Exhibit C
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement, dated as of September 22, 1997
(this "Agreement"), is made by and among Candlewood Hotel Company, Inc., a
Delaware corporation ("Candlewood" or the "Company"), Doubletree Corporation, a
Delaware corporation ("Doubletree"), Xx. Xxxx X. XxXxxx ("XxXxxx"), on behalf of
himself and as representative of the Alexander Xxxx XxXxxx Trust dated March 14,
1995 and the Xxxxxxxxxxx Xxxxx XxXxxx Trust dated March 14, 1995 (collectively,
the "Trusts"), the Xxxxxx X. Fix Family Partnership, L.P. (the "Fix
Partnership") and each of the parties set forth on Schedule A attached hereto
(collectively, the "Investors", and, together with Candlewood, Doubletree,
XxXxxx, the Trusts and the Fix Partnership, the "Parties").
BACKGROUND
X. XxXxxx, Doubletree and the Fix Partnership had preciously entered
into that certain Incorporation and Registration Rights Agreement dated
September 1, 1996 (the "Original Agreement").
B. The Company completed an initial public offering of its Common
Stock, par value $0.01 per share (the "Common Stock"), on November 5, 1996 (the
"Initial Public Offering").
C. In connection with the issuance and sale of $65 million of its
Series A Cumulative Convertible Preferred Stock (the "Preferred Stock"), the
Company has agreed to grant certain registration rights with respect to the
shares of Common Stock issuable upon the conversion of the Preferred Stock.
D. The parties to the Original Agreement hereby terminate the
Original Agreement and enter into this Agreement on the terms and subject to the
conditions set forth below.
NOW, THEREFORE, in consideration of the foregoing and intending to be
legally bound, the Parties agree as follows:
1. CERTAIN DEFINITIONS. SO. AS USED IN THIS AGREEMENT, THE
FOLLOWING TERMS SHALL HAVE THE FOLLOWING RESPECTIVE MEANINGS:
"Commission" means the United States Securities and Exchange
Commission.
"Certificate of Designation" means the Certificate of Designations,
Preferences and Relative, participating, Optional and Other Special Rights of
Preferred Stock and
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Qualifications, Limitations and Restrictions Thereof, dated September 22, 1997,
relating to the Preferred Stock.
"Eligible Securities" means the shares of Common Stock (i) issued to
Doubletree, XxXxxx, the Trusts and the Fix Partnership upon the reorganization
of the Company from Candlewood hotel Company, LLC to a Delaware corporation,
(ii) to be issued upon the conversion of the Preferred Stock into Common Stock,
stock dividends paid with respect to such shares or issued in exchange for or in
lieu of such shares, and (iii) issued or issuable upon exercise of any Purchase
Warrant (Eligible Securities described in clauses (ii) and (iii) being referred
to collectively as "Preferred Eligible Securities").
"Holder" means a registered holder of outstanding Eligible Securities
or securities convertible into or exercisable for Eligible Securities.
"Purchase Warrant" means any warrant for the purchase of Common Stock
issued to any holder of Series A Preferred Stock in accordance with the terms of
the Certificate of Designation establishing the preferences and rights of and
the qualifications, limitations and restrictions with respect to, the Preferred
Stock.
"Securities Act" the means the Securities Act of 1933 or any similar
Federal statute, and the rules and regulations of the Commission thereunder, all
as the same shall be in effect at the time.
2. REQUIRED REGISTRATION.
(a) At any time after 180 days from the date of the issuance and
sale of the Preferred Stock, (i) Doubletree, or (ii) Investors holding at least
50% of the shares of the Preferred Eligible Securities may deliver to the
Company a written request that the Company file and use its best efforts to
cause to become effective a registration statement under the Securities Act with
respect to such number of the Eligible Securities owned by Doubletree or the
Investors as shall be specified in such request (a "Registration Request");
provided, however, that the Company shall not be obligated to effect any such
registration pursuant to subsection (ii) on behalf of the Investors unless the
anticipated aggregate offering price, net of underwriting discounts and
commissions, would exceed $20,000,000. Except as otherwise provided in Section
2(b)(iv) and 2(b)(v) hereof, the Company shall not be required to file and use
its best efforts to cause to become effective, pursuant to a Registration
Request under this Section 2, (a) more than two registration statements at the
demand of Doubletree, or (b) more than two registration statements at the demand
of the Investors. The party or parties delivering a Registration Request is
hereinafter referred to as the "Requesting Holder." The second Registration
Request made by the Investors may be identified by the Requesting Holder as a
"Priority Demand".
(b) As soon as practicable following the receipt of a
Registration Request, the Company will use its best efforts to register under
the Securities Act, for public sale in accordance with the method of disposition
specified in such Registration Request, the number of shares of Eligible
Securities specified in such Registration
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Request (and the number of Eligible Securities specified in all notices received
from Holders within 20 days after their receipt of notice delivered pursuant to
Section 4 hereof). The Company will also be entitled to include in any
registration statement filed pursuant to a Registration Request, for sale in
accordance with the method of disposition specified in such Registration
Request, such number of shares of Common Stock as the Company shall desire to
sell for its own account. If the method of sale designated is an underwritten
public offering, the managing underwriter or underwriters must be reasonably
acceptable to both the Requesting Holder, or the holders of a majority of the
Eligible Securities held by all parties comprising the Requesting Holder if more
than one party is the Requesting Holder, and the Company, which acceptance shall
not be unreasonably withheld. Notwithstanding the foregoing provisions of this
paragraph (b), to the extent that, in the opinion of the underwriter or
underwriters (if the method of disposition shall be an underwritten public
offering), marketing considerations require the reduction of the number of
shares of Common Stock covered by any such registration, the number of shares of
Common Stock to be registered and sold pursuant to such registration shall be
reduced as follows:
(i) The number of shares of Eligible Securities to be registered
on behalf of the Company shall be reduced (to zero, if necessary);
(ii) The number of shares of Eligible Securities to be
registered on behalf of XxXxxx, the Trusts and the Fix Partnership shall be
reduced (to zero, if necessary) pro rata according to the number of shares
of Eligible Securities held by each; and
(iii) The number of shares of Eligible Securities to be
registered on behalf of Doubletree and the Investors shall be reduced pro
rata according to the number of shares of Eligible Securities held by each;
provided, however, that in connection with a Priority Demand the number of
shares of Eligible Securities requested to be registered on behalf of the
Investors shall only be reduced after the number of shares requested to be
registered by Doubletree has been reduced to zero.
(iv) Notwithstanding the foregoing, if in connection with any
Registration Request made by Doubletree, the number of Eligible Securities
requested to be registered by Doubletree shall have been reduced, the
number of Registration Requests granted to Doubletree pursuant to clause
2(a) above shall be increased by one.
(v) Notwithstanding the foregoing, if in connection with any
Registration Request made by the Investors, the Investors requesting
inclusion of Eligible Securities in such registration shall experience a
reduction in the number of such Eligible Securities by 10% or more, the
number of Registration Requests granted to the Investors pursuant to clause
2(a) above shall be increased by one.
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(vi) In no event shall any registration of Common Stock by the
Company pursuant to Section (vi)(a) of the Certificate of Designation
constitute a Registration Request allocable to any Holder pursuant to
clause 2(a) above.
(c) Notwithstanding the foregoing provisions of this Section 2, the
Company shall not be obligated to file a registration statement at the demand of
any Holder pursuant to this Section 2 within 180 days following any underwritten
public offering of Common Stock or of securities of the Company convertible into
or exercisable or exchangeable for Common Stock.
3. SHELF REGISTRATION ON FORM S-3.
(a) At any time after 180 days from the date of the issuance and sale
of the Preferred Stock, any Holder or Holders may deliver to the Company a
written request (a "Form S-3 Request") that the Company file and use its best
efforts to cause to become effective a "shelf" registration statement on Form
S-3 (or such equivalent successor form) under the Securities Act for an offering
to be made on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act (a "Shelf Registration Statement") with respect to such number of
Eligible Securities owned by the Holder or Holders as shall be specified in such
request (and the number of Eligible Securities specified in all notices received
from Holders within 20 days after their receipt of notice delivered pursuant to
Section 4 hereof); provided, however, that the Company shall not be obligated to
effect any such registration pursuant to this Section 3 unless the aggregate
value of the securities to be registered thereon would exceed $2,500,000. The
Company shall not be required to file and use its best efforts to cause to
become effective, pursuant to a Form S-3 Request under this Section 3, (a) more
than two Shelf Registration Statements on behalf of Doubletree, or (b) more than
two Shelf Registrations on behalf of the Investors.
(b) As soon as practicable following the receipt of a Form S-3
Request, the Company will use its best efforts to register under the Securities
Act, for an offering to be made on a delayed or continuous basis pursuant to
Rule 415 of the Securities Act, the number of shares of Eligible Securities
specified in such Form S-3 Request (and the number of Eligible Securities
specified in all notices received from Holders within 20 days after their
receipt of notice delivered pursuant to Section 4 hereof). The Company will
also be entitled to include in any Shelf Registration Statement filed pursuant
to this Section 3 such number of shares of Common Stock as the Company shall
desire to sell for its own account.
4. PIGGYBACK REGISTRATION.
(a) If the Company at any time proposes to register Common Stock
under the Securities Act for sale to the public (including registrations
pursuant to Section 2 or 3 hereof), whether for its own account or for the
account of other security holders or bow (except registration statements on Form
X-0, X-0 or another form not available for registering the Eligible Securities
for sale to the public), each such time it will give written notice to all
Holders of its intention to do so. Upon the written request of any Holder (a
"Piggyback Request"), given within 20 days after receipt of any such notice, to
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register any of its Eligible Securities, the Company will use its best efforts
to cause the Eligible Securities as to which registration shall have been so
requested to be covered by the registration statement proposed to be filed by
the Company.
(b) In the event that any registration statement described in this
Section 4 shall relate, in whole or in part, to an underwritten public offering
of shares of Common Stock, the Eligible Securities to be registered must be sold
through the same underwriters as have been selected by the Company or agreed to
pursuant to Section 2(b) hereof. Otherwise, the method of distribution of the
Eligible Securities to be sold by any Holder making a Piggyback Request shall be
as specified therein. Except in the case of a registration statement filed
pursuant to a Registration Request under Section 2 hereof or a Form S-3 Request
made under Section 3 hereof, the number of shares of Common Stock to be included
in such registration statement on account of any person (other than the Company)
may be reduced if and to the extent that the underwriter or underwriters shall
be of the opinion that such inclusion would materially adversely affect the
marketing of the total number of shares of Common Stock proposed to be sold, and
the number of shares to be registered and sold by each person (other than the
Company) shall be reduced pro rata according to the relative number of
fully-diluted shares owned by such person. Notwithstanding the foregoing
provisions of this Section 4, the Company may withdraw any registration
statement referred to in this Section 4 without thereby incurring any liability
to any requesting Holder.
5. LEGISLATION PROCEDURES. If and whenever the Company is required
by the provisions of Section 2, 3 or 4 to effect the registration of any
Eligible Securities under the Securities Act, the Company shall:
(a) prepare and file with the Commission a registration statement
with respect to such securities which will permit the public sale thereof in
accordance with the method of distribution specified in the applicable
Registration Request, and the Company shall use its best efforts (i) to cause
such registration statement to be filed within 60 days of receipt of the
Registration Request, (ii) to cause such registration statement to be declared
effective as promptly as practicable and (iii) to maintain the effectiveness of
such registration statement for a period of not less than 90 days (or until such
time as all securities sold thereunder shall have been sold, in the case of a
registration on Form S-3);
(b) promptly prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to effect and maintain the
effectiveness of such registration statement for the period specified in Section
5(a) and as to comply with the provisions of the Securities Act with respect to
the disposition of all Eligible Securities covered by such registration
statement in accordance with the intended method of disposition set forth in
such registration statement for such period, including such amendments or
supplements as are necessary to cure any untrue statement or omission referred
to in Section 5(e)(vi);
(c) provide to the managing underwriter or underwriters and not more
than one counsel for all underwriters and to the Holders of Eligible Securities
to be
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included in such registration statement and not more than one counsel for all
such Holders (such counsel to be reasonably acceptable to the Company) the
opportunity to participate in the preparation of (i) such registration
statement, (ii) each prospectus relating thereto and included therein or filed
with Commission and each amendment or supplement thereto;
(d) make available for inspection by the parties referred to in
Section 5(c) such financial and other information and books and records of the
Company, and cause the officers, directors and employees of the Company, and
counsel and independent certified public accountants of the Company, to respond
to such inquiries, as shall be reasonably necessary, in the judgment of
respective counsel to such Holders and such underwriter or underwriters, to
conduct a reasonable investigation within the of the Securities Act; provided,
however, that each such person shall be required to retain in confidence and not
to disclose to any other person any information or records reasonably designated
by the Company in writing as being confidential until such time as such
information becomes a matter of public record (whether by virtue of its
inclusion in such registration statement or otherwise), unless (i) such person
shall be required to disclose such information pursuant to the subpoena or order
of any court or other governmental agency or body having jurisdiction over the
matter or to the National Association of Insurance Commissioners or (ii) such
information is required to be set forth in such registration statement or the
prospectus included therein or in an amendment to such registration statement or
an amendment or supplement to such prospectus in order that such registration
statement, prospectus, amendment or supplement, as the case may be, shall not
contain an untrue statement of a material fact or omit to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and such information has not been so set forth after the
request by a Holder to such effect; and provided, further, that the Company need
not make such formation available, nor need it cause any officer, director or
employee to respond to such inquiry, unless each such Holder and such counsel,
upon the Company's request, execute and deliver to the Company an undertaking to
substantially the same effect contained in the immediately preceding proviso;
(e) immediately notify the persons referred to in Section 5(c) and
(if requested by any such person) confirm such advice in writing, (i) when such
registration statement or any prospectus included therein or any amendment or
supplement thereto has been filed and, with respect to such registration
statement or any such amendment, when the same has become effective, (ii) of any
material comments by the Commission with respect thereto or any request by the
Commission for amendments or supplements to such registration statement or
prospectus or for additional information, (iii) of the issuance by the
Commission of any stop order suspending the effectiveness of such registration
statement or the initiation of any proceedings for that purpose, (iv) if at any
time the representations and warranties of the Company contemplated by Section
5(l)(i) cease to be due and correct in all material respects, (v) of the receipt
by the Company of any notification with respect to the suspension of the
qualification of any Eligible Securities for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose or (vi) at any time
when a prospectus is required to be delivered under the Securities Act, of the
occurrence or failure to occur of any event, or any other change in
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law, fact or circumstance, as a result of which such registration statement,
prospectus any amendment or supplement thereto, or any document incorporated by
reference in any of the foregoing, contains an untrue statement of a material
fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances then existing;
(f) take reasonable efforts to obtain the withdrawal at the earliest
practicable date of any order suspending the effectiveness of such registration
statement or any post-effective amendment thereto:
(g) if requested by the managing underwriter or underwriters or the
holders of at least a majority of the Eligible Securities being sold in
connection with an underwritten public offering, promptly incorporate in a
prospectus supplement or post-effective amendment such information as such
managing underwriter or underwriters or such Holders reasonably specify should
be included therein relating to the terms of the sale of such Eligible
Securities, including, without limitation, information with respect to the
number of Eligible Securities being sold to such underwriters, the names and
descriptions of such Holders, the purchase price being paid therefor by such
underwriters and any other terms of the underwritten (or best efforts
underwritten) offering of the Eligible Securities to be sold in such offering,
and make all required filings of such prospectus supplement or post-effective
amendment promptly after notification of the matters to be incorporated in such
prospectus supplement or post-effective amendment;
(h) furnish to each Holder of Eligible Securities included in such
registration and each underwriter and compel for Holder, if any, thereof an
executed copy of such registration statement, each such amendment and supplement
thereto (in each case including all exhibits thereto, whether or not such
exhibits are incorporated by reference therein) and such number of copies of the
prospectus included in such registration statement (including each preliminary
prospectus and any summary prospectus) and each amendment or supplement thereto,
in conformity with the requirements of the Securities Act, as such Holder and
managing underwriter, if any, may reasonably request in order to facilitate the
disposition of such Eligible Securities by such Holder or by the participating
underwriters;
(i) use its best efforts to (i) register or qualify the Eligible
Securities to be included in such registration statement under such other
securities laws or blue sky laws of such jurisdictions as any Holder of such
Eligible Securities and each managing underwriter, if any, thereof shall
reasonably request, (ii) keep such registrations or qualifications in effect for
so long as is necessary to effect the disposition of such Eligible Securities in
the manner contemplated by the registration statement, the prospectus included
therein and any amendment or supplement thereto and (iii) take any and all such
actions as may be reasonably necessary or advisable to enable such Holder and
any participating underwriter or underwriters to consummate the disposition in
such jurisdictions of such Eligible Securities; provided, however, that the
Company shall not be required for any such purpose to (A) qualify generally to
do business as a foreign corporation or a broker-dealer any jurisdiction wherein
it would not otherwise be required
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to qualify but for the requirements of this Section 5(i), (B) subject itself to
taxation in any such jurisdiction or (C) consent to general service of process
in any such jurisdiction;
(j) cooperate with the Holders of the Eligible Securities included in
such registration and the managing underwriters, if any, to facilitate the
timely preparation and delivery of certificates representing Eligible Securities
to be sold, which certificate shall be printed, lithographed or engraved, or
produced by any combination of such methods, on steel engraved borders and which
shall not bear any restrictive legends; and, in the case of an underwritten
public offering, enable such Eligible Securities to be registered in such names
as the underwriter or underwriters may request at least two business days prior
to any sale of such Eligible Securities;
(k) provide not later than the effective date of the registration
statement a CUSIP number for all Eligible Securities;
(l) enter into an underwriting agreement, engagement letter, agency
agreement, "best efforts" underwriting agreement or similar agreement, as
appropriate, and take such other actions in connection therewith as the Holders
of at least a majority of the Eligible Securities to be included in such
registration shall reasonably request in order to expedite or facilitate the
disposition of such Eligible Securities, and in connection therewith, whether or
not an underwriting agreement is entered into and whether or nor the
registration is an underwritten public offering, (i) make such representations
and warranties to the Holders of such Eligible Securities included in such
registration and the underwriters, if any, in form, substance and scope as are
customarily made in an underwritten public offering, (ii) obtain an opinion of
counsel to the Company in customary form and covering such matters as are
customarily covered by such an opinion as the Holders of at least a majority of
such Eligible Securities and the underwriters, if any, may reasonably request,
addressed to each participating Holder and the underwriters, if any, and dated
the effective date of such registration statement (or, if such registration
includes an underwritten public offering, dated the date of the closing under
the underwriting agreement); (iii) obtain a "cold comfort" letter from the
independent certified public accountants of the Company addressed to the Holders
of the Eligible Securities included in such registration and the underwriters,
if any, dated the effective date of such registration statement (and, if such
registration includes an underwritten public offering, also dated the date of
the closing under the underwriting agreement), such letter to be in customary
form and covering such matters as are customarily covered by such letters; (iv)
deliver such documents and certificates as may be reasonably requested by the
Holders of at least a majority of the Eligible Securities included in such
registration and the managing underwriter or underwriters, if any, to evidence
compliance with clause (i) above and with any customary conditions contained in
the underwriting agreement or other agreement entered into by the Company, and
(v) undertake such obligations relating to expense reimbursement,
indemnification and contribution as are provided in Sections 6, 7 and 8 hereof;
and
(m) otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission.
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Notwithstanding the provisions of Section 5(a), the Company's obligation to
file a registration statement, or cause such registration statement to become
effective, shall be suspended, without incurring any liability to any Holder,
for a period not to exceed 90 days if there exists at the time material
non-public information relating to the Company that, in the reasonable opinion
of the Company, should not be disclosed, provided that any such suspension all
occur no more than once in any twelve (12)-month period. In such an event, the
Company shall promptly inform all Holders of the Company's decision to defer
filing of a registration statement and shall notify all Holders promptly (but in
any event not later than upon the expiration of the 90-day period specified in
the immediately preceding sentence) of the recommencement of the Company s
efforts to file the registration statement and to cause the registration
statement to become effective.
In connection with each registration of Eligible Securities hereunder, the
Holders thereof will furnish to the Company in writing such information with
respect to themselves and the proposed distribution by them as shall be
reasonably necessary in order to assure compliance with applicable federal and
state securities law. Each such Holder also agrees to notify the Company as
promptly as practicable of any inaccuracy or change in information previously
furnished by such Holder to the Company or of the occurrence of any other event,
in either case as a result of which any prospectus relating to such registration
contains an untrue statement of a material fact regarding such Holder or the
distribution of such Eligible Securities or omits to state any material fact
regarding such Holder or the distribution of such Eligible Securities required
to be stated therein or necessary to make the statements therein not misleading
in light of the circumstances then existing, and promptly to furnish to the
Company any additional information required to correct and update such
previously famished information or required so that such prospectus shall not
contain, with respect to such Holder or the distribution of such Eligible
Securities, an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading, in light of the circumstances then existing. Each such Holder
further agrees that upon giving any notice referred to in the immediately
preceding sentence, or upon receipt of any notice from the Company pursuant to
Section 5(e)(vi) hereof, such Holder shall forthwith discontinue the disposition
of Eligible Securities pursuant to the registration statement applicable to such
Eligible Securities until such Holder shall have received copies of an amended
or supplemented registration statement or prospectus, and if so directed by the
Company, such Holder shall deliver to the Company (at the Company's expense) all
copies, other than permanent file copies, then in such Holder's possession of
the prospectus covering such Eligible Securities at the time of receipt of such
notice.
6. EXPENSES. The Company shall pay all expenses incurred in
complying with Sections 2, 3 and 4, including without limitation all
registration and filing fees, printing expenses, fees and disbursements of
counsel and independent public accountants for the Company, fees and expenses of
one counsel for the selling Holders, fees and expenses (including counsel fees)
incurred in connection with complying with state securities or "blue sky" laws
(other than those which by law must be paid by the selling security holders),
fees of the National Association of Securities Dealers, Inc., transfer taxes,
fees of transfer agents and registrars and stock exchange listing fees, but
excluding all underwriting discounts and selling commissions applicable to the
sale of Eligible
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Securities. All expenses of participating sellers other than those assumed by
the Company in this Agreement shall be borne by such sellers in proportion to
the number of shares sold by each seller or as they may otherwise agree.
7. INDEMNIFICATION.
(a) In the event of a registration of Eligible Securities under the
Securities Act pursuant to Section 2, 3 or 4, the Company shall indemnify and
hold harmless each selling Holder, each underwriter of such Eligible Securities
thereunder and each other person, if any, who controls such selling Holder or
underwriter within the meaning of the Securities Act, against any losses,
claims, damages or liabilities, joint or several, to which such selling Holder,
underwriter or controlling person may become subject under the Securities Act or
otherwise or in any action in respect thereof, and will reimburse each such
selling Holder, underwriter and controlling person for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action, as such expenses
are incurred, insofar as such losses, claims, ties or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any registration statement
under which such Eligible Securities were registered under the Securities Act
pursuant to Section 2, 3 or 4, any preliminary prospectus or final prospectus
contained therein, or any amendment or supplement thereof, or arise out of or
are based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, provided, however, that the Company shall not be liable to any such
selling Holder, underwriter or controlling person in any such case if and to the
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in conformity with information furnished by such selling Holder,
underwriter or controlling person in writing specifically for use in such
registration statement or prospectus.
(b) In the event of a registration of any of the Eligible Securities
under the Securities Act pursuant to Section 2, 3 or 4, each selling Holder of
such Eligible Securities, severally and not jointly, will indemnify and hold
harmless the Company, each underwriter and each person, if any, who controls the
Company or any underwriter within the meaning of the Securities Act, each
officer of the Company who signs the registration statement, each director of
the Company, each other seller of securities registered by the registration
statement covering such Eligible Securities and each person, if any, who
controls such seller, against all losses, claims, damages or liabilities, joint
or several, to which the Company or any such officer, director, underwriter,
other seller or controlling person may become subject under the Securities Act
or otherwise, and shall reimburse the Company and each such officer, director,
underwriter, other seller and controlling person for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability or action, but only to the extent that any
such loss, claim, damage or liability (or action in respect thereof) arises out
of or is based upon an untrue statement or alleged untrue statement or omission
or alleged omission made in reliance upon and in conformity with information
pertaining to such Holder furnished in writing to the Company by such
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Holder specifically for use in the registration statement or prospectus relating
to such Eligible Securities. Notwithstanding the immediately preceding
sentence, the liability of each such Holder hereunder shall, not in any event
exceed the net proceeds received by such Holder from the sale of Eligible
Securities covered by such registration statement.
(c) Promptly after receipt by an indemnified party hereunder of
notice of the commencement of any action, such indemnified party, if a claim in
respect thereof is to be made against an indemnifying party hereunder, shall
notify such indemnifying party in writing thereof, but the omission so to notify
such indemnifying party shall not relieve such indemnifying party from any
liability that it may have to any indemnified party other than under this
Section 7 and, unless the failure to so provide notice materially adversely
affects or prejudices such indemnifying party's defense against any action,
shall not relieve such indemnifying party any liability that it may have to any
indemnified party under this Section 7. In case any such action shall be
brought against any indemnified party and it shall notify an indemnifying party
of the commencement thereof, such indemnifying party shall be entitled to
participate in and, to the extent it shall wish, to assume and undertake the
defense thereof with counsel reasonably satisfactory to such indemnified party,
and, after notice from such indemnifying party to such indemnified party of its
election so to assume and undertake the defense thereof, such indemnifying party
shall not be liable to such indemnified party under this Section 7 for any legal
expenses subsequently incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of investigation and of liaison with
counsel so selected; provided, however, that, if the defendants in any such
action include both the indemnified parry and the indemnifying parry and the
indemnified party shall have reasonably concluded that there may be reasonable
defenses available to it that are different from or additional to those
available to the indemnifying party or if the interests of the indemnified
party reasonably may be deemed to conflict with the interests of the
indemnifying party, the indemnified parry shall have the right to select a
separate counsel and to assume and undertake the defense of such action, with
the expenses and fees of such separate counsel and other expenses related to
such defense to be reimbursed by the indemnifying parry as incurred.
(d) No indemnifying party shall be liable for any amounts paid in a
settlement effected without the consent of such indemnifying party, which
consent shall not be unreasonably withheld. No indemnifying party shall
consent to entry of any judgment or enter into any settlement which does not
include as an unconditional term thereof the giving by the plaintiff to the
indemnified party of a release from all liability in respect of such claim or
litigation.
(e) The reimbursements required by this Section 7 shall be made by
periodic payments during the course of the investigation or defense, as and
others bills are received and expenses incurred.
8. CONTRIBUTION. If for any reason the indemnity set forth in
Section 7 is unavailable or is insufficient to hold harmless an indemnified
party, then the indemnifying party shall contribute to the amount paid or
payable by such indemnified party as a result of the aggregate losses, claim,
damages, liabilities and expenses of the
Page 51 of 92
nature contemplated by said indemnity (i) in such proportion as is appropriate
to renew the relative fault of the indemnifying party on the one hand and such
indemnified party on the other (determined by reference to, among other things,
whether the untrue statement of a material fact or omission to state a material
fact relates to information supplied by the indemnifying party or such
indemnified party and the parties' relative intent, knowledge, access to
information and opportunity to correct or event such untrue statement or
omission), or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law or provides a lesser sum to such indemnified party
than the amount hereinafter calculated, in such proportion as is appropriate to
reflect not only the relative fault of the indemnifying party and such
indemnified party but also the relative benefits received by the indemnifying
party on the one hand and such indemnified party on the other, as well as any
other relevant equitable considerations.
The Company and the Parties agree that it would not be just and
equitable if contribution pursuant to this Section 8 were determined by pro rata
allocation or by any other the method of allocation which does not take account
of the equitable considerations referred to in the immediately preceding
paragraph. The amount paid or payable by an indemnified party as a result of
the losses, claims, damage., liabilities or expenses referred to in such
paragraph shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by such indemnified party
in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section, a Holder shall not be required
to contribute any amount in excess of the amount by which the net proceeds of
the sale of Eligible Securities sold by such Holder and distributed to the
public exceeds the amount of any damages which such Holder has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person which is not guilty of such fraudulent
misrepresentation.
9. UNDERWRITING AGREEMENT. If Eligible Securities are to be sold
pursuant to a registration statement in an underwritten offering pursuant to
Section 2, 3 or 4, the Company and each selling Holder of Eligible Securities
agrees to enter into a written agreement with the managing underwriter or
underwriters selected in the manner herein provided in such form and containing
such provisions as are reasonably satisfactory to the Company and each such
selling Holder and as are customary in the securities business for such an
arrangement among such underwriter or underwriters, each such selling Holder and
companies of the Company's size and investment stature. No Holder of Eligible
Securities may participate in any underwritten sale of Eligible Securities
pursuit to Section 2, 3 or 4 hereof unless such Holder agrees to sell such
Holder's securities in accordance with any underwriting arrangements approved by
the persons Settled hereunder to specify the method of distribution of the
securities being registered and completed and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
reasonably required under the terms of such underwriting arrangements.
Page 52 of 92
10. LIMITATIONS ON SUBSEQUENT REGISTRATION RIGHTS. If, subsequent to
the date hereof, the Company grants to any holders or prospective holders of the
Company's securities the right to require that the Company register any
securities of the Company under the Securities Act, such registration rights
shall be granted subject to the rights of the Holders to include all or part of
their Eligible Securities in any such registration on the terms and conditions
set forth in Section 4.
11. RULE 144. The Company covenants with the Holders of Eligible
Securities that, if and to the extent the Company shall be required to do so
under the Securities Exchange Act of 1934, as amended, and the rules and
regulations thereunder, as the same may be amended and in effect at the time
(the "Exchange Act"), the Company shall timely file the reports required to be
filed by it under the Exchange Act or the Securities Act (including, but not
limited to, the reports under Sections 13 and 15(d) of the Exchange Act
referred to in subparagraph (c)(l) of Rule 144 adopted by the Commission under
the Securities Act), all to the extent required from time to time to enable such
Holder to sell Eligible Securities without registration under the Securities Act
within the limitations of the exemption provided by Rule 144 under the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission. Upon the request of any
Holder of Eligible Securities, the Company shall deliver to such Holder a
written statement as to whether it has complied with such requirements.
12. EFFECT OF FAILURE TO SELL AND PURCHASE PREFERRED STOCK. The
shares of Preferred Stock will be sold in two separate sales of shares pursuant
to the Stock Purchase Agreement. If the sale of such shares on the Second
Closing Date (as defined in the Stock Purchase Agreement) does not occur within
six months of the Initial Closing Date (as defined in the Stock Purchase
Agreement), on such six month anniversary date, pursuant to Section (vi)(r) of
the Certificate of Designation, all shares of Preferred Stock then outs shall,
at the option of each Holder, be converted into Common Stock at the then
applicable Conversion Price (as defined in the Certificate of Designation) or
purchased by the Company for the Liquidation Amount (as defined in the
Certificate of Designation).
(a) If all shares of Preferred Stock are purchased by the Company
pursuant to Section (vi)(r) of the Certificate of Designation, all rights of the
Holders pursuant to this Agreement shall terminate immediately upon such
purchase.
(b) In the event that any shares of Preferred Stock are converted
into Common Stock pursuant to Section (vi)(r) of the Certificate of Designation,
the rights of the Investors pursuant to this Agreement shall be modified as
follows:
(i) The number of Registration Requests to which the Investors
shall be entitled pursuant to Section 2(a) shall be reduced to one, and in
connection with such Registration Request, the Company shall not be
obligated to effect any such registration pursuant to Section 2(a) unless
the anticipated aggregate offering price, net of underwriting discounts and
commissions, would exceed $10,000,000.
Page 53 of 92
(ii) The Investors shall not be enabled to any Priority Demand
pursuant to Section 2(a).
(iii) The number of Form S-3 Requests to which the Investors
shall be entitled pursuant to Section 3(a) shall be reduced to one.
13. MISCELLANEOUS.
(a) All covenants and agreements contained in this Agreement by or
behalf of any of the signatories shall bind and inure to the benefit of the
respective successors and permitted assigns of the signatories, whether so
expressed or not. If any permitted transferee of any Holder of Eligible
Securities shall acquire Eligible Securities in any manner (other than by way of
a registered public offering), whether by operation of law or otherwise, such
Eligible Securities shall be held subject to all of the terms of this Agreement,
and by taking and holding such Eligible Securities such transferee shall be
entitled to receive the benefits of and be conclusively deemed to have agreed to
be bound by and to perform all of the terms and provisions of this Agreement.
The benefits to which any such permitted transferee shall be entitled shall
include, without limitation, the rights to register Eligible Securities under
Sections 2, 3 and 4 hereof; provided, however, that any such permitted
transferee shall not be entitled to deliver to the Company a Registration
Request or a Form S-3 Request pursuant to Section 2 or 3 hereof unless such
permitted transferee acquired from its transferor (i) with respect to Eligible
Seventies issued upon the conversion of Preferred Stock, at least 100,000
Eligible Securities; provided, however, that the transfer of registration rights
held pursuant to this Agreement to a partner, shareholder, equity holder or
officer of any Investor shall be without restriction as to minimum shareholding;
or (ii) with respect to all over Eligible Securities, at least a majority of the
Eligible Securities owned by such transferor at the time of transfer. If the
Company shall so request, any such successor or permitted assign shall agree in
writing to acquire and hold the Eligible Securities subject to all of the terns
thereof. This Section 13(a) shall not be deemed to create any right on the part
of any Holder to transfer Eligible Securities in contravention of any
restriction thereon contained in any other agreement to which such Holder is a
party.
(b) All notices, consents and other communications under this
Agreement shall be in writing and shall be deemed to have been duly given when
(a) delivered by hand, (b) sent by telecopier (with receipt confirmed), provided
that a copy is mailed by registered mail, return receipt requested, or (c) when
received by the addressee, if sent by Express Mail, Federal Express or other
express delivery service (receipt requested) in each case to the appropriate
addresses and telecopier numbers set forth below (or to such other addresses and
telecopier numbers as a party may designate as to itself by notice to the other
parties):
(i) If to Doubletree: 000 Xxxxx 00xx Xxxxxx, Xxxxx 000,
Xxxxxxx, XX 00000, Attention: General Counsel, telecopier no. (602)
220-6666.
Page 54 of 92
(ii) If to the Company: Xxxxxxxxx Xxxxxx Xxxx, 0000 Xxxx
Xxxxxxx, Xxxxxxx, Xxxxxx 00000, telecopier number (000) 000-0000,
Attention: President.
(iii) If to XxXxxx or the Trusts: Xxxxxxxxx Xxxxxx Xxxx, 0000
Xxxx Xxxxxxx, Xxxxxxx, Xxxxxx 00000, telecopier number (316) 631- I333,
Attention: Xxxx XxXxxx.
(iv) If to the Fix Partnership: Xxxxxxxxx Xxxxxx Xxxx, 0000
Xxxx Xxxxxxx, Xxxxxxx, Xxxxxx 00000, telecopier number (000) 000-0000,
Attention: Xxxxxx Fix.
(v) If to an Investor: at the address set forth on Schedule A
attached hereto.
(c) This Agreement shall be governed and construed in accordance with
the laws of the State of Delaware.
(d) This Agreement may not be amended or modified, and no provision
hereof may be waived, except in writing, and any such writing shall only be
effective with respect to a Party who has executed such writing. The failure of
any of the Parties to insist upon strict adherence to any term of this Agreement
on any occasion shall not be considered a waiver of that term or deprive such
Party of the right thereafter to insist upon strict adherence to that term or
any other term of this Agreement.
(e) This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
(f) The Parties acknowledge that there may be no adequate remedy at
law if any Parry fails to perform any of its obligations hereunder and that each
Party may be irreparably harmed by any such failure, and accordingly agree that
each Party, in addition to any other remedy to which it may be entitled in law
or in equity, shall be entitled to compel specific performance of the
obligations of any other Party under this Agreement in accordance with the terms
and conditions of this Agreement in any court of the United States or any state
thereof having jurisdiction.
(g) The headings in this Agreement are for convenience of reference
only and shad not limit or otherwise affect the meaning hereof.
(h) In the event that any one or more of the provisions contained
herein or the application thereof in any circumstances, is held invalid, illegal
or unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be in any way impaired thereby, it being
intended that all of the rights and privileges of the Holders shall be
enforceable to the fullest extent permitted by law.
Page 55 of 92
(i) This Agreement is intended by the parties as a final expression
of their agreement and a complete and exclusive statement of the agreement and
understanding of the parties hereto in respect of the subject matter confined
herein. There are no restrictions, promises, warranties or undertakings over
than those set forth or referred to herein or therein. This Agreement
supersedes all prior agreements and understandings between the Parties with
respect to such subject matter.
Page 56 of 92
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized as of the day
and year first above written.
CANDLEWOOD HOTEL COMPANY, INC.
By: /s/Xxxx X. XxXxxx
------------------------------
Name: Xxxx X. XxXxxx
Title: Chief Executive Officer
DOUBLETREE CORPORATION
By: /s/Xxxxx X. Xxxxxxx
------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Senior Vice President,
General Counsel and
Secretary
XXXXXX X. FIX FAMILY PARTNERSHIP, L.P.
By: /s/ Xxxxxx X. Fix
------------------------------
Name: Xxxxxx X. Fix
Title: General Partner
By: /s/ Xxxxxx X. Fix
------------------------------
Name: Xxxxxx X. Fix
XXXX X. XxXXXX, for himself and on
behalf of the XXXXXXXXX XxXXXX TRUST
DATED MARCH 14, 1995 and the XXXXXXXXXXX
XXXXX XxXXXX TRUST DATED MARCH 14, 1995
/s/Xxxx X. XxXxxx
------------------------------
Name: Xxxx X. XxXxxx
Page 57 of 92
OLYMPUS GROWTH FUND II, L.P.
By: OGP II, L.P., its General Partner
By: Xxxxxx, L.L.C., its General
Partner
By /s/Xxxxx X. Xxxxxx
------------------------------
Name: Xxxxx X. Xxxxxx
Title: General Partner
OLYMPUS EXECUTIVE FUND, L.P.
By: OEF, L.P., its General Partner
By: Xxxxxx, L.L.C., its General
Partner
By: /s/Xxxxx X. Xxxxxx
------------------------------
Name: Xxxxx X. Xxxxxx
Title: General Partner
XXXXXX GUARANTY TRUST COMPANY OF NEW
YORK, AS TRUSTEE OF THE COMMINGLED
PENSION TRUST FUND (MULTI-MARKET SPECIAL
INVESTMENT FUND II) OF XXXXXX GUARANTY
TRUST COMPANY OF NEW YORK
By: /s/Xxxxxx X. Xxxxx, XX
------------------------------
Name: Xxxxxx X. Xxxxx, XX
Title: Vice President
XXXXXX GUARANTY TRUST COMPANY OF NEW
YORK, AS TRUSTEE OF THE MULTI-MARKET
SPECIAL INVESTMENT TRUST FUND OF XXXXXX
GUARANTY TRUST COMPANY OF NEW YORK
By: /s/Xxxxxx X. Xxxxx, XX
------------------------------
Name: Xxxxxx X. Xxxxx, XX
Title: Vice President
Page 58 of 92
XXXXXX GUARANTY TRUST COMPANY OF NEW
YORK, AS INVESTMENT MANAGER AND AGENT
FOR THE XXXXXX X. XXXXX FOUNDATION
(MULTI-MARKET ACCOUNT)
By: /s/Xxxxxx X. Xxxxx, XX
------------------------------
Name: Xxxxxx X. Xxxxx, XX
Title: Vice President
CHASE VENTURE CAPITAL ASSOCIATES, L.P.
By: Chase Capital Partners, its General
Partner
By /s/Xxxxx X. Xxxxxxx
------------------------------
Name: Xxxxx X. Xxxxxxx
Title:
PRIVATE EQUITY
INVESTORS III, L.P.
By: Xxxxx X. Xxxxx Associates III, LLC
General Partner
By: /s/Xxxxx X. Xxxxx
------------------------------
Name: Xxxxx X. Xxxxx
Title: Managing Member
EQUITY-LINKED INVESTORS-II
By: Xxxxx X. Xxxxx Associates-II
General Partner
By: /s/Xxxxx X. Xxxxx
------------------------------
Name: Xxxxx X. Xxxxx
Title: Managing General Partner
59 of 92
LNR CANDLEWOOD HOLDINGS, INC.
By: /s/Xxxxxxxx X. Xxxxxx
------------------------------
Name: Xxxxxxxx X. Xxxxxx
Title: Treasurer
DELAWARE STATE EMPLOYEES' RETIREMENT
FUNDS
By: Pecks Management Partners Ltd. its
Investment Advisor
By: /s/Xxxxxx X. Xxxxxx
------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Managing Director
DECLARATION OF TRUST FOR THE DEFINED
BENEFIT PLAN OF ZENECA HOLDINGS INC.
By: Pecks Management Partners Ltd. its
Investment Advisor
By: /s/Xxxxxx X. Xxxxxx
------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Managing Director
Page 60 of 92
DECLARATION OF TRUST FOR THE DEFINED
BENEFIT PLAN OF ICI AMERICAN HOLDINGS
INC.
By: Pecks Management Partners Ltd. its
Investment Advisor
By: /s/Xxxxxx X. Xxxxxx
------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Managing Director
X.X. XxXXXXXXX FAMILY TRUST
By: Pecks Management Partners Ltd. its
Investment Advisor
By: /s/Xxxxxx X. Xxxxxx
------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Managing Director
ADVANCE CAPITAL PARTNERS, L.P.
By: Advance Capital Associates, L.P.
By: Advance Capital Management,
LLC
By /s/Xxxxxx X. Xxxxxxxxx
------------------------------
Name: Xxxxxx X. Xxxxxxxxx
Title: Principal
Page 61 of 92
ADVANCE CAPITAL OFFSHORE PARTNERS, L.P.
By: Advance Capital Offshore
Associates, LDC
By: Advance Capital Associates,
L.P.
By: Advance Capital Management,
LLC
By /s/Xxxxxx X. Xxxxxxxxx
------------------------------
Name: Xxxxxx X. Xxxxxxxxx
Title: Principal
ALLIED CAPITAL CORPORATION
By /s/G. Xxxxxx Xxxxxxxx
------------------------------
Name: G. Xxxxxx Xxxxxxxx
Title: Managing Director
ALLIED CAPITAL CORPORATION II
By /s/G. Xxxxxx Xxxxxxxx
------------------------------
Name: G. Xxxxxx Xxxxxxxx
Title: Managing Director
THE FFJ 1997 NOMINEE TRUST
By /s/Xxxxxxx Xxxxxx
------------------------------
Name: Xxxxxxx Xxxxxx
Title: Trustee
Page 62 of 92
THE MUTUAL LIFE INSURANCE COMPANY OF NEW
YORK
By /s/Xxxxxxx X. Xxxxxx
------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Managing Director
HARBOR INVESTMENTS LTD.
By: Strong Capital Management, Inc.,
its Investment Advisor
By /s/Xxxxxxx X. Xxxxxxxxxxx
------------------------------
Name: Xxxxxxx X. Xxxxxxxxxxx
Title: Vice President
STRONG SPECIAL INVESTMENT LIMITED
PARTNERSHIP
By: Strong Capital Management, Inc. its
General Partner
By /s/Xxxxxxx X. Xxxxxxxxxxx
------------------------------
Name: Xxxxxxx X. Xxxxxxxxxxx
Title: Vice President
STRONG QUEST LIMITED PARTNERSHIP
By: Strong Capital Management, Inc. its
General Partner
By /s/Xxxxxxx X. Xxxxxxxxxxx
------------------------------
Name: Xxxxxxx X. Xxxxxxxxxxx
Title: Vice President
Page 63 of 92
/s/Xxxxxxx X. Xxxxxx
------------------------------
Xxxxxxx X. Xxxxxx
/s/Xxxxxx X. Xxxxx, Xx.
------------------------------
Xxxxxx X. Xxxxx, Xx.
/s/Xxxx Xxxxxxxx
------------------------------
Xxxx Xxxxxxxx
/s/Xxxxxx X. Xxxxxxx, Xx.
------------------------------
Xxxxxx X. Xxxxxxx, Xx.
/s/Xxxxxx Xxxxx
------------------------------
Xxxxxx Xxxxx
/s/Xxxxxxx Xxxxxxx
------------------------------
Xxxxxxx Xxxxxxx
/s/Xxxxx Xxxxxx
------------------------------
Xxxxx Xxxxxx
/s/Xxxxxxx Xxxx
------------------------------
Xxxxxxx Xxxx
/s/Xxxxx Xxxxx
------------------------------
Xxxxx Xxxxx
/s/Xxxxxx X. Xxxxxx, Xx.
------------------------------
Xxxxxx X. Xxxxxx, Xx.
/s/Xxxxx Xxxxxxx
------------------------------
Xxxxx Xxxxxxx
Page 64 of 92
/s/Xxxxx Xxxxxx
------------------------------
Xxxxx Xxxxxx
/s/Xxxxx Xxxxxx
------------------------------
Xxxxx Xxxxxx
/s/Xxxxx Xxxxxx
------------------------------
Xxxxx Xxxxxx
/s/Xxxxxx X. Xxxxxxx
------------------------------
Xxxxxx X. Xxxxxxx
/s/Xxxxxxx XxXxxxxx
------------------------------
Xxxxxxx XxXxxxxx
/s/Xxxxxx X. XxXxxxxxx
------------------------------
Xxxxxx X. XxXxxxxxx
/s/Xxxxx X. Xxxxx
------------------------------
Xxxxx X. Xxxxx
/s/Xxxx Xxxxx
------------------------------
Xxxx Xxxxx
/s/Xxxxxxx X. Xxxxx
------------------------------
Xxxxxxx X. Xxxxx
Page 65 of 92
