuer of the transactions contemplated by this Agreement,
except as may be required to comply with applicable federal and state securities
laws. Neither the execution, delivery and performance of this Agreement nor the
consummation of the transactions contemplated hereby by Issuer will (a) conflict
with or result in any breach of any provision of the respective organizational
documents of any of the Issuer Companies; (b) result in a violation or breach
of, or constitute (with or without due notice or lapse of time or both) a
default (or give rise to any right of termination, cancellation or acceleration)
under, or result in the loss of a benefit under, or result in the creation of a
Lien on any property or asset of the Issuer Companies under, any of the terms,
conditions or provisions of any Contract or other instrument or obligation to
which any of the Issuer Companies is a party or by which it or any of them or
any of their properties or assets may be bound; or (c) violate any Laws of any
Governmental Authority applicable to any of the Issuer Companies or any of their
respective properties or assets.
Section 4.8. Issuer SEC Reports.
(a) The Issuer SEC Reports complied, as of their respective dates of
filing, in all material respects with all applicable requirements of the
Exchange Act and the Securities Act. As of their respective dates, none of the
Issuer SEC Reports, including, without limitation any exhibits thereto or
financial statements or schedules included or incorporated by reference therein,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
made therein not misleading in light of the circumstances under which they were
made. There are no material agreements, contracts, indentures, leases or other
instruments that are required to be described in the Issuer SEC Reports or to be
filed as an exhibit to any of the Issuer SEC Reports that are not described or
filed as required. Except for Issuer, none of the Issuer Companies is required
to file any forms, reports or other documents with the SEC, or any other foreign
or domestic securities exchange or Governmental Authority with jurisdiction over
securities Laws. Issuer has timely filed all reports, registration statements
and other filings required to be filed by it with the SEC.
(b) Each of the balance sheets (including the related notes and
schedules) included or incorporated by reference in the Issuer SEC Reports
fairly present the consolidated financial position of the Issuer Companies as of
the respective dates thereof, and the other related financial statements
(including the related notes and schedules) included or incorporated by
reference therein fairly present the consolidated results of operations and cash
flows of the Issuer Companies for the respective fiscal periods or as of the
respective dates set forth therein. Each of the financial statements (including
the related notes and schedules) included or incorporated by reference in the
Issuer SEC Reports (i) complied as to form with the applicable accounting
requirements and rules and regulations of the SEC and (ii) was prepared in
accordance with GAAP consistently applied during the period presented.
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(c) The accounts receivable of the Issuer Companies as reflected in the
Issuer SEC Reports (except those collected since the dates thereof in the
ordinary course of business), are good and collectible without the necessity of
legal process except to the extend reserved against on the financial statements
included therein.
(d) All offers and sales of Issuer Stock or the capital stock or
interest in the Subsidiaries prior to the date hereof were either duly
registered or exempt from registration requirements of the Securities Act and
applicable state securities and Blue Sky laws.
(e) The accountants, Price Waterhouse Coopers, who have audited the
financial statements included or incorporated by reference in the Issuer SEC
Reports are independent public accountants as required by the Securities Act and
the Exchange Act.
Section 4.9. Absence of Undisclosed Liabilities.
(a) Except as disclosed in the Issuer SEC Reports or as otherwise
specifically disclosed on Schedule 4.9 attached hereto, neither Issuer nor any
of its Subsidiaries has any liabilities of a material nature, whether absolute,
contingent or otherwise, and whether due or to become due (including, without
limitation, all liabilities for Taxes) that should be reflected or reserved
against in accordance with GAAP, and that are not adequately reflected or
reserved against on the Issuer current balance sheet contained in the most
recent Issuer SEC Reports, including the footnotes thereto.
(b) Issuer, together with its Subsidiaries, maintains a system of
internal accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or specific
authorization; (ii) transactions are recorded as necessary to permit preparation
of financial statements in conformity with generally accepted accounting
principles and to maintain accountability for assets; (iii) access to assets is
permitted only in accordance with management's general or specific
authorization; and (iv) the recorded accountability for assets is compared with
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
Section 4.10. Absence of Certain Events.
Except as set forth in the Issuer SEC Reports filed prior to the date
of this Agreement, the Memorandum or as otherwise specifically disclosed on
Schedule 4.10 attached hereto, since September 30, 1999, the business of Issuer
has been operated in the ordinary course and none of the Issuer Companies has
suffered any material change in its business, assets, liabilities, financial
condition or results of operations that has had or is reasonably likely to have
a Material Adverse Effect upon the Issuer Companies. Except as disclosed on
Schedule 4.10 attached hereto, or as otherwise specifically contemplated by this
Agreement, there has not been since September 30, 1999:
(a) any labor dispute that has had or is reasonably likely to have a
Material Adverse Effect upon the Issuer Companies;
(b) except as otherwise reflected on Schedule 4.3, any entry by any of
the Issuer Companies into any material Contract or transaction (including,
without limitation, any borrowing, capital expenditure, sale of assets or any
Lien made on any of the properties or assets of any of the Issuer Companies)
that cannot be terminated within 30 days without penalty;
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(c) any change in the accounting policies or practices of Issuer;
(d) any damage, destruction or loss, whether covered by insurance or
not, that has had or is reasonably likely to have a Material Adverse Effect upon
the Issuer Companies;
(e) any material change in underwriting, pricing, actuarial or
investment practices or policies;
(f) any new, or any amendment to any existing, employment, severance or
consulting Contract, the implementation of, or any agreement to implement, any
Issuer benefit plans, or any alteration of any of the Issuer Companies'
employment practices or terms and conditions of employment, in each case other
than in the ordinary course of business consistent with past practice;
(g) except as otherwise reflected on Schedule 4.3, any issuance by any
of the Issuer Companies of any shares of capital stock, or any repurchase or
redemption by any of the Issuer Companies of any shares of their respective
capital stock;
(h) except as otherwise reflected on Schedule 4.3, any purchase, sale,
lease or other disposition of, or execution and delivery of any agreement by
any, Issuer Company contemplating the purchase, sale, lease or other disposition
of, properties and assets by any Issuer Company;
(i) except as otherwise reflected on Schedule 4.3, any merger or
consolidation of any of the Issuer Companies with any other Person, or any
acquisition by any of the Issuer Companies of the stock or business of another
Person, or any action taken or any commitment entered into with respect to or in
contemplation of any such termination or the liquidation, dissolution,
recapitalization, reorganization or other winding up of the business or
operation of any of the Issuer Companies;
(j) except as otherwise reflected on Schedule 4.3, any borrowing,
agreement to borrow funds or assumption, endorsement or guarantee of
indebtedness by any of the Issuer Companies or any termination or material
amendment of any evidence of indebtedness, contract, agreement, deed, mortgage,
lease, license or other instrument, commitment or agreement to which any of the
Issuer Companies is bound or by which any of them or their respective properties
is bound other than in the ordinary course of business and consistent with past
practices and other than any such borrowing, agreement to borrow, termination or
amendment that would not have a Material Adverse Effect;
(k) any declaration or payment of any dividend on, or any other
distribution with respect to, the capital stock of any of the Issuer Companies;
(l)any Lien on any of the assets, tangible or intangible, of any of the
Issuer Companies; or
(m) any agreement to do any of the foregoing.
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Section 4.11. Real Property.
(a) Except as disclosed on Schedules 4.11 and 4.12, Issuer (either
directly or through a Subsidiary) has good and marketable title in fee simple to
each of the Company Hotels and good and marketable title to each of the items of
personal property used in the Issuer's business in each case free and clear of
all liens, charges, encumbrances, claims, security interests, defects and
restrictions. All leases pursuant to which the Issuer Companies lease any items
of real or personal property are valid, binding and enforceable leases. To the
extent described or incorporated by reference in the Issuer SEC Reports, such
leases conform in all material respects to the description thereof set forth or
incorporated by reference in the Issuer SEC Reports and no notice has been given
or material claim asserted by anyone adverse to the rights of Issuer Companies
under any of such leases or affecting the Issuer Companies or the present
owner's rights to continued possession of any leased property.
(b) The Issuer has title policies in effect naming one of the Issuer
Companies as insured party with respect to each of the Current Hotels.
(c) (i) To the Knowledge of Issuer, each of the Issuer Companies has
all permits, licenses, franchises and authorizations of all Governmental
Authorities as are necessary to own, lease or operate the Current Hotels and to
conduct its business in the manner described in the Issuer SEC Reports, (ii)
none of the Issuer Companies has received notice that it has not fulfilled or
performed any its material obligations with respect to such permits, and (iii)
to the Knowledge of Issuer, none of such permits contains any restriction that
is materially burdensome to the Issuer Companies.
(d) To the Knowledge of Issuer, no lessee, licensee or concessionaire
of any portion of any of the Current Hotels is in material default under any of
the leases or licenses governing such properties and, to the Knowledge of
Issuer, there is no event which, but for the passage of time or the giving of
notice, or both, would constitute a material default under any of such leases or
license, except such defaults that would not singly or in the aggregate, have a
Material Adverse Effect on the condition (financial or otherwise), business,
properties, net worth, results of operations or prospects of the Issuer or its
Subsidiaries taken as a whole.
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Section 4.12. Litigation.
Except as set forth in the Issuer SEC Reports or specifically disclosed
on Schedule 4.12, there are no civil, criminal or administrative actions, suits,
claims, hearings, proceedings or investigations pending or, to the Knowledge of
Issuer, threatened against or relating to any of the Issuer Companies or any of
their respective officers, directors, partners or members in their capacity as
such, or to which any of the Issuer Companies assets are subject at law or in
equity, or before any Governmental Authority.
Section 4.13. Insurance.
The Operators of the Current Hotels are insured by insurers of
recognized financial responsibility against such losses and risks and in
such amounts as are customary in the businesses in which they are engaged, and
the appropriate Issuer Companies are named as an additional insured with respect
to all insurance coverage; none of the Issuer Companies has any reason to
believe that the Operators will not be able to renew that coverage as and when
such coverage expires or to obtain similar coverage from similar insurers as may
be necessary to continue its business at a cost that would not have a Material
Adverse Effect on the condition (financial or other), business, net worth or
results of operations of the Issuer Companies. During the last two years, to the
Knowledge of Issuer, none of the Operators of the Current Hotels has been denied
any insurance coverage which it has requested, has made any material change in
the scope or nature of its insurance coverage nor received notice of any
material increase in premiums for any of such policies nor of any termination or
refusal to renew such policies. To the Knowledge of Issuer, during the past five
years, there has been no lapse in coverage of any of the Operator's property,
fire and casualty, product liability, workers' compensation, automobile,
comprehensive general liability or other form of insurance carried by the
Operators in the ordinary course of business.
Section 4.14. Material Agreements.
Schedule 4.14 contains a list of all Contracts to which any of the
Issuer Companies is a party that are material to the Issuer Companies and which
are not included in the Issuer SEC Reports. All such Contracts were duly and
validly executed by the parties thereto and to the Knowledge of Issuer none of
the parties thereto is in material breach or material default under any such
Contract. All Contracts to which any of the Issuer Companies is a party or by
which any of the Issuer Companies or any of their property is bound or affected
are, to the Knowledge of Issuer, valid, binding and enforceable in accordance
with their respective terms, subject to bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting creditors' rights generally and to
applicable limitations on the availability of equitable remedies, including
considerations of public policy, are in full force and effect, and there exists
no default which, after notice or lapse of time, or both, would result in a
right to accelerate or loss of rights of any of the Issuer Companies.
Section 4.15. Employee Benefit Plans.
(a) Except for the 1997 Incentive Plan of the Issuer, none of the
Issuer Companies maintains any employee benefit plan as defined in Section 3(3)
of ERISA, or any other plan or arrangement, whether or not subject to ERISA,
that provides deferred compensation, bonus, stock option, stock purchase,
hospitalization, disability, severance, insurance or similar benefits (each, an
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"Employee Benefit Plan"), at any time contributed to, maintained or sponsored by
or on behalf of any Issuer Company, for the benefit of any present or former
employee, independent contractor, officer or director of any Issuer Company or
with respect to which any Issuer Company has any liability or potential
liability. None of the Issuer Companies maintains any (i) Employee Benefit Plan
that is a "pension plan" (as defined in Section 3(2) of ERISA but not including
a multiemployer plan within the meaning of Section 3(37) or 4001(a)(3) of ERISA)
(the "Pension Plans"), (ii) Employee Benefit Plan that is a "multiemployer plan"
(as defined in Sections 3(37) and 4001(a)(3) of ERISA (the "Multiemployer
Plans") or (iii) Employee Benefit Plan that is a "welfare plan" (as defined in
Section 3(1) of ERISA) (the "Welfare Plans").
Section 4.16. Labor Matters.
None of the Issuer Companies is involved in any material labor dispute
and has received no notice that any such dispute is threatened. No general labor
problem exists or, to the Knowledge of Issuer, is imminent with the employees of
any of the Current Hotels or any of the Issuer Companies.
Section 4.17. Employment Matters.
Set forth on Schedule 4.17 is a true and complete list setting forth a
description of the terms of employment and compensation arrangements of all
officers and employees of the Issuer. The Issuer has provided to the Acquiror
copies of all (i) employment agreements currently in effect; (ii) agreements
with consultants or advisors; (iii) non-competition agreements executed by
employees and officers with Issuer; (iv) severance agreements, programs and
policies of Issuer with or relating to its employees; and (v) plans, programs,
agreements and other arrangements of Issuer with or relating to its employees
which contain change in control provisions. Except as set forth on Schedule
4.17, Issuer is not a party to or bound by any severance, golden parachute or
other agreement with any officer, director, employee or consultant pursuant to
which such person would be entitled to receive any additional compensation or an
accelerated payment of compensation as a result of the consummation of the
transactions contemplated hereby.
Section 4.18. Maryland Law Requirements.
The Board of Directors of Issuer has taken all necessary actions so
that (i) the provisions of Sections 3-601 through 3-604 of the Maryland Code
regarding business combinations will not apply to current or future transactions
between Issuer and Acquiror; (ii) the provisions of Sections 3-701 through 3-709
of the Maryland Code restricting the voting rights of holders of certain control
shares will not apply in any way to shares held by Acquiror and (iii) the
issuance of the Series A Preferred Stock and the Underlying Common Stock does
not violate the provisions of Sections 3 and 4 of Article VI of the Charter.
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Section 4.19. American Stock Exchange.
Issuer has (a) made all recommended consultations with the American
Stock Exchange, (b) taken all appropriate actions to obtain consent or approvals
from the American Stock Exchange ("AMEX"), and (3) obtained all such consents or
approvals, with respect to the issuance and terms of the Series A Preferred
Stock.
Section 4.20. Charter and Bylaw Provisions.
The Company hereby advises Acquiror that the Issuer's Board of
Directors has duly exempted Acquiror's or any subsequent transferees' or
holders' acquisition, ownership, conversion and transfer of the Series A
Preferred Stock or the Underlying Common Stock from the application of any and
all provisions of the Charter and Bylaws which purport to restrict or limit
acquisition, ownership or transfer of Issuer's securities. No provisions of the
Charter or the Bylaws shall restrict, limit or in any way adversely affect
Acquiror's or any subsequent transferees' or holders' ability to convert the
Series A Preferred Stock into the Underlying Common Stock.
Section 4.21. Tax Matters.
Except as set forth on Schedule 4.21:
(a) The Issuer Companies are members of an affiliated group, within the
meaning of Section 1504(a) of the Code, of which Issuer is the common parent,
and such affiliated group files a consolidated federal income tax return;
(b) Each of the Issuer Companies has timely filed or caused to be filed
all material Tax Returns required to have been filed by or for it, and all
information set forth in such Tax Returns (including, without limitation, the
computation of all net operating loss, credit, and other carry-overs) is
accurate and complete in all material respects;
(c) Each of the Issuer Companies has paid or made adequate provision on
its books and records in accordance with GAAP for all Taxes covered by such Tax
Returns;
(d) None of the Issuer Companies has granted (or is subject to) any
waiver that is currently in effect of the period of limitations for the
assessment of any Tax; no unpaid Tax deficiency has been assessed or asserted
against or with respect to Issuer or any of its Subsidiaries by any Governmental
Authority; no power of attorney relating to Taxes that is currently in effect
has been granted by or with respect to any of the Issuer Companies; there are no
currently pending administrative or judicial proceedings, or any deficiency or
refund litigation, with respect to Taxes of any of the Issuer Companies;
(e) Each of the Issuer Companies is in compliance with, and its records
contain all information and documents (including, without limitation, properly
completed IRS Forms W-9) necessary to comply with, all applicable information
reporting and Tax withholding requirements;
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(f) There are no unpaid Taxes due and payable by any of the Issuer
Companies that are or could become a Lien on any asset, or otherwise adversely
affect the business, properties, or financial condition, of any of the Issuer
Companies;
(g) None of the Issuer Companies has made or entered into, or holds any
asset subject to, a consent filed pursuant to Section 341(f) of the Code or a
"safe harbor lease" subject to former Section 168(f)(8) of the Internal Revenue
Code of 1954, as amended before the Tax Reform Act of 1984; and
(h) None of the Issuer Companies is required to include in income any
amount for an adjustment pursuant to Section 481 of the Code.
(i) Each of the Issuer Companies that is a partnership or a limited
liability company will be treated as a partnership, and not as an association
taxable as a corporation or a publicly traded partnership, for federal income
tax purposes.
(j) Schedule 4.21 describes all material, currently effective Tax
elections, consents, and agreements made by or affecting any of the Issuer
Companies, lists all material types of Taxes paid and Tax returns filed by or on
behalf of any of the Issuer Companies, and expressly indicates each Tax with
respect to which any of the Issuer Companies or has been included in a
consolidated, unitary, or combined Tax Return.
Section 4.22. Fees and Expenses of Brokers and Others.
Except as disclosed on Schedule 4.22, none of the Issuer Companies is
directly or indirectly committed to any liability for any brokers' or finders'
fees or any similar fees in connection with the transactions contemplated by
this Agreement or has retained any broker or other intermediary to act directly
or indirectly on its behalf in connection with the transactions contemplated by
this Agreement. With respect to the relationships described on Schedule 4.22,
Issuer will pay all such obligations in full with the proceeds of the
transactions contemplated by this Agreement. Issuer has provided to Acquiror
true and complete copies of any Contracts to which any of the Issuer Companies
is a party relating to the relationships described on Schedule 4.22. Except as
set forth on Schedule 4.22 no other fees or expenses will be payable by Issuer
to any other advisors or intermediaries in connection with this Agreement and
the transactions contemplated hereby.
Section 4.23. Accuracy of Information.
Neither this Agreement nor any of the Exhibits or Schedules to this
Agreement delivered by Issuer, nor any certificate or other document provided by
the Issuer Companies or their employees or agents to Acquiror or any affiliate
of Acquiror in connection with the transactions contemplated hereby nor the
Memorandum contains an untrue statement of a material fact or omits to state a
material fact necessary to make the statements contained herein or therein not
misleading.
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Section 4.24. Intellectual Property.
None of the Issuer Companies owns or has any rights to any trademarks,
trade names, patent rights, copyrights, licenses or trade secrets. The franchise
agreements and licenses pursuant to which the Current Hotels are operated are in
full force and effect and, to the Knowledge of Issuer, no material event of
default has occurred thereunder. The Issuer Companies have not received any
notice of any pending or threatened termination of any of such franchise
agreements, or any infringement by the Issuer Companies of any trademarks, trade
names, patent rights, copyrights, licenses or trade secrets relating to such
franchise agreements.
Section 4.25. No Vote Required.
No vote of the holders of the outstanding shares of Issuer Stock is
necessary to approve this Agreement and the transactions contemplated hereby.
Section 4.26. Environmental.
(a) None of the Issuer Companies has received notice that any of the
Current Hotels is not in material compliance with any and all applicable
foreign, federal, state and local laws and regulations relating to the
protection of human health and safety, the environment or hazardous or toxic
substances or wastes, pollutants or contaminants ("Environmental Laws"). To the
Knowledge of Issuer, the Issuer Companies (i) have received all permits,
licenses or other approvals required of them under applicable Environmental Laws
to conduct their respective business and (ii) are in material compliance with
all terms and conditions of any such permit, license or approval.
(b) Except as disclosed in the environmental reports listed on Schedule
4.26 attached hereto but based solely on Issuer's examination of such
environmental reports, and to the Knowledge of Issuer, the Issuer Companies and
the entities from which the Issuer Companies acquired the Current Hotels
("Selling Entities"), have not at any time, and, to the Knowledge of the Issuer,
no other party has at any time, handled, buried, stored, retained, refined,
transported, processed, manufactured, generated, produced, spilled, allowed to
seep, leak, escape or leach, or be pumped, poured, emitted, emptied, discharged,
injected, dumped, transferred or otherwise disposed of or dealt with, Hazardous
Materials (as hereinafter defined) on, to or from the Current Hotels. The Issuer
Companies do not intend to use the Issuer Real Property for the purpose of
handling, burying, storing, retaining, refining, transporting, processing,
manufacturing, generating, producing, spilling, seeping, leaking, escaping,
leaching, pumping, pouring, emitting, emptying, discharging, injecting, dumping,
transferring or otherwise disposing of or dealing with Hazardous Materials,
except for such Hazardous Materials as may be customarily required in hotel
operations, stored and used in the quantities customary for such uses and in
compliance with applicable Environmental Laws.
(c) Except as disclosed in the environmental reports listed on Schedule
4.26, based solely on the Issuer's examination of such environmental reports,
and to the Knowledge of Issuer, there has been no seepage, leak, escape, leach,
discharge, injection, release, emission, spill, pumping, pouring, emptying or
dumping of Hazardous Materials into waters on or adjacent to the Issuer Real
Property or onto lands from which such hazardous or toxic waste or substances
might seep, flow or drain into such waters.
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(d) None of the Issuer Companies has received notice of any occurrence
or circumstance which, with notice or passage of time or both, would give rise
to, any claim under or pursuant to any Environmental Law pertaining to hazardous
or toxic waste or substances on or originating from the Current Hotels or
arising out of the conduct of any such party, including, without limitation,
pursuant to any Environmental Law.
(e) As used herein, "Hazardous Materials" shall include, without
limitation, any flammable explosives, radioactive materials, hazardous
materials, hazardous wastes, hazardous or toxic substances, or related
materials, asbestos or any material as defined by any Federal, state or local
environmental law, ordinance, rule, or regulation including, without limitation,
Environmental Laws, the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended (42 U.S.C. Section 9601, et seq.), the
Resource Conservation and Recovery Act, as amended (41 U.S.C. Section 9601, et
seq.) and the regulations adopted and publications promulgated pursuant to each
of the foregoing or by any Federal, state or local governmental authority having
or claiming jurisdiction over the Current Hotels.
Section 4.27. Investment Company.
The Issuer Companies are not now and after the sale of the Series A
Preferred Stock to be sold hereunder and application of the net proceeds from
such sale, none of them will be, an "investment company", or an entity
"controlled" by an "investment company" as such terms are defined in the
Investment Company Act of 1940, as amended.
ARTICLE V
COVENANTS
Section 5.1. Board of Directors.
The Board of Directors of Issuer shall, effective as of the Closing
Date, consist of ____________, and the current Board of Directors shall take all
necessary action to accomplish same. Notwithstanding the foregoing, the
appointment of the Acquiror's nominees shall be subject to the receipt by the
Issuer from such nominees of an executed copy of the Issuer's standard form
officers and directors questionnaire in form and substance satisfactory to the
Board of Directors and otherwise qualified to the satisfaction of the existing
members of the Board of Directors.
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Section 5.2. Public Announcements.
The parties hereto have agreed upon the text of a joint press release
in the form of Schedule 5.2 attached hereto, announcing, among other things, the
execution of this Agreement and the issuance of the Series A Preferred Stock.
Acquiror and Issuer will consult with each other before issuing or making, and
will provide each other the opportunity to review and comment upon, any
additional press release any additional public statement with respect to this
Agreement or the transactions contemplated herein and shall not issue any such
press release or make any such public statement prior to such consultation or as
to which the other party promptly and reasonably objects, except as may be
required by Law (as determined in good faith by the party proposing to issue the
press release or public statement), in which case the party proposing to issue
such press release or make such public announcement shall use its best efforts
to consult in good faith with the other party before issuing any such press
release or making any such public announcement.
Section 5.3. Notice of Certain Events.
Issuer shall give prompt written notice to Acquiror, and Acquiror shall
give prompt notice to Issuer of any failure of Issuer or Acquiror, as the case
may be, to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder; provided, however, that the delivery
of any notice pursuant to this Section 5.3 shall not serve to cure such breach
or non-compliance or limit or otherwise affect the remedies available hereunder
to the party receiving such notice.
Section 5.4. Subsequent Issuer SEC Reports.
Issuer shall deliver to Acquiror, promptly upon the filing thereof, a
copy of any reports, registration statements or other documents filed by Issuer
with the SEC subsequent to September 30, 1999, and not previously delivered to
Acquiror. In connection therewith, Acquiror agrees to furnish promptly upon
request by Issuer, all information relating to the Acquiror as may be necessary
for Issuer to file timely with the SEC a current report on Form 8-K relating to
the Closing of the transactions contemplated by this Agreement.
Section 5.5. Charter and Bylaw Provisions Regarding Ownership of
Stock.
Issuer covenants and agrees not to revoke, modify, waive or amend in
any respect the actions taken by the Issuer's board of directors referred to in
Section 4.20 of this Agreement. Issuer acknowledges that Acquiror and its
successors, assigns, transferees and assignees may rely, in all material
respects, on the representations, warranties and covenants in this Agreement in
acquiring the Series A Preferred Stock and in exercising the right to convert
the Series A Preferred Stock into the Underlying Common Stock. Issuer further
covenants and agrees that for so long as Acquiror or any of its affiliates owns
any of the Series A Preferred Stock or the Underlying Common Stock, Issuer will
not seek to impose, implement or in any manner institute any restrictions or
limitations on ownership, penalties, forfeiture provisions or any similar or
other provisions with respect to the ownership, disposition, transfer, exercise
or conversion of the Series A Preferred Stock or the Underlying Common Stock
without the prior written consent of Acquiror. The matters addressed in Section
4.20 above and this Section 5.5 shall not be affected in any way by any
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subsequent stock split, stock dividend, stock repurchases or redemptions,
recapitalization, rights offering or any other transaction involving the capital
stock of the Issuer. The Issuer agrees, upon the request of Acquiror at any
time, to provide any further or better evidence to Acquiror, its lenders,
underwriters, counsel, advisors, successors, assigns or transferees, of the
matters addressed in Section 4.20 above or this Section 5.5.
ARTICLE VI
MISCELLANEOUS
Section 6.1. Survival of Representations and Warranties.
The representations and warranties made herein shall survive for one
(1) year after the Closing Date.
Section 6.2. Brokerage Fees and Commissions.
Except as otherwise described in Section 4.22 of this Agreement, no
broker, finder or investment banker is entitled to any brokerage, finder's or
other similar fee or commission in connection with the transactions contemplated
by this Agreement based upon arrangements made by or on behalf of Issuer; and no
broker, finder or investment banker is entitled to any brokerage, finder's or
other fee or commission in connection with the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of Acquiror.
Section 6.3. Entire Agreement; Assignment.
This Agreement (a) constitutes the entire agreement between the Parties
with respect to the subject matter hereof and supersedes, all other prior
agreements and understandings, both written and oral, between the parties or any
of them with respect to the subject matter hereof and (b) shall not be assigned
by operation of law or otherwise, except that Acquiror may assign its rights and
obligations hereunder to an Affiliate, provided that any such assignment by
Acquiror shall not relieve it of liability for breach of any of its obligations
hereunder.
Section 6.4. Notices.
All notices, requests, claims, demands and other communications
hereunder shall be in writing and shall be given (and shall be deemed to have
been duly given upon receipt) by delivery in person, by cable, telecopy,
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telegram or telex, or by registered or certified mail (postage prepaid, return
receipt requested) to the respective parties as follows:
if to Issuer: Host Funding, Inc.
6116 North Central Expressway
Suite 1313
Dallas, Texas 75206
Attention: Michael S. McNulty, President
with a copy to: James M. Duncan, P.C.
6116 N. Central Expressway
Suite 1313
Dallas, Texas 75206
Attention: James M. Duncan, Esq.
if to Acquiror: MacKenzie Patterson, Inc.
1040 School Street
Moraga, California 84556
Attn: Glen Fuller
with a copy to: Paul Derenthal
Derenthal & Dannhauser
One Post Street, Suite 575
San Francisco, California 94104
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
Section 6.5. Governing Law.
This Agreement shall be governed by and construed in accordance with
the laws of the State of Texas regardless of the laws that might otherwise
govern under applicable principles of conflicts of laws thereof; provided, that
with respect to corporate law matters affecting the Issuer, this Agreement
shall, with respect to such matters, be governed by and construed in accordance
with the laws of the State of Maryland.
Section 6.6. Descriptive Headings.
The descriptive headings herein are inserted for convenience of
reference only and are not intended to be part of or to affect the meaning or
interpretation of this Agreement.
Section 6.7. Parties in Interest.
This Agreement shall be binding upon and inure solely to the benefit of
each of the Parties hereto, and, except as otherwise provided herein, nothing in
this Agreement is intended to or shall confer upon any other person any rights,
benefits or remedies of any nature whatsoever under or by reason of this
Agreement.
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Section 6.8. Counterparts.
This Agreement may be executed in two or more counterparts, each of
which shall be deemed to be an original, but all of which shall constitute one
and the same agreement.
Section 6.9. Specific Performance.
The Parties hereto agree that irreparable damage would occur in the
event any of the provisions of this Agreement were not performed in accordance
with the terms hereof and that the Parties shall be entitled to specific
performance of the terms hereof, in addition to any other remedy at law or
equity.
Section 6.10. Fees and Expenses.
Except as otherwise set forth herein, all costs and expenses incurred
in connection with this Agreement and the transactions contemplated hereby shall
be paid by each of the respective Parties incurring such costs or expenses;
provided, Acquiror has agreed to on behalf of Issuer, pay James M. Duncan, P.C.,
a fee of $20,000.00 for services rendered in connection with the transaction
contemplated hereby.
Section 6.11. Severability.
If any term or other provision of this Agreement is invalid, illegal or
incapable of being enforced by any rule of law or public policy, all other
conditions and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner adverse to either of the
Parties. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
Parties as closely as possible in an acceptable manner, to the end that the
transactions contemplated hereby are fulfilled to the extent possible.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, each of the Parties hereto has caused this
Agreement to be duly executed on its behalf by its officers thereunto duly
authorized, all as of the day and year first above written.
MACKENZIE PATTERSON, INC.
By: /s/ C.E. Patterson
Name: C.E. Patterson
Title: President
HOST FUNDING, INC.
By: /s/ Michael S. McNulty
Name: Michael S. McNulty
Title: President
31
ADVISORY AGREEMENT
This Advisory Agreement (this "Agreement") is entered into effective as
of the 1st day of January, 2000 by and among HOST FUNDING, INC., a Maryland
corporation (together with any and all of its wholly-owned subsidiaries, the
"Company"), and MACKENZIE PATTERSON, INC. a California corporation (the
"Advisor").
RECITALS
A. The Company desires to engage the Advisor upon the terms and
conditions of this Agreement.
B. Advisor desires to be engaged by the Company upon the terms and
conditions of this Agreement.
ARTICLE I
DEFINITIONS
The capitalized terms used in this Agreement shall have the meanings
set forth in this Article I. All terms used in this Agreement that are not
defined in this Article I shall have the meanings set forth elsewhere in this
Agreement.
"Acquired Assets" shall have the meaning set forth in Section 2.1 of
this Agreement.
"Acquisition Fee" shall have the meaning set forth in Section 9.2 of
this Agreement.
"Additional Company Hotel Properties" shall have the meaning set forth
in Section 2.3 of this Agreement.
"Advisor Property or Properties" means any hotel property or properties
owned by the Advisor or an Affiliate thereof as of the effective date hereof and
hereafter acquired by or contributed to the Company or an Affiliate thereof.
"Affiliate" means with respect to any Person, any director or officer
of such Person, any corporation, association, firm or other entity of which such
Person (or any officer or director of such Person) is a member, director or
officer, and any other Person, directly or indirectly controlling, controlled
by, or under common control with, such Person. For the purposes of this
definition, "control" (including, with correlative meanings, the term
"controlling," "controlled by" and "under common control with"), as used with
respect to any Person, shall mean the possession, directly or indirectly, of the
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power to direct or cause the direction of the management and policies of
such Person, whether through the ownership of voting securities, by contract or
otherwise.
"Base Fee" shall have the meaning set forth in Section 9.1 of this
Agreement.
"Board of Directors" means the board of directors of the Company or any
committee authorized by the Board of Directors to perform any of the Company's
responsibilities with respect to this Agreement.
"Bufete" means Bufete Grupo Internacional S.A. de C.V.
"Bufete Property or Properties" means any hotel property or properties
owned by Bufete or an Affiliate thereof as of the effective date hereof and
hereafter acquired by or contributed to the Company or an Affiliate thereof.
"Bylaws" means the Company's Bylaws, as the same may be amended from
time to time.
"Cash Available for Distribution to Shareholders" means all cash funds
of the Company on hand on a quarterly basis after (a) the payment of all Company
costs and expenses (including all payments, principal, interest or otherwise,
with respect to any indebtedness of the Company and including therein, any sums
due on Senior Securities) that are due and payable as of such time, and (b) the
provision for adequate working capital reserves as determined by the Board of
Directors, officers of the Company and the Advisor to be reasonably necessary
for the operation of the Company, including the provision for payments of all
Company costs and expenses (including all payments to thereafter become due and
owing on any indebtedness of the Company and including therein, any sums to
thereafter become due on Senior Securities).
"Cash Investments" shall have the meaning set forth in Section 2.5 of
this Agreement.
"Change of Control" means (a) the occurrence of any event or
circumstance which the Company would be required to report as a "change of
control" on Form 8-K, (b) any transaction which results in any Person
(including, without limitation, any Person constituting a "group," as such term
is defined in Section 13(d)(3) of the Securities Exchange Act of 1934 [as
amended and the rules and regulations thereunder]) becoming the direct or
indirect beneficial owner of securities representing more than fifty percent
(50%) of the combined voting power of the then outstanding securities of the
Company, (c) any consolidation or merger to which the Company is a party and
which requires the approval of any shareholder of the Company, or (d) the sale
or transfer of all or substantially all of the assets of the Company as an
entity, and which requires the approval of any shareholder of the Company.
"Charter" means the Company's charter filed with the Secretary of State
of the State of Maryland, as the same may be amended from time to time.
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"Code" means the Internal Revenue Code of 1986, as amended from time to
time, and to the extent applicable, the regulations promulgated thereunder.
"Company Investments" means the Acquired Assets, including, without
limitation, the Additional Company Hotel Properties, the Existing Company Hotel
Properties, the Other Investments, the Cash Investments, and any and all other
investments originated or consummated by the Advisor pursuant hereto for the
benefit of the Company.
"Disposition Fee" has the meaning set forth in Section 9.3 of this
Agreement.
"Existing Company Hotel Properties" shall have the meaning set forth in
Section 2.2 of this Agreement.
"Independent Directors" means the two (2) independent directors of the
Board of Directors.
"Lessees" shall have the meaning set forth in Section 2.2 of this
Agreement.
"Manager" shall have the meaning set forth in Section 2.2 of this
Agreement.
"MeriStar Transaction" means the transaction pursuant to which the
Company or one of its Affiliates may acquire from MeriStar Hospitality Operating
Partnership and/or Richard Williamsburg Associates all or a portion of certain
Additional Company Hotel Properties located in Hanover, Maryland, Ocean City,
Maryland and Richmond, Virginia, respectively.
"Other Investments" shall have the meaning set forth in Section 2.4 of
this Agreement.
"Person" means an individual, corporation, partnership, association,
limited liability company, trust or any unincorporated organization or other
entity.
"REIT" shall have the meaning set forth in Section 2.6 of this
Agreement.
"Senior Securities" means any bond, debenture, note or similar
obligation or instrument constituting a security and evidencing indebtedness,
and any stock of the Company of a class having priority over any other class
(including, without limitation, the Shares) as to the distribution of assets or
payment of dividends.
"Shareholders" means the holders of record of the Company's Shares.
"Shares" means shares of the Class "A" Common Stock of the Company,
$0.01 par value per Share.
"Term" shall have the meaning set forth in Section 11.1 of this
Agreement.
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"Termination Date" shall have the meaning set forth in Section 11.2 of
this Agreement.
"Winn Transaction" means the transaction pursuant to which the Company
or one of its Affiliates may acquire from Winn Limited Partnership all or a
portion of certain Additional Company Hotel Properties located in Abingdon,
Virginia, Fayetteville, North Carolina, Durham, North Carolina, and Augusta,
Georgia, respectively.
ARTICLE II
THE COMPANY
Section 2.1 The Company's Investment Objective
The investment objective of the Company is to acquire certain assets
selected by the Advisor in accordance with underwriting criteria established by
the Board of Directors (the "Acquired Assets") with the intention of creating a
portfolio of investments intended to preserve the capital base of the Company
and generate income for distribution to the Shareholders.
Section 2.2 Managing the Company Investments
The Company currently owns twelve (12) hotel properties (collectively,
the "Existing Company Hotel Properties"). The Company has also executed lease
agreements with non-affiliated companies (the "Lessees") who manage and operate
certain of the Company Properties. The Lessees pay the Company monthly and
quarterly rent and retain any profits generated by the Company Properties after
such rent is paid. The Company has also executed a management agreement relating
to one of the Company Properties in which a non-affiliated company (the
"Manager") operates such property, retains a management fee and an accounting
fee, then pays the Company all operating profits after such management and
accounting fees are paid.
The Company hereby appoints the Advisor as its exclusive agent to
supervise and oversee the Lessees, the Manager, and the Company Investments,
including, without limitation, the Existing Company Hotel Properties. The
Company shall appoint a designated representative with whom the Advisor shall be
entitled to rely upon as the official and duly authorized representative of the
Company for all purposes under this Agreement, and as the representative of the
Board of Directors of the Company. Except where an action under this Agreement
expressly requires the written approval of a majority of the Board of Directors
of the Company, the Advisor shall be entitled to rely on the advice and consent
of the designated representative as the sole and exclusive representative of the
Company for purposes of the administration of this Agreement, and where the
approval of a majority of the Board of Directors is required, the Advisor may
rely on the designated representative to provide or deny such approval in
writing, within a reasonable time after the written request of the Advisor.
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Section 2.3 Acquiring and Disposing of Properties
In addition to the Existing Company Hotel Properties, the Company
intends to make additional investments in hotel and motel properties (the
"Additional Company Hotel Properties") and hereby retains the Advisor as the
Company's exclusive agent in representing the Company in such acquisitions. The
Company may also desire to dispose of certain properties, and the Company hereby
retains the Advisor as the Company's exclusive agent in representing the Company
in any transaction involving the disposition of any of the Existing Company
Hotel Properties. The Company shall pay the Advisor a Fee upon consummation of
each such transaction in which the Company acquires Additional Company Hotel
Properties or disposes of any Existing Company Hotel Properties, as provided in
Section 9.2 of this Agreement.
Section 2.4 Other Investments
The Company, from time to time, may make investments in loans secured
by real estate or other acquisitions or investments in real estate not related
to hotel properties (collectively, the "Other Investments"). The Other
Investments shall be subject to an Acquisition Fee payable to Advisor upon
consummation of each such acquisition or loan transaction, as provided in
Section 9.2 of this Agreement.
Section 2.5 Cash Investments
The Company, from time to time, may deposit cash with financial or
other institutions. The Advisor, as agent for the Company, may direct such
institutions to invest such cash in money market accounts, short term interest
bearing accounts, repurchase agreements, or other interest bearing financial
instruments (collectively, the "Cash Investments") in accordance with criteria
established from time to time by the Board of Directors. Such Cash Investments
shall not be subject to any additional fees payable to Advisor.
Section 2.6 REIT Status
The Company is currently structured so that the Company may qualify in
the future as a Real Estate Investment Trust ("REIT") under the Code. The
Company has not elected to become a REIT, but may elect REIT status in the
future. The Company intends to undertake no activities, create no relationships
with any Persons, or make any investments that would preclude the Company from
qualifying as a REIT, unless otherwise directed by the Board of Directors.
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ARTICLE III
ENGAGEMENT OF THE ADVISOR
Upon the terms and conditions set forth in this Agreement, the Company
hereby engages the the Advisor to perform the services described in this
Agreement and the Advisor agrees to perform the same in accordance with the
terms and conditions, and for the compensation set forth herein.
ARTICLE IV
DUTIES OF THE ADVISOR
As the advisor to the Company, but subject to the terms of the Charter,
Bylaws, this Agreement and the supervision and/or prior approval (if required by
the Charter, Bylaws or this Agreement) of the Board of Directors, the Advisor,
on behalf of the Company, hereby agrees to perform the following services to and
on behalf of the Company :
(a) serve as the Company's advisor and consultant in
connection with the administrative, policy and investment decisions to
be made by the Board of Directors, furnish reports to the Board of
Directors, and provide research, economic and statistical data in
connection with the Existing Company Hotel Properties, the Additional
Company Hotel Properties, the Other Investments, the Cash Investments,
and any and all other Company Investments;
(b) administer the day-to-day operations of the Company and
perform or supervise the various administrative functions reasonably
necessary for the management of the Company;
(c) maintain the Company's books of account and other
records and files;
(d) retain, consultants, accountants, correspondents, lenders,
technical advisors, attorneys, brokers, underwriters, corporate
fiduciaries, depositories, agents for collection, insurers, insurance
agents, banks, builders, property owners, auditors, property managers,
mortgagors, and other mortgage and investment participants, and any and
all agents for any of the foregoing, including Affiliates of the
Advisor, and Persons acting in any other capacity deemed by the Board
of Directors necessary or desirable for the performance of any of the
foregoing services; provided that any fees, costs and expenses payable
to the third parties (including Affiliates of the Advisor) incurred by
the Advisor in connection with the foregoing shall be the sole
responsibility of the Company;
(e) act as attorney-in-fact or agent in disbursing and
collecting funds of the Company, including Cash Investments, in paying
the debts and fulfilling the obligations of the Company and, in
acquiring, disposing of and refinancing the Existing Company Hotel
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Properties, the Additional Company Hotel Properties, the Other
Investments, and/or any other Company Investments, and handling,
prosecuting and settling any claims of the Company, including the
foreclosure or other enforcement of any mortgage or other lien securing
investments, including, without limitation, those related to the Other
Investments, and exercise its own discretion in doing so; provided that
any fees and costs payable to third parties (including Affiliates of
the Advisor) incurred by the Advisor in connection with the foregoing
shall be the sole responsibility of the Company;
(f) advise the Company in its negotiations with banks and
other lenders for loans to be made to the Company, and with investment
banking firms and broker-dealers for the public or private sales of the
securities of the Company (with respect to the Shares, the Senior
Securities or otherwise) or for loans for the Company, but in no event
in such a way so that the Advisor shall be acting as broker-dealer or
underwriter, and provided, further, that any fees, costs and expenses
payable to third parties (including Affiliates of the Advisor) in
connection with the foregoing shall be the sole responsibility of the
Company, subject to the provisions of Articles VII and VIII below;
(g) advise the Company on investment and reinvestment of money
of the Company, including, without limitation, with regard to Cash
Investments;
(h) obtain appraisal reports (which may be prepared by the
Advisor or its Affiliates) on any potential Additional Company Hotel
Properties or properties related to any potential Other Investments,
provided, however, that any fees, costs or expenses payable to third
parties (including Affiliates of the Advisor) in connection with the
foregoing shall be the sole responsibility of the Company;
(i) at any time reasonably requested by the Board of Directors
(but not more than monthly) make reports of its performance of services
to the Board of Directors;
(j) communicate on behalf of the Company with the
Shareholders, the holders of Senior Securities and other Persons, as
required to satisfy the continuous reporting and other requirements of
any governmental bodies or agencies to the Shareholders, holders of
Senior Securities and other Persons, including the Securities and
Exchange Commission, the American Stock Exchange, and any other
securities exchange upon which the securities of the Company are listed
or admitted for trading, and to maintain effective relations with the
Shareholders and the holders of Senior Securities;
(k) counsel the Company in connection with policy decisions to
be made by the Board of Directors;
(l) provide the executive and administrative personnel, office
space and services required in rendering the foregoing services to the
Company;
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(m) consult with the Board of Directors and the officers of
the Company and furnish them with advice and recommendations with
respect to the acquisition, disposition or financing of the Existing
Company Hotel Properties, the Additional Company Hotel Properties, the
Other Investments, or commitments therefor, or any other Company
Investments of, or Company Investments to be considered by, the
Company, and furnish advice and recommendations with respect to other
aspects of the business and affairs of the Company;
(n) present to the Company investment opportunities that are
within the investment objectives described in Section 2.1 hereof and
otherwise in accordance with the policies of the Company;
(o) present to the Company disposition and sale opportunities
with regard to any of the Company Investments, including those
involving any of the Additional Company Hotel Properties, Existing
Company Hotel Properties, or Other Investments, as applicable;
(p) perform such other services as may be required from time
to time for management and other activities of the Company as the
Advisor shall deem appropriate under the particular circumstances or as
the Company may reasonably request; and
(q) unless otherwise notified by the Board of Directors, have
a representative of the Advisor in attendance at all regular and
special meetings of the Board of Directors (and the Board of Directors
shall provide reasonable advance notice to the Advisor of such
meetings).
Notwithstanding the foregoing, the Advisor shall not have any power or
authority to make any acquisition of Additional Company Hotel Properties, or any
disposition of any Existing Company Hotel Properties, or to enter into any
contract, lease, or agreement where the amount contracted to be paid or received
by the Company during any period of less than five years under the contract
would exceed $500,000, or the term would exceed five years, without the prior
written consent of a majority of the Board of Directors of the Company.
ARTICLE V
INFORMATION REGARDING THE COMPANY
In order for the Advisor to fulfill its duties the Board of Directors
shall authorize the Company to provide the Advisor with full information
concerning the Company, its capitalization and investment policies and the
intentions of the Board of Directors with respect to future investments. The
Company shall furnish the Advisor with a copy of all audited statements, a
signed copy of each report prepared by independent accountants, and such other
information with regard to its affairs as the Advisor may from time to time
reasonably request. The Advisor shall at all reasonable times have access to the
books and records of the Company. The Advisor shall keep confidential any and
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all information obtained in connection with the services rendered hereunder
and shall not disclose any such information to non-Affiliated third parties
except with the prior consent of the Company or as required by legal process
or to discharge its duties hereunder.
ARTICLE VI
INVESTMENTS
The Advisor may from time to time be granted, but is not hereby
granted, the power and authority to acquire and dispose of specific Company
Investments and to make and terminate commitments for specific Company
Investments, on behalf of, in the name of and at the sole risk of the Company,
without further or express authority from the Board of Directors; provided,
however that the Board of Directors shall have the power to revoke, suspend,
modify or limit such power and authority at any time or from time to time, but
not retroactively.
ARTICLE VII
COSTS AND EXPENSES TO BE PAID BY THE ADVISOR
Except as otherwise provided herein, the Advisor will pay for its own
account all expenses incurred by the Advisor in connection with the performance
of its obligations under this Agreement without regard to the compensation
received by the Advisor from the Company pursuant hereto. Without limiting the
generality of the foregoing, the Advisor shall bear the following expenses
incurred in connection with the performance of its duties under this Agreement:
(a) employment expenses of the personnel employed by the
Advisor (other than fees paid and reimbursement of expenses made to
independent managers, independent contractors, mortgage servicers,
consultants, managers, local property managers or agents employed by or
on behalf of the Company including such persons or entities which may
be Affiliates of the Advisor when acting in any such capacity, all of
which shall be the responsibility of the Company), including but not
limited to, salaries, wages, payroll taxes and the costs of employee
benefit plans, and, except to the extent such expenses are otherwise
reimbursable pursuant to this Agreement, temporary help expenses.
Notwithstanding the foregoing, any options to purchase the capital
stock of the Company granted by the Company to directors, officers,
managers, members and/or key employees of the Advisor shall not be an
expense to be borne by the Advisor pursuant to this Article VII;
(b) rent, telephone, utilities, office furniture, equipment,
computers and machinery and other office expenses of the Advisor,
except to the extent such expenses relate solely to an office
maintained by the Company separate from the office of the Advisor;
(c) audit fees and expenses of the Advisor;
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(d) insurance of the Advisor; and
(e) except as otherwise provided herein, miscellaneous
administrative and overhead expenses incurred in supervising,
monitoring and inspecting the Company Investments or relating to the
performance by the Advisor of its obligations under this Agreement.
(f) all ordinary and recurring expenses relating to the
continued organization of the Company;
(g) ordinary and recurring administrative expenses of the
Company, except as otherwise provided in Article VIII below;
(h) with respect to the Company's Shares and Senior
Securities outstanding and publicly-registered as of the
effective date of this Agreement, all ordinary and recurring
legal, auditing, accounting, listing, reporting, registration
and other costs and expenses incurred in connection with the
transfer, trading and continued stock exchange listing of such
securities, and with respect to all unregistered securities
outstanding as of the effective date of this agreement, all
ordinary and recurring legal, auditing, accounting, reporting
and other costs and expenses incurred in connection with the
transfer of such securities;
(i) all ordinary expenses connected with processing payments
of dividends authorized by the Board of Directors to be made or caused
to be made by the Company to holders of securities of the Company;
(j) all expenses connected with ordinary and recurring
communications to holders of securities of the Company, whether as to
Shares, Senior Securities or otherwise, and other bookkeeping and
clerical work necessary to maintain relations with holders of
securities, including the cost of printing and mailing certificates for
securities and proxy solicitation materials and reports to holders of
the Company securities, whether in connection with Shares, Senior
Securities or otherwise; and
(k) transfer agent and registrar fees and charges.
ARTICLE VIII
COSTS AND EXPENSES TO BE PAID BY THE COMPANY
In addition to reimbursements elsewhere provided in this Agreement
(including, but not limited to, Articles IV and XV), the Company shall pay
directly or reimburse the Advisor for the following expenses incurred by the
Advisor on behalf of the Company in connection with the services provided by
Advisor to the Company hereunder, in addition to the compensation provided for
in this Agreement:
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(a) financing costs and debt service with respect to
indebtedness of the Company, including discounts, points and similar
fees;
(b) taxes on income and taxes and assessments on real
property, whether with respect to the Existing Company Hotel
Properties, the Additional Company Hotel Properties, the Other
Investments, or otherwise, and all other taxes applicable to the
Company;
(c) taxes and assessments on property and taxes as an expense
of doing business directly related to the Advisor's activities on
behalf of the Company hereunder;
(d) with respect to any Shares or Senior Securities issued
after the effective date of this Agreement, all legal, auditing,
accounting, underwriting, brokerage, listing, reporting, registration
and other fees, and printing, engraving and other expenses and taxes
incurred in connection with the issuance, distribution, transfer,
trading, registration and stock exchange listing of the Company's
securities, including, without limitation, with regard to any Shares or
Senior Securities, whether such expenses are directly incurred by the
Company or are allocated to the Company by the Advisor either pursuant
to this Agreement or as otherwise agreed to by the Board of Directors
from time to time;
(e) expenses of revising, amending, converting, modifying,
reorganizing or terminating the Company or its Charter documents,
by-laws, contracts, leases, and loan agreements;
(f) fees and expenses paid to trust managers and officers who
are not employees or Affiliates of the Advisor, independent advisors,
independent contractors, auditors, mortgage servicers, consultants,
managers, local property managers or management firms, accountants,
attorneys and other agents employed by or on behalf of the Company and
out-of-pocket expenses of the officers, directors and employees of the
Company;
(g) expenses directly connected with the acquisition,
disposition and ownership of the Company Investments, including the
Existing Company Hotel Properties, the Additional Company Hotel
Properties, and the Other Investments (including the costs of
foreclosure, insurance premiums, legal services, brokerage and sales
commissions, franchise fees, maintenance, repair, improvement and local
management and operation of the Existing Company Hotel Properties, and
any Additional Company Hotel Properties or Other Investments), other
than expenses with respect thereto of employees of the Advisor to the
extent that such expenses are to be borne by the Advisor pursuant to
Article VII above, and any expenses allocated to the Company by the
Advisor as agreed to by the Board of Directors from time to time;
(h) all costs, expenses, fees and liabilities incurred in
connection with defending or prosecuting any litigation or arbitration
on behalf of the Company in any matter in which the Company may be a
party or participant, defending or presenting the Company's interests
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in any administrative or governmental proceeding or investigation to
which the Company may be a party, target or other interested
participant, or otherwise participating in any other legal action,
proceeding, dispute or controversy involving the Company, its assets,
business operations or interests; and
(i) all insurance costs incurred in connection with the
Company (including officer and director liability insurance, if any).
The Advisor shall prepare a statement documenting the expenses of the
Company during each month, and shall deliver such statement to the Board of
Directors within twenty (20) days after the end of such month. Any expense paid
or payable to an Affiliate of the Advisor for which the Advisor is seeking
payment or reimbursement hereunder shall be reasonable. Expenses incurred by the
Advisor on behalf of the Company, and reimbursable pursuant to this Article VIII
(or pursuant to any of the other provisions of this Agreement), shall be
reimbursed monthly to the Advisor within ten (10) days following receipt by the
Company of the statement therefor from the Advisor.
ARTICLE IX
COMPENSATION OF THE ADVISOR
As the Advisor's compensation for the services to be rendered by the
Advisor pursuant to this Agreement, the Company will, during the Term of this
Agreement, pay to the Advisor the fees set forth in this Article IX, and make
the reimbursements provided for in Article VIII and elsewhere in this Agreement.
Section 9.1 Base Fee
The Company shall pay during the Term to the Advisor a base annual fee
of $350,000 (the "Base Fee"), to be paid in equal monthly installments of
$29,167.00, in advance. Advisor shall not be required to issue invoices for such
installments, which shall be deposited automatically on the first day of each
month during the term of this Agreement to the bank account designated by
Advisor.
Section 9.2 Acquisition Fee
Subject to the provisions of Sections 9.5 and 9.6 below, upon the
consummation or making of each acquisition, loan or investment by the Company of
or in Company Investments involving improved or unimproved real property,
including, without limitation, the acquisition of Additional Company Hotel
Properties or the acquisition of, or the making of loans with respect to, the
Other Investments, the Company shall pay to the Advisor an acquisition fee (the
"Acquisition Fee") in an amount equal to the fee generally paid to independent
advisors and consultants performing such services in the geographical area of
the property acquired, but in no event less than one percent (1%) of the
purchase price of each acquisition or one percent (1%) of the amount of each
loan and/or investment, any such Acquisition Fee to be paid in immediately
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available funds upon the closing of each acquisition, loan and/or
investment transaction; provided, with respect to the MeriStar Transaction and
the Winn Transaction, such Acquisition Fee shall be in an amount equal to the
applicable purchase price multiplied by fifty (50) basis points (0.5%).
Section 9.3 Disposition Fee
Upon the consummation of the sale or disposition of any of the Company
Investments, including with regard to any of the Additional Company Hotel
Properties, Existing Company Hotel Properties or Other Investments, as
applicable, the Company shall pay to the Advisor a Disposition Fee in an amount
equal to the fee normally paid to consultants in the geographical area in which
the disposed property is located, but in no event less than one-half of one
percent (0.5%) of the sales price.
Section 9.4 Additional Fee based on Cash Available for Distribution to
Shareholders
In addition to the fees set forth above, the Advisor shall be entitled
to an annual fee equal to 20% of any Cash Available for Distribution to
Shareholders remaining after payment or reservation for payment of an amount
equal to $0.40 per annum for each of the Company's outstanding Shares. Such
amount shall be calculated as of the end of each calendar quarter during the
term of this Agreement, and any such fee that is due shall be paid not later
than 30 days after the end of the quarter for which a payment is due.
Section 9.5 Bufete Property or Properties.
With respect to the Bufete Property or Properties, as applicable, and
notwithstanding anything to the contrary contained in this Agreement, no
Acquisition Fee shall be payable by the Company to the Advisor with regard to
any transaction(s) involving the Bufete Property or Properties.
Section 9.6 Advisor Property or Properties.
With respect to the Advisor Property or Properties, as applicable, and
notwithstanding anything to the contrary contained in this Agreement, upon the
consummation of any transaction(s) involving the Advisor Property or Properties,
the Company shall pay to the Advisor an Acquisition Fee in an amount reasonably
determined by the Independent Directors.
ARTICLE X
ADVISORY RESPONSIBILITY
The Advisor assumes no responsibility under this Agreement other than
to exercise reasonable efforts to render the services called for hereunder in
good faith. The Advisor shall not be responsible for any action of the Board of
Directors in following or declining to follow any advice or recommendations of
the Advisor. The Advisor, its officers, directors, managers, members and
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employees, shall not be liable to the Company, the Board of Directors, its
officers, the Shareholders, the holders of Senior Securities, or any other
Persons, except by reason of acts proven by a court of competent jurisdiction to
constitute bad faith, intentional misconduct, gross negligence or reckless
disregard of duty. Subject to the provisions of the last two (2) sentences of
this Article X, the Advisor shall reimburse, indemnify and hold harmless the
Company, the Board of Directors, its officers, the Shareholders and the holders
of Senior Securities, for and from any and all expenses, losses, damages,
liabilities, demands, charges and claims of any nature (including reasonable
attorneys' fees) (collectively, "Losses"), and in respect of or arising from any
acts or omissions of the Advisor, its officers, directors, managers, members or
employees, or any of its Affiliates, which are determined by a court of
competent jurisdiction to constitute bad faith, intentional misconduct, gross
negligence or reckless disregard of duty.
The Company shall reimburse, defend, indemnify and hold harmless the
Advisor, its officers, directors, managers, members, employees, contractors and
agents, for and from any and all Losses in respect of or arising from any acts
or omissions of the Advisor, its officers, directors, managers, members and
employees, and its Affiliates, made in good faith in the performance of the
Advisor's duties and responsibilities under this Agreement and not constituting
bad faith, intentional misconduct, gross negligence or reckless disregard of its
duties. The Company confirms that in performing services hereunder the Advisor
(including its officers, directors, managers, members, employees and Affiliates)
will be an agent of the Company for the purpose of the indemnification
provisions of the Charter and Bylaws, as from time to time amended.
Notwithstanding anything contained in this Article X to the contrary, the
Advisor, nor its officers, directors, managers, members or Affiliates, shall be
liable to the Company, the Board of Directors, its officers, the Shareholders,
the holders of Senior Securities, or any other Persons, except for such
violations of law or for conduct which would preclude the Advisor, or its
officers, directors, managers, members or Affiliates, from being indemnified
under such provisions.
ARTICLE XI
TERM OF THE AGREEMENT; TERMINATION
Section 11.1 Term
Unless sooner terminated pursuant to Sections 11.2, 11.3, 11.4 or 11.5,
this Agreement shall commence on January 1, 2000, shall remain in force until
December 31, 2002, and shall thereafter automatically renew for additional three
(3) year periods (in any instance, the "Term").
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Section 11.2 Termination by Company for Cause
At the sole option of a majority vote of the Board of Directors, this
Agreement may be terminated by written notice of termination from the Company to
the Advisor if any of the following events occur:
(a) the Advisor shall violate or default in the performance of
any material provision of this Agreement and, after written notice of
such violation, shall not cure such default within thirty (30) days or,
if the default is of a nature that it cannot reasonably be cured within
thirty (30) days, the Advisor shall not diligently proceed to cure the
default as soon as practicable thereafter;
(b) the Advisor shall be adjudged bankrupt or insolvent by a
court of competent jurisdiction, or an order shall be made by a court
of competent jurisdiction for the appointment of a receiver,
liquidator, or trustee of the Advisor, or of all or substantially all
of its property by reason of the foregoing, or approving any petition
filed against the Advisor for reorganization, and such adjudication or
order shall remain in force or unstayed for a period of one hundred
twenty (120) days; or
(c) any criminal violation involving the Advisor, its
business, assets, operations or capital committed by any officer or
director of the Advisor, or any violation of civil law involving the
Advisor, its business, assets, operations or capital committed by any
officer or director of the Advisor, including without limitation any
violation of federal or state securities laws, or involving allegations
of fraud; or
(d) the Advisor shall institute proceedings for voluntary
bankruptcy or shall file a petition seeking reorganization under the
federal bankruptcy laws, or for relief under any law for relief of
debtors, or shall consent to the appointment of a receiver for itself
or for all or substantially all of its property, or shall make a
general assignment for the benefit of its creditors, or shall admit in
writing its inability to pay its debts, generally, as they become due.
Any notice of termination under this Section 11.2, or under Sections
11.3 or 11.4 below, shall be effective on the later of the date specified in
such notice, which may be the day on which such notice is given or any date
thereafter, or the date of expiration of any cure period specified herein,
except as modified pursuant to the provisions of Section 11.4 (the "Termination
Date"). The Advisor agrees that if any of the events specified in subsection
(b), (c) or (d) of this Section 11.2 shall occur, it shall give written notice
thereof to the Board of Directors within fifteen (15) days after the occurrence
of such event.
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Section 11.3 Termination by Advisor for Cause
At the sole option of the Advisor, this Agreement may be terminated by
written notice of termination from the Advisor to the Company if any of the
following events occur:
(a) the Company shall violate or default in the performance of
any material provision of this Agreement, and, after written notice of
such violation, shall not cure such default within thirty (30) days or,
if the default is of a nature that it cannot be cured within thirty
(30) days, the Company shall not diligently proceed to cure the default
as soon as practicable thereafter;
(b) the Company shall be adjudged bankrupt or insolvent by a
court of competent jurisdiction, or an order shall be made by a court
of competent jurisdiction for the appointment of a receiver,
liquidator, or trustee of the Company, or of all or substantially all
of its property (including, without limitation, the Company
Investments) by reason of the foregoing, or approving any petition
filed against the Company for reorganization, and such adjudication or
order shall remain in force or unstayed for a period of one hundred
twenty (120) days;
(c) any criminal violation involving the Company, its
business, assets, operations or capital committed by any officer or
director of the Company, or any violation of civil law involving the
Company, its business, assets, operations or capital committed by any
officer or director of the Company, including without limitation any
violation of federal or state securities laws, or involving allegations
of fraud; or
(d) the Company shall institute proceedings for voluntary
bankruptcy or shall file a petition seeking reorganization under the
federal bankruptcy laws, or for relief under any law for relief of
debtors, or shall consent to the appointment of a receiver for itself
or for all or substantially all of its property ( including, without
limitation, the Company Investments), or shall make a general
assignment for the benefit of its creditors, or shall admit in writing
its inability to pay its debts, generally, as they become due.
The Company agrees that if any of the events specified in subsection
(b), (c) or (d) of this Section 11.3 shall occur, it shall given written notice
thereof to the Advisor within fifteen (15) days after the occurrence of such
event.
Section 11.4 Termination by Either Party Without Cause
In addition to the rights of termination granted to the parties hereto
pursuant to Sections 11.2 and 11.3 above, this Agreement may be terminated
without cause by either the Company or the Advisor upon written notice to the
other party given not sooner than ninety (90) days prior to the expiration of
the then current three (3) year Term (but with a Termination Date as of the
expiration of the then current three (3) year Term.
Section 11.5 Termination by Company with respect to a Change of
Control
In addition to the rights of termination granted to the Company
pursuant to Sections 11.2 and 11.4 above, this Agreement may be terminated by
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the Company upon thirty (30) days' prior written notice from the Company to the
Advisor of the anticipated occurrence of a Change of Control (but with the
Termination Date being the date of the effectiveness of the Change of Control);
provided, such notice of termination shall automatically be deemed null and void
and if no further force or effect if the anticipated Change of Control does not
occur.
Section 11.6 Compensation, Reimbursements and Fees Upon
Termination
Upon termination of this Agreement by the Company or the Advisor
pursuant to Sections 11.2, 11.3 or 11.4, as applicable, or by the Company
pursuant to Section 11.5, all compensation due to the Advisor through the
Termination Date, and any reimbursements that the Advisor is entitled to receive
hereunder shall be promptly paid by the Company, without deduction or set off of
any kind, unless such deduction or set off is authorized in writing by the
Advisor; provided, in the event of the termination of this Agreement by the
Company pursuant to Sections 11.4 or 11.5, the Advisor shall, in addition to the
foregoing compensation and reimbursements, promptly be paid a termination fee in
an amount equal to two (2) times the Base Fee.
Section 11.6 Duties of Advisor Upon Termination
After the Termination Date of this Agreement, the Advisor shall not be
entitled to compensation for further services hereunder. The Advisor shall
forthwith, as soon as reasonably practicable, and on or about the Termination
Date:
(a) promptly pay over to the Company all monies collected and
held for the account of the Company pursuant hereto, after deducting
any accrued compensation and reimbursement for its expenses, if any, to
which, as applicable, it is then entitled in accordance with the
provisions hereof;
(b) promptly deliver to the Board of Directors a full
accounting, including a statement showing all payments collected by it
and a statement of all monies held by it, covering the period following
the date of the last accounting furnished to the Board of Directors;
(c) promptly deliver to the Board of Directors all property
and documents of the Company then in the custody of the Advisor; and
(d) cooperate with the Company to provide an orderly
transition of the services provided hereunder.
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ARTICLE XII
ASSIGNMENT, AMENDMENTS AND WAIVERS
Section 12.1 Assignment
The Company may terminate this Agreement at any time in the event of
its assignment by the Advisor except an assignment to a corporation,
association, trust or other successor organization which may take over the
property and carry on the affairs of the Advisor; provided, that following such
assignment the Persons who controlled the operations of the Advisor on the date
such Advisor became the advisor to the Company shall control the operation of
the successor organization, including the performance of its duties under this
Agreement, and they shall be bound by the same restrictions by which they were
bound prior to such assignment; however, if at any time subsequent to such an
assignment such Persons shall cease to control the operations of the successor
organization, the Company may thereupon terminate this Agreement, in accordance
with the terms and conditions of Article XI. Such an assignment or any other
assignment of this Agreement by the Advisor shall bind the assignee hereunder in
the same manner as the Advisor is bound hereunder. This Agreement shall not be
assignable by the Company without the prior written consent of the Advisor,
except in the case of any assignment by the Company to a Person which is the
successor to the Company, in which case such successor shall be bound hereby and
by the terms of said assignment in the same manner and to the same extent as the
Company is bound hereby. Any successor organization that is a permitted assignee
under this Section 12.1, whether a successor to the Advisor or to the Company,
shall be obligated to execute such agreements, certificates or other documents
as the nonassigning party shall reasonably request to evidence that such
successor organization is bound hereby.
Section 12.2 Amendments
This Agreement may not be amended, supplemented or discharged, and none
of its provisions may be modified, except expressly by an instrument in writing
signed by the party to be charged, provided that, in the case of the Company,
such amendment, supplement, discharge or modification must be approved by a
majority vote of the Board of Directors or by a vote of the Shareholders as
provided in the Bylaws and, in the case of the Advisor, such amendment,
supplement, discharge or modification must be approved by a majority vote of the
members of the Advisor.
Section 12.3 Waivers
Any term or provision of this Agreement may be waived, but only in
writing by the party which is entitled to the benefit of that provision. No
waiver by any party of any default with respect to any provision, condition or
requirement hereof shall be deemed to be a continuing waiver in the future
thereof or a waiver of any other provision, condition or requirement hereof; nor
shall any delay or omission of any party to exercise any right hereunder in any
manner impair the exercise of any such right accruing to it thereafter.
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ARTICLE XIII
OTHER ACTIVITIES OF ADVISOR
Nothing herein shall prevent the Advisor or its Affiliates from
engaging in other activities or businesses or from acting as advisor to any
other Person (including any other REIT) or from managing other investments,
including those of investors or investments advised, sponsored or organized by
the Advisor or one of its Affiliates, even though such Person has investment
policies and objectives similar to those of the Company; provided the Advisor
first presents to the Company any investment opportunity which comes to the
Advisor and otherwise meets the investment objectives of the Company discussed
in Article II hereof, and provided, further, that the Advisor shall notify the
Company in writing in the event that it or one of its Affiliates does so act (or
intends to so act) as an advisor to another REIT. The Advisor or its Affiliates
may also render such services to joint ventures, partnerships or limited
liability companies in which the Company is a co-venturer, partner or member and
to the other entities in such joint ventures, partnerships or limited liability
companies. In addition, nothing herein shall prevent any officers, directors,
managers, employees or members of the Advisor from engaging in any other
business or from rendering services of any kind to any other Person (including
competitive business activities), provided, any of such officers, directors,
managers, employees or members have first presented to the Company any
investment opportunity which comes to any of said parties and otherwise meets
the investment objectives of the Company described in Article II hereof.
ARTICLE XIV
BANK ACCOUNTS
The Advisor shall establish and maintain one or more bank accounts in
its own name or, at the direction of the Board of Directors, in the name of the
Company, and shall collect and deposit into such account or accounts and
disburse therefrom any monies on behalf of the Company, provided that no funds
in any such account shall be commingled with any funds of the Advisor or any
other Person. The Advisor shall from time to time render an appropriate
accounting of such collections and payments to the Company and or its designated
auditors.
ARTICLE XV
PROTECTION OF INVESTMENTS
The Advisor shall cooperate with the legal counsel to the Company, as
deemed appropriate in the Advisor's reasonable discretion, to assure that (a)
the title to any Additional Company Hotel Properties and Other Investments, as
applicable, are insured by appropriate policies of title insurance; (b) any
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Additional Company Hotel Properties or Other Investments, as applicable,
forming part of the Company Investments are duly insured, by appropriate
insurance policies, against loss or damage by fire, with extended coverage, and
against such other insurable hazards and risks as is customary and appropriate
in the circumstances; (c) the policies from time to time specified by the Board
of Directors with regard to the protection of the Company Investments are
carried out; and (d) proper Board of Directors approval is received for all of
the Company Investments. Any and all fees and costs incurred by the Advisor in
performing such functions, whether payable to its Affiliates or independent
persons, shall be borne solely by the Company.
ARTICLE XVI
RECORDS
The Advisor shall maintain appropriate books of account and records
relating to services performed pursuant hereto, which books of account and
records shall be available for inspection by representatives of the Company upon
reasonable notice during normal business hours.
ARTICLE XVII
LIMITATION ON ACTIVITIES
The Advisor shall refrain from taking any action that in its sole
judgment made in good faith, and on advice of counsel, where appropriate, and in
the exercise of reasonable care, (a) would affect adversely the status of the
Company to qualify as a REIT, (b) would subject the Company to regulation under
the Investment Company Act of 1940, (c) would violate any law, rule, regulation
or statement of policy of any governmental body or agency having jurisdiction
over the Company or its securities, including, without limitation the Shares and
any Senior Securities, or (d) otherwise is not permitted by the Charter or
Bylaws, except if such action shall be ordered by the Board of Directors, in
which case the Advisor shall notify promptly the Board of Directors of the
Advisor's judgment of the potential impact of such action and shall refrain from
taking such action until it receives further clarification or instructions from
the Board of Directors. The Advisor shall not take any action ordered by the
Board of Directors not to be taken. Notwithstanding the foregoing, neither the
Advisor, nor its directors, officers, agents or employees, or Affiliates shall
be liable to the Company, the Board of Directors, its officers, the
Shareholders, the holders of any Senior Securities, or any other Persons, for
any act or omission by the Advisor, its directors, officers, employees, agents
or shareholders, except as provided in Article X of this Agreement. Subject to
the foregoing, in performing its duties and obligations under this Agreement,
the Advisor, its officers, directors, agents, employees and Affiliates shall
abide by and comply with the written policies of the Company which the Company
shall have provided to the Advisor.
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ARTICLE XVIII
SELF-DEALING
Neither the Advisor nor any Affiliate of the Advisor shall sell any
property or assets to the Company or purchase any property or assets from
the Company, directly or indirectly, except as approved by a majority vote of
the Board of Directors and the Advisor, provided that any Person wholly-owned
(directly or indirectly) by the Company may sell property or assets to the
Company or purchase assets from the Company without such approval.
ARTICLE XIX
NO PARTNERSHIP OR JOINT VENTURE
The Company and the Advisor are not partners or joint venturers with
each other and neither the terms of this Agreement nor the fact that the Company
and the Advisor have joint interest in any one or more investments shall be
construed so as to make them such partners or joint venturers or impose any
liability as such on either of them.
ARTICLE XX
FIDELITY BOND
The Advisor shall not be required to obtain or maintain a fidelity bond
in connection with the performance of its services hereunder.
ARTICLE XXI
OTHER SERVICES
Should the Board of Directors request that the Advisor or any officer,
director, manager, member or employee thereof, render services for the Company
other than as specifically set forth in this Agreement, such services shall be
separately compensated and not be deemed to be services pursuant to this
Agreement.
ARTICLE XXII
SHAREHOLDER LIABILITY
No Shareholder or holder of any Senior Securities shall be personally
liable for any of the obligations of the Company, or the Advisor, respectively,
under this Agreement.
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ARTICLE XXIII
LOANS
If any loans are made to the Company by the Advisor or an Affiliate of
the Advisor, the maximum amount of interest that may be charged by the
Advisor or such Affiliate and the terms of any such loans shall be no less
favorable than the interest rate and terms available to the Company from
unaffiliated Persons for similar commercial loans. For purposes hereof, any
fees, compensation and/or reimbursements to which the Advisor is entitled from
the Company, if not paid within fifteen (15) days after such fees, compensation
and/or reimbursements are due, shall bear interest at prevailing rates from the
date on which such fees, compensation and/or reimbursements are due the Advisor
until paid in full.
ARTICLE XIV
NOTICES
Any notice required or permitted to be delivered to any party under the
provisions of this Agreement shall be deemed validly given, whether actually
received or not, when (a) deposited in a United States Postal Service
depository, postage prepaid, registered or certified, return receipt requested,
and addressed to the party at the address specified on the signature pages
hereof, or such other address as shall be specified by written notice delivered
one party to the other, or (b) when hand delivered to such address with delivery
receipt required, or (c) when given to recognized overnight courier service to
such address with delivery receipt required. The time for responding to any
notice hereunder shall begin to run when actual delivery of the notice is made
at the recipients' address.
ARTICLE XV
MISCELLANEOUS PROVISIONS
Section 25.1 Entire Agreement. This Agreement contains the entire
agreement between the parties relating to the subject matter hereof and all
prior agreements relative hereto which are not contained herein are terminated.
Section 25.2 Law Governing. This Agreement shall be governed by and
construed in accordance with the laws of the State of California.
Section 25.3 Successors and Assigns. Subject to the provisions of
Section 12.1 hereof, this Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective legal representatives,
successors and assigns.
Section 25.4 Severability. The provisions of this Agreement are
independent of and severable from each other, and no provision shall be affected
or rendered invalid or unenforceable by virtue of the act that for any reason
any other or others of them may be invalid or unenforceable in whole or in part.
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Section 25.5 Headings. The Article and Section headings appearing in
this Agreement are for convenience of reference only and are not intended, to
any extent or for any purpose, to limit or define the text of any Article or
Section.
Section 25.6 Construction. Whenever required by the context, as used in
this Agreement, the singular number shall include the plural, and vice versa,
and the gender of all words used shall include the masculine, feminine and the
neuter.
Section 25.7 Further Assurances. In connection with this Agreement and
the transactions contemplated hereby, each party shall execute and deliver any
additional documents and instruments and perform any additional acts that may be
necessary or appropriate to effectuate and perform the provisions of this
Agreement and the transactions contemplated hereby.
Section 25.8 Venue and Forum. The parties hereto agree that any
dispute, claim or controversy which may arise between the parties concerning
this agreement shall be resolved by submission to trial without a jury, and all
parties hereby expressly waive any right to a jury trial in connection with any
such dispute. The prevailing party shall be entitled to reimbursement of its
reasonable costs and expenses including attorneys' fees. The proper venue for
such trial of any such matter shall be Oakland, California.
Section 25.9 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be an original, but all of which taken
together shall constitute a single document.
IN WITNESS WHEREOF, the parties have executed this Agreement effective
as of the date first above written.
HOST FUNDING, INC., a Maryland corporation
By: /s/ Michael S. McNulty
Name:
Title: President
Address: 6116 N. Central Expressway
Suite 1313
Dallas, Texas 75206
MACKENZIE PATTERSON INC.
A California corporation
By: /s/ C. E. Patterson
Name:
Title: President
Address: 1640 School Street
Moraga, CA 94556
23
HOST FUNDING, INC.
ARTICLES SUPPLEMENTARY
SERIES A CONVERTIBLE PREFERRED STOCK
(Liquidation Preference $4.00 per share)
Host Funding, Inc., a Maryland corporation (the "Corporation"), hereby
certifies to the State Department of Assessments and Taxation of Maryland (the
"SDAT") that:
FIRST:
1. Under a power contained in Article VI of the Corporation's Charter
(inclusive of these Articles Supplementary, the "Charter"), the Board of
Directors of the Corporation, by resolutions duly adopted by the Unanimous
Written Consent of Directors in Lieu of Special Meeting dated September 30,
1999, classified and designated 2,000,000 shares of Preferred Stock (as defined
in the Charter) as Series A Convertible Preferred Stock, $0.01 par value per
share (the "Original Series A Preferred"), with the preferences, conversion and
other rights, voting powers, restrictions, limitations as to dividends and other
distributions, qualifications and terms, set forth in the Articles Supplementary
filed with the SDAT on October 26, 1999.
2. As of the date of these Articles Supplementary, no shares of the
Original Series A Preferred have been issued by the Corporation.
3. Under a power contained in Article VI of the Corporation's Charter,
the Board of Directors of the Corporation, by resolution duly adopted by the
Unanimous Written Consent of Directors in Lieu of Special Meeting dated as of
December 15, 1999, reclassified and redesignated the Original Series A Preferred
as Series A Convertible Preferred Stock, $0.01 par value per share, with the
following preferences, conversion and other rights, voting powers, restrictions,
limitations as to dividends and other distributions, qualifications and terms,
which, upon any restatement of the Charter, shall be deemed to be a part of
Article VI of the Charter.
SERIES A CONVERTIBLE PREFERRED STOCK
A. CERTAIN DEFINITIONS
Unless the context otherwise requires, the terms defined in this
Paragraph A shall have, for all purposes of these Articles Supplementary, the
meanings herein specified (with terms defined in the singular having comparable
meanings when used in the plural).
"ASE" shall mean the American Stock Exchange.
<PAGE>
"Additional Shares of Common Stock" shall mean all shares of
Common Stock issued by the Corporation after the Issue Date excluding those
shares issued or issuable (i) upon conversion of the Series A Preferred Stock,
(ii) to officers, directors or employees of the Corporation pursuant to stock
option plans or agreements on terms approved by the Board of Directors, (iii) as
a dividend or distribution on Series A Preferred Stock or (iv) for which an
adjustment of the Conversion Ratio is made on the Series A Preferred Stock
pursuant to these Articles Supplementary.
"Board of Directors" shall mean the Board of Directors of the
Corporation or any committee authorized by such Board of Directors to perform
any of its responsibilities with respect to the Series A Preferred Stock.
"Business Day" shall mean any day, other than a Saturday or
Sunday, that is neither a legal holiday nor a day on which banking institutions
in San Francisco, California are authorized or required by law, regulation or
executive order to close.
"Bylaws" means the bylaws of the Corporation.
"Charter" shall have the meaning set forth in the recital to
these Articles Supplementary.
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
"Common Stock" shall mean the shares of Class A Common Stock,
$0.01 par value per share, of the Corporation.
"Constituent Person" shall have the meaning set forth in
subsection (e) of subparagraph 6 of paragraph B.
"Conversion Ratio" shall have the meaning set forth in
subsection (a) of subparagraph 6 of paragraph B.
"Convertible Securities" means any evidences of indebtedness,
shares of stock (other than Common Stock and Series A Preferred Stock) or other
securities convertible into or exchangeable for Common Stock.
"Corporation" shall have the meaning set forth in the recital
to these Articles Supplementary.
"Current Market Price" of a share of publicly traded Common
Stock or any other class of shares of stock or other security of the Corporation
or any other issuer for any day shall mean the last reported sales price,
regular way, on such day or, if no sale takes place on such day, the average of
the reported closing bid and asked prices on such day, regular way, in either
2
<PAGE>
case as reported on the ASE or, if such security is not listed or admitted
for trading on the ASE, on the principal national securities exchange on which
such security is listed or admitted for trading or, if not listed or admitted
for trading on any national securities exchange, on the NASDAQ Stock Market or,
if such security is not quoted on the NASDAQ Stock Market, the average of the
closing bid and asked prices on such day in the over-the-counter market as
reported by NASDAQ or, if bid and asked prices for such security on such day
shall not have been reported through NASDAQ, the average of the bid and asked
prices on such day as furnished by any New York Stock Exchange member firm
regularly making a market in such security and selected for such purpose by the
Board of Directors or, if such security is not so listed or quoted, as
determined in good faith by the Board of Directors.
"Distribution Payment Date" shall have the meaning set forth
in subparagraph 3 of paragraph B.
"Distribution Period" shall have the meaning set forth in
subparagraph 3 of paragraph B.
"Event" shall have the meaning set forth in subsection (d) of
subparagraph 7 of paragraph B.
"Fair Market Value" shall mean the fair market value as
determined in good faith by the Board of Directors.
"Issue Date" shall mean the first date on which Series A
Preferred Stock is issued.
"Junior Shares" shall have the meaning set forth in
subparagraph 2 of paragraph B.
"Liquidation Preference" shall have the meaning set forth in
subsection (a) of subparagraph 4 of paragraph B.
"Non-Electing Share" shall have the meaning set forth in
subsection (e) of subparagraph 6 of paragraph B.
"Options" means rights, options, or warrants to subscribe for,
purchase or otherwise acquire either Common Stock or Convertible Securities.
"Parity Shares" shall have the meaning set forth in
subparagraph (2) of paragraph B.
"Person" shall mean an individual, corporation, partnership,
estate, trust (including a trust qualified under Section 401(a) or 501(c)(17) of
the Code), a portion of a trust permanently set aside for or to be used
exclusively for the purposes described in Section 642(c) of the Code,
association, private foundation within the meaning of Section 509(a) of the
Code, joint stock company or other entity, and also includes a group as that
term is used for purposes of Section 13(d)(3) of the Securities Exchange Act of
1934, as amended.
3
<PAGE>
"Record Date" shall have the meaning set forth in subparagraph
3 of paragraph B.
"Redemption Date" shall have the meaning set forth in
subsection (b) of subsection 8 of paragraph B.
"Redemption Notice" shall have the meaning set forth in
subsection (b) of subsection 8 of paragraph B.
"Redemption Price" shall have the meaning set forth in
subsection (a) of subsection 8 of paragraph B
"Securities" shall have the meaning set forth in subsection
(d)(iii) of subparagraph 6 of paragraph B.
"Series A Preferred Stock" shall mean the Corporation's Series
A Convertible Preferred Stock, $.01 par value per share, liquidation preference
$4.00 per share, as classified by these Articles Supplementary.
"Set apart for payment" shall be deemed to include, without
any action other than the following, the recording by the Corporation in its
accounting ledgers of any accounting or bookkeeping entry which indicates,
pursuant to the authorization of distributions by the Board of Directors, the
allocation of funds to be paid on any class of shares of stock; provided,
however, that if any funds for any class of Junior Shares or any Parity Shares
are placed in a separate account of the Corporation or delivered to a
disbursing, paying or other similar agent, then "set apart for payment" with
respect to the Series A Preferred Stock shall mean placing such funds in a
separate account or delivering such funds to a disbursing, paying or other
similar agent.
"Trading Day" shall mean any day on which the securities in
question are traded on the ASE, or if such securities are not listed or admitted
for trading on the ASE, on the principal national securities exchange on which
such securities are listed or admitted, or if not listed or admitted for trading
on any national securities exchange, on the NASDAQ Stock Market, or if such
securities are not quoted on such NASDAQ Stock Market, in the applicable
securities market in which the securities are traded.
"Transaction" shall have the meaning set forth in subsection
(e) of subparagraph 6 of paragraph B hereof.
"Transfer Agent" shall mean American Stock Transfer or such
other agent or agents of the Corporation as may be designated by the Board of
Directors or their designee as the transfer agent for the Series A Preferred
Stock.
4
<PAGE>
B. SERIES A PREFERRED STOCK
1. Number.
The number of shares of Series A Preferred Stock shall be 2,000,000.
2. Relative Seniority.
In respect of rights to receive distributions and to participate in
distributions or payments in the event of any liquidation, dissolution or
winding up of the Corporation, the Series A Preferred Stock shall rank pari
passu with any other shares of preferred stock of the Corporation (the "Parity
Shares"), and will rank senior to the Common Stock and any other class or series
of shares of stock of the Corporation ranking, as to distributions and upon
liquidation, junior to the Parity Shares (collectively, the "Junior Shares").
3. Distributions.
The holders of the then outstanding shares of Class A Preferred Stock
shall be entitled to receive, when, and as authorized by the Board of Directors
out of any funds legally available therefor, cumulative cash distributions in an
amount per share equal to $0.09 per quarter (equal to a rate of 9% of the
Liquidation Preference per annum). Quarterly dividends on the Class A Preferred
Stock are payable as authorized by the Board of Directors on the fourth Tuesday
of January, April, July and October of each year, commencing on or about April
25, 2000 (each such day being hereinafter called a "Distribution Payment Date"
and each period ending on a Distribution Payment Date being hereinafter called a
"Distribution Period"), with respect to each Distribution Period, to
stockholders of record as they appear on the share transfer records of the
Corporation at the close of business on the dividend record dates authorized by
the Board of Directors, or if none are authorized, on the last Friday of
December, March, June and September (each, a "Record Date"). The amount of any
distribution payable for the initial Distribution Period and for any other
Distribution Period greater or less than a full calendar quarter shall be
prorated and computed on the basis of a three hundred and sixty (360) day year
of twelve (12), thirty (30) day months. Distributions on each share of Class A
Preferred Stock shall accrue and be cumulative from and including the Issue Date
thereof, whether or not (i) distributions on such shares are earned or declared
or (ii) on any Distribution Payment Date there shall be funds legally available
for the payment of distributions. Distributions paid on the shares of Class A
Preferred Stock in an amount less than the total amount of such distributions at
the time accrued and payable on such shares shall be allocated pro rata on a per
share basis among all such shares at the time outstanding. Distributions on
account of any arrearage for any past Distribution Periods may be declared and
paid at any time, without reference to any regular distribution, as may be fixed
by the Board of Directors.
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<PAGE>
The amount of any distributions accrued on any share of Class A
Preferred Stock at any Distribution Payment Date shall be the amount of any
unpaid distributions accumulated thereon through and during such Distribution
Period, to and including such Distribution Payment Date, whether or not earned
or declared, and the amount of distributions accrued on any share of Class A
Preferred Stock at any date other than a Distribution Payment Date shall be
equal to the sum of the amount of any unpaid distributions accumulated thereon,
to and including the last preceding Distribution Payment Date, whether or not
earned or declared, together with interest thereon from the Distribution Payment
Date. Accrued but unpaid distributions will bear interest at the rate of nine
percent (9%).
If any shares of Class A Preferred Stock are outstanding, no full
distributions shall be declared or paid or set apart for payment on any other
class of Parity Shares or Junior Shares for any period unless full cumulative
distributions have been declared and paid or declared and a sum sufficient for
the payment thereof has been set apart for payment on the Class A Preferred
Stock for all past distribution periods and the then current distribution
period. If distributions are not paid in full, or not declared in full and a sum
sufficient for such full payment is not set apart for payment thereof, upon the
Class A Preferred Stock and any class of Parity Shares, no distributions may be
paid on Junior Shares and all distributions declared upon the Class A Preferred
Stock and upon any other class of Parity Shares shall be paid or declared pro
rata so that in all cases the amount of distributions paid or declared per share
on the Class A Preferred Stock and Parity Shares shall bear to each other the
same ratio that accumulated distributions per share, including distributions
accrued or in arrears, if any, on the Class A Preferred Stock and Parity Shares
bear to each other. Except as provided in the preceding sentence, unless full
cumulative distributions on the Class A Preferred Stock have been paid or
declared and a sum sufficient for such full payment set apart for payment for
all past distribution periods and the then current distribution period, no
distributions shall be declared or paid or set apart for payment or other
distribution upon the Common Stock, or, except as provided above, on any other
Junior Shares or Parity Shares, nor shall any Common Stock or any other Junior
Shares or Parity Shares be redeemed, purchased or otherwise acquired for any
consideration (or any payment made to or available for a sinking fund for the
redemption of any such shares) by the Corporation or any subsidiary of the
Corporation.
Except as provided in these Articles Supplementary, the Class A
Preferred Stock shall not be entitled to participate in the earnings or assets
of the Company.
4. Liquidation Preference.
(a) Upon the voluntary or involuntary dissolution, liquidation or
winding up of the Corporation, the holders of the shares of
Series A Preferred Stock then outstanding shall be entitled to
receive and to be paid out of the assets of the Corporation
legally available for distribution to its stockholders, before
any payment or distribution shall be made on any Junior
Shares, the amount of $4.00 per share of Series A Preferred
Stock (the "Liquidation Preference"), plus accrued and unpaid
distributions thereon.
6
<PAGE>
(b) After the payment to the holders of the Series A Preferred
Stock of the full preferential amounts provided for in this
subparagraph 4, the holders of the Series A Preferred Stock
shall have no right or claim to any of the remaining assets of
the Corporation.
(c) If, upon any voluntary or involuntary dissolution,
liquidation, or winding up of the Corporation, the preference
amounts payable with respect to the Series A Preferred Stock
and any Parity Shares are not paid in full, no payment will be
made to any holder of Junior Shares and the holders of the
Series A Preferred Stock and of such Parity Shares will share
ratably in any such distribution of assets of the Corporation
in proportion to the full respective preferential amounts
provided for in this paragraph B to which they are entitled.
(d) In determining whether a distribution (other than upon
voluntary or involuntary liquidation) by dividend, redemption
or other acquisition of shares of stock of the Corporation or
otherwise is permitted under the Maryland General Corporation
Law, no effect shall be given to amounts that would be needed,
if the Corporation were to be dissolved at the time of the
distribution, to satisfy the preferential rights upon
dissolution of holders of the Series A Preferred Stock.
5. Reclassification of Converted Shares; Shares to be Retired.
(a) All shares of Series A Preferred Stock which shall have been
converted pursuant to subparagraph 6 herein shall
automatically be converted into shares of Common Stock. The
number of shares of Common Stock issuable upon conversion
shall be determined in accordance with subparagraph 6 hereof.
(b) All shares of Series A Preferred Stock which shall have been
issued and reacquired in any manner by the Corporation shall
be restored to the status of authorized but unissued Preferred
Stock, without designation as to class.
6. Conversion.
Holders of shares of Series A Preferred Stock shall have the right to
convert all or a portion of such shares into shares of Common Stock, as follows:
(a) Subject to and upon compliance with the provisions of this
subparagraph 6, a holder of shares of Series A Preferred Stock
shall have the right, exercisable at any time after December
23, 2002, to convert such shares into fully paid and
nonassessable shares of Common Stock on the date provided for
in the last paragraph of subsection (b) of this subparagraph 6
by surrendering such shares to be converted, such surrender to
be made in the manner provided in subsection (b) of this
subparagraph 6. Each share of Series A Preferred Stock may be
converted into one (1) fully paid and non- assessable share of
Common Stock (the "Conversion Ratio"), as such Conversion
Ratio may be adjusted as provided herein.
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<PAGE>
(b) In order to exercise the conversion right, the holder of each
share of Series A Preferred Stock to be converted shall
surrender the certificate representing such share, duly
endorsed or assigned to the Corporation or in blank, at the
office of the Transfer
Agent, accompanied by written notice to the Corporation that
the holder thereof elects to convert such share of Series A
Preferred Stock. Unless the shares issuable on conversion are
to be issued in the same name as the name in which such share
of Series A Preferred Stock is registered, each share
surrendered for conversion shall be accompanied by instruments
of transfer, in form reasonably satisfactory to the
Corporation, duly executed by the holder or such holder's duly
authorized agent. Holders of shares of Series A Preferred
Stock at the close of business on a Record Date shall be
entitled to receive the distribution payable on such shares on
the corresponding Distribution Payment Date notwithstanding
the conversion thereof following such Record Date and prior to
such Distribution Payment Date. A holder of shares of Series A
Preferred Stock on a Record Date who (or whose transferee)
tenders any such shares for conversion into shares of Common
Stock on or prior to such Distribution Payment Date will
receive the distribution payable by the Corporation on such
shares of Series A Preferred Stock on such Distribution
Payment Date.
As promptly as practicable after the surrender of certificates
for shares of Series A Preferred Stock as aforesaid, the
Corporation shall issue and shall deliver (or shall cause the
issuance and delivery) at such office to such holder, or on
written order of the holder, a certificate or certificates for
the number of shares of Common Stock issuable upon the
conversion of such shares in accordance with the provisions of
this subparagraph 6, and any fractional interest in respect of
a share of Common Stock arising upon such conversion shall be
settled as provided in subsection (c) of this subparagraph 6.
Each conversion shall be deemed to have been effected
immediately prior to the close of business on the date on
which the certificates for shares of Series A Preferred Stock
shall have been surrendered and such notice received by the
Corporation as aforesaid, and the person or persons in whose
name or names any certificate or certificates for shares of
Common Stock shall be issuable upon such conversion shall be
deemed to have become the holder or holders of record of the
shares represented thereby at such time on such date.
(c) No fractional shares or scrip representing fractions of shares
of Common Stock shall be issued upon conversion of shares of
the Series A Preferred Stock. Instead of any fractional
interest in a share of Common Stock that would otherwise be
deliverable upon the conversion of a share of Series A
Preferred Stock, the Corporation shall pay to the holder of
such share an amount in cash equal to the amount determined by
multiplying the fraction of such share of Common Stock by the
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Current Market Price of shares of Common Stock on the Trading
Day immediately preceding the date of conversion. If more
than one share of Series A Preferred Stock shall be
surrendered for conversion at one time by the same holder, the
number of shares of Common Stock issuable upon conversion
thereof shall be computed on the basis of the aggregate number
of shares of Series A Preferred Stock so surrendered.
(d) The Conversion Ratio shall be adjusted from time to time as
follows:
(i) If the Corporation shall after the Issue Date (A)
subdivide its outstanding shares of Common Stock into
a greater number of shares or (B) combine its
outstanding shares of Common Stock into a smaller
number of shares, the number of shares of Common
Stock issuable upon conversion of the Series A
Preferred Stock shall be proportionately increased in
the case of a subdivision or decreased in the case of
a combination, effective immediately after the
opening of business on the next Business Day
following the effective date of a subdivision or
reclassification, as the case may be. Such
adjustment(s) shall be made successively whenever any
of the events listed above shall occur.
(ii) If the Corporation shall after the Issue Date (A)
make a distribution to holders of any class of shares
of stock of the Corporation in Common Stock or (B)
issue any shares of stock by reclassification of its
Common Stock, the number of shares of Common Stock
issuable upon conversion of the Series A Preferred
Stock shall be proportionately increased, effective
immediately after the opening of business on the
Business Day next following the record date for such
issuance. Such adjustment(s) shall be made
successively whenever any of the events listed above
shall occur.
(iii) If the Corporation shall issue or sell after the
Issue Date, Additional Shares of Common Stock at a
price less than $3.00 per share, the number of shares
of Common Stock issuable upon conversion of the
Series A Preferred Stock shall be proportionately
increased, effective immediately after the opening of
business on the Business Day next following the date
of such issuance or sale. Such adjustment(s) shall be
made successively upon each additional issuance or
sale of Additional Shares of Common Stock.
(iv) If the Corporation shall issue after the Issue Date,
Options or Convertible Securities entitling the
holder thereof to acquire shares of Common Stock,
whether by exercise, conversion, or exchange, at a
price less than $3.00 per share, the shares of Common
Stock issuable with respect to any such Option
or Convertible Securities, shall be deemed to be
Additional Shares of Common Stock at the time of
issuance of such Common Stock, and the Conversion
Ratio shall be adjusted as provided in subsection
(d)(iii) of this subparagraph 6.
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(e) If the Corporation shall be a party to any transaction
(including without limitation a merger, consolidation,
statutory share exchange, self tender offer for all or
substantially all of the shares of Common Stock, sale of all
or substantially all of the Corporation's assets or
recapitalization of the Common Stock and excluding any
transaction as to which subsection (d)(i) of this subparagraph
6 applies (each of the foregoing being referred to herein as a
"Transaction"), in each case as a result of which shares of
Common Stock shall be converted into the right to receive
shares, stock, securities or other property (including
cash or any combination thereof), each share of
Series A Preferred Stock which is not converted into
the right to receive shares, stock, securities or other
property in connection with such Transaction shall thereafter
be convertible into the kind and amount of shares, stock,
securities and other property (including cash or any
combination thereof) receivable upon the consummation of such
Transaction by a holder of that number of shares of Common
Stock into which one share of Series A Preferred Stock was
convertible immediately prior to such Transaction, assuming
such holder of shares of Common Stock (i) is not a Person with
which the Corporation consolidated or into which the
Corporation merged or which merged into the Corporation or to
which such sale or transfer was made, as the case may be (a
"Constituent Person"), or an affiliate of a Constituent Person
and (ii) failed to exercise such holder's rights of election,
if any, as to the kind or amount of shares, stock, securities
and other property (including cash) receivable upon
consummation of such Transaction (each a "Non-Electing Share")
(provided that if the kind or amount of shares, stock,
securities and other property (including cash) receivable upon
consummation of such Transaction by each Non-Electing Share is
not the same for each Non-Electing Share, then the kind and
amount of shares, stock, securities and other property
(including cash) receivable upon consummation of such
Transaction for each Non-Electing Share shall be deemed to be
the kind and amount so receivable per share by a plurality of
the Non-Electing Shares). The Corporation shall not be a party
to any Transaction unless the terms of such Transaction are
consistent with the provisions of this subsection (e), and it
shall not consent or agree to the occurrence of any
Transaction until the Corporation has entered into an
agreement with the successor or purchasing entity, as the case
may be, for the benefit of the holders of the Series A
Preferred Stock, that will require such successor or
purchasing entity, as the case may be, to make provision in
its certificate or articles of incorporation or other
constituent documents to the end that the provisions of this
subsection (e) shall thereafter correspondingly be made
applicable as nearly as may reasonably be, in relation to any
shares of stock or other securities or property thereafter
deliverable upon conversion of the Series A Preferred Stock.
The provisions of this subsection (e) shall similarly apply to
successive Transactions.
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(f) If:
(i) the Corporation shall declare a distribution on the
Common Stock other than in cash out of current
earnings applicable to Common Stock, determined on
the basis of the most recent annual or quarterly
consolidated balance sheet of the Corporation and its
consolidated subsidiaries available at the time of
the declaration of the distribution; or
(ii) the Corporation shall authorize the issuance of
Additional Shares of Common Stock; or
(iii) the Corporation shall authorize the issuance of
Options or Convertible Securities; or
(iv) there shall be any reclassifications of the Common
Stock or any consolidation or merger to which the
Corporation is a party and for which approval of any
stockholders of the Corporation is required, or a
statutory share exchange involving the conversion or
exchange of shares of Common Stock into securities or
other property, or a self tender offer by the
Corporation for all or substantially all of its
outstanding shares of Common Stock, or the sale or
transfer of all or substantially all of the assets of
the Corporation as an entity and for which approval
of any stockholder of the Corporation is required; or
(v) there shall occur the voluntary or involuntary
liquidation, dissolution or winding up of the
Corporation;
then the Corporation shall cause to be filed with the Transfer
Agent and shall cause to be mailed to the holders of the
Series A Preferred Stock at their addresses as shown on the
share records of the Corporation, as promptly as possible, but
at least fifteen (15) days prior to the applicable date
hereinafter specified, a notice stating (A) the record date as
of which the holders of Common Stock of record to be entitled
to such distribution or grant of Options or Convertible
Securities are to be determined; or (B) the date on which such
reclassification, consolidation, merger, statutory share
exchange, sale, transfer, liquidation, dissolution or winding
up is expected to become effective, and the date as of which
it is expected that holders of Common Stock of record shall be
entitled to exchange their shares of Common Stock for
securities or other property, if any, deliverable upon such
reclassification, consolidation, merger, statutory share
exchange, sale, transfer, liquidation, dissolution or winding
up. Failure to give or receive such notice or any defect
therein shall not affect the legality or validity of the
proceedings described in this subparagraph 6.
(g) Whenever the Conversion Ratio is adjusted as herein provided,
the Corporation shall promptly prepare a notice of such
adjustment of the Conversion Ratio setting forth the adjusted
Conversion Ratio and the effective date on which such
adjustment becomes effective and shall mail such notice of
such adjustment of the Conversion Ratio to the holder of each
share of Series A Preferred Stock at such holder's last
address as shown on the share records of the Corporation.
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(h) In any case in which subsection (d) of this subparagraph 6
provides that an adjustment shall become effective on the date
next following the record date for an event, the Corporation
may defer until the occurrence of such event (A) issuing to
the holder of any shares of Series A Preferred Stock converted
after such record date and before the occurrence of such event
the additional shares of Common Stock issuable upon such
conversion by reason of the adjustment required by such event
over and above the shares of Common Stock issuable upon such
conversion before giving effect to such adjustment and (B)
fractionalizing any share of Series A Preferred Stock and/or
paying to such holder any amount of cash in lieu of any
fraction pursuant to subsection (c) of this subparagraph 6.
(i) If any action or transaction would require adjustment of the
Conversion Ratio pursuant to more than one subsection of this
subparagraph 6, only one adjustment shall be made, and such
adjustment shall be the amount of adjustment that has the
highest absolute value to the holders of the Series A
Preferred Stock.
(j) If the Corporation shall take any action affecting the Common
Stock, other than an action described in this subparagraph
(6), that in the opinion of the Board of Directors would
materially and adversely affect the conversion rights of the
holders of the Series A Preferred Stock, the Conversion Ratio
for the Series A Preferred Stock may be adjusted, to the
extent permitted by law, in such manner, if any, and at such
time, as the Board of Directors, in its sole discretion, may
determine to be equitable in the circumstances.
(k) The Corporation will at all times reserve and keep available,
free from preemptive rights, out of the aggregate of its
authorized but unissued Common Stock, for the purpose of
effecting conversion of the Series A Preferred Stock, the full
number of shares of Common Stock deliverable upon the
conversion of all outstanding shares of Series A Preferred
Stock not theretofore converted. For purposes of this
subsection (k), the number of shares of Common Stock that
shall be deliverable upon the conversion of all outstanding
shares of Series A Preferred Stock shall be computed as if at
the time of computation all such outstanding shares were held
by a single holder.
Any Common Stock issued upon conversion of the Series A
Preferred Stock shall be validly issued, fully paid and
nonassessable. The Corporation shall use its best efforts to
list the Common Stock required to be delivered upon conversion
of the Series A Preferred Stock, prior to such delivery, upon
each national securities exchange, if any, upon which the
outstanding Common Stock is listed at the time of such
delivery.
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Prior to the delivery of any securities that the Corporation
shall be obligated to deliver upon conversion of shares of
Series A Preferred Stock, the Corporation shall endeavor to
comply with all federal and state laws and regulations
thereunder requiring the registration of such securities with,
or any approval of or consent to the delivery thereof by, any
governmental authority.
(l) The Corporation will pay any and all documentary stamp or
similar issue or transfer taxes payable in respect of the
issue or delivery of Common Stock or other securities or
property on conversion of shares of Series A Preferred Stock
pursuant hereto; provided, however, that the Corporation shall
not be required to pay any tax that may be payable in respect
of any transfer involved in the issue or delivery of Common
Stock or other securities or property in a name other than
that of the holder of the Series A Preferred Stock to be
converted, and no such issue or delivery shall be made unless
and until the person requesting such issue or delivery has
paid to the Corporation the amount of any such tax or has
established, to the reasonable satisfaction of the
Corporation, that such tax has been paid.
(m) In addition to the foregoing adjustments, the Corporation
shall be entitled to make such reductions in the Conversion
Ratio, in addition to those required herein, as it in its
discretion considers to be advisable in order that any share
distributions, subdivisions of shares, reclassification or
combination of shares, distribution of rights, options,
warrants to purchase shares or securities, or a distribution
of other assets (other than cash distributions) will not be
taxable to the holders of the Series A Preferred Stock, or, if
that is not possible, to diminish any income taxes that are
otherwise payable because of such event.
7. Voting Rights and Directors.
(a) Except as set forth in this subparagraph 7 below, holders of
Series A Preferred Stock shall be entitled to that number of
votes equal to the number of shares of Common Stock into which
a share of Series A Preferred Stock may then be converted, and
holders of Series A Preferred Stock shall vote together as a
single voting group with the holders of Common Stock on all
matters submitted or required to be submitted to the
Corporation's common stockholders for approval. Holders of
Series A Preferred Stock shall be entitled to receive notice
of any meeting of stockholders of the Corporation.
(b) The holders of the Series A Preferred Stock, voting together
as a separate class, shall have the right to elect, at each
annual stockholders meeting of the Corporation, two (2)
members of the Board of Directors. In the case of any vacancy
in the office of a director occurring among the directors
elected by the holders of the Series A Preferred Stock, the
remaining director so elected by the holders of the Series A
Preferred Stock shall be entitled to appoint a successor to
hold office for the unexpired term of the director whose place
shall be vacant. Any director who shall have been elected by
the holders of the Series A Preferred Stock or any director so
appointed as provided in the preceding sentence, may be
removed during his or her term of office, whether with or
without cause, only by the affirmative vote of the holders of
a majority of the Series A Preferred Stock.
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(c) The affirmative vote of the holders of a majority of the
outstanding shares of Series A Preferred Stock voting as a
single voting group, or the written consent of holders of a
majority of the shares of Series A Preferred Stock, shall be
necessary for authorizing, effecting or validating any of the
following:
(i) the merger or consolidation of the Corporation or any
subsidiary of the Corporation with any other entity
or the sale, conveyance or other disposition of all
or any substantial part of the Corporation's assets
to any other person or entity;
(ii) the issuance of any shares of Series A Preferred
Stock after the Issue Date of the initial shares of
Series A Preferred Stock;
(iii) any increase or decrease (other than by redemption or
conversion) in the total number of authorized shares
of Series A Preferred Stock or any other class or
series of the Corporation's preferred stock;
(iv) the issuance of any shares of Common Stock at a price
less than $3.00 per share;
(v) the issuance of any Options or Convertible Securities
which may be convertible into shares of Common Stock
at a price less than $3.00 per share;
(vi) all matters required by law to be approved by the
holders of the Series A Preferred Stock as a separate
voting group;
(vii) any amendment, alteration, or deletion of any of the
rights, preferences or privileges of the Series A
Preferred Stock;
(viii) the voluntary dissolution, liquidation or winding up
of the Corporation or the sale, lease, transfer or
conveyance of all or any substantial part of the
assets of the Corporation;
(ix) any increase or decrease in the number of directors
comprising the Board of Directors as of the date of
acceptance of these Articles Supplementary by the
SDAT; and
14
<PAGE>
(x) any act or proposed transaction by the Corporation
that would commit financial resources of the
Corporation to the extent that the holders of the
Series A Preferred Stock reasonably anticipate would
dilute the value of the Series A Preferred Stock or
materially and adversely affect the ability of the
Corporation to redeem the Series A Preferred Stock
pursuant to sub- paragraph 8 below.
(d) As long as any shares of Class A Preferred Stock remain
outstanding, the Corporation will not, without the affirmative
vote or consent of the holders of at least two-thirds of the
holders of the Class A Preferred Stock outstanding at the
time, given in person or by proxy, either in writing or at a
meeting (with the holders of the Class A Preferred Stock
voting separately as a class), (i) authorize or create, or
increase the authorized or issued amount of, any class of
shares of stock ranking prior to the Class A Preferred Stock
with respect to the payment of distributions or the
distribution of assets upon liquidation, dissolution or
winding up or reclassify any authorized shares of stock of the
Corporation into such shares, or create, authorize or issue
any Options or Convertible Securities evidencing the right to
purchase any such shares; or (ii) amend, alter or repeal the
provisions of the Charter or these Articles Supplementary for
the Class A Preferred Stock whether by merger, consolidation
or otherwise (an "Event"), so as to materially and adversely
affect any right, preference, privilege or voting power of
the Class A Preferred Stock.
8. Redemption of Series A Preferred Stock.
(a) At any time after December 23, 2002, any holder of Series A
Preferred Stock shall have the right, exercisable at the
holder's option, to require the Corporation to redeem from
time to time all or any part of the holder's Series A
Preferred Stock, upon notice duly given to the Corporation as
hereinafter specified, at the redemption price of $4.00 per
share plus all accrued and unpaid cash dividends thereon (the
"Redemption Price").
(b) Any holder of Series A Preferred Stock demanding redemption
pursuant to this subparagraph 8 shall send written notice of
such demand (the "Redemption Notice") to the Secretary of the
Corporation addressed to the Corporation's principal office
setting forth the number of shares of Series A Preferred
Stock to be redeemed. Delivery of and payment for the shares
of Series A Preferred Stock to be redeemed shall be made at
the principal office of the Corporation on the Redemption
Date. The "Redemption Date" as used in this subparagraph 8
shall mean a date designated by the Corporation for
redemption of the Series A Preferred Stock which date
shall be within ten (10) days from the date of
receipt of the Redemption Notice. On the Redemption Date the
holder of the Series A Preferred Stock demanding redemption
shall deliver to the Corporation the certificate or
certificates representing the shares of Series A Preferred
Stock to be redeemed, duly endorsed, against payment for such
shares by the Corporation by certified check or other
immediately available funds in the amount of the aggregate
Redemption Price.
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C. EXCLUSION OF OTHER RIGHTS
The Series A Preferred Stock shall not have any voting powers,
preferences or relative, participating, optional or other special rights, other
than those specifically set forth in these Articles Supplementary (as such
Articles Supplementary may be amended from time to time) and in the Charter. The
Series A Preferred Stock shall have no preemptive or subscription rights.
D. HEADINGS OF SUBDIVISIONS
The headings of the various subdivisions hereof are for convenience of
reference only and shall not affect the interpretation of any of the provisions
hereof.
E. SEVERABILITY OF PROVISIONS
If any voting powers, preferences or relative, participating, optional
and other special rights of the Series A Preferred Stock or qualifications,
limitations or restrictions thereof set forth in these Articles Supplementary
(as such Articles Supplementary may be amended from time to time) is invalid,
unlawful or incapable of being enforced by reason of any rule of law or public
policy, all other voting powers, preferences and relative, participating,
optional and other special rights of Series A Preferred Stock and
qualifications, limitations and restrictions thereof set forth in these Articles
Supplementary (as so amended) which can be given effect without the invalid,
unlawful or unenforceable voting powers, preferences or relative, participating,
optional or other special rights of Series A Preferred Stock or qualifications,
limitations and restrictions thereof shall be given such effect. None of the
voting powers, preferences or relative participating, optional or other special
rights of the Series A Preferred Stock or qualifications, limitations or
restrictions thereof herein set forth shall be deemed dependent upon any other
such voting powers, preferences or relative, participating, optional or other
special right of Series A Preferred Stock or qualifications, limitations or
restrictions thereof unless so expressed herein.
SECOND: These Articles Supplementary were duly adopted by the Board of
Directors of the Corporation in the manner and by the vote required by law.
THIRD: The undersigned President acknowledges these Articles
Supplementary to be the corporate act of the Corporation and, as to all matters
or facts required to be verified under oath, the undersigned President
acknowledges that, to the best of his knowledge, information and belief, these
matters and facts are true in all material respects and that this statement is
made under the penalties for perjury.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the Corporation has caused these Articles
Supplementary to be executed under seal in the name and on its behalf by its
President and attested to by its Secretary on this 17th day of December, 1999.
HOST FUNDING, INC., a Maryland corporation
By: /s/ Michael S. McNulty
Name: Michael S. McNulty
Title: President
ATTEST:
/s/ John G. Rebensdorf
John G. Rebensdorf, Assistant Secretary
17
THE WARRANTS ISSUABLE PURSUANT TO THIS WARRANT AGREEMENT AND THE SHARES ISSUABLE
UPON EXERCISE OF SUCH WARRANTS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR THE SECURITIES ACT OF ANY STATE (COLLECTIVELY, THE
"ACTS"). NEITHER THE WARRANTS NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD,
TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACTS OR AN OPINION OF COUNSEL SATISFACTORY TO
COUNSEL OF HOST FUNDING, INC. TO THE EFFECT THAT SUCH REGISTRATIONS ARE NOT
REQUIRED.
WARRANT AGREEMENT
This Warrant Agreement (this "Agreement") is entered into as of the
21st day of December, 1999 by and between Host Funding, Inc., a Maryland
corporation (the "Company"), and MacKenzie Patterson, Inc., a California
corporation ("MPI").
R E C I T A L S
A. The Company and MPI have entered into that certain Stock Purchase
Agreement (the "Purchase Agreement") dated effective as of December 21, 1999.
B. Pursuant to the terms and conditions of the Purchase Agreement, the
Company has agreed to issue and deliver Warrants (as hereinafter defined) to
MPI, representing the right to purchase in the aggregate up to 500,000 shares of
the Class A Common Stock, $0.01 par value, of the Company (the "Common Stock"),
on the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements of the parties contained in this Agreement, the receipt and
sufficiency of which are hereby agreed and acknowledged, the parties hereto
agree as follows:
ARTICLE I
Terms Defined
As used in this Agreement, the following terms have the respective
meanings set forth in this Article I. All terms used in this Agreement that are
not defined in this Article I shall have the meaning set forth elsewhere in this
Agreement.
<PAGE>
"Affiliate" means, with respect to any Person, any other Person who
controls, is controlled by or is under common control with such Person.
"Board of Directors" means the Board of Directors of the Company.
"Code" means the Internal Revenue Code of 1986, as amended, and the
rules and regulations promulgated thereunder.
"Convertible Securities" shall have the meaning set forth in Section
4.2 (b) of this Agreement.
"Current Market Price" shall have the meaning set forth in Section 4.1
(b) of this Agreement.
"Date of Issuance" means December 21, 1999.
"Election to Exercise" shall have the meaning set forth in Section 2.4
of this Agreement.
"Exercise Date" shall have the meaning set forth in Section 2.4 of this
Agreement.
"Exercise Price" means $3.00 per share of Common Stock payable by a
Warrantholder upon exercise of a Warrant, as such Exercise Price may be adjusted
from time to time in accordance with the provisions of Article IV of this
Agreement.
"Expiration Date" means December 21, 2005.
"Outstanding" when used with reference to Common Stock at any date,
means all issued shares of Common Stock at such date, except shares then held in
the treasury of the Company.
"Person" means any individual, corporation, partnership, limited
liability company, trust, incorporated or unincorporated association, joint
venture, joint stock company, organization, government (or an agency or
political subdivision thereof) or other entity of any kind, and shall include
any successor (by merger or otherwise) of such entity.
"Securities Acts" means the Securities Act of 1933 and any applicable
state securities or blue sky laws, as they may be amended from time to time, and
the rules and regulations promulgated thereunder, all as the same shall be in
effect at the time.
"Warrant" or "Warrants" means the warrant or warrants and any successor
or replacement warrant or warrants issued and delivered in accordance with the
terms and conditions of this Agreement and initially representing the right to
purchase in the aggregate up to 500,000 shares of Common Stock.
2
<PAGE>
"Warrant Certificate" or "Warrant Certificates" shall have the meaning
set forth in Section 2.2 of this Agreement.
"Warrantholder" means any Person in whose name a Warrant Certificate
shall be registered in the Warrant Register.
"Warrant Certificate" or "Warrant Certificates" shall have the meanings
set forth in Section 2.1 of this Agreement.
"Warrant Office" shall have the meaning set forth in Section 3.1 of
this Agreement.
"Warrant Register" shall have the meaning set forth in Section 3.1 of
this Agreement.
"Warrant Shares" means the shares of Common Stock purchased or
purchasable by a Warrantholder or the permitted assignees of a Warrantholder
upon exercise of a Warrant pursuant to Article II of this Agreement.
ARTICLE II
Issuance and Exercise of Warrants
2.1 Grant of Warrants. Subject to the terms and conditions of this
Agreement, the Company hereby grants to MPI, warrants to purchase 500,000 shares
of Common Stock of the Company.
2.2 Form of Warrant Certificates. The Warrants shall be evidenced by
certificates in the form of Exhibit A attached to this Agreement (the "Warrant
Certificates" or individually, a "Warrant Certificate"). Each Warrant
Certificate shall evidence the right, subject to the provisions of this
Agreement and the Warrant Certificate, to purchase the number of shares of
Common Stock set forth therein, adjusted as provided in Article IV of this
Agreement, upon payment of the Exercise Price.
2.3 Term. Subject to the limitations and requirements contained in this
Agreement, a Warrant may be exercised as a whole at any time or in part from
time to time commencing on the Date of Issuance and terminating at 5:00 p. m.,
PDT San Francisco, California time, on the Expiration Date. Any Warrant not
exercised prior to the Expiration Date shall become void, and all rights
thereunder and all rights in respect thereof under this Agreement shall cease.
2.4 Method of Exercise. To exercise a Warrant, the Warrantholder shall
deliver to the Company, at the Warrant Office (a) the Election to Exercise form
(the "Election to Exercise") attached to the Warrant Certificate duly completed
and signed, (b) payment in full of the Exercise Price (in the manner described
in Section 2.6 below) for all Warrant Shares purchased pursuant to the Election
to Exercise, and (c) the Warrant Certificate. A Warrant shall be deemed to be
exercised on the date of receipt by the Company of the Election to Exercise,
accompanied by payment for the Warrant Shares and surrender of the Warrant
Certificate, and such date is referred to herein as the "Exercise Date." Upon
such exercise, the Company shall issue and deliver (or shall cause the transfer
3
<PAGE>
agent of the Common Stock to issue and deliver) to the Warrantholder a
certificate for the full number of the Warrant Shares purchased by the
Warrantholder, against the receipt by the Company of the Warrant Certificate and
the payment of the total Exercise Price for all such Warrant Shares. Upon any
partial exercise of a Warrant, the Company shall forthwith issue and deliver to
or upon the order of the exercising Warrantholder a new Warrant Certificate, in
the name of the exercising Warrantholder, or as such Warrantholder may request,
calling in the aggregate on the face or faces thereof for the number of Warrant
Shares equal to the number of such shares called for on the face of the original
Warrant Certificate minus the number of such shares designated by the
Warrantholder in the Election to Exercise. The Company will cancel all Warrants
and related Warrant Certificates surrendered for exercise pursuant to this
Section 2.4. The Person in whose name the certificate(s) for Common Stock is to
be issued shall be deemed to have become a holder of record of such Common Stock
on the Exercise Date. Each certificate representing the Warrant Shares shall
upon issuance bear the Company's standard restrictive legend.
2.5 Fractional Shares. No fractional shares of Common Stock are to be
issued upon the exercise of a Warrant, but in lieu of such fractional share, the
Company shall make a cash payment therefor equal to the Exercise Price then in
effect multiplied by such fractional share.
2.6 Payment of Exercise Price. Upon exercise of a Warrant, the Exercise
Price shall be payable by the Warrantholder to the Company by (i) a certified or
cashier's check, or (ii) a wire transfer of immediately available funds, or
(iii) the surrender to the Company by the Warrantholder of unexercised Warrants,
or (iv) any combination of the foregoing, in an amount equal to the Exercise
Price then in effect multiplied by the number of Warrant Shares with respect to
which a Warrant is then being exercised. For purposes of paying the aggregate
Exercise Price, each unexercised Warrant surrendered to the Company shall be
valued at the difference between the Current Market Price on the date of
surrender thereof and the Exercise Price then in effect. Upon such surrender of
an unexercised Warrant, the Company shall immediately cancel such Warrant on the
Warrant Register and all rights with respect to such surrendered Warrant shall
immediately cease. If a Warrantholder surrenders unexercised Warrants valued in
an amount in excess of the aggregate Exercise Price, only the amount of the
unexercised Warrants so surrendered which is not in excess of the aggregate
Exercise Price shall be applied to the payment thereof and the balance of such
Warrant shall be returned to the Warrantholder.
2.7 Costs. The Company shall pay all documentary, stamp, transfer or
other transactional taxes attributable to the issuance or delivery of the
Warrants or the Warrant Shares; provided, however, that the Company shall not be
required to pay any taxes which may be payable in respect of any transfer
involved in the issuance or delivery of any certificate for Warrant Shares in a
name other than that of the Warrantholder.
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ARTICLE III
Warrant Office; Transfer
3.1 Warrant Office. The Company shall maintain an office for certain
purposes specified in this Agreement (the "Warrant Office"), which office shall
initially be 1040 School Street, Moraga, California 84556 Attention: Glen
Fuller, and may subsequently be such other office of the Company or of any
transfer agent of the Common Stock of the Company as to which written notice has
previously been given to the Warrantholders. The Company shall maintain, at the
Warrant Office, appropriate books for the registration and transfer of the
Warrant Certificates (the "Warrant Register").
3.2 Ownership of Warrants. The Company may deem and treat the Person in
whose name a Warrant Certificate is registered in the Warrant Register as the
record holder and owner of a Warrant for all purposes, until due presentation of
the Warrant Certificate for registration of transfer as provided in this Article
III.
3.3 Restrictions on Exercise and Transfer of Warrants. Subject to the
restrictions on transfer of Warrants in this Section 3.3, the Company, from time
to time, shall register the transfer of a Warrant in the Warrant Register upon
surrender of the related Warrant Certificate at the Warrant Office properly
endorsed or accompanied by appropriate instruments of transfer and written
instructions for transfer satisfactory to the Company. Upon any such transfer, a
new Warrant Certificate shall be issued to the transferee and the surrendered
Warrant Certificate shall be canceled by the Company. The Company shall pay all
expenses, taxes (other than transfer or income taxes incurred by the
Warrantholder or the transferee) and other charges payable in connection with
the transfer of Warrants pursuant to this Section 3.3.
(a) Restrictions in General. Each Warrantholder, by acceptance
of a Warrant Certificate, represents and warrants that such
Warrantholder is acquiring the Warrants and any related Warrant Shares
for its own account and for the purpose of investment and not with a
view to the sale or distribution thereof, except for sales pursuant to
an effective registration statement or pursuant to an exemption from
registration under the Securities Acts; provided, the Company
acknowledges that MPI may transfer Warrants to its Affiliates, if, and
only if, such transfer or transfers do not disqualify the Company from
the exempt offering provisions of Regulation D under the Securities Act
of 1933 relating to the issuance of Warrants to MPI by the Company.
(b) Opinion of Counsel. Each Warrantholder, by acceptance of a
Warrant Certificate, covenants and agrees that such Warrantholder will
not sell or otherwise dispose of any Warrants or related Warrant Shares
in the absence of (i) an effective registration statement under the
Securities Acts or (ii) an opinion acceptable in form and substance to
the Company from counsel reasonably acceptable to the Company, or an
opinion of counsel to the Company, to the effect that no registration
of the Warrants or related Warrant Shares is required under the
Securities Acts.
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(c) Termination of Restrictions. If, in the opinion of counsel
to the Warrantholder, a copy of which shall be furnished and reasonably
acceptable to the Company, a Warrant may be freely transferred pursuant
to the provisions of the Securities Acts, the restrictions set forth in
this Section 3.3 shall terminate and, upon request by the
Warrantholder, the Company shall cause the restrictive legends on the
Warrant Certificate to be removed.
ARTICLE IV
Adjustment Provisions
4.1 Adjustment of Exercise Price and Number of Warrant Shares.
(a) The Exercise Price shall be subject to adjustment from
time to time as provided in this Article IV. Upon each adjustment of
the Exercise Price, the Warrantholder shall thereafter be entitled to
purchase, upon exercise of a Warrant, at the Exercise Price resulting
from such adjustment, the number of shares of Common Stock (calculated
to the nearest whole shares pursuant to Section 4.5) obtained by
multiplying the Exercise Price in effect immediately prior to such
adjustment by the number of shares of Common Stock purchasable pursuant
to this Agreement immediately prior to such adjustment and dividing the
resulting product by the Exercise Price resulting from such adjustment.
(b) For purposes of making adjustments to the Exercise Price
pursuant to this Article IV, the "Current Market Price" shall be
determined as of the date of the issuance or sale giving rise to the
adjustment and shall be equal to the last reported sale price with
respect to shares of Common Stock as reported on the principal exchange
on which the Common Stock is then traded on such date. If there are no
reported transactions on such exchange or on such date, the "Current
Market Price" shall be the average of the highest current independent
bid and lowest current independent offer for the Common Stock on such
date.
4.2 Stock Dividends. If the Company shall declare a dividend or any
other distribution upon any capital stock which is payable in shares of Common
Stock, the Exercise Price shall be reduced to the quotient obtained by dividing
(i) the number of shares of Common Stock and Common Stock equivalents
outstanding immediately prior to such declaration multiplied by the then
effective Exercise Price by (ii) the total number of shares of Common Stock and
Common Stock equivalents outstanding immediately after such declaration, and the
number of shares of Common Stock issuable upon exercise of the Warrants shall be
adjusted as provided in Section 4.3. All shares of Common Stock and all
securities convertible into or exchangeable for Common Stock ("Convertible
Securities") issuable in payment of any dividend or other distribution upon the
capital stock of the Company shall be deemed to have been issued or sold without
consideration.
6
<PAGE>
4.3 Stock Splits and Reverse Stock Splits. If the Company shall
subdivide its outstanding shares of Common Stock into a greater number of shares
or shall declare a stock dividend, the Exercise Price shall be proportionately
reduced as provided in Section 4.2 and the number of Warrant Shares issuable
upon exercise of each Warrant shall be proportionately increased by multiplying
the number of shares of Common Stock then issuable upon exercise of a Warrant by
a number determined by dividing (i) the total number of shares of Common Stock
and Common Stock equivalents outstanding immediately after such stock split or
stock dividend by (ii) the total number of shares of Common Stock and Common
Stock equivalents outstanding immediately prior to such stock split or stock
dividend. If the Company shall combine the outstanding shares of Common Stock
into a smaller number of shares, the Exercise Price shall be proportionately
increased and the number of Warrant Shares issuable upon exercise of each
Warrant shall be proportionately decreased.
4.4 Reorganizations and Asset Sales. Notwithstanding anything herein to
the contrary, if any capital reorganization or reclassification of the Company,
or any consolidation or merger of the Company with another Person, or the sale
of all or substantially all of the assets of the Company shall be effected in
such a way that the holders of the shares of Common Stock shall be entitled to
receive securities or assets with respect to or in exchange for shares of Common
Stock, adequate provision shall be made, prior to and as a condition of such
reorganization, reclassification, consolidation, merger or sale, whereby each
Warrantholder shall have the right to receive, upon the terms and conditions
specified herein and in lieu of the Warrant Shares otherwise issuable upon the
exercise of such Warrants, such securities or assets as may be issuable or
payable with respect to or in exchange for the number of shares of Common Stock
issuable upon exercise of the Warrants, immediately prior to such
reorganization, reclassification, consolidation, merger or sale. In any such
case, appropriate provision shall be made with respect to the rights and
interests of each Warrantholder so that the provisions of this Agreement shall
be applicable with respect to any securities or assets thereafter deliverable
upon exercise of the Warrants. The Company shall not effect any such
consolidation, merger or sale unless prior to or simultaneously with the
consummation thereof, the surviving or successor Person resulting from such
consolidation or merger or the purchaser of such assets shall assume by written
instrument delivered to each Warrantholder the obligation to deliver to such
Warrantholder such securities or assets as such Warrantholder may be entitled to
receive.
4.5 Rounding of Calculations; Minimum Adjustment. All calculations
under this Article IV, shall be made to the nearest cent or to the nearest whole
share (as provided in Section 2.4), as the case may be.
4.6 Statement Regarding Adjustments. Whenever the Exercise Price shall
be adjusted as provided in this Article IV, the Company shall promptly file at
the Warrant Office a statement showing in detail the facts requiring such
adjustment and the Exercise Price and new number of shares of Common Stock
issuable upon exercise of a Warrant after giving effect to such adjustment, and
the Company shall also cause a copy of such statement to be delivered to the
Warrantholders. Each such statement shall be signed by the Company's president
or chief financial officer.
7
<PAGE>
4.7 Notice to Warrantholders. In the event the Company shall propose to
take any action of the type described in Sections 4.2, 4.3 or 4.4, the Company
shall give notice to the Warrantholders, in the manner set forth in Section 6.6,
which notice shall specify the record date, if any, with respect to any such
action and the approximate date on which such action is to take place. Such
notice shall also set forth such facts with respect thereto as shall be
reasonably necessary to indicate the effect of such action (to the extent such
effect may be known at the date of such notice) on the Exercise Price and the
number, kind or class of shares or other securities or property which shall be
deliverable upon exercise of a Warrant. In the case of any action which would
require the fixing of a record date, such notice shall be given at least ten
(10) days prior to the date so fixed, and in case of all other action, such
notice shall be given at least fifteen (15) days prior to the taking of such
proposed action.
4.8 Minimum Adjustment. Notwithstanding the foregoing, no adjustment to
the Exercise Price shall be made if such adjustment results in a change in the
Exercise Price then in effect of less than one percent (1%) and any adjustment
of less than one percent (1%) of any Exercise Price shall be carried forward and
shall be made at the time of and together with any subsequent adjustment that,
together with the adjustment or adjustments so carried forward, equals one
percent (1%) or more; provided, however, that upon the exercise of a Warrant,
the Company shall have made all necessary adjustments (to the nearest cent) not
theretofore made to the Exercise Price up to and including the date upon which a
Warrant is exercised.
4.9 Statements on Warrants. The form of Warrant Certificate need not be
changed because of any adjustment made pursuant to this Article IV, and Warrant
Certificates issued after such adjustment may state the same Exercise Price and
the same number of shares of Common Stock as are stated in the Warrant
Certificates initially issued pursuant to this Agreement. The Company, however,
may make changes in the form of Warrant Certificate that it deems necessary and
that does not affect the substance thereof or the rights of the holders of the
Warrant Certificates; and any Warrant Certificates thereafter issued or
countersigned, whether in exchange or substitution for an outstanding Warrant
Certificate or otherwise, shall be in the form as so changed.
ARTICLE V
Covenants of the Company
5.1 Dilution or Impairments. The Company will not, by amendment of its
Articles of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms of this Agreement. Without limiting the generality of the foregoing,
the Company shall at all times reserve and keep available, so long as this
Agreement remains in effect, free from preemptive rights, the number of shares
of Common Stock equal to the number of Warrant Shares to be issued upon the
exercise of all Warrants issued and outstanding.
8
<PAGE>
5.2 Registration of Warrant Shares. The company will register the
Warrant Shares in accordance with the terms and conditions of the Registration
Rights Agreement between the Company and MPI of even date with this Agreement.
ARTICLE VI
Miscellaneous
6.1 Entire Agreement. This Agreement and the Warrant Certificate
contain the entire Agreement between the Warrantholder and the Company with
respect to the Warrants and the Warrant Shares and supersedes all prior
agreements or understandings with respect thereto.
6.2 Governing Law. This Agreement shall be interpreted, construed
and governed by the laws of the State of Maryland.
6.3 Waiver and Amendment. Any term or provision of this Agreement may
be waived at any time by the party which is entitled to the benefits thereof,
and any term or provision of this Agreement may be amended or supplemented at
any time by Agreement of the holders of all Warrants and the Company, except
that any waiver of any term or condition, or any amendment or supplementation,
of this Agreement must be in writing. No single or partial exercise of any
rights or remedies hereunder shall operate as a waiver or preclude the exercise
of any other rights or remedies hereunder, and a waiver of any breach or failure
to enforce any of the terms or conditions of this Agreement shall not in any way
affect, limit or waive a party's rights hereunder at any time to enforce strict
compliance thereafter with every term or condition of this Agreement.
6.4 Severability. Any provision contained in this Agreement which is
prohibited or unenforceable by law shall be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions
contained in this Agreement.
6.5 Copy of Warrant. A copy of this Agreement shall be filed among the
records of the Company and shall be available at all reasonable times for
inspection by any Warrantholder at the principal office of the Company.
6.6 Notices. Any notices or communications under this Agreement shall
be given by any of the following means: (i) registered, certified or first class
mail, (ii) hand delivery or (iii) telex, telecopy or facsimile transmission.
Such notice or communication shall be sent to the respective parties at the
addresses listed below. Except as expressly provided herein, notice shall be
deemed to have been given when sent to or refused by the party to whom notice is
being given. Notice given by first class mail shall be deemed received on the
9
<PAGE>
third business day following the date on which it is mailed. Communication by
telex, telecopy or facsimile shall be confirmed by posting a copy of the same by
registered, certified or first class mail in an envelope properly addressed to
the respective parties at the address listed below:
If to the Company: Host Funding, Inc.
1040 School Street
Moraga, California 84556
Telecopy No. 925/376-7983
Attn: Glen Fuller
If to a Warrantholder: At the last address of the Warrantholder
appearing on the Warrant Register
Any party may, by written notice to the others, change the representative or the
address to which such notices and communications are to be sent.
6.7 Limitation of Liability; Not Shareholders. No provision of this
Agreement shall be construed as conferring upon a Warrantholder the right to
vote, consent, receive dividends or receive notices in respect of meetings of
shareholders, or any other matter whatsoever as a shareholder of the Company. No
provision hereof, in the absence of affirmative action by the Warrantholder to
purchase Warrant Shares, and no mere enumeration herein of the rights or
privileges of the Warrantholder, shall give rise to any liability of such
Warrantholder for the purchase price of any shares of Common Stock or as a
shareholder of the Company, whether such liability is asserted by the Company or
by creditors of the Company.
6.8 Exchange of Warrant Certificates. Subject to Section 3.3 of this
Agreement, upon surrender for exchange of a Warrant Certificate to the Company,
the Company at its expense will promptly issue and deliver to or upon the order
of a Warrantholder, a new Warrant Certificate of like tenor, in the name of such
Warrant holder or as such Warrantholder may direct, calling in the aggregate for
the purchase of the number of shares of the Common Stock to be issued upon the
exercise of the Warrant Certificate so surrendered. The Company shall pay all
taxes (other than securities transfer taxes) and all other expenses and charges
payable in connection with the preparation, execution and delivery of Warrant
Certificates pursuant to this Section 6.8.
6.9 Replacement of Warrant Certificates. Upon receipt of evidence
satisfactory to the Company of the loss, theft, mutilation or destruction of a
Warrant Certificates, and in the case of any such loss, theft or destruction
upon delivery of an Agreement of indemnity in such form and amount as shall be
reasonably satisfactory to the Company, or in the event of such mutilation upon
surrender and cancellation of a Warrant Certificate, the Company will make and
deliver a new Warrant Certificate of like tenor, in the name of the
Warrantholder, in lieu of such lost, stolen, destroyed or mutilated Warrant
Certificate. A Warrant Certificate shall be promptly cancelled by the Company
upon the surrender hereof in connection with any exchange or replacement. The
Company shall pay all taxes (other than securities transfer taxes) and all other
expenses and charges payable in connection with the preparation, execution and
delivery of Warrant Certificate pursuant to this Section 6.9.
10
<PAGE>
6.10 Headings. The Article and Section and other headings herein are
for convenience only and are not a part of this Agreement and shall not affect
the interpretation thereof.
[SIGNATURE PAGE FOLLOWS]
11
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first written above.
COMPANY:
HOST FUNDING, INC.
By: /s/ Michael S. McNulty, President
Michael S. McNulty, President
MACKENZIE PATTERSON, INC.
By: /s/ C.E. Patterson
Name: C.E. Patterson
Title: President
12
<PAGE>
EXHIBIT A
[FORM OF WARRANT CERTIFICATE]
NO. ------------- ---------- Warrants
WARRANTS
TO PURCHASE SHARES OF CLASS A COMMON STOCK OF
HOST FUNDING, INC.
Host Funding, Inc., a Maryland corporation (the "Company"), for value
received, hereby certifies that
----------------------------------------------------------
or registered assigns, is the owner of the number of Warrants, set
forth above, each of which represents the right, subject to the terms and
conditions hereof and of the Warrant Agreement between the Company and MacKenzie
Patterson, Inc., dated effective as of December __, 1999 (the "Warrant
Agreement"), to purchase from the Company at any time, or from time to time,
from the date of original issuance of the Warrants to December __, 2005 (or, if
such date is not a Business Day (as defined below), the first following Business
Day) (the "Exercise Period"), the number of shares of common stock, par value
$0.01 per share, of the Company (the "Common Stock) described in the Warrant
Agreement (each share of Common Stock issuable upon exercise of a Warrant is
referred to as a "Warrant Share"). Subject to the terms and conditions of the
Warrant Agreement, the price per Warrant Share, with respect to the Warrants
represented by this Warrant Certificate shall be $3.00 per share, adjusted as
provided in Article IV of the Warrant Agreement (the "Exercise Price"), payable
in full as to each Warrant exercised at the time of purchase. The term "Business
Day" as used herein means any day, other than a Saturday or Sunday, that is not
a day in which banking institutions in San Francisco, California are authorized
by law, regulations or executive order to close.
The Warrants may be exercised in whole or in part at any time or from
time to time during the Exercise Period. Any Warrants not exercised during the
Exercise Period shall become void, and all rights hereunder and all rights in
respect hereof and under the Warrant Agreement shall cease at the end of the
Exercise Period.
Each exercise of Warrants shall be made, and shall be deemed effective
for the purpose of determining the date of exercise, only upon surrender hereof
to the Company at the Warrant Office maintained by the Company pursuant to the
Warrant Agreement, with the form of Election to Exercise attached to this
<PAGE>
Warrant Certificate duly completed and signed, and upon payment in full to the
Company of the Exercise Price by (i) certified or cashier's check, (ii) a wire
transfer of immediately available funds, (iii) the surrender to the Company by
the Warrantholder of unexercised Warrants, or (iv) any combination of the
foregoing, all as provided in the Warrant Agreement and upon compliance with
and subject to the conditions set forth herein and in the Warrant Agreement.
All shares of Common Stock issued upon exercise of the Warrants will be
validly issued, fully paid and nonassessable shares of Common Stock.
This Warrant Certificate is issued under and in accordance with the
Warrant Agreement and is subject to the terms and provisions of the Warrant
Agreement, which terms and provisions are hereby incorporated by reference
herein and made a part hereof. The Warrant Agreement is available for inspection
by the registered holder at the principal office of the Company.
The Company shall not be required upon the exercise of the Warrants
represented hereby to issue fractions of Warrant Shares or to distribute share
certificates that evidence fractional Warrant Shares. The holder of this Warrant
Certificate expressly waives its right to receive any fraction of a Warrant
Share or a share certificate representing a fraction of a Warrant Share.
Fractional Warrant Shares that otherwise would be issuable in respect of such
exercise shall be paid in cash as provided in the Warrant Agreement, and the
number of Warrant Shares issuable shall be rounded down to the next nearest
whole number. If the Warrants represented hereby are not exercised in full, the
Company will issue to an exercising holder a new Warrant Certificate
representing the Warrants not exercised.
This Warrant Certificate may be exchanged either separately or in
combination with other Warrant Certificates at the principal office of the
Company for new Warrant Certificates representing the same aggregate number of
Warrants as were evidenced by the Warrant Certificate or Warrant Certificates
exchanged, upon surrender of this Warrant Certificate and upon compliance with
and subject to the conditions set forth herein and in the Warrant Agreement.
The Warrants represented by this Warrant Certificate may be
transferred, in whole or in part (subject to restrictions set forth in the
Warrant Agreement), at the principal office of the Company by the registered
holder hereof in person or by his attorney duly authorized in writing, upon
surrender of this Warrant Certificate and compliance with and subject to the
conditions set forth herein and in the Warrant Agreement. Upon any such
transfer, a new Warrant Certificate or new Warrant Certificates, representing in
the aggregate the number of Warrants represented by this Warrant Certificate,
will be issued to the transferee. The holder of this Warrant Certificate, by
accepting this Warrant Certificate, consents and agrees with the Company and
with every transferee of Warrants represented by this Warrant Certificate that
until due presentation for the registration of transfer of this Warrant
Certificate on the Warrant Register maintained by the Company, the Company may
deem and treat the person or entity in whose name this Warrant Certificate is
registered as the lawful owner for all purposes whatsoever.
Nothing contained in the Warrant Agreement or in this Warrant
Certificate shall be construed as conferring on the holder of any Warrants or
his transferee any rights whatsoever as a shareholder of the Company.
<PAGE>
The Warrant Agreement and this Warrant Certificate shall be deemed a
contract made under the laws of the State of Maryland and for all purposes shall
be construed in accordance with the laws of the State of Maryland without giving
effect to the principles of conflicts of law thereof.
THE WARRANTS REPRESENTED HEREBY AND THE SHARES OF COMMON STOCK ISSUABLE
UPON EXERCISE OF THE WARRANTS ARE SUBJECT TO THE CONDITIONS SPECIFIED IN THE
WARRANT AGREEMENT, DATED DECEMBER ____, 1999 BETWEEN HOST FUNDING, INC. AND
MACKENZIE PATTERSON, INC. NO TRANSFER IN VIOLATION OF SAID AGREEMENT SHALL BE
EFFECTIVE. THIS WARRANT MAY NOT BE SOLD OR TRANSFERRED EXCEPT PURSUANT TO AN
EFFECTIVE AND CURRENT REGISTRATION STATEMENT OR POST-EFFECTIVE AMENDMENT THERETO
FOR SUCH SHARES UNDER THE SECURITIES ACT OF 1933 (THE "ACT") OR AN APPLICABLE
EXEMPTION UNDER THE ACT. THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF
THE WARRANTS REPRESENTED HEREBY MAY NOT BE SOLD OR TRANSFERRED WITHOUT AN
EFFECTIVE AND CURRENT REGISTRATION STATEMENT OR POST-EFFECTIVE AMENDMENT THERETO
FOR SUCH SHARES UNDER THE ACT OR AN OPINION OF COUNSEL IN FORM AND SUBSTANCE
SATISFACTORY TO THE ISSUER THAT REGISTRATION IS NOT REQUIRED UNDER THE ACT.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed under its corporate seal.
Dated:
HOST FUNDING, INC.
(CORPORATE SEAL)
By:
Name:
Its:
By:
Name:
Its:
<PAGE>
ELECTION TO EXERCISE
(To be executed upon exercise of Warrant)
TO HOST FUNDING, INC.:
The undersigned hereby elects to exercise the right of purchase
represented by the within Warrant Certificate for, and to purchase thereunder,
shares of Common Stock, as provided for therein, and tenders herewith payment of
the purchase price in full in the amount of $ .
Please issue a certificate or certificates for such shares of Common
Stock in the name of:
SOCIAL SECURITY OR OTHER Name:
IDENTIFYING NUMBER OF
SHAREHOLDER
Address:
Signature:
Note: The above signature should
correspond exactly with the name
on the face of the Warrant
Certificate or with the name of
assignee appearing is the
assignment form below.
Dated:
<PAGE>
ASSIGNMENT
(To be executed only upon assignment of Warrant Certificate)
For value received, ------------ hereby sells, assigns and transfer unto
- ------------ the within Warrant Certificate, together with all right, title and
interest therein, and does hereby irrevocably constitute and appoint -----------
attorney in fact, to transfer said Warrant Certificate on the books of the
Company, with full power of substitution in the premises.
Dated:
-------------------------------
Note: The above signature should
correspond exactly with the name
on the face of the Warrant Certificate
SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF
ASSIGNEE
REGISTRATION RIGHTS AGREEMENT
by and between
HOST FUNDING, INC.
and
MACKENZIE PATTERSON, INC.
Dated: December 21, 1999
<PAGE>
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made and
entered into as of December 21, 1999, by and between Host Funding, Inc., a
Maryland corporation (the "Company"), and MacKenzie Patterson, Inc., a
California corporation ("MPI"), for the benefit of the Designated Holders (as
defined herein). This Agreement is entered into pursuant to that certain Stock
Purchase Agreement of even date herewith, between the Company and MPI (the
"Purchase Agreement"). The execution of this Agreement is a condition to the
closing of the transactions contemplated by the Purchase Agreement.
The parties hereby agree as follows:
1. Definitions.
As used in this Agreement the following terms have the
meanings indicated:
"Affiliate" shall mean, with respect to any Person, any other
Person who controls, is controlled by or is under common control with
such Person.
"Approved Underwriter" has the meaning set forth in Section
(f) of this Agreement.
"Common Stock" means the Class A Common Stock, $.01 par value
per share, of the Company.
"Company" means Host Funding, Inc., a Maryland corporation.
"Company Underwriter" has the meaning set forth in Section
4(a) of this Agreement.
"Demand Registration" has the meaning set forth in Section
3(a) of this Agreement.
"Demand Registration Statement" has the meaning set forth in
Section 3(a) of this Agreement.
"Designated Holder" means each record owner of any Registrable
Securities, including MPI and its Affiliates, and any transferee to
whom Registrable Securities have been transferred, other than a
transferee to whom such securities have been transferred pursuant to a
Registration Statement under the Securities Act or Rule 144 under the
Securities Act.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
2
<PAGE>
"Holders' Counsel" has the meaning set forth in Section
6(a)(i) of this Agreement.
"Incidental Registration" has the meaning set forth in
Section 4(a) of this Agreement.
"Indemnified Party" has the meaning set forth in Section 7(c)
of this Agreement.
"Indemnifying Party" has the meaning set forth in Section 7(c)
of this Agreement.
"Initiating Holders" has the meaning set forth in Section 3(a)
of this Agreement.
"Inspector" has the meaning set forth in Section 6(a)(viii) of
this Agreement.
"NASD" has the meaning set forth in Section 6(a)(xiv) of this
Agreement.
"MPI" means MacKenzie Patterson, Inc., a California
corporation.
"Person" means any individual, firm, corporation, partnership,
limited liability company, trust, incorporated or unincorporated
association, joint venture, joint stock company, government (or an
agency or political subdivision thereof) or other entity of any kind,
and shall include any successor (by merger or otherwise) of such
entity.
"Preferred Stock" means the Series A Convertible Preferred
Stock, $.01 par value per share, liquidation preference $4.00 per
share, of the Company, issued to MPI pursuant to the terms of the
Purchase Agreement.
"Purchase Agreement" means the Stock Purchase Agreement of
even date herewith between the Company and MPI.
"Records" has the meaning set forth in Section 6(a)(viii) of
this Agreement.
"Registrable Securities" means the Underlying Common Stock,
upon original issuance thereof and at all times subsequent thereto
except as provided in this Agreement.
"Registration Expenses" has the meaning set forth in Section
6(d) of this Agreement.
"Registration Statement" means a registration statement filed
pursuant to the Securities Act.
"SEC" means the Securities and Exchange Commission or any
similar agency then having jurisdiction to enforce the Securities Act.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
3
<PAGE>
"Underlying Common Stock" means the shares of the Common Stock
issuable upon conversion of the Preferred Stock and the shares of
Common Stock issuable upon exercise of the Warrants.
"Warrants" means the warrants issued by the Company to MPI
pursuant to the Purchase Agreement and the Warrant Agreement.
"Warrant Agreement" means the Warrant Agreement dated
effective as of December 21, 1999 between the Company and MPI.
2. General; Securities Subject to this Agreement.
(a) Grant of Rights. The Company hereby grants registration
rights to the Designated Holders upon the terms and conditions set forth in this
Agreement.
(b) Registrable Securities. For the purposes of this
Agreement, Registrable Securities will cease to be Registrable Securities when
(i) a Registration Statement covering the resale of such Registrable Securities
by the Designated Holders has been declared effective under the Securities Act
by the SEC and such Registrable Securities have been disposed of pursuant to
such effective Registration Statement, (ii) the entire amount of Registrable
Securities proposed to be sold by a Designated Holder in a single sale, in the
opinion of counsel satisfactory to the Company and the Designated Holder, each
in their reasonable judgment, may be distributed to the public without any
limitation as to volume or manner of sale pursuant to Rule 144(k) (or any
successor provision then in effect) under the Securities Act or (iii) the
Registrable Securities are proposed to be sold or distributed by a Person not
entitled to the registration rights granted by this Agreement.
(c) Holders of Registrable Securities. A Person is deemed to
be a holder of Registrable Securities whenever such Person owns of record
Registrable Securities, or holds an option to purchase, or a security
convertible into or exercisable or exchangeable for, Registrable Securities,
whether or not such acquisition or conversion has actually been effected and
disregarding any legal restrictions upon the exercise of such rights. If the
Company receives conflicting instructions, notices or elections from two or more
Persons with respect to the same Registrable Securities, the Company may act
upon the basis of the instructions, notice or election received from the
registered owner of such Registrable Securities. Registrable Securities issuable
upon exercise of an option or upon conversion of another security shall be
deemed outstanding for the purposes of this Agreement.
4
<PAGE>
3. Demand Registration.
(a) Request for Demand Registration. At any time after the
date of this Agreement, one or more Designated Holders holding at least 25% of
the Registrable Securities (the "Initiating Holders") may make, in the
aggregate, up to four (4) written requests to the Company to register, under the
Securities Act and under the securities or "blue sky" laws of any jurisdictions
designated by such holders (a "Demand Registration"), the number of Registrable
Securities stated in such request. Each request for a Demand Registration
by the Initiating Holders shall state the amount of the Registrable Securities
proposed to be sold and the intended method of disposition thereof and may
include the resale from time to time of Registrable Securities by the Designated
Holders in market transactions or other methods specified in the notice. Upon a
request for a Demand Registration, the Company shall promptly take such steps as
are reasonably necessary or appropriate to prepare and file with the SEC and to
be declared effective a registration statement (a "Demand Registration
Statement") to effect the registration and/or resale of the Registrable
Securities in the amounts and in the manner described in such request, including
a shelf registration on Form S-3 or any successor thereto with respect to the
resale of the Registrable Securities by the Designated Holders.
(b) Incidental or "Piggy-Back" Rights with Respect to a Demand
Registration. Each of the Designated Holders (other than the Initiating Holders)
may offer its Registrable Securities under any Demand Registration Statement
pursuant to this Section 3. Within ten (10) days after the receipt from the
Initiating Holders of a request for a Demand Registration, the Company shall (i)
give written notice thereof to all of the Designated Holders (other than the
Initiating Holders) and (ii) subject to Section 3(e), include in such
registration all of the Registrable Securities held by such Designated Holders
from whom the Company has received a written request for inclusion therein
within ten (10) days following receipt by such Designated Holders of the written
notice referred to in clause (i) above (which Designated Holders shall be deemed
Initiating Holders for purposes of this Section 3). Each such request by such
Designated Holders shall specify the number of Registrable Securities proposed
to be registered and the intended method of disposition thereof. The failure of
any Designated Holder to respond within such ten (10) day period referred to in
clause (ii) above shall be deemed to be a waiver of such Designated Holder's
rights under this Section 3, provided that any Designated Holder may waive its
rights under this Section 3 prior to the expiration of such ten (10) day period
by giving written notice to the Company, with a copy to the Initiating Holders.
(c) Effective Demand Registration. The Company shall use its
best efforts to cause any such Demand Registration Statement to become and
remain effective as soon as practicable, but in any event not later than ninety
(90) days after it receives a request under Section 3(a) hereof and shall
maintain the effectiveness of the Demand Registration Statement until the
earlier to occur of (i) the date on which all Registrable Securities included in
the Demand Registration Statement become freely tradeable without restriction
pursuant to Rule 144(k) under the Securities Act, or any successor provision,
5
<PAGE>
(ii) the date on which the Initiating Holders sell all of the Registrable
Securities, and (iii) two (2) years from the effective date of the Demand
Registration Statement. A registration shall not constitute a Demand
Registration until it has become effective and remains continuously effective in
accordance with the terms of the preceding sentence; provided, however, that a
registration shall neither constitute a Demand Registration nor a written
request for registration pursuant to Section 3(a), if (x) after such Demand
Registration has become effective, such registration or the related offer, sale
or distribution of Registrable Securities thereunder is interfered with in any
way by any stop order, injunction or other order or requirement of the SEC or
other governmental agency or court for any reason not attributable to the
Initiating Holders and such interference is not thereafter eliminated, (y) the
conditions to closing specified in the underwriting agreement, if any,
entered into in connection with such Demand Registration are not satisfied or
waived, other than by reason of a failure by the Initiating Holders or (z) if
the request for such Demand Registration is withdrawn by the Initiating Holders,
in which event such Initiating Holders shall immediately reimburse the Company
upon demand for all Registration Expenses incurred by the Company in relation to
such Demand Registration.
(d) Expenses. In any registration initiated as a Demand
Registration, the Company shall pay all Registration Expenses (other than
underwriting discounts, commissions and applicable transfer taxes with respect
to Registrable Securities) in connection therewith, whether or not such Demand
Registration becomes effective, unless the Demand Registration fails to become
effective due to a withdrawal by the Initiating Holders or by reason of any
failure attributable to the Initiating Holders, in which latter event the
Initiating Holders shall immediately reimburse the Company upon demand for all
Registration Expenses incurred by the Company in connection with such Demand
Registration.
(e) Underwriting Procedures. If the Initiating Holders holding
a majority of the Registrable Securities held by all of the Initiating Holders
to which the requested Demand Registration relates so elect, the offering of
such Registrable Securities pursuant to such Demand Registration shall be in the
form of a firm commitment underwritten offering and the managing underwriter or
underwriters selected for such offering shall be the Approved Underwriter (as
hereinafter defined) selected in accordance with Section 3(f). In connection
with any Demand Registration under this Section 3 involving an underwritten
offering, none of the Registrable Securities held by any Designated Holder
making a request for inclusion of such Registrable Securities pursuant to
Section 3(b) hereof shall be included in such underwritten offering unless such
Designated Holder accepts the terms of the underwriting as agreed upon by the
Company, the Initiating Holders and the Approved Underwriter, and then only in
such quantity as will not, in the opinion of the Approved Underwriter,
jeopardize the success of such offering by the Initiating Holders. If the
Approved Underwriter advises a Designated Holder in writing that in its opinion
the aggregate amount of Registrable Securities requested to be included in such
offering is sufficiently large to have a material adverse effect on the success
of the underwritten offering, then the Company shall include in such
registration only the aggregate amount of Registrable Securities that in the
opinion of the Approved Underwriter may be sold without any such material
adverse effect and shall reduce, first as to the Designated Holders (who are not
original Initiating Holders and who requested to participate in such
registration pursuant to Section 3(b) hereof) as a group, if any; and second as
to the Initiating Holders as a group, pro rata within each group based on the
number of Registrable Securities included in the request for Demand
Registration.
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(f) Selection of Underwriters. If any Demand Registration of
Registrable Securities is in the form of an underwritten offering, the Company
shall select and obtain an investment banking firm to act as the managing
underwriter of the offering (the "Approved Underwriter"). If the Company fails
to select and obtain an Approved Underwriter, the Initiating Holders holding a
majority of the Registrable Securities held by all such Initiating Holders shall
select and obtain an Approved Underwriter, subject to the reasonable approval of
the Company.
4. Incidental or "Piggy-Back" Registration.
(a) Request for Incidental Registration. If the Company
proposes to file a Registration Statement under the Securities Act with respect
to an offering by the Company for its own account (other than a Registration
Statement on Form S-4 or Form S-8 or any successor thereto) or an offering on
behalf of other securities holders of the Company (other than the Designated
Holders), then the Company shall give written notice of such proposed filing to
each of the Designated Holders of Registrable Securities at least thirty (30)
days before the anticipated filing date of the Registration Statement, and such
notice shall describe the proposed registration and distribution and offer such
Designated Holders the opportunity to register the number of Registrable
Securities as each such holder may request (an "Incidental Registration"). The
Company shall use its reasonable best efforts (within ten (10) days of the
notice provided for in the preceding sentence) to cause the managing underwriter
or underwriters of a proposed underwritten offering (the "Company Underwriter")
to permit each Designated Holder which has requested in writing to include
Registrable Securities in the Incidental Registration to participate in such
offering on the same terms and conditions as the securities of the Company
included therein. In connection with any Incidental Registration under this
Section 4(a) involving an underwritten offering, the Company shall not be
required to include any Registrable Securities in such underwriting unless the
Designated Holders thereof accept the terms of the underwriting as agreed upon
between the Company and the Company Underwriter, and then only in such quantity
as will not, in the opinion of the Company Underwriter, jeopardize the success
of the offering by the Company. If in the written opinion of the Company
Underwriter the registration of all or part of the Registrable Securities which
the Designated Holders have requested to be included in the underwritten
offering by the Company would materially adversely affect such offering, then
the Company shall be required to include in such Incidental Registration, to the
extent of the amount that the Company Underwriter believes may be sold without
causing such adverse effect, first, all of the securities to be offered for the
account of the Company; second, the Registrable Securities to be offered for the
account of the Designated Holders pursuant to this Section 4, pro rata based on
the amount recommended by the Company Underwriter; and third, any other
securities requested to be included in such underwriting.
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(b) Expenses. The Company shall bear all Registration Expenses
(other than underwriting discounts, commissions and applicable transfer taxes
with respect to Registrable Securities) in connection with any Incidental
Registration pursuant to this Section 4, whether or not such Incidental
Registration becomes effective.
5. Holdback Agreements.
(a) Restrictions on Public Sale by Designated Holders. Each of
the Designated Holders agrees not to effect any public sale or distribution
(including, without limitation, any sales or distributions pursuant to an
effective shelf registration statement) of any Registrable Securities being
registered or of any securities convertible into or exchangeable or exercisable
for such Registrable Securities, including a sale pursuant to Rule 144 under the
Securities Act, during the sixty (60) day period beginning on the effective date
of such Registration Statement (except as part of such
registration), (i) in the case of a non-underwritten public offering, if and to
the extent requested by the Initiating Holders (in the event of a Demand
Registration pursuant to Section 3) or the Company (in the event of an
Incidental Registration pursuant to Section 4(a)), as the case may be, or (ii)
in the case of an underwritten public offering, if and to the extent requested
by the Approved Underwriter (in the event of a Demand Registration pursuant to
Section 3) or the Company Underwriter (in the event of an Incidental
Registration pursuant to Section 4(a), as the case may be.
(b) Restrictions on Public Sale by the Company. The Company
agrees not to effect any public sale or distribution of any of its securities,
or any securities convertible into or exchangeable or exercisable for such
securities (except pursuant to registrations on Form S-4 or S-8 or any successor
thereto), during the period beginning on the effective date of any Registration
Statement in which the Designated Holders of Registrable Securities are
participating and ending on the earlier of (i) the date on which all Registrable
Securities registered on such Registration Statement are sold and (ii) ninety
(90) days after the effective date of such Registration Statement.
6. Registration Procedures.
(a) Obligations of the Company. Whenever registration of
Registrable Securities has been requested pursuant to Section 3 or Section 4 of
this Agreement, the Company shall use its reasonable best efforts to effect the
registration and sale of such Registrable Securities in accordance with the
Designated Holders' intended method of distribution thereof as quickly as
practicable, and in connection with any such request, the Company shall, as
expeditiously as possible:
(i) prepare and file with the SEC a Registration
Statement on any form for which the Company then qualifies or which counsel for
the Company and the Designated Holders shall deem appropriate and which form
shall be available for the sale of such Registrable Securities in accordance
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with the intended method of distribution thereof, and use its reasonable
best efforts to cause such Registration Statement to become and remain
effective; provided, however, that (A) before filing a Registration Statement or
prospectus or any amendments or supplements thereto, the Company shall provide
counsel selected by the Designated Holders holding a majority of the Registrable
Securities being registered in such registration ("Holders' Counsel") and any
other Inspector with an adequate and appropriate opportunity to review such
Registration Statement and each prospectus included therein (and each amendment
or supplement thereto) to be filed with the SEC, and will not file any
Registration Statement or prospectus or any amendment or supplement thereto to
which the Designated Holders whose Registrable Securities are being registered
or sold pursuant thereto shall reasonably object, and (B) the Company shall
notify the Holders' Counsel and each seller of Registrable Securities of any
stop order issued or threatened by the SEC and take all reasonable action
required to prevent the entry of such stop order or to remove it if entered as
soon as possible;
(ii) prepare and file with the SEC such amendments
and supplements to such Registration Statement and the prospectus used in
connection therewith as may be necessary to keep such Registration Statement
effective for the periods described herein;
(iii) as soon as reasonably possible, furnish to each
seller of Registrable Securities, prior to filing a Registration Statement,
copies of such Registration Statement as is proposed to be filed, and thereafter
such number of copies of such Registration Statement, each amendment and
supplement thereto (in each case including all exhibits thereto), the prospectus
included in such Registration Statement (including each preliminary prospectus)
and such other documents as each such seller may reasonably request in order to
facilitate the disposition of the Registrable Securities owned by such seller;
(iv) register or qualify such Registrable Securities
under such other securities or "blue sky" laws of such jurisdictions as any
seller of Registrable Securities may reasonably request (and to notify each
Designated Holder of any notification with respect to the suspension of the
qualification of the Registrable Securities for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose), and to continue
such qualification in effect for the periods described herein, and do any and
all other acts and things which may be reasonably necessary or advisable to
enable any such seller to consummate the disposition in such jurisdictions of
the Registrable Securities owned by such seller; provided, however, that the
Company shall not be required to (A) qualify generally to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
Section 6(a)(iv), (B) subject itself to taxation in any such jurisdiction solely
as a result of this Section 6(a)(iv) or (C) consent to general service of
process in any such jurisdiction solely as a result of this Section 6(a)(iv);
(v) use its reasonable best efforts to cause the
Registrable Securities covered by such Registration Statement to be
registered with or approved by such other governmental agencies or authorities
as may be necessary by virtue of the business and operations of the Company or
otherwise to enable the seller or sellers of Registrable Securities to
consummate the disposition of such Registrable Securities;
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(vi) notify each seller of Registrable Securities
at any time when a prospectus relating thereto is required to be delivered
under the Securities Act, upon discovery that, or upon the happening of any
event as a result of which, the prospectus included in such Registration
Statement contains an untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances under which they were made,
and promptly prepare and file a supplement or amendment to such prospectus and
furnish to each seller of Registrable Securities a reasonable number of copies
of a supplement to or an amendment of such prospectus as may be necessary so
that, upon delivery to the purchasers of such Registrable Securities, such
prospectus shall not contain an untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances under which they
were made;
(vii) enter into and perform customary agreements
(including an underwriting agreement in customary form with the Approved
Underwriter or Company Underwriter, if any, selected as provided in Section 3 or
Section 4, as the case may be) and take such other actions as are prudent and
reasonably required in order to expedite or facilitate the disposition of such
Registrable Securities;
(viii) make available for inspection by any seller of
Registrable Securities, any managing underwriter participating in any
disposition pursuant to such Registration Statement, Holders' Counsel and any
attorney, accountant or other agent retained by any such seller or any managing
underwriter (each, an "Inspector" and collectively, the "Inspectors"), all
financial and other records, pertinent corporate documents and properties of the
Company and its subsidiaries (collectively, the "Records") as shall be
reasonably necessary to enable them to exercise their due diligence
responsibility, and cause the Company's and its subsidiaries' officers,
directors and employees, and the independent public accountants of the Company,
to supply all information reasonably requested by any such Inspector in
connection with such Registration Statement. Records that the Company
determines, in good faith, to be confidential and which it notifies the
Inspectors are confidential shall not be disclosed by the Inspectors unless (A)
the disclosure of such Records is necessary to avoid or correct a misstatement
or omission in the Registration Statement, (B) the release of such Records is
ordered pursuant to a subpoena or other order from a court of competent
jurisdiction or (C) the information in such Records was known to the Inspectors
on a non-confidential basis prior to its disclosure by the Company or has been
made generally available to the public. Each seller of Registrable Securities
agrees that it shall, upon learning that disclosure of such Records is sought in
a court of competent jurisdiction, give notice to the Company and allow the
Company, at the Company's expense, to undertake appropriate action to prevent
disclosure of the Records deemed confidential;
(ix) if such sale is pursuant to an underwritten
offering, use its best efforts to obtain a "cold comfort" letter from the
Company's independent public accountants in customary form and covering such
matters of the type customarily covered by "cold comfort" letters as Holders'
Counsel or the managing underwriter reasonably request;
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(x) use its best efforts to furnish, at the
request of any seller of Registrable Securities on the date such securities
are delivered to the underwriters for sale pursuant to such registration or, if
such securities are not being sold through underwriters, on the date the
Registration Statement with respect to such securities becomes effective, an
opinion, dated such date, of counsel representing the Company for the purposes
of such registration, addressed to the underwriters, if any, and to the seller
making such request, covering such legal matters with respect to the Registrable
Securities and the registration thereof in respect of which such opinion is
being given as such seller may reasonably request and are customarily included
in such opinions;
(xi) otherwise use its best efforts to comply
with all applicable rules and regulations of the SEC, and make available to
its security holders, as soon as reasonably practicable but no later than
fifteen (15) months after the effective date of the Registration Statement, an
earnings statement covering a period of twelve (12) months beginning after the
effective date of the Registration Statement, in a manner which satisfies the
provisions of Section 11(a) of the Securities Act and Rule 158 thereunder;
(xii) cause all such Registrable Securities to be
listed on each securities exchange on which similar securities issued by
the Company are then listed (provided that the applicable listing requirements
are satisfied) and direct the Company's transfer agent to cooperate with the
Designated Holders to facilitate the timely preparation and delivery of
certificates not bearing any securities laws restrictive legends representing
the Registrable Securities to be sold and in such denominations and names as the
Designated Holders may request;
(xiii) keep Holders' Counsel advised in writing as to
the initiation and progress of any registration under Section 3 or Section 4
hereunder;
(xiv) cooperate with each seller of Registrable
Securities and each underwriter participating in the disposition of such
Registrable Securities and their respective counsel in connection with any
filings required to be made with the National Association of Securities Dealers,
Inc. (the "NASD");
(xv) file, when due, all reports and other filings
required to be made by the Company pursuant to the Exchange Act so as to
enable the Designated Holders to comply with the current public information
requirements contained in paragraph (c) of Rule 144 under the Securities Act (or
any successor provisions) and to qualify the Company for the use of a
Registration Statement on Form S-3 for the resale of the Registrable Securities
by the Designated Holders (if the Company otherwise meets the eligibility
requirements for the use of Form S-3);
(xvi) use best efforts to take all other steps
reasonably necessary to effect the registration of the Registrable
Securities contemplated hereby; and
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(xvii) make any effort to obtain the withdrawal of
any order suspending the effectiveness of any Registration Statement at the
earliest possible time.
(b) Seller Information. The Company may require each seller of
Registrable Securities as to which any registration is being effected to furnish
to the Company such information regarding the seller's distribution of
Registrable Securities as the Company may from time to time reasonably request
in writing.
(c) Notice to Discontinue. Each Designated Holder of
Registrable Securities agrees that, upon receipt of any notice from the Company
of the happening of any event of the type described in Section 6(a)(vi), such
Designated Holder shall forthwith discontinue disposition of Registrable
Securities pursuant to the Registration Statement covering such Registrable
Securities until such Designated Holder's receipt of copies of the supplemented
or amended prospectus contemplated by Section 6(a)(vi) and, if so directed by
the Company, such Designated Holder shall deliver to the Company (at the
Company's expense) all copies, other than permanent file copies then in such
Designated Holder's possession, of the prospectus covering such Registrable
Securities which is current at the time of receipt of such notice. If the
Company shall give any such notice, the Company shall extend the period during
which such Registration Statement shall be maintained effective pursuant to
this Agreement (including, without limitation, the period referred to in Section
6(a)(ii)) by the number of days during the period from and including the date of
the giving of such notice pursuant to Section 6(a)(vi) to and including the date
when the Designated Holder shall have received the copies of the supplemented or
amended prospectus contemplated by and meeting the requirements of Section
6(a)(vi).
(d) Registration Expenses. The Company shall pay all expenses
(other than as set forth in Sections 3(d) and 4(b)) arising from or incident to
the performance of, or compliance with, this Agreement, including, without
limitation, (i) SEC, stock exchange and NASD registration and filing fees, (ii)
all fees and expenses incurred in complying with securities or "blue sky" laws
(including reasonable fees, charges and disbursements of counsel in connection
with "blue sky" qualifications of the Registrable Securities), (iii) all
printing, messenger and delivery expenses, (iv) the fees, charges and expenses
of counsel to the Company and of its independent public accountants and any
other accounting fees, charges and expenses incurred by the Company (including,
without limitation, any expenses arising from any special audits or comfort
letters incident to or required by any registration or qualification) and the
reasonable legal fees, charges and expenses of one counsel engaged by the
Initiating Holders to represent their interests in connection with a Demand
Registration and (v) any liability insurance or other premiums for insurance
obtained by the Company in connection with any Demand Registration or Incidental
Registration pursuant to the terms of this Agreement, regardless of whether such
Registration Statement is declared effective (all such expenses being
"Registration Expenses").
7. Indemnification; Contribution.
(a) Indemnification by the Company. The Company agrees to
indemnify and hold harmless and to reimburse upon request, to the fullest extent
permitted by law, each Designated Holder, its officers, directors, trustees,
partners, employees, advisors and agents and each Person who controls (within
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<PAGE>
the meaning of the Securities Act or the Exchange Act) such Designated Holder
from and against any and all losses, claims, damages, liabilities and expenses
(including reasonable costs of investigation and counsel) arising out of or
based upon any untrue, or allegedly untrue, statement of a material fact
contained or incorporated by reference in any Registration Statement, prospectus
or preliminary prospectus or notification or offering circular (as amended or
supplemented if the Company shall have furnished any amendments or supplements
thereto) or arising out of or based upon any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, except insofar as the same are contained
in any information concerning such Designated Holder furnished in writing to the
Company by such Designated Holder expressly for use therein. The Company shall
also provide customary indemnities to any underwriters of the Registrable
Securities, their officers, directors and employees and each Person who controls
such underwriters (within the meaning of the Securities Act and the Exchange
Act) to the same extent as provided above with respect to the indemnification of
the Designated Holders.
(b) Indemnification by Designated Holders. In connection with
any Registration Statement in which a Designated Holder is participating
pursuant to Section 3 or Section 4 hereof, each such Designated Holder shall
furnish to the Company in writing such information with respect to such
Designated Holder as the Company may reasonably request or as may be required by
law for use in connection with any such Registration Statement or prospectus and
each Designated Holder agrees to indemnify and hold harmless, to the fullest
extent permitted by law, the Company, its directors, officers, employees and
each Person who controls the Company (within the meaning of the Securities Act
and the Exchange Act) to the same extent as the foregoing indemnity from the
Company to the Designated Holders, but only with respect to any such information
with respect to such Designated Holder furnished in writing to the Company by
such Designated Holder expressly for use therein.
(c) Conduct of Indemnification Proceedings. Any Person
entitled to indemnification hereunder (the "Indemnified Party") agrees to give
prompt written notice to the indemnifying party (the "Indemnifying Party") after
the receipt by the Indemnified Party of any written notice of the commencement
of any action, suit, proceeding or investigation or threat thereof made in
writing for which the Indemnified Party intends to claim indemnification or
contribution pursuant to this Agreement; provided, however, that the failure so
to notify the Indemnified Party shall not relieve the Indemnifying Party of any
liability that it may have to the Indemnified Party hereunder. If notice of
commencement of any such action is given to the Indemnifying Party as above
provided, the Indemnifying Party shall be entitled to participate in and, to the
extent it may wish, jointly with any other Indemnifying Party similarly
notified, to assume the defense of such action at its own expense, with counsel
chosen by it and reasonably satisfactory to such Indemnified Party. The
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Indemnified Party shall have the right to employ separate counsel in any such
action and participate in the defense thereof, but the fees and expenses of such
counsel (other than reasonable costs of investigation) shall be paid by the
Indemnified Party unless (i) the Indemnifying Party agrees to pay the same, (ii)
the Indemnifying Party fails to assume the defense of such action with counsel
reasonably satisfactory to the Indemnified Party in its reasonable judgment or
(iii) the named parties to any such action (including any impleaded parties)
have been advised by such counsel that either (x) representation of such
Indemnified Party and the Indemnifying Party by the same counsel would be
inappropriate under applicable standards of professional conduct or (y) there
may be one or more legal defenses available to the Indemnified Party which are
different from or additional to those available to the Indemnifying Party. In
either of such cases, the Indemnifying Party shall not have the right to assume
the defense of such action on behalf of such Indemnified Party but shall pay, or
promptly reimburse the Indemnified Party upon request for, the Indemnified
Party's counsel fees and expenses and all losses, claims, costs, liabilities and
expenses, as incurred by the Indemnified Party arising out of or based upon the
matters described in Section 7(a). No Indemnifying Party shall be liable for any
settlement entered into without its written consent, which consent shall not be
unreasonably withheld.
(d) Contribution. If the indemnification provided for in this
Section 7 from the Indemnifying Party is unavailable to an Indemnified Party
hereunder in respect of any losses, claims, damages, liabilities or expenses
referred to therein, then the Indemnifying Party, in lieu of indemnifying
such Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such losses, claims, damages, liabilities or
expenses in such proportion as is appropriate to reflect the relative fault of
the Indemnifying Party and Indemnified Party in connection with the actions
which resulted in such losses, claims, damages, liabilities or expenses, as well
as any other relevant equitable considerations. The relative faults of such
Indemnifying Party and Indemnified Party shall be determined by reference to,
among other things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged omission to
state a material fact, has been made by, or relates to information supplied by,
such Indemnifying Party or Indemnified Party, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
action. The amount paid or payable by a party as a result of the losses, claims,
damages, liabilities and expenses referred to above shall be deemed to include,
subject to the limitations set forth in Sections 7(a), 7(b) and 7(c), any legal
or other fees, charges or expenses reasonably incurred by such party in
connection with any investigation or proceeding; provided that the total amount
to be contributed by a Designated Holder shall be limited to the net proceeds
received by such Designated Holder from the sale of Registrable Securities
pursuant to the Registration Statement, prospectus, notification or offering
circular alleged to contain such untrue statement of material fact or omission
of a material fact.
The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 7(d) were determined by pro
rata allocation or by any other method of allocation which does not take account
of the equitable considerations referred to in the immediately preceding
paragraph. 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.
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8. Rule 144.
The Company covenants that it shall (a) file any reports
required to be filed by it under the Exchange Act and (b) take such further
action as each Designated Holder of Registrable Securities may reasonably
request (including providing any information necessary to comply with Rule 144
under the Securities Act), all to the extent required from time to time to
enable such Designated Holder to sell Registrable Securities without
registration under the Securities Act within the limitation of the exemptions
provided by (i) Rule 144 under the Securities Act, as such rule may be amended
from time to time, or (ii) any similar rules or regulations hereafter adopted by
the SEC. The Company shall, upon the request of any Designated Holder of
Registrable Securities, deliver to such Designated Holder a written statement as
to whether it has complied with such requirements.
9. Miscellaneous.
(a) Recapitalizations, Exchanges, etc. The provisions of this
Agreement shall apply, to the full extent set forth herein with respect to (i)
the Registrable Securities and (ii) any and all equity securities of the Company
or any successor or assign of the Company (whether by merger, consolidation,
sale of assets or otherwise) which may be issued in respect of, in conversion
of, in exchange for or in substitution of, the Registrable Securities and shall
be appropriately adjusted for any stock dividends, splits, reverse splits,
combinations, recapitalizations and the like occurring after the date hereof.
The Company shall cause any successor or assign (whether by merger,
consolidation or otherwise) to enter into a new registration rights agreement
with the Designated Holders having the same substantive terms of this Agreement
as a condition of any such transaction.
(b) No Inconsistent Agreements. The Company shall not enter
into any agreement with respect to its securities that is inconsistent with the
rights granted to the Designated Holders in this Agreement or grant any
additional registration rights to any Person or with respect to any securities
which are not Registrable Securities which are prior in right to or inconsistent
with the rights granted in this Agreement.
(c) Remedies. The Designated Holders, in addition to being
entitled to exercise all rights granted by law, including recovery of damages,
shall be entitled to specific performance of their rights under this Agreement.
The Company agrees that monetary damages would not be adequate compensation for
any loss incurred by reason of a breach by it of the provisions of this
Agreement and hereby agrees to waive in any action for specific performance the
defense that a remedy at law would be adequate.
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(d) Amendments and Waivers. Except as otherwise provided
herein, the provisions of this Agreement may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given unless consented to in writing by (i) the Company and (ii) the
Designated Holders holding Registrable Securities representing (after giving
effect to any adjustments) at least 75% of the aggregate value of Registrable
Securities owned by all of the Designated Holders. Any such written consent
shall be binding upon the Company and all of the Designated Holders. A copy of
any such amendment together with an executed signature page shall be timely
distributed to all Designated Holders.
(e) Notices. All notices, demands and other communications
provided for or permitted hereunder shall be made in writing and shall be made
by registered or certified first-class mail, return receipt requested,
telecopier, courier service, overnight mail or personal delivery:
(i) if to the Company:
Host Funding, Inc.
1040 School Street
Moraga, California 84556
Telecopy: 925/376-7983
Attention: President
(ii) if to MPI:
MacKenzie Patterson, Inc.
1040 School Street
Moraga, California 84556
Telecopy: 925/376-7983
Attention: Glen Fuller
(iii) if to any other Designated Holder,
at its address as it appears on the
stock record books of the Company.
All such notices and communications shall be deemed to have
been duly given when delivered, if personally delivered by hand or delivered by
commercial courier service or overnight mail; two (2) Business Days after being
deposited in the mail, postage prepaid, if mailed; and when receipt is
mechanically acknowledged, if telecopied.
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(f) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and permitted assigns of each of
the parties hereto. The Company may not assign its rights or obligations under
this Agreement without the prior written consent of each Designated Holder.
Notwithstanding the foregoing, no assignee of the Company shall have any of the
rights granted under this Agreement until such assignee of the Company shall
acknowledge its rights and obligations under this Agreement by a signed written
agreement for the benefit of the Designated Holders pursuant to which such
assignee accepts such rights and obligations.
(g) Third Party Beneficiaries. No Person other than the
parties hereto and their successors and permitted assigns is intended to be a
beneficiary of any of the rights granted hereunder.
(h) Counterparts. This Agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(i) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(j) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF MARYLAND, WITHOUT REGARD
TO THE PRINCIPLES OF CONFLICTS OF LAW THEREOF.
(k) Severability. If 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 and enforceability of any such provision in every other respect and of
the remaining provisions hereof shall not be in any way impaired, it being
intended that all of the rights and privileges of the Designated Holders shall
be enforceable to the fullest extent permitted by law.
(l) Entire Agreement. This Agreement is intended by the
parties as a final expression of their agreement and intended to be 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 and in the Purchase Agreement. This Agreement supersedes all other prior
agreements and understandings between the parties with respect to such subject
matter.
(m) Further Assurances. Each of the parties shall execute such
documents and perform such further acts as may be reasonably required or
desirable to carry out or to perform the provisions of this Agreement.
(n) Forms. All references in this Agreement to particular
forms of registration statements, rules and laws are intended to include any
successor forms, rules or laws which are intended to replace, or to apply to
similar transactions, as the forms, rules or laws herein referenced.
[SIGNATURE PAGE FOLLOWS]
17
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IN WITNESS WHEREOF, the undersigned have executed, or have caused to be
executed, this Agreement on the date first written above.
HOST FUNDING, INC.
By:/s/ Michael S. McNulty
Name: Michael S. McNulty
Title: President
MACKENZIE PATTERSON, INC.
By:/s/ C.E. Patterson
Name: C.E. Patterson
Title: President
18
