INVESTOR AGREEMENT
INVESTOR AGREEMENT, (this "Agreement") made as of April 23, 1997, by and
between JANUS INDUSTRIES, INC., a Delaware corporation, with offices at 000
Xxxxxxx Xxxxxx, Xxxxx, Xxx Xxxxxx 00000 (the "Corporation") and each of XXXXX X.
XXXX ("Xxxx") and XXXXX XXXXXX ("Yeaggy") and XXXX HOSPITALITY INC. III, an Ohio
corporation ("Xxxx Hospitality" and together with Xxxx and Yeaggy, each, a
"Shareholder").
Recitals:
A. As a result of the closing of the transactions contemplated by (i) the
Asset Purchase Agreement dated as of April 23, 1997 by and among the
Corporation, Xxxx Yeaggy of Ohio, Inc., Motel Associates of Westerville, Inc.
Xxxx and Yeaggy; and (ii) the Agreement and Plan of Merger dated as of April 23,
1997 (collectively, with (i), the "Acquisition Agreements") by and among the
Corporation, Xxxx Group Management Corp., Envoy Inns of America, Inc., Xxxx and
Yeaggy, the Shareholders, collectively, will become the owners of 10,451.88
shares of the Corporation's Preferred Stock, Series B (the "Preferred Stock")
and 3,799,999 shares of the Corporation's common stock (the "Common Stock").
B. The Shareholders will control approximately 43% of the issued and
outstanding shares of the Common Stock of the Corporation.
C. The Corporation and the Shareholders desire to set forth the terms upon
which the Preferred Stock and the Common Stock are to be held by the
Shareholders for the purpose of assuring compliance with the various securities
laws, and preservation of the Corporation's federal income tax attributes, and
the Corporation further desires to confirm certain representations and
warranties of the Shareholders.
NOW, THEREFORE, in consideration of the premises and the terms, provisions,
covenants and conditions hereinafter set forth, and for other valuable
consideration, the receipt of which is hereby acknowledged, the parties hereby
agree as follows:
1. Definitions. As used in this Agreement, the following terms shall have
the respective meanings set forth below. All capitalized terms used herein and
not defined in this Section 1 shall have the meanings ascribed to such terms
elsewhere in this Agreement.
The term "Commission" shall mean the Securities and Exchange Commission or
any other federal agency at the time administering the federal securities laws
with respect to the registration and public offering of securities of the
Corporation.
The term "Corporation Securities" shall mean, collectively, the Preferred
Stock and the shares of Common Stock.
The term "Person" shall mean any individual, sole proprietorship,
partnership, joint venture, trust, unincorporated organization, association,
corporation, institution, government entity or government or any group comprised
of one or more of the foregoing.
The term "Securities Act" shall mean the Federal Securities Act of 1933, as
amended from time to time and the rules, regulations, decisions and
interpretations promulgated thereunder or such other federal act, rules,
regulations, decisions and interpretations as may regulate and require the
registration of the public offering of securities of the Corporation.
2. Certificate Legend. Each certificate or document representing the
Corporation Securities issued pursuant to this Agreement shall be imprinted with
a legend substantially as follows:
The securities represented by this certificate have not been registered
under the Securities Act of 1933 or the securities laws of any state. These
securities have been acquired for investment and not with a view to
distribution or resale, and may not be sold, assigned, made subject to a
security interest, pledged, hypothecated, or otherwise transferred except
pursuant to an effective registration statement under the Securities Act of
1933 and applicable state laws or exemptions therefrom or an opinion of
counsel to the Corporation that such registration is not required as to
such sale or offer.
The Restated Certificate of Incorporation, as amended of the Corporation
prohibits the purchase or acquisition of record or beneficial ownership of,
or any beneficial or other interest in, any shares of the capital stock or
securities of the Corporation if, at the date of such purchase or
acquisition, such person or entity is, or would be after giving effect to
any such proposed purchase or acquisition, directly, indirectly or by
attribution, a holder of five percent (5%) or more of the issued and
outstanding capital stock of the Corporation, determined based on the fair
market value of the capital stock of the Corporation or the votes
represented by the shares of the capital stock of the Corporation entitled
to vote for the election of directors.
A copy of the Restated Certificate of Incorporation of the Corporation is
available for inspection and copying at the principal offices of the
Corporation, and a copy of the provisions of the Restated Certificate of
Incorporation of the Corporation setting forth such restrictions will be
furnished to the record holder of this certificate without charge upon
written request to the Corporation.
The Corporation will furnish without charge to each stockholder who so
requests, a statement of the powers, designations, preferences and
relative, participating, optional or other special rights of each class of
stock or series thereof and the qualifications, limitations or restrictions
of such preferences and/or or rights.
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The securities represented by this certificate are subject to substantial
restrictions on transfer contained in an Investor Agreement with the
Corporation, a copy of which can be obtained from the Corporation.
3. Covenants of the Shareholder. Each Shareholder, by acquiring the
Corporation Securities, hereby covenants and agrees that:
(a) the Shareholder will not offer for sale or sell, or pledge,
assign, hypothecate or otherwise transfer the Corporation Securities to any
Person unless pursuant to:
(i) an effective registration statement under the Securities Act
("Registration Statement") covering such offer and sale; or
(ii) an exemption from registration under the Securities Act;
provided that prior to any such proposed transfer, the Shareholder shall give
written notice to the Corporation of the Shareholder's intentions to effect such
transfer, which notice shall be accompanied by such evidence as may be
reasonably satisfactory to the Corporation that the proposed transfer may be
effected without registration under the Securities Act, or
(iii) the provisions of Rule 144 under the Securities Act, if
applicable or any successor rule thereto.
Notwithstanding the foregoing, the Shareholder may pledge the Preferred
Stock to a bank or other financial institution as security for a loan provided
that the Shareholder delivers an opinion of legal counsel for the Shareholder
(which counsel and opinion (in form, scope and substance) shall be satisfactory
to the Corporation), that such pledge would be in compliance with the federal
and state securities laws.
(b) Any offer or sale of the Corporation Securities shall be made in
accordance with the federal and state securities laws (including the prospectus
delivery requirements of the Securities Act), of applicable jurisdictions and
any other applicable law.
(c) Each of the Corporation Securities transferred as above provided
shall bear the appropriate restrictive legend unless, in the opinion of legal
counsel for the Shareholder (which counsel and opinion (in form, scope and
substance) shall be satisfactory to the Corporation), such legend is not
required in order to establish compliance with any provisions of the Securities
Act.
4. Representations and Warranties of the Shareholders. Each Shareholder
hereby represents and agrees that:
(a) The Shareholder has full power, authority and capacity to execute
this Agreement, to make the representations and agreements contained in this
Agreement and, in the case of Xxxx Hospitality, this Agreement and the
transactions contemplated hereby have been duly authorized by all necessary
actions on the part of the Shareholder, and this Agreement is a
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legal, valid and binding obligation of the Shareholder enforceable against the
Shareholder in accordance with its terms; and
(b) The Shareholder understands each of the following representations
and agreements, and hereby represents and agrees to each of the following with
the understanding that the Corporation will rely upon the Shareholder
representations and agreements in determining whether the Corporation may issue
the Corporation Securities to the Shareholder under applicable securities laws:
(i) The Shareholder is either an accredited investor (under the
qualifications set forth in paragraph (vii) below) or has indicated by checking
the following box that the Shareholder is not an accredited investor but is
represented by a representative who is a "purchaser representative" as defined
in Regulation D of the Commission under the Securities Act and in any event is
able to bear the economic risk of an investment in the Corporation Securities,
including the loss of his entire investment.
(ii) The Shareholder has prior substantial investment experience,
including investments in non-registered securities, and recognizes the highly
speculative nature of an investment in the Corporation Securities.
(iii) The Shareholder has been afforded the opportunity to ask
questions of, and receive answers from, directors and executive officers of the
Corporation concerning the Corporation and the terms and conditions of the
offering of the Corporation Securities pursuant to the Acquisition Agreements.
The Shareholder has been furnished with all information and all documents which
he has requested.
(iv) Neither the offer nor the sale of the Corporation Securities
is being registered under the Securities Act or the securities laws of any
state. The Corporation Securities are being offered and sold in reliance on
exemptions from registration under the Securities Act and the various state
securities laws for transactions not involving any public offering. Accordingly,
none of the Corporation Securities can be sold, assigned, bequeathed, exchanged,
pledged, hypothecated or otherwise transferred (each individually a "Transfer")
by the Shareholder unless and until each is registered under the Securities Act
and the securities laws of each applicable state or an exemption from
registration pursuant to the Securities Act and such laws is available to the
Shareholder.
(v) The Corporation is relying on exemptions from the various
federal and state securities laws which depend, in part, upon the Shareholder's
investment intent and upon the information the Shareholder has set forth in this
Agreement. This Agreement is delivered to the Corporation by the Shareholder
with the understanding and intent that the Corporation will rely on the
information contained in this Agreement and with such Shareholder's consent to
such reliance.
(vi) The Corporation Securities are being acquired by the
Shareholder for the Shareholder's own account for investment and not for
distribution or resale or
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fractionalization thereof or reselling thereof or any part thereof within the
meaning of the Securities Act other than in compliance therewith or in
accordance with an exemption therefrom. The Shareholder will not transfer any of
the Corporation Securities unless they are registered under the Securities Act
and the securities laws of each applicable state or unless an exemption from
each such registration is available for such Transfer. The Shareholder has
adequate means of providing for the Shareholder's current needs and possible
personal and business contingencies and has no need for liquidity of his
investment in the Corporation Securities.
(vii) Unless indicated otherwise in clause (i) above, the
Shareholder fits within, and is adequately described by, one or more of the
following categories: (1) the Shareholder is a natural person who has a net
worth or joint net worth with the Shareholder's spouse in excess of $1,000,000
at the time of the Shareholder's purchase; or (2) the Shareholder is a natural
person who had an individual income in excess of $200,000 in each of the two
most recent years or a joint income with the Shareholder's spouse in excess of
$300,000 in each of those years and has a reasonable expectation of reaching the
same income level in the current year; or (3) the Shareholder is an officer
and/or director of the Corporation; or (4) the Shareholder is either (a) a bank
as defined in Section 3(a)(2) of the Securities Act or a savings and loan
association or other institution as defined in Section 3(a)(5)(A) of the
Securities Act, whether acting in its individual or fiduciary capacity, (b) a
broker or dealer registered pursuant to Section 15 of the Securities Exchange
Act of 1934, as amended, (c) an insurance Corporation as defined in Section
2(13) of the Securities Act, (d) an investment Corporation registered under the
Investment Corporation Act of 1940, as amended, or a business development
Corporation as defined in Section 2(a)(48) of such Act, (e) a Small Business
Investment Corporation licensed by The United States Small Business
Administration under Section 301(c) or (d) of the Small Business Investment Act
of 1958, as amended, (f) a plan established or maintained by a state or its
political subdivisions, or any agency or instrumentality of a state or its
political subdivisions, for the benefit of its employees, if such plan has total
assets in excess of $5,000,000, or (g) an employee benefit plan within the
meaning of the Employee Retirement Income Security Act of 1974, as amended, if
the investment decision is made by a plan fiduciary, as defined in Section 3(21)
of such Act, which plan fiduciary is a bank, savings and loan association, an
insurance Corporation or a registered investment advisor, or if the employee
benefit plan has total assets in excess of $5,000,000 or, if a self-directed
plan, with investment decisions made solely by persons who otherwise meet these
suitability standards; or (5) the Shareholder is a private business development
Corporation as defined in Section 202(a)(22) of the Investment Advisors Act of
1940, as amended; or (6) the Shareholder is an organization described in Section
501(c)(3) of the Internal Revenue Code of 1986, as amended, a corporation, a
Massachusetts or similar business trust or a partnership not formed for the
specific purpose of acquiring the Corporation Securities with total assets in
excess of $5,000,000; or (7) the Shareholder is a trust, with total assets in
excess of $5,000,000, not formed for the specific purpose of acquiring the
Corporation Securities, whose purchase is directed by a sophisticated person who
has such knowledge and experience in financial and business matters that he or
she is capable of evaluating the merits and risks of the prospective investment;
or (8) the Shareholder is a corporation or partnership, and each and every
equity owner of such entity certifies that he or she meets the qualifications
set forth in either clause (1), (2), (3), (4), (5), (6) or (7) above. As used in
this Agreement, the term "net worth" means the excess of total assets over total
liabilities. In determining income, an
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investor should add to his adjusted gross income any amount attributable to
tax-exempt income received, losses claimed as a limited partner in any limited
partnership, deductions claimed for depletion, contributions to an XXX or Xxxxx
retirement plan, alimony payments and any amount by which income from long-term
capital gains has been reduced in arriving at adjusted gross income.
(viii) The Shareholder agrees that the Shareholder shall not
cancel, terminate or revoke this Agreement or any other agreement executed by
the Shareholder with respect to the purchase of the Corporation Securities and
that this Agreement shall survive the Shareholder's death or disability, except
as pursuant to the laws of the applicable jurisdiction.
(ix) The address set forth below is the Shareholder's true and
correct residence, and he has no present intention of becoming a resident of any
other country, state or jurisdiction prior to the Shareholder's acquisition of
the Corporation Securities.
(x) The Shareholder acknowledges that the Corporation and its
officers and agents have made no representations or warranties, whether orally
or in writing, or express or implied, as to the financial condition, assets,
operations, business, prospects or condition of the Corporation other than as
set forth in the Acquisition Agreements and the Corporation's Disclosure Letter
delivered in connection therewith.
(xi) The Shareholder understands the meaning and legal
consequences of the foregoing representations and warranties, which are true and
correct as of the date hereof and will be true and correct as of the date of the
Shareholder's purchase of the Corporation Securities subscribed for herein. Each
such representation and warranty shall survive such purchase.
5. Standstill.
(a) Without the prior written consent of the Board of Directors of the
Corporation, the Shareholder agrees that until the Termination Date (as defined
below), he shall not sell or contract to sell, exchange, assign, bequeath,
pledge, mortgage, alienate, grant an option to purchase, hypothecate or
otherwise in any manner whatsoever (voluntarily or involuntarily, by operation
of law or otherwise) Transfer or encumber record or beneficial ownership of any
shares of the Common Stock or any securities issued with respect to any such
shares or into which they may be converted, exchanged or otherwise changed.
(b) The Corporation shall have no obligation to consent to a Transfer
of the Common Stock unless it shall have received an opinion, in writing, of
counsel of its choosing, that the proposed Transfer of the Common Stock does not
give rise to an "ownership change" under ss.382 or otherwise adversely affect
the availability to the Corporation of its net operating loss carry forwards and
any other applicable tax attributes for Federal Income Tax purposes.
(c) The Shareholder acknowledges and agrees that the Corporation will
give to its stock transfer agent instructions prohibiting the Transfer of the
Common Stock in violation
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of this Agreement. Shareholder acknowledges any Transfer in violation of this
Agreement will be void.
(d) In the event that the Corporation is notified of a proposed
Transfer by the Shareholder or a transfer proposed by any other person who is
subject to an agreement with the Corporation containing standstill provisions
substantially similar to those set forth in this Section 5 (a "Standstill
Agreement") including, without limitation, those agreements existing as of this
date with Daewoo Corporation, Mitsubishi Corp., General Electric Capital
Corporation and The Prudential Insurance Company of America, and the Corporation
determines preliminarily to consent to such Transfer or transfer, the
Corporation shall notify all persons (including the Shareholder) who are subject
to a Standstill Agreement of such proposed consent. The Shareholder and each
other person who is subject to a Standstill Agreement shall have 30 days from
the date of such notice to advise the Corporation in writing whether it wishes
to Transfer or transfer securities of the Corporation, and the amount of
securities it wishes to Transfer or transfer. The Corporation shall then
allocate, in the sole discretion of the Board of Directors of the Corporation,
the number of securities of the Corporation which may be the subject of a
Transfer or transfer among those persons who have indicated in writing their
desire to transfer securities of the Corporation in the event the Corporation
consents to the original Transfer or transfer. In such event the Corporation may
establish such mechanism to monitor any such Transfer or transfer, including
time limitations on such Transfer or transfer, as it deems appropriate.
(e) The restrictions of this Section 5 shall terminate on the earliest
to occur of (i) notification from the Corporation to the Shareholder of such
termination, (ii) the fourth annual anniversary of the date of the Agreement, or
(iii) the Transfer with the prior written consent of the Board of Directors of
the Corporation of all of the Common Stock. The date of termination of the
Agreement shall be the "Termination Date".
6. Notices. Except as otherwise provided in this Agreement, all notices,
requests, claims, demands, waivers and other communications under this Agreement
shall be in writing and shall be deemed to have been duly given when delivered
by hand, if delivered personally or by courier, or five business days after
being deposited in the mail (registered or certified mail, postage prepaid,
return receipt requested) properly addressed as set forth below. Any such notice
or other communication shall be addressed (a) if to the Shareholders, at their
respective addresses set forth below or at such other address as a Shareholder
shall have furnished to the Corporation in writing, with a copy to (which shall
not be a condition to adequate notice) Xxxxxx Xxxxxxx, Esq., Xxxxxxxx & Shohl,
L.L.P., 1900 Chemed Center, 000 X. Xxxxx Xx., Xxxxxxxxxx, Xxxx 00000, or (b) if
to the Corporation, to 000 Xxxxxxx Xxxxxx, X.X. Xxx 0000, Xxxxx, Xxx Xxxxxx
00000 or to such other address and/or to the attention of such other copied
person as the Corporation shall have furnished to the Shareholders and each such
other holder in writing.
7. Waiver, Amendment. Any modification, waiver, amendment or termination of
this Agreement or any provision hereof shall be effective only if in writing and
signed all parties to this Agreement.
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8. Successors, Assigns. This Agreement shall inure to the benefit of and be
binding upon the parties and the personal representatives of the Shareholders
hereto and their respective successors and permitted assigns. Nothing in this
Agreement, expressed or implied, is intended to confer on any person other than
the parties hereto or their respective successors and assigns, any rights,
remedies, obligations or liabilities under or by reason this Agreement.
9. Invalidity. In the event any provision of this Agreement shall be held
invalid or unenforceable by any court, such holding shall not invalidate or
render unenforceable any other provision of this Agreement.
10. Governing Law. This Agreement shall be interpreted and construed in
accordance with the laws of the State of Delaware.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
and delivered on the day and year first above written.
JANUS INDUSTRIES, INC.
By: _______________________________
Name: Xxxxx X. Xxxxxx
Title: President
___________________________________
Xxxxx X. Xxxx
Residence: 0000 Xxxxxxxxx Xxx
Xxxx Xxxxx, XX 00000
Social Security Number: ###-##-####
___________________________________
Xxxxx Xxxxxx
Residence: 0000 Xxxxxxx Xxxx
Xxxxxxxxxx, Xxxx 00000
Social Security Number: ###-##-####
XXXX HOSPITALITY, INC. III
By:________________________________
Name: Xxxxx X. Xxxx
Title: President
Address: 0000 X. Xxxxxx Xx.
Xxxxxxxxxx, XX 00000
E.I.N.:
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