Page 19 of 38 Pages
SUBSCRIPTION AGREEMENT
This Subscription Agreement (the "Agreement") is entered into as of
the date set forth on the signature page hereof by and between Extended Stay
America, Inc., a Delaware corporation (together with its successors and
permitted assigns, "Issuer"), and the undersigned investor (together with its
successors and permitted assigns, "Investor"). Capitalized terms used but not
otherwise defined herein shall have the meanings set forth in Section 9.1.
RECITALS
Subject to the terms and conditions of this Agreement, Investor
desires to subscribe for and purchase, and Issuer desires to issue and sell to
Investor, certain shares of Issuer's common stock, par value $.01 per share (the
"Common Stock"). The Issuer is offering an aggregate of not more than thirteen
million, five hundred thousand (13,500,000) shares of Common Stock in a private
placement to the Investor and other investors at a purchase price of $17.625 per
share and on the other terms and conditions contained in this Agreement.
TERMS OF AGREEMENT
In consideration of the mutual representations, warranties, covenants
and agreements contained herein, the parties hereto agree as follows:
ARTICLE I
SUBSCRIPTION AND ISSUANCE OF COMMON STOCK
1.1 Subscription and Issuance of Common Stock. Subject to the terms
------------------------------------------
and conditions of this Agreement, Issuer will issue and sell to Investor and
Investor subscribes for and will purchase from Issuer the number of shares of
Common Stock set forth on the signature page hereof (the "Shares") for the
aggregate purchase price set forth on the signature page hereof, which shall be
equal to the product of the number of Shares subscribed for by Investor times
the per share purchase price specified in the above Recitals to this Agreement
(the "Purchase Price").
1.2 Legend. Any certificate or certificates representing the Shares
------
shall bear the following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), AND MAY NOT BE SOLD,
TRANSFERRED, OR OTHERWISE DISPOSED OF BY THE
HOLDER EXCEPT PURSUANT TO (1) AN EFFECTIVE
REGISTRATION STATEMENT FILED UNDER THE ACT OR (2)
AN EXEMPTION FROM REGISTRATION UNDER THE ACT AND
IN ACCORDANCE WITH AN OPINION OF COUNSEL IN FORM
AND SUBSTANCE SATISFACTORY TO THE ISSUER THAT AN
Page 20 of 38 Pages
EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.
SUCH SHARES ALSO MAY NOT BE SOLD, TRANSFERRED, OR
OTHERWISE DISPOSED OF EXCEPT IN COMPLIANCE WITH
ANY APPLICABLE STATE SECURITIES LAWS.
ARTICLE II
CLOSING
2.1 Closing. The closing of the transactions contemplated herein (the
-------
"Closing") shall take place on a date designated by Issuer, which date shall be
on or before February 5, 1997 (unless such date is extended by Issuer, after
consultation with Xxxxx & Company Incorporated, to a date not later than
February 28, 1997). The Closing shall take place at the offices of Xxxxx &
Company Incorporated, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000. To effect the
Closing, unless the Investor and the Issuer otherwise agree (i) Investor shall
pay the Purchase Price to Issuer, by wire transfer of immediately available
funds to an account designated in writing by Issuer against delivery by Issuer
to Investor of certificates for the Shares duly issued and registered in the
name of Investor; and (ii) all other agreements and other documents referred to
in this Agreement which are required for the Closing shall be executed and
delivered (to the extent not done prior to the Closing).
2.2 Termination. This Agreement may be terminated at any time prior to
-----------
the Closing:
(a) by mutual written consent of Issuer and Investor;
(b) by Investor, upon a material breach of any material
representation, warranty, covenant or agreement on the part of Issuer set forth
in this Agreement, or if any material representation or warranty of Issuer shall
have become untrue in any material respect, in either case such that the
conditions in Section 8.1 would be incapable of being satisfied by the date of
the Closing; and
(c) by Issuer, upon a material breach of any material
representation, warranty, covenant or agreement on the part of Investor set
forth in this Agreement, or if any material representation or warranty of
Investor shall have become untrue in any material respect, in either case such
that the conditions in Section 8.2 would be incapable of being satisfied by the
date of the Closing.
2.3 Effect of Termination. In the event of termination of this
-----------------------
Agreement pursuant to Section 2.2, this Agreement shall forthwith become void,
there shall be no liability on the part of Issuer or Investor to each other and
all rights and obligations of any party hereto shall cease; provided, however,
that nothing herein shall relieve any party from liability for the willful
breach of any of its representations, warranties, covenants or agreements set
forth in this Agreement.
Page 21 of 38 Pages
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE ISSUER
As a material inducement to Investor entering into this Agreement and
subscribing for the Shares, Issuer represents and warrants to Investor as
follows:
3.1 Corporate Status. The Issuer is a corporation duly organized,
-----------------
validly existing and in good standing under the laws of the State of Delaware.
3.2 Corporate Power and Authority. The Issuer has the corporate power
-----------------------------
and authority to execute and deliver this Agreement and to perform its
obligations hereunder and consummate the transactions contemplated hereby. The
Issuer has taken all necessary corporate action to authorize the execution,
delivery and performance of this Agreement and the transactions contemplated
hereby.
3.3 Enforceability. This Agreement has been duly executed and
--------------
delivered by the Issuer and constitutes a legal, valid and binding obligation of
the Issuer, enforceable against the Issuer in accordance with its terms, except
as the same may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the enforcement of creditors' rights
generally and general equitable principles regardless of whether such
enforceability is considered in a proceeding at law or in equity.
3.4 No Violation. The execution and delivery by the Issuer of this
-------------
Agreement, the consummation of the transactions contemplated hereby, and the
compliance by Issuer with the terms and provisions hereof (including, without
limitation, the Issuer's issuance to Investor of the Shares as contemplated by
and in accordance with this Agreement), will not result in a default under (or
give any other party the right, with the giving of notice or the passage of time
(or both), to declare a default or accelerate any obligation under) or violate
the Certificate of Incorporation or Bylaws of the Issuer or any material
Contract to which the Issuer is a party (except to the extent such a default
would not, in the case of a Contract, have a Material Adverse Effect on the
Issuer), or any Requirement of Law applicable to the Issuer, or result in the
creation or imposition of any material Lien upon any of the capital stock,
properties or assets of the Issuer or any of its Subsidiaries (except where such
Lien would not have a Material Adverse Effect on Issuer). No consents, filings,
authorizations or other actions of any Governmental Authority are required for
the Issuer's execution, delivery and performance of this Agreement. No consent,
approval, waiver or other action by any Person under any Contract to which the
Issuer is a party or by which the Issuer or any of its properties or assets are
bound is required or necessary for the execution, delivery or performance by the
Issuer of this Agreement and the consummation of the transactions contemplated
hereby, except where the failure to obtain such consents would not have a
Material Adverse Effect on Issuer.
3.5 Valid Issuance. Upon payment of the Purchase Price by Investor and
--------------
delivery to Investor of the certificates for the Shares, such Shares will be
validly issued, fully paid and non- assessable.
3.6 SEC Reports and Nasdaq Compliance. Since January 1, 1996, the
-----------------------------------
Issuer has made all filings required to be made by it under the Securities Act,
Page 22 of 38 Pages
the Exchange Act and the securities laws of any state, and any rules and
regulations promulgated thereunder and pursuant to any Requirements of Law (the
"SEC Reports"). The SEC Reports, when filed, complied in all material respects
with all applicable requirements of the Securities Act, the Exchange Act or
other Requirements of Law. None of the SEC Reports, at the time of filing,
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
therein not misleading in light of the circumstances in which they were made.
Issuer has delivered or made accessible to Investor true, accurate and complete
copies of the SEC Reports, as amended, which were filed with the SEC since
January 1, 1996, and as in effect as of the date hereof. The Issuer has taken
all necessary actions to ensure its continued inclusion in, and the continued
eligibility of the Common Stock for trading on, The Nasdaq National Market under
all currently effective and currently proposed inclusion requirements. Each
balance sheet included in the SEC Reports (including any related notes and
schedules) fairly presents in all material respects the consolidated financial
position of the Issuer and its Subsidiaries as of its date, and each of the
other financial statements included in the SEC Reports (including any related
notes and schedules) fairly presents in all material respects the consolidated
results of operations or other information therein of Issuer and its
Subsidiaries for the periods or as of the dates therein set forth in accordance
with GAAP consistently applied during the periods involved (except (i) for any
pro forma financial information, (ii) that the interim reports are subject to
adjustments which might be required as a result of year end audit, and (iii) as
otherwise stated therein).
3.7 Governing Documents. Issuer has delivered or made available to
--------------------
Investor true, accurate and complete copies of Issuer's Certificate of
Incorporation and Bylaws in effect as of the date hereof.
3.8 Commissions. In connection with the purchase and sale of Shares
-----------
hereunder, Issuer has agreed to pay Xxxxx & Company Incorporated and/or its
designated sub-agents a placement fee. Issuer has not incurred any other
obligation for any finder's or broker's or agent's fees or commissions in
connection with the transactions contemplated hereby.
3.9 Use of Proceeds. The proceeds of the offering and sale of Common
----------------
Stock of the Issuer offered hereby, net of payment of placement fees and
expenses, will be used by Issuer for general corporate purposes, including, but
not limited to, financing possible acquisitions and the construction of extended
stay lodging facilities.
3.10 SEC Registration. As of the date hereof and based upon the rules
----------------
and regulations of the SEC, Issuer meets all of the requirements for the use
generally of a Form S-3 registration statement under the Securities Act.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF INVESTOR
As a material inducement to Issuer entering into this Agreement and
issuing the Shares, Investor represents and warrants to the Issuer as follows:
4.1 Power and Authority. The Investor, if other than a natural person,
-------------------
is an entity duly organized, validly existing and in good standing under the
Page 23 of 38 Pages
laws of the state of its incorporation or organization. The Investor has the
corporate, partnership or other power and authority under applicable law to
execute and deliver this Agreement and consummate the transactions contemplated
hereby, and has all necessary authority to execute, deliver and perform its
obligations under this Agreement and consummate the transactions contemplated
hereby. The Investor has taken all necessary corporate or other action to
authorize the execution, delivery and performance of this Agreement and the
transactions contemplated hereby.
4.2 No Violation. The execution and delivery by Investor of this
-------------
Agreement, the consummation of the transactions contemplated hereby, and the
compliance by Investor with the terms and provisions hereof, will not result in
a default under (or give any other party the right, with the giving of notice or
the passage of time (or both), to declare a default or accelerate any obligation
under) or violate any charter or similar documents of Investor, if other than a
natural person, or any Contract to which the Investor is a party or by which it
or its properties or assets are bound, or violate any Requirement of Law
applicable to Investor, other than such violations or defaults which,
individually and in the aggregate, do not and will not have a Material Adverse
Effect on the Investor. The Investor is familiar with Rule 10b-6 promulgated
under the Exchange Act, a copy of which is attached hereto as Exhibit A, and is
in full compliance with the provisions thereof with respect to the transactions
contemplated hereby.
4.3 Consents/Approvals. No consents, filings, authorizations or
------------------
actions of any Governmental Authority are required for Investor's execution,
delivery and performance of this Agreement. No consent, approval, waiver or
other actions by any Person under any Contract to which Investor is a party or
by which the Investor or any of its properties or assets are bound is required
or necessary for the execution, delivery and performance by Investor of this
Agreement and the consummation of the transactions contemplated hereby.
4.4 Enforceability. This Agreement has been duly executed and
--------------
delivered by Investor and constitutes a legal, valid and binding obligation of
Investor, enforceable against the Investor in accordance with its terms, except
as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditor's rights generally and general equitable principles regardless of
whether enforceability is considered in a proceeding at law or in equity.
4.5 No Distribution. Investor is acquiring the Shares hereunder for
----------------
its own account and with no present intention of distributing or selling such
Shares and further agrees not to transfer such Shares in violation of the
Securities Act or any applicable state securities law, and no one other than
Investor has any beneficial interest in the Shares. Investor agrees that it will
not sell or otherwise dispose of any of the Shares unless such sale or other
disposition has been registered under the Securities Act or, in the opinion of
counsel, is exempt from registration under the Securities Act and has been
registered or qualified or, in the opinion of such counsel, is exempt from
registration or qualification under applicable state securities laws. Investor
understands that the offer and sale by Issuer of the Shares being acquired by
Investor hereunder has not been registered under the Securities Act by reason of
their contemplated issuance in transactions exempt from the registration and
prospectus delivery requirements of the Securities Act pursuant to Section 4(2)
thereof, and that the reliance of the Issuer on such exemption from registration
is predicated in part on these representations and warranties of Investor.
Page 24 of 38 Pages
Investor acknowledges that pursuant to Section 1.2 of this Agreement a
restrictive legend consistent with the foregoing has been or will be placed on
the certificates for the Shares.
4.6 Accredited Investor. Investor is an "accredited investor" as such
-------------------
term is defined in Rule 501(a) of Regulation D under the Securities Act ( a copy
of which is attached hereto as Exhibit B), and has such knowledge and experience
---------
in financial and business matters that it is capable of evaluating the merits
and risks of the investment to be made by it hereunder.
4.7 Adequate Information. Investor has received from Issuer, and has
---------------------
reviewed, such information which Investor considers necessary or appropriate to
evaluate the risks and merits of an investment in the Shares, including without
limitation, the documents listed on Exhibit C. Investor acknowledges that the
---------
information set forth under the heading of "RISK FACTORS" in Exhibit D hereto is
---------
specifically incorporated herein by reference and forms an integral part of this
Agreement.
4.8 Opportunity to Question. Investor has had the opportunity to
-------------------------
question, and has questioned, to the extent deemed necessary or appropriate,
representatives of Issuer so as to receive answers and verify information
obtained in Investor's examination of Issuer, including the information that
Investor has received and reviewed as referenced in Section 4.7 hereof in
relation to its investment in the Shares.
4.9 No Other Representations. No oral or written representations have
------------------------
been made to Investor in connection with Investor's acquisition of the Shares
which were in any way inconsistent with the information reviewed by Investor.
Investor acknowledges that no representations or warranties of any type or
description have been made to it by any Person with regard to the Issuer, any of
its Subsidiaries, any of their respective businesses, properties or the
investment contemplated herein, other than the representations and warranties
set forth in Article III hereof.
4.10 Knowledge and Experience. Investor has such knowledge and
--------------------------
experience in financial, tax and business matters, including substantial
experience in evaluating and investing in common stock and other securities
(including the common stock and other securities of new and speculative
companies), so as to enable Investor to utilize the information referred to in
Section 4.7 hereof and any other information made available by Issuer in order
to evaluate the merits and risks of an investment in the Shares and to make an
informed investment decision with respect thereto.
4.11 Independent Decision. Investor is not relying on Issuer or on any
--------------------
legal or other opinion in the materials reviewed by Investor with respect to the
financial or tax considerations of Investor relating to its investment in the
Shares. Investor has relied solely on the representations, warranties, covenants
and agreements of Issuer in this Agreement (including the Exhibits hereto) and
on Investor's examination and independent investigation in making its decision
to acquire the Shares.
4.12 Commissions. Investor has not incurred any obligation for any
-----------
finder's or broker's or agent's fees or commissions in connection with the
transactions contemplated hereby.
Page 25 of 38 Pages
ARTICLE V
COVENANTS
5.1 Public Announcements. Investor agrees not to make any public
---------------------
announcement or issue any press release or otherwise publicly disseminate any
information about the subject matter of this Agreement. Issuer shall have the
right to make such public announcements and shall control, in its sole and
absolute discretion, the timing, form and content of all press releases or other
public communications of any sort relating to the subject matter of this
Agreement, and the method of their release, or publication thereof.
5.2 Further Assurances. Each party shall execute and deliver such
-------------------
additional instruments and other documents and shall take such further actions
as may be necessary or appropriate to effectuate, carry out and comply with all
of the terms of this Agreement and the transactions contemplated hereby. Each of
Investor and Issuer shall make on a prompt and timely basis all governmental or
regulatory notifications and filings required to be made by it with or to any
Governmental Authority in connection with the consummation of the transactions
contemplated hereby. Issuer and Investor each agree to cooperate with the other
in the preparation and filing of all forms, notifications, reports and
information, if any, required or reasonably deemed advisable pursuant to any
Requirement of Law or the rules of The Nasdaq National Market in connection with
the transactions contemplated by this Agreement and to use their respective best
efforts to agree jointly on a method to overcome any objections by any
Governmental Authority to any such transactions. Except as may be specifically
required hereunder, neither of the parties hereto or their respective Affiliates
shall be required to agree to take any action that in the reasonable opinion of
such party would result in or produce a Material Adverse Effect on such party.
5.3 Notification of Certain Matters. Each party hereto shall give
---------------------------------
prompt notice to the other party of the occurrence, or non-occurrence, of any
event which would be likely to cause any representation or warranty herein to be
untrue or inaccurate, or any covenant, condition or agreement herein not to be
complied with or satisfied.
ARTICLE VI
REGISTRATION RIGHTS
Investor shall have the following registration rights with respect to
the Registrable Securities owned by it:
6.1 Transfer of Registration Rights. Investor may assign the
-----------------------------------
registration rights with respect to the Shares to any party or parties to which
it may from time to time transfer the Shares, provided that the transferee
agrees in writing with Issuer to be bound by the applicable provisions of this
Agreement regarding such registration rights and indemnification relating
thereto. Upon assignment of any registration rights pursuant to this Section
6.1, Investor shall deliver to Issuer a notice of such assignment which includes
the identity and address of any assignee and such other information reasonably
requested by Issuer in connection with effecting any such registration
(collectively, Investor and each such subsequent holder is referred to as a
"Holder").
Page 26 of 38 Pages
6.2 Required Registration. As promptly as practicable after the Closing,
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Issuer agrees to register all of the Shares pursuant to a registration statement
on Form S-3, or, if Issuer is not then eligible to use Form S-3, such other form
as may be appropriate (the "Shelf Registration"). Issuer shall maintain the
effectiveness of the Shelf Registration until such time as Issuer reasonably
determines based on an opinion of counsel that the Holders will be eligible to
sell all of the Shares then owned by the Holders without the need for continued
registration of the Shares in the three month period immediately following the
termination of the effectiveness of the Shelf Registration. Issuer's obligations
contained in this Section 6.2 shall terminate on the second anniversary of the
date on which the Shares are issued hereunder. Notwithstanding the foregoing,
Issuer may delay filing the Shelf Registration, and may withhold efforts to
cause the Shelf Registration to become effective, if Issuer determines in good
faith that such registration might (i) interfere with or affect the negotiation
or completion of any transaction that is being contemplated by Issuer (whether
or not a final decision has been made to undertake such transaction) at the time
the right to delay is exercised, or (ii) involve initial or continuing
disclosure obligations that might not be in the best interest of Issuer's
stockholders. If, after the Shelf Registration becomes effective, Issuer advises
the Holders that Issuer considers it appropriate for the Shelf Registration to
be amended, the Holders shall suspend any further sales of their registered
shares until Issuer advises them that an amendment to the Shelf Registration has
been declared effective.
6.3 Registration Procedures.
-----------------------
(a) In case of each registration effected by the Issuer subject to
this Article VI, the Issuer shall keep each Holder advised in writing as to the
initiation of each such registration and as to the completion thereof. In
addition, the Issuer shall at its own expense:
(i) prepare and file with the SEC such amendments and supplements
to such registration statement as may be necessary to keep such registration
effective and comply with provisions of the Securities Act with respect to the
disposition of all securities covered thereby during such period;
(ii) update, correct, amend and supplement such registration as
necessary;
(iii) if an offering under the Shelf Registration is to be
underwritten, in whole or in part, enter into a written agreement in form and
substance reasonably satisfactory to the Issuer, the managing underwriter and
the registering Holder;
(iv) notify Holder when the Shelf Registration is declared
effective by the SEC and furnish such number of prospectuses, including
preliminary prospectuses, and other documents incident thereto as Holder may
reasonably request from time to time;
(v) register or qualify such Registrable Securities under such
other securities or blue sky laws of such jurisdictions of the United States as
Holder may reasonably request to enable it to consummate the disposition in such
jurisdiction of the Registrable Securities (provided that Issuer will not be
required to (i) qualify generally to do business in any jurisdiction where it
would not otherwise be required to qualify but for this provision, or (ii)
consent to general service of process in any such jurisdiction);
Page 27 of 38 Pages
(vi) notify Holder at any time when a prospectus relating to the
Registrable Securities is required to be delivered under the Securities Act, of
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
any fact necessary to make the statement therein not misleading, and at the
request of Holder, Issuer will prepare a supplement or amendment to such
prospectus, so that, as thereafter delivered to purchasers of such shares, such
prospectus will not contain any untrue statements of a material fact or omit to
state any fact necessary to make the statements therein not misleading;
(vii) cause all such Registrable Securities to be listed on each
securities exchange or automated quotation system on which similar securities
issued by Issuer are then listed or quoted and obtain all necessary approvals
for trading thereon;
(viii) provide a transfer agent and registrar for all such
Registrable Securities not later than the effective date of such registration
statement; and
(ix) upon the sale of any Registrable Securities pursuant to such
registration statement, remove all restrictive legends from all certificates or
other instruments evidencing the Registrable Securities.
(b) Notwithstanding anything stated or implied to the contrary in
Section 6.3(a) above, the Issuer shall not be required to consent to any
underwritten offering of the Registrable Securities or to any specific
underwriter participating in any underwritten public offering of the Registrable
Securities.
(c) Except as required by law, all expenses incurred by the Issuer in
complying with this Article VI, including but not limited to, all registration,
qualification and filing fees, printing expenses, fees and disbursements of
counsel and accountants for the Issuer, blue sky fees and expenses (including
fees and disbursements of counsel related to all blue sky matters)
("Registration Expenses") incurred in connection with any registration pursuant
to this Article VI shall be borne by the Issuer. All underwriting discounts and
selling commissions applicable to a sale incurred in connection with any
registration of Registrable Securities and the legal fees and other expenses of
Holder shall be borne by Holder.
6.4 Further Information. If Registrable Securities owned by a Holder
-------------------
are included in any registration, such Holder shall furnish the Issuer such
information regarding itself as the Issuer may reasonably request and as shall
be required in connection with any registration referred to in this Agreement
and Holder shall indemnify the Issuer with respect thereto in accordance with
Article VII hereof. Investor hereby represents and warrants to Issuer that it
has accurately and completely provided the requested information and answered
questions (a) through (d) on the signature pages of this Agreement, and Investor
agrees and acknowledges that Issuer may rely on such information as being true
and correct for purposes of preparing and filing the Shelf Registration at the
time of filing thereof and at the time it is declared effective, unless Investor
has notified Issuer in writing to the contrary prior to such time.
Page 28 of 38 Pages
ARTICLE VII
INDEMNIFICATION
7.1 Indemnification Generally. Issuer, on the one hand, and Investor,
-------------------------
on the other hand, (each an "Indemnifying Party"), shall indemnify the other
from and against any and all losses, damages, liabilities, claims, charges,
actions, proceedings, demands, judgments, settlement costs and expenses of any
nature whatsoever (including, without limitation, reasonable attorneys' fees and
expenses) or deficiencies resulting from any breach of a representation,
warranty or covenant by the Indemnifying Party and all claims, charges, actions
or proceedings incident to or arising out of the foregoing.
7.2 Indemnification Relating to Registration Rights.
-----------------------------------------------
(a) With respect to any registration effected or to be effected
pursuant to Article VI of this Agreement, the Issuer shall indemnify each Holder
of Registrable Securities whose securities are included or are to be included
therein, each of such Holder's directors and officers, each underwriter (as
defined in the Securities Act) of the securities sold by such Holder (if any),
and each Person who controls (within the meaning of the Securities Act) any such
Holder or underwriter (a "Controlling Person") from and against all losses,
damages, liabilities, claims, charges, actions, proceedings, demands, judgments,
settlement costs and expenses of any nature whatsoever (including, without
limitation, attorneys' fees and expenses) or deficiencies of any such Holder or
any such underwriter or Controlling Person caused by:
(i) any untrue statement (or alleged untrue statement) of a
material fact contained in any registration statement or prospectus
relating to the Registrable Securities (as amended or supplemented if
the Issuer shall have furnished any amendments or supplements thereto)
or any preliminary prospectus;
(ii) any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the
statement therein, in the light of the circumstances under which it
was made, not misleading; or
(iii) any violation by the Issuer of the Securities Act or any
rule or regulation promulgated thereunder applicable to the Issuer, or
of any blue sky or other state securities laws or any rule or
regulation promulgated thereunder applicable to the Issuer,
in each case, relating to any action or inaction required of the Issuer in
connection with any such registration, and, subject to Section 7.3 below, will
reimburse each such Person entitled to indemnity under this Section 7.2 for all
legal and other expenses reasonably incurred in connection with investigating or
defending any such loss, damage, liability, claim, charge, action, proceeding,
demand, judgment, settlement or deficiency; provided, however, that the
foregoing indemnity and reimbursement obligation shall not be applicable to the
extent that any such matter arises out of or is based on any untrue statement
(or alleged untrue statement) or omission (or alleged omission) made in reliance
upon and in conformity with written information furnished to the Issuer by an
authorized officer of such Holder or by or on behalf of such an underwriter
specifically for use in such registration statement or prospectus.
Page 29 of 38 Pages
(b) With respect to any registration effected or to be effected
pursuant to this Agreement, each Holder of Registrable Securities whose
securities are included or are to be included therein, shall indemnify the
Issuer from and against all losses, damages, liabilities, claims, charges,
actions, proceedings, demands, judgments, settlement costs and expenses of any
nature whatsoever (including, without limitation, reasonable attorneys' fees and
expenses) or deficiencies of the Issuer caused by:
(i) any untrue statement (or alleged untrue statement) of a
material fact contained in any registration statement or prospectus
relating to the Registrable Securities (as amended or supplemented if
the Issuer shall have furnished any amendments or supplements thereto)
or any preliminary prospectus;
(ii) any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the
statement therein, in the light of the circumstances under which it
was made, not misleading; or
(iii) any violation by such Holder of the Securities Act or any
rule or regulation promulgated thereunder applicable to the Issuer or
such Holder or of any blue sky or other state securities laws or any
rule or regulation promulgated thereunder applicable to the Issuer or
such Holder,
in each case, relating to any action or inaction required of such Holder in
connection with any such registration, and, subject to Section 7.3 below, will
reimburse the Issuer for all legal and other expenses reasonably incurred in
connection with investigating or defending any such loss, damage, liability,
claim, charge, action, proceeding, demand, judgment, settlement or deficiency;
provided, however, that the foregoing indemnity and reimbursement obligation
--------
shall only be applicable to the extent that any such matter arises out of or is
based on any untrue statement (or alleged untrue statement) or omission (or
alleged omission) made in reliance upon and in conformity with written
information furnished to the Issuer by an authorized officer of the Holder
specifically for use in such prospectus; provided, further, that the obligation
-------- -------
of the Holder hereunder shall be limited to an amount equal to the proceeds to
the Holder of Registrable Securities sold as contemplated hereunder.
7.3 Indemnification Procedures. Each Person entitled to
-----------------------------
indemnification under this Section (an "Indemnified Party") shall give notice as
promptly as reasonably practicable to each party required to provide
indemnification under this Section (an "Indemnifying Party") of any action
commenced against or by it in respect of which indemnity may be sought
hereunder, but failure to so notify an Indemnifying Party shall not relieve such
Indemnifying Party from any liability that it may have otherwise than on account
of this indemnity agreement so long as such failure shall not have materially
prejudiced the position of the Indemnifying Party. Upon such notification, the
Indemnifying Party shall assume the defense of such action if it is a claim
brought by a third party, and after such assumption the Indemnifying Party shall
not be entitled to reimbursement of any expenses incurred by it in connection
with such action. In any such action, any Indemnified Party shall have the right
to retain its own counsel, but the fees and expenses of such counsel shall be at
the expense of such Indemnified Party unless (i) the Indemnifying Party and the
Indemnified Party shall have mutually agreed to the contrary or (ii) the named
parties in any such action (including any impleaded parties) include both the
Page 30 of 38 Pages
Indemnifying Party and the Indemnified Party and representation of both parties
by the same counsel would be inappropriate due to actual or potential differing
or conflicting interests between them. The Indemnifying Party shall not be
liable for any settlement of any proceeding effected without its written consent
(which shall not be unreasonably withheld or delayed by such Indemnifying
Party), but if settled with such consent or if there be final judgment for the
plaintiff, the Indemnifying Party shall indemnify the Indemnified Party from and
against any loss, damage or liability by reason of such settlement or judgment.
ARTICLE VIII
CONDITIONS TO CLOSING
8.1 Conditions to the Obligation of Investor. The obligation of
-------------------------------------------
Investor to proceed with the Closing is subject to the following conditions, any
and all of which may be waived, in whole or in part, to the extent permitted by
applicable law:
(a) Representations and Warranties. Each of the representations
-------------------------------
and warranties of Issuer contained in this Agreement shall be true and correct
in all material respects as of the Closing as though made on and as of the
Closing, except (i) for changes specifically permitted by this Agreement, and
(ii) that those representations and warranties which address matters only as of
a particular date shall remain true and correct as of such date, except in any
case for such failures to be true and correct which would not, individually or
in the aggregate, have a Material Adverse Effect on the Issuer. Xxxxx and
Company Incorporated shall have received a certificate of an executive officer
of Issuer to such effect on behalf of Investor.
(b) Agreement and Covenants. The Issuer shall have performed or
------------------------
complied in all material respects with all agreements and covenants required by
this Agreement to be performed or complied with by it on or prior to the
Closing. Xxxxx and Company Incorporated shall have received a certificate of an
executive officer of Issuer to such effect on behalf of Investor.
(c) No Order. No governmental authority or other agency or
---------
commission or federal or state court of competent jurisdiction shall have
enacted, issued, promulgated, enforced or entered any statute, rule, regulation,
executive order, decree, injunction, or other order (whether temporary,
preliminary or permanent) which is in effect and which materially restricts,
prevents or prohibits consummation of the Closing or any transaction
contemplated by this Agreement.
8.2 Conditions to the Obligation of Issuer. The obligation of the
----------------------------------------
Issuer to proceed with the Closing is subject to the following conditions, any
and all of which may be waived, in whole or in part, to the extent permitted by
applicable law:
(a) Representations and Warranties. Each of the representations
-------------------------------
and warranties of Investor contained in this Agreement shall be true and correct
as of the Closing as though made on and as of the Closing, except (i) for
changes specifically permitted by this Agreement, and (ii) that those
representations and warranties which address matters only as of a particular
date shall remain true and correct as of such date, except in any case for such
failures to be true and correct which would not, individually or in the
aggregate, have a Material Adverse Effect on the Investor. Unless the Issuer
Page 31 of 38 Pages
receives written notification to the contrary at the Closing, the Issuer shall
be entitled to assume that the preceding is accurate in all respects at the
Closing.
(b) Agreement and Covenants. The Investor shall have performed or
-----------------------
complied in all material respects with all agreements and covenants required by
this Agreement to be performed or complied with by it on or prior to the
Closing. Unless the Issuer receives written notification to the contrary at the
Closing, the Issuer shall be entitled to assume that the preceding is accurate
in all respects at the Closing.
(c) No Order. No governmental authority or other agency or
---------
commission or federal or state court of competent jurisdiction shall have
enacted, issued, promulgated, enforced or entered any statute, rule, regulation,
executive order, decree, injunction, or other order (whether temporary,
preliminary or permanent) which is in effect and which materially restricts,
prevents or prohibits consummation of the Closing or any transaction
contemplated by this Agreement.
ARTICLE IX
MISCELLANEOUS
9.1 Defined Terms. As used herein the following terms shall have the
-------------
following meanings:
"Affiliate" shall have the meaning ascribed to it in Rule 12b-2
of the General Rules and Regulations under the Exchange Act, as in effect on the
date hereof.
"Certificate of Incorporation" means the Issuer's Restated
Certificate of Incorporation, as the same may be supplemented, amended or
restated from time to time.
"Closing" has the meaning in Section 2.1 of this Agreement.
"Common Stock" has the meaning specified in the Recitals to this
Agreement.
"Contract" means any indenture, lease, sublease, loan agreement,
mortgage, note, restriction, commitment, obligation or other contract, agreement
or instrument.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"GAAP" means generally accepted accounting principles in effect
in the United States of America from time to time.
"Governmental Authority" means any nation or government, any
state or other political subdivision thereof, and any entity or official
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
"Issuer" means Extended Stay America, Inc., a Delaware
corporation.
Page 32 of 38 Pages
"Lien" means any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind (including any conditional sale or other
title retention agreement, any lease in the nature thereof, and the filing of or
agreement to give any financing statement under the Uniform Commercial Code or
comparable law or any jurisdiction in connection with such mortgage, pledge,
security interest, encumbrance, lien or charge).
"Material Adverse Change (or Effect)" means a change (or effect),
in the condition (financial or otherwise), properties, assets, liabilities,
rights, obligations, operations, business or prospects, which change,
individually or in the aggregate, is materially adverse to such condition,
properties, assets, liabilities, rights, obligations, operations, business or
prospects.
"Person" means an individual, partnership, corporation, business
trust, joint stock company, estate, trust, unincorporated association, joint
venture, Governmental Authority or other entity, of whatever nature.
"Purchase Price" has the meaning specified in Section 1.1 of this
Agreement.
"Register", "registered" and "registration" refer to a
registration of the offering and sale of Common Stock effected by preparing and
filing a registration statement in compliance with the Securities Act and the
declaration or ordering of the effectiveness of such registration statement.
"Registrable Common Stock" shall mean and include (a) the Common
Stock of the Issuer, as authorized on the date of this Agreement, (b) any other
capital stock of any class or classes (however designated) of the Issuer,
authorized on or after the date hereof, the holders of which shall have the
right either to all or a share of the balance of current dividends and
liquidating distributions after the preference of any preferred stock, or the
holders of which shall ordinarily, in the absence of contingencies, be entitled
to vote for the election of a majority of directors of the Issuer (even though
the right so to vote has been suspended by the happening of such a contingency)
and (c) any other securities into which or for which any of the securities
described in (a) or (b) may be converted or exchanged pursuant to a plan of
recapitalization, reorganization, merger, sale of assets or otherwise.
"Registrable Securities" means all Shares of Common Stock
acquired by Investor pursuant to this Agreement and any other shares of
Registrable Common Stock or other securities issued in respect of such Shares by
way of a stock dividend or stock split or in connection with a combination or
subdivision of Issuer's Common Stock or by way of a recapitalization, merger or
consolidation or reorganization of Issuer; provided, however, that as to any
particular securities, such securities will cease to be Registrable Securities
when they have been sold (i) pursuant to a registration statement covering such
securities or (ii) in a transaction exempt from the registration and prospectus
delivery requirements of the Securities Act under Section 4(1) thereof, and the
certificate or other evidence of ownership of such securities that is issued
upon consummation of the transfer set forth in (i) or (ii) above does not bear
the restrictive legend required pursuant to Section 1.2 of this Agreement and
such securities may be resold without subsequent registration under the
Securities Act.
"Requirements of Law" means as to any Person, the articles of
Page 33 of 38 Pages
incorporation, by-laws or other organizational or governing documents of such
person, and any domestic or foreign and federal, state or local law, rule,
regulation, statute or ordinance or determination of any arbitrator or a court
or other Governmental Authority, in each case applicable to or binding upon such
Person or any of its properties or to which such Person or any of its property
is subject.
"SEC" means the Securities and Exchange Commission.
"SEC Reports" has the meaning specified in Section 3.6 of this
Agreement.
"Securities Act" means the Securities Act of 1933, as amended.
"Shares" has the meaning specified in Section 1.1 of this
Agreement.
"Subsidiary" means as to any Person, a corporation of which more
than 50% of the outstanding capital stock having full voting power is at the
time directly or indirectly owned or controlled by such Person.
9.2 Other Definitional Provisions.
-----------------------------
(a) All terms defined in this Agreement shall have the defined
meanings when used in any certificates, reports or other documents made or
delivered pursuant hereto or thereto, unless the context otherwise requires.
(b) Terms defined in the singular shall have a comparable meaning
when used in the plural, and vice versa.
(c) All accounting terms shall have a meaning determined in
accordance with GAAP.
(d) As used herein, the neuter gender shall also denote the
masculine and feminine, and the masculine gender shall also denote the neuter
and feminine, where the context so permits.
(e) The words "hereof", and "hereunder", and words of similar
import, when used in this Agreement shall refer to this Agreement as a whole
(including any Exhibits hereto) and not to any particular provision of this
Agreement.
9.3 Notices. All notices, requests, demands, claims, and other
-------
communications hereunder shall be in writing and shall be delivered by certified
or registered mail (first class postage pre-paid), guaranteed overnight
delivery, or facsimile transmission if such transmission is confirmed by
delivery by certified or registered mail (first class postage pre-paid) or
guaranteed overnight delivery, to the following addresses and telecopy numbers
(or to such other addresses or telecopy numbers which such party shall
subsequently designate in writing to the other party):
(a) if to Issuer to:
Extended Stay America, Inc.
Page 34 of 38 Pages
000 Xxxx Xxx Xxxx Xxxx., Xxxxx 0000
Xx. Xxxxxxxxxx, Xxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxx, Secretary
Facsimile: (000) 000-0000
with a copy to:
Xxxx, Xxxx & Xxxxx
Three First Xxxxxxxx Xxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attention: D. Xxxx XxXxxxxx, Esq.
Facsimile: (000) 000-0000
(b) if to Investor to the address set forth next to its name on
the signature page hereto.
with a copy to:
Xxxxxx & Carnelutti
000 Xxxxx Xxxxxx - 0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Xxx X. Xxxxxxxx, Esq.
Telecopy: (000) 000-0000
Page 35 of 38 Pages
9.4 Remedies.
--------
(a) Each of the Investor and Issuer acknowledge that the other
party would not have an adequate remedy at law for money damages in the event
that any of the covenants or agreements of such party in this Agreement was not
performed in accordance with its terms, and it is therefore agreed that each of
Investor and Issuer in addition to and without limiting any other remedy or
right such party may have, shall have the right to an injunction or other
equitable relief in any court of competent jurisdiction, enjoining any such
breach and enforcing specifically the terms and provisions hereof, and each of
Investor and Issuer hereby waive any and all defenses such party may have on the
ground of lack of jurisdiction or competence of the court to grant such an
injunction or other equitable relief.
(b) All rights, powers and remedies under this Agreement or
otherwise available in respect hereof at law or in equity shall be cumulative
and not alternative, and the exercise or beginning of the exercise of any
thereof by any party shall not preclude the simultaneous or later exercise of
any other such right, power or remedy by such party.
9.5 Entire Agreement. This Agreement (including the Exhibits attached
----------------
hereto) and other documents delivered at the Closing pursuant hereto, contains
the entire understanding of the parties in respect of its subject matter and
supersedes all prior agreements and understandings between or among the parties
with respect to such subject matter. The Exhibits constitute a part hereof as
though set forth in full above.
9.6 Expenses; Taxes. Except as otherwise provided in this Agreement,
----------------
the parties shall pay their own fees and expenses, including their own counsel
fees, incurred in connection with this Agreement or any transaction contemplated
hereby. Any sales tax, stamp duty, deed transfer or other tax (except taxes
based on the income of Investor) arising out of the issuance of the Shares by
Issuer to Investor and consummation of the transactions contemplated by this
Agreement shall be paid by the Issuer.
9.7 Amendment; Waiver. This Agreement may not be modified, amended,
------------------
supplemented, canceled or discharged, except by written instrument executed by
both parties. No failure to exercise, and no delay in exercising, any right,
power or privilege under this Agreement shall operate as a waiver, nor shall any
single or partial exercise of any right, power or privilege hereunder preclude
the exercise of any other right, power or privilege. No waiver of any breach of
any provision shall be deemed to be a waiver of any preceding or succeeding
breach of the same or any other provision, nor shall any waiver be implied from
any course of dealing between the parties. No extension of time for performance
of any obligations or other acts hereunder or under any other agreement shall be
deemed to be an extension of the time for performance of any other obligations
or any other acts. The rights and remedies of the parties under this Agreement
are in addition to all other rights and remedies, at law or equity, that they
may have against each other.
9.8 Binding Effect; Assignment. The rights and obligations of this
----------------------------
Agreement shall bind and inure to the benefit of the parties and their
respective successors and legal assigns. The rights and obligations of this
Agreement may not be assigned by any party without the prior written consent of
the other party.
Page 36 of 38 Pages
9.9 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be an original but all of which together shall
constitute one and the same instrument.
9.10 Headings. The headings contained in this Agreement are for
--------
convenience of reference only and are not be given any legal effect and shall
not affect the meaning or interpretation of this Agreement.
9.11 Governing Law; Interpretation. This Agreement shall be construed
-----------------------------
in accordance with and governed for all purposes by the laws of the State of
Delaware applicable to contracts executed and to be wholly performed within such
State.
9.12 Severability. The parties stipulate that the terms and provisions
------------
of this Agreement are fair and reasonable as of the date of this Agreement.
However, if any provision of this Agreement shall be determined by a court of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions, covenants and restrictions of this Agreement shall remain
in full force and effect and shall in no way be affected, impaired or
invalidated. If, moreover, any of those provisions shall for any reason be
determined by a court of competent jurisdiction to be unenforceable because it
is excessively broad or vague as to duration, activity or subject, it shall be
construed by limiting, reducing or defining it so as to be enforceable.
9.13 Limitation of Trustee, Officer and Shareholder Liability. The
----------------------------------------------------------
following shall apply to the undersigned only if the Investor is a series of a
Massachusetts business trust (the "Trust"). The Issuer hereby acknowledges that
this Agreement and any agreements, documents, and instruments executed in
connection herewith (collectively, the "Documents") relate solely to the
undersigned and not to any other series of the Trust. The Issuer hereby agrees
that, in seeking to enforce any of its rights under any of the Documents, it
will look solely to the undersigned, and not to any other series of the Trust,
and that all such other series shall have no liabilities or obligations under
the Documents. Additionally, notice is hereby given that the Documents are
executed on behalf of the trustees of the Trust as trustees and not
individually, and that the obligations set forth in the Documents are not
binding upon any of the trustees, officers or shareholders of the Trust
individually, but are binding only upon the assets and property of the
undersigned Trust.
[SIGNATURES AND OTHER INFORMATION ON NEXT TWO PAGES]
Page 37 of 38 Pages
IN WITNESS WHEREOF, the parties hereto have caused this Subscription
Agreement to be duly executed and delivered as of the date set forth below.
NAME OF INVESTOR: ADDRESS FOR NOTICES (Please Print):
------------------------------------ ----------------------------------
----------------------------------
SIGNATURE: ----------------------------------
Attention:
------------------------
By: Telecopy:
---------------------------------- ------------------------
Printed Name:
Title: Tax Identification #:
-------------
Exact Name to appear on Stock Certificate:
------------------------------------
Number of Shares Subscribed For:
---------------------
Aggregate Purchase Price (see Section 1.1): $
--------------------
Investor hereby provides the following additional information:
(a) Excluding the shares of Common Stock subscribed for above,
set forth below is the number of shares of Common Stock and options ("Options")
and warrants ("Warrants" and, together with Common Stock and Options,
"Securities") which Investor beneficially owns or of which Investor is the
------------------
record owner on the date hereof. Please refer to the definition of beneficial
----------
ownership on Exhibit E attached hereto. If none, please so state.
--------- ---------
Number of Shares: (excluding the Shares subscribed for above)
----------------
Number of Options:
----------------
Number of Warrants:
----------------
Please indicate by an asterisk (*) above if Investor disclaims "beneficial
----------
ownership" of any of the above listed Securities, and indicate in response to
---------
question (b) below who has beneficial ownership.
(b) If Investor disclaims "beneficial ownership" in question (a),
--------------------
please furnish the following information with respect to the person(s) other
than Investor who is the beneficial owner(s) of the Securities in question. If
not applicable, please check box:
Name of Beneficial Owner:
------------------------------------
Relationship to Investor:
------------------------------------
Number of Securities Beneficially Owned:
---------------------
Page 38 of 38 Pages
NAME OF INVESTOR:
------------------------------
(c) Are any of the Securities listed in response to question (a)
the subject of a voting agreement, contract, or other arrangement whereby others
have voting control over, or any other interest in, any of Investor's
Securities?
Yes [ ] No [ ]
If the answer is "Yes", please give details:
----------------------------------
(d) Please describe each position, office or other material
relationship which Investor has had with the Issuer or any of its affiliates,
including any Subsidiary of Issuer, within the past three years. Please include
a description of any loans or other indebtedness, and any contracts or other
arrangements or transactions involving a material amount, payable by Investor to
the Issuer or any of its affiliates, including its Subsidiaries, or by the
Issuer or any of its affiliates, including its Subsidiaries, to Investor.
"Affiliates" of the Issuer include its directors and executive officers, and any
other person controlling or controlled by the Issuer. If none, please so state.
Answer:
(e) Please provide the name and address of other person(s), if
any, to whom any proxy statements, registration statements (including notice of
effectiveness thereof), prospectuses or similar documents and information should
be delivered by Issuer on behalf of the Investor in the future, with respect to
the Investor's shares:
------------------------------------ --------------------------------------
------------------------------------ --------------------------------------
------------------------------------ --------------------------------------
------------------------------------ --------------------------------------
(f) Please advise of special stock certificate delivery
requirements for closing, if any:
_______________________________________________________________________________
_______________________________________________________________________________
ACCEPTED: EXTENDED STAY AMERICA, INC.
By: Dated: February ____, 1997
--------------------------
Xxxxxx X. Xxxxxxx,
Senior Vice President