Exhibit 4.9
THE SECURITIES REPRESENTED BY THIS DEBENTURE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED ("ACT"), OR APPLICABLE STATE SECURITIES LAWS
("STATE ACTS") AND CANNOT BE SOLD, HYPOTHECATED, DONATED OR OTHERWISE
TRANSFERRED UNLESS IN COMPLIANCE WITH SAID ACT AND STATE ACTS AND THE RULES AND
REGULATIONS PROMULGATED THEREUNDER.
HUDSON HOTELS CORPORATION
CONVERTIBLE SUBORDINATED DEBENTURE DUE JULY 1, 2001
$7,500,000 Date of Issue: July 10, 1996
CUSIP Number: 443794 AA 0
Hudson Hotels Corporation, a corporation duly organized and existing under
the laws of the State of New York (herein referred to as the "Company"), with
principal offices located at One Airport Systems Way, Suite 200, Rochester, New
York 14624, for value received hereby promises to pay to Oppenheimer Bond Fund
For Growth or its registered assigns (herein referred to as the "Holder") the
principal sum of Seven Million Five Hundred Thousand Dollars ($7,500,000)
(herein referred to as the "Principal"), on July 1, 2001 at 12:00 noon ("Stated
Maturity"), at the Company offices or at such other place as may be designed by
Holder in such coin or currency of the United States of America as at the time
of payment shall be legal tender for the payment of public and private debts,
and to pay interest on the Principal at the rate of send and one half percent
(7.5%) per annum, with the first interest payment due and payable on August 1,
1996, and thereafter interest shall be due and payable monthly, on the first day
of each month until the Principal is paid in full or duly provided for under the
terms of this Debenture. Payment of interest may be made at the option of the
Holder by check mailed to the address of the Holder as such address may appear
on the Debenture Register (as hereinafter defined) of the Company.
The Company shall maintain or cause to be maintained a Debenture Register
(the "Debenture Register") at its Company offices in Rochester, New York,
listing the names and addresses of all holders of its debentures, now existing
or hereafter arising. By written notice to the Company, the Holder may instruct
the Company to change the Holder's address on the Debenture Register.
SUBORDINATION
The term "Senior Indebtedness" shall mean: (1) the principal of and
premium (if any) and unpaid interest on all indebtedness whether outstanding on
the date of execution of this Debenture or thereafter created, incurred,
assumed, issued or guaranteed (a) which is for (i) money borrowed, or (ii) all
or part of the consideration for the acquisition (whether by way of purchase,
merger, consolidation or otherwise) of any business or entity or part thereof
and (b) for the payment of which the Company is liable directly or indirectly as
a guarantor or surety; (2) obligations of the Company under any capitalized
lease or obligations of any subsidiary of the Company under any capitalized
lease that are guaranteed by the Company and (3) any and all deferrals, renewals
or extensions of any such indebtedness or obligations; unless in any instrument
creating or evidencing such indebtedness or obligation or
pursuant to which the same is outstanding it is provided that such indebtedness
or obligation is subordinate to any other indebtedness of the Company or that
such indebtedness or obligation is not superior in right of payment to the
Debenture.
This Debenture, including the Principal hereof and interest hereon, is
subordinate and junior in right of payment to the Senior Indebtedness of the
Company. In the case of any bankruptcy, insolvency, receivership,
conservatorship, reorganization, or arrangement with, or assignment for the
benefit of creditors, readjustment of debt, marshaling of assets and liabilities
or similar proceeding or any liquidation or winding-up of, or relating to, the
Company, whether voluntary or involuntary, all such obligations and rights,
including post-default interest, shall be entitled to be paid in full before any
payment shall be made on account of the Principal, or interest or premium, if
any, on this Debenture.
CONVERSION
At Holder's option, at any time on or before the Stated Maturity, this
Debenture or any part hereof may be converted, subject to the terms and
provisions of this Debenture, into duly authorized, validly issued, fully paid
and non-assessable shares of $.001 par value common stock of the Company at the
conversion price of $7.50 per share, or in case an adjustment of such price has
taken place pursuant to this Debenture, then at the price as adjusted (such
price or adjusted price being herein referred to as the "Conversion Price").
The Holder may effect such conversion by completing and executing the
Notice of Conversion in the form attached hereto, and returning the same to the
Company together with this Debenture. Within thirty (30) days after receipt of
the Notice of Conversion, the Company shall deliver to the Holder a certificate
for the conversion shares, a check for the interest accrued on this Debenture
with respect to the amount of Principal converted through the date of
conversion, and to the extent that this Debenture was not fully converted, a new
debenture for the amount of Principal not so converted, with the same terms and
conditions contained herein.
In the case this Debenture is converted, this Debenture, upon surrender of
this Debenture to the Company at its principal offices, shall be canceled by the
Company.
The Conversion Price shall be subject to adjustment from time to time as
follows:
If the Company shall (A) pay a dividend or other distribution on its common
stock in shares of common stock or other capital stock, (B) subdivide its
outstanding shares of common stock into a greater number of shares, or (C)
combine its outstanding shares of common stock into a smaller number of shares,
then the conversion price in effect immediately prior thereto shall be adjusted
proportionately so that the Holder, upon surrender of this Debenture for
conversion after the record date fixing stockholders to be affected by such
event, shall be entitled to receive upon conversion the number of such shares of
the Company which the Holder would have been entitled to receive after the
happening of such event had this Debenture been converted immediately prior to
such record date. Such adjustment shall be made whenever any such event shall
occur, and also shall be effective retroactively as to a Debenture converted
between such record date and the date of the occurrence of any such event.
In the event of any (1) consolidation or merger of the Company (other than
a consolidation or merger in which the Company is the surviving entity), (2)
reclassification, capital reorganization or change in the Company's common stock
(other than solely a change in par value, or from par value to no par value), or
(3) consolidation or merger of another entity into the Company and in which
there is a reclassification or change of the Company's common stock,
then and in each such event the Holder shall have the right thereafter to
convert this Debenture into the kin and amount of shares of stock and other
securities and property receivable upon such reorganization, reclassification,
merger or other change, by holders of the number of shares of common stock into
which this Debenture might have been converted immediately prior to the
occurrence of any such event.
The Conversion Price shall automatically be reset on December 31, 1998 (the
"Reset Date") to a price (the "Reset Price") equal to 125% of the Average Volume
Weighted Price of the Company's common stock for the thirty trading days (i.e.,
days on which trading is authorized on the National Association of Securities
Dealers Automated Quotations system ("NASDAQ") (or such other market as may be
the principal market for the Company's common stock at the time) next preceding
the Reset Date; provided, however that if the aggregate volume of trading in the
Company's common stock during those thirty days is less than 150,000 shares, the
thirty days shall be increased to include the minimum number of trading days
having 150,000 shares in aggregate volume. For the purpose of this calculation,
Average Volume Weighted Price shall mean the sum of the daily closing prices
multiplied by the daily volume for the trading days in question, divided by the
total volume for the trading period in question. The daily volume and daily
closing price shall be taken from Blumbergs. Under no circumstance will the
Conversion Price be reset to a price lower than $4.50 per share (the "Floor
Amount") or higher than $7.50 per share (the "Ceiling Amount"). Notwithstanding
the preceding sentence, if any of the transactions specified in the preceding
two paragraphs shall have occurred, the Floor Amount and Ceiling amount shall be
equitably adjusted in a manner identical to the adjustments to the Conversion
Price pursuant to those paragraphs. The Company shall within 10 days after the
Reset Date deliver to the Holder an officer's certificate or a certificate from
the Company's independent public accountants setting for the computation
required by this paragraph and the resulting Reset Price.
If the Holder exercises its option for conversion, the Holder shall be
entitled to interest accrued on this Debenture through the date of conversion.
Subject to the aforementioned requirement for payment, no adjustment is to be
made on conversion for interest accrued hereon or for monetary dividends on
common stock issued on conversion.
No fractional shares will be issued upon any conversion, but an adjustment
in cash will be made at a rate equal to the closing price for the common stock
on NASDAQ (or such other market as may be the principal market for the Company's
common stock at the time) at the close of business three business days prior to
the conversion date, in respect of any fraction of a share which would otherwise
be issuable upon the surrender of this Debenture for conversion.
The Company covenants that it will at all times reserve and keep available,
solely for the purpose of issuance or delivery upon conversion of this Debenture
as herein provided, such number of shares of common stock of the Company as
shall be issuable upon the conversion of this Debenture. The Company covenants
that all shares of common stock, so reserved, shall upon issuance, be duly and
validly issued and fully paid and non-assessable.
Until the Stated Maturity, the Company shall not have the option to force
conversion of this Debenture and the Company shall not have the option to prepay
this Debenture absent consent of the Holder.
REDEMPTION AT HOLDER'S OPTION
If there shall be a merger, consolidation or reorganization of the Company
into or with another corporation through one or a series of related transactions
(with payment in cash or stock or any combination thereof) in which the
shareholders of the Company immediately prior to such transaction or series of
transactions shall own less than 50% of the voting securities of the surviving
corporation (a "Redemption Event"), the Holder shall have the right, at the
Holder's option, to require the Company to redeem the Holder's Debenture, or any
portion thereof that is an integral multiple of $1000, on the date (the
"Redemption Date") that is 30 days after the Company Notice (as defined below),
for cash at a price equal to 101% of the principal amount of such Debenture to
be redeemed (the "Redemption Price"), together with accrued interest to the
Redemption Date.
Within 15 days after the occurrence of a Redemption Event, the Company is
obligated to mail to all holders of record of the Debentures a notice (the
"Company Notice") of the occurrence of such Redemption Event and of the
redemption right arising as a result thereof. To exercise the redemption right
a holder of such Debentures must deliver on or before the 20th business day
after the date of the Company Notice written notice to the Company of the
holder's exercise of such right, together with the Debentures with respect to
which the right is being exercised, duly endorsed for transfer to the Company.
REGISTRATION
(1) The Company shall immediately prepare and file a registration
statement with the Securities and Exchange Commission, registering for sale to
the public the common shares issuable upon conversion of this Debenture. The
Company covenants to make such registration statement effective within one
hundred twenty (12) days after the date of issuance thereof.
(2) Whenever, prior to July 1, 2001, the Company proposes to file with the
Securities and Exchange Commission a Registration Statement (other than a Form
S-4, S-8 or comparable registration statement) which purports to register for
sale to the public shares of the Company, it shall, at least thirty (30) days
prior to such filing, give written notice of such proposed filing to the Holder
at the address that appears on the Debenture Register, and shall offer to
include and shall include in such filing all or a portion of the Holder's shares
of Company common stock (including any shares into which the Holder agrees in
such notice to convert this Debenture immediately before the closing of that
offering) upon receipt by the Company, no less than ten (10) days prior tot he
proposed filing date, of a request therefor setting forth the facts with respect
to such proposed disposition, subject to the right of the managing underwriter,
in any such offering that is underwritten, to limit the number of securities
that may be included in such offering on a pro rata basis with any other person
on whose behalf securities are being registered.
(3) The company will maintain such Registration Statement filed under
subparagraph (1) or (2) hereof current under the Securities Act of 1933 until
the earlier of (a) the sale of all the securities subject to such Registration
Statement of (b) the Stated Maturity.
(4) All fees, disbursements and out-of-pocket expenses and costs incurred
by the Company in connection with the preparation and filing of any Registration
Statement under this section and in complying with applicable securities and
Blue Sky laws (including, without limitation, all attorneys' fees) shall be
borne by the Company. each selling shareholder (including the Holder) shall
bear the cost of underwriting discounts and commissions, if any, applicable to
the shares being registered by that shareholder and the fees and expenses of the
shareholder's counsel. The Company shall use its best efforts to qualify any of
the securities for sale in such states
as the selling shareholders reasonably designate. However, the Company shall
not be required to qualify in any state which will require an escrow or other
similar restriction relating tot he Company and/or the selling shareholders.
The Company at its expense will supply the selling shareholders with copies of
such Registration Statement and the prospectus or offering circular included
therein and other related documents in such quantities as may be reasonably
requested by them and the Company shall enter into an indemnification agreement
with the selling shareholders, indemnifying them against any and all losses
arising out of the information in the Registration Statement (excluding, as to
each selling shareholder, information supplied in writing by that selling
shareholder, as to which the selling shareholder shall indemnify the Company).
ASSIGNABILITY
Subject to compliance with applicable securities laws, this Debenture is
freely assignable in whole or in part by the Holder without the consent of the
Company. The Holder shall give the Company written 10 days' notice before the
Holder assigns this Debenture. Upon any such assignment, the assignee shall
have the right to register itself and its address as the "Holder" on the
Company's Debenture Register. Subject to compliance with applicable securities
laws, the indebtedness represented by this Debenture may, at the request of the
Holder, be subdivided and represented by two or more debentures that are
substantially identical to this Debenture, provided that (1) those two or more
debentures shall in the aggregate represent the same Principal as is represented
by this Debenture, (2) no such other Debenture shall have a lesser principal
than $50,000, and (3) if the registered holder thereof will be other than the
Holder of this Debenture, any such other debenture shall exclude the section
entitled "Representations and Warranties" contained in this Debenture. The
Company shall not be required to register any such transfer unless it shall have
received an opinion of counsel that applicable securities laws have been
complied with.
REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to the Holder that:
(1) the Company and each Subsidiary (which Subsidiaries are listed on
Exhibit B attached hereto) are corporations duly organized, validly existing and
in good standing under the laws of the State of New York and each has the
corporate power and authority to carry on the businesses it has been carrying on
and proposes to carry on;
(2) the issuance, execution, and delivery of this Debenture for and on
behalf of the Company has been duly authorized by all necessary corporate
proceedings; this Debenture has been duly executed and delivered for and on
behalf of the Company and constitutes the valid and binding agreement of the
Company, enforceable in accordance with its terms; and
(3) the Company's annual report on form 10-KSB, filed with the Securities
and Exchange Commission ("SEC") for the fiscal year ended December 31, 1995, the
Company's quarterly report on Form 10-QSB filed with the SEC for the quarter
ended March 31, 1996, and the Company's proxy statement dated March 29, 1996,
copies of which have been delivered to the Holder, did not contain, as of their
respective dates, any untrue statement of a material fact and did not omit to
state a material fact required by SEC rules and regulations to be stated therein
or necessary to make the statements therein, in light of the circumstances of
the Holder's reliance thereon in purchasing this Debenture, not misleading.
NOTICE TO HOLDER
If at any time the Company shall propose: 91) to fix a record date for the
making of any monetary or other distribution, including the distribution or
issuance of stock or securities, to the holders of its common stock, or to
effect the subdivision or combination of the outstanding shares of its common
stock; or (2) to effect any reclassification or change of outstanding shares of
its common stock, any consolidation or merger, or any conveyance, transfer or
other disposition of all or substantially all of the Company's or any
subsidiary's assets; or (3) to effect any liquidation, dissolution or winding up
of the Company; or (4) to seek additional capital from a sale of the Company's
securities; then, and in any one or more of such cases, the Company shall cause
notice thereof to be mailed to the Holder at such address as appears on the
Debenture Register at least twenty (20) business days prior to the date on which
(a) the books of the Company shall close, or a record be taken, for such
distribution, subdivision, or combinations, or (b) such distribution,
subdivision or combination (if the books are not closed and no record is taken
therefor) or such reclassification, change, consolidation, merger, conveyance,
transfer, liquidation, dissolution or winding-up shall be effective, as the case
may be.
COVENANTS OF THE COMPANY
For purposes of these covenants, "Company" shall include the Company and
all subsidiaries. The Company covenants that it will:
(1) FINANCIAL STATEMENTS. Furnish to the Holder, as soon as available,
but in any event not later than 90 days after the close of each fiscal year of
the Company, a copy of the annual financial statements for such year for the
Company, prepared on no less than an audited basis including a balance sheet,
and related statements of income (loss) and retained earnings and cash flows,
all in reasonable detail, prepared in accordance with generally accepted
accounting principles on a basis consistently maintained throughout the period
involved and with prior periods, such financial statements being prepared by a
certified public accountant of recognized standing selected by the Company and
acceptable to the Holder.
(2) PAYMENT OF TAXES. Pay and discharge, at or before maturity or the
termination of any duly granted extension thereof, all of the Company's payroll
tax and all of its other tax liabilities, except where the same may be contested
in good faith by appropriate proceedings, and will maintain, in accordance with
generally accepted accounting principles, appropriate reserves, if required by
law, rule or regulation, for the accrual of any of the same which are being
contested.
(3) MAINTENANCE OF PROPERTIES; INSURANCE. Keep all properties used or
useful in the business of the Company in good working order and condition;
maintain or have maintained with financially sound and reputable insurance
companies, insurance on all properties in such amounts as the Company deems
proper in accordance with sound business practices against such risks as are
usually insured against in the same general area, and by companies engaged in
the same or similar business, such amount not to be less than the full insurable
value thereof, and will furnish to the Holder full information as to the
insurance carried and certificates thereof on the date hereof and on the renewal
date(s) of any and all such policies of insurance.
(4) CONDUCT OF BUSINESS AND MAINTENANCE EXISTENCE. Continue to engage in
business of the same general type as now conducted by the Company and preserve,
renew and keep in full force and effect its corporate existence and take all
reasonable action to maintain its rights, patents, trademarks, privileges and
franchises necessary or desirable in the normal conduct of business, provided
that the Company retains the right to merge any subsidiary of the Company into
the Company or into another subsidiary of the Company.
(5) LIENS. Discharge any lien, charge or encumbrance affixed to the
Company's property and assets within 120 days following the affixation thereof;
provided that the Company may bond any such lien and thereafter dispute the
application of such lien.
(6) SEC FILINGS. Within 15 days after it files them with the SEC, send to
the Holder copies of (a) the annual, quarterly, and other reports that the
Company is required to file with the SEC pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 and (b) copies of all materials sent to the
holders of the Company's common stock; and the Company also will timely comply
with its reporting and filing obligation sunder the applicable federal
securities laws.
(7) COMPLIANCE CERTIFICATES. Send to the Holder, within 120 days after
the end of each fiscal year of the Company, a certificate, signed by two
officers of the Company, including its chief financial officer, stating whether
or not the signers know of any Event of Default by the Company in performing any
of its obligations under this Debenture; and, if they do know of any such Event
of Default, the certificate shall describe it and its status.
(8) NOTICES OF DEFAULTS. Send written notice to the Holder if an Event of
Default, as defined in this Debenture, occurs, or if a default occurs and is
continuing on any Senior Indebtedness or under any other Company debt; and the
Company will send to the Holder a copy of any notices claiming any such default
received by the Company.
(9) NEGATIVE PLEDGE. The Company will not place or allow the placing or
incurrence of any mortgage, lien, pledge, security interest or other encumbrance
on any assets of the Company except to secure, on original issuance, Senior
Indebtedness and except for judgment and similar liens for which the Company
posts a full bond insuring payment by a surety company within 30 days.
(1) MUTILATED, LOST, DESTROYED, OR WRONGFULLY TAKEN DEBENTURE. If the
Holder claims that this Debenture has been mutilated, lost, destroyed or
wrongfully taken, issue and deliver to the Holder a replacement Debenture
provided that the requirements of Section 8-405 of the New York Uniform
Commercial Code have been met and, if this Debenture has been mutilated, that it
is surrendered to the Company.
EVENTS OF DEFAULT AND CERTAIN RIGHTS ON DEFAULT
The following events shall constitute Events of Default under this
Debenture:
(1) The failure by the Company to make any payment of interest or
Principal when due under the terms of this Debenture;
(2) Any failure by the Company to perform any obligation, covenant or
agreement hereunder that is not cured within ten 91) days after Holder gives the
Company written notice thereof;
(3) Financial difficulties of Company or any significant subsidiary as
evidenced by: the filing of a voluntary or involuntary petition in bankruptcy,
or under any chapters of the Bankruptcy Code, or under any federal or state
statute providing for relief of debtors; the making of an assignment for the
benefit of creditors; or the appointment of a receiver or trustee for all or a
major part of its property;
(4) If any representation or warranty made by the Company herein is found
to have been false when made;
(5) If any holder or holders of Senior Indebtedness or of any other
Company debt or of any subsidiary's debt accelerates the maturity thereof
pursuant to provisions concerning default thereunder, and the aggregate amount
of all such accelerated debt exceeds $50,000.
Upon the occurrence of any Event of Default, all amounts due and owing
under this Debenture, including all interest accrued on the Principal hereunder,
shall, at Holder's option, become immediately due and payable without
presentment, demand, protest or other notice of any kind. In the event of such
acceleration, the Holder shall be entitled to reimbursement from the Company for
reasonable attorney's fees involved in the representation of the Holder's
interests and for all other costs of collection
MODIFICATION
The Debenture shall not be modified or amended without the prior written
consent of the Holder.
CONSTRUCTION
The Company and Holder agree that this Debenture shall be interpreted and
construed according to the laws of the State of New York.
IN WITNESS WHEREOF, the Company has caused this Debenture to be executed in
its corporate name by its President, is corporate seal to be impressed hereon,
and attested by its Secretary, as of the Date of issue first above written,
HUDSON HOTELS CORPORATION
Attest: By:
/s/ Alan S. Lockwood /s/ E. Anthony Wilson
- --------------------------- -----------------------------
Alan S. Lockwood, Secretary E. Anthony Wilson, President
Attached:
Exhibit A. Notice of Conversion
Exhibit B. Subsidiaries
EXHIBIT A
NOTICE OF CONVERSION
TO: HUDSON HOTELS CORPORATION
The undersigned, being the Holder of the Debenture referred to herein and
enclosed herewith, hereby elects to convert some portion or all of the Principal
of such Debenture to common shares of Hudson Hotels Corporation, in accordance
with the provisions of the Convertible Subordinated Debenture due July 1, 2001
and as set forth below. Please deliver the certificate for common shares, the
payment of accrued Interest (if any), and the new Debenture for the amount of
Principal not converted, to the undersigned at the address set forth below.
Date (Conversion Date) _____________________________________________________
Name of Holder _____________________________________________________
Address _____________________________________________________
City, State, Zip _____________________________________________________
Taxpayer I.D. No. _____________________________________________________
Face Amount of Debenture ________________________________________________
Amount Converted _____________________________________________________
Remaining Principal _____________________________________________________
Signature of Holder _____________________________________________________
Signature Guarantee _____________________________________________________
EXHIBIT B
SUBSIDIARIES
Delray Beach Hotel Corp.
950 Jefferson Road Hotel Corp.
Watertown Hotel Corp.
Brookwood Funding Corp.
Victor Hotel Corp.
Ridge Road Hotel Corp.
Muar Lakes Hotel Corp.
Jamestown Hotel Corp.
Airport Hotel Corp.
Canandaigua Hotel Corp.