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Exhibit 4.2
MERITAGE HOSPITALITY GROUP INC.
SUBSCRIPTION AGREEMENT
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Agreement entered into this ____ day of ________, 19__, between
Meritage Hospitality Group Inc. and the undersigned Investor.
1. GENERAL. This Agreement sets forth the terms upon which Investor
will invest in Series A Convertible Preferred Shares of the Corporation with the
provisions provided in the attached Certificate of Designation. A majority of
the proceeds will be utilized for working capital.
2. SUBSCRIPTION AMOUNT AND PAYMENT. Investor hereby subscribes for
_____ Series A Convertible Preferred Shares at $__ per share, and tenders
payment for the full purchase price made payable to Meritage Hospitality Group
Inc.
3. INVESTOR'S REPRESENTATIONS AND WARRANTIES. Investor represents,
warrants and covenants to the Corporation that:
3.1 Investor is acquiring the Series A Convertible Preferred
Shares for Investor's own account, for investment only and not with a
view to or for resale in connection with any distribution of such
shares;
3.2 Investor has received and read the Corporation's report on
Form 10-KSB/A Amendment No. 2 and Annual Report to Shareholders for the
year ended November 30, 1995, the Corporation's Form 10-QSB for the
quarter ended August 31, 1996, the Proxy Statement issued by the
Corporation in connection with its 1996 Annual Shareholders Meeting and
the Supplemental Offering Materials;
3.3 Investor is aware that the offer and sale of the Series A
Convertible Preferred Shares has not been registered under the
Securities Act of 1933 (the "Act") in reliance upon the exemptions
provided in Regulation D thereof;
3.4 Investor is an "accredited investor" as defined in
Regulation D promulgated under the Act, and has sufficient knowledge
and experience in business and financial matters to understand and
evaluate the merits and risks of this investment and has had an
opportunity to ask questions of and receive answers from officers of
the Corporation concerning this investment;
3.5 Investor understands the speculative nature of an
investment in Series A Convertible Preferred Shares and, accordingly,
is able to bear the economic risk of this investment and could afford a
complete loss of such investment;
3.6 Investor understands that the Corporation is under no
obligation nor does it have any intention to register the Series A
Convertible Preferred Shares under the Act or any State securities
laws or to comply with the requirements for any exemption which might
otherwise be available, or to supply any investor with any information
necessary to enable
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Investor to sell the Series A Convertible Preferred Shares under Rule
144 or any other rule or regulation of the Securities and Exchange
Commission, except for the registration rights provided in this
Agreement; and
3.7 Investor acknowledges that a legend will be placed upon
certificates representing the shares of Series A Convertible Preferred
Shares purchased in substantially the following form:
The securities represented by this certificate have not been
registered under the Securities Act of 1933 or the laws of any
state or province and may not be transferred in the absence of
(a) an effective registration statement for the securities
under the Securities Act of 1933 and applicable state or
provincial laws, or (b) an opinion of counsel satisfactory to
the Corporation that such registration is not required.
4. INDEMNITY. Investor understands the meaning and legal consequences
of the representations and warranties contained in Section 3 and agrees to
indemnify the Corporation, its officers, directors and controlling persons from
and against any and all loss, damage, liability or expense, including costs and
reasonable attorneys' fees, due to or arising out of a breach of any
representation or warranty of Investor, whether contained in this Agreement or
any other agreement which Investor has executed with respect to this offering.
5. REGISTRATION RIGHTS. The following registration rights apply to all
Series A Convertible Preferred Shares purchased by Investor pursuant to this
Agreement.
5.1 NUMBER OF REGISTRATIONS. On any two separate occasions,
upon the written request of Investor given on or before October 1,
1998, the Corporation will prepare and file, promptly after such
request and in no case more than 60 days after receipt of such notice,
and thereafter use its best efforts to cause to become effective, a
registration statement ("Registration Statement") on a form to be
selected by the Corporation under and complying with the Act, covering
such number of Series A Convertible Shares and Common Shares into which
they are convertible (together the "Shares") as shall be specified in
Investor's request; PROVIDED, HOWEVER, that the Corporation shall not
be obligated to register Shares with a market value of less than
$500,000 pursuant to any such request, market value to be measured as
of the date of such request.
5.2 UNDERWRITING. If Investor so requests, the offering or
distribution of Shares under this Section shall be pursuant to a firm
underwriting. The managing underwriter shall be a nationally recognized
investment banking firm selected by Investor, but subject to the
Corporation's approval, which approval shall not be unreasonably
withheld. The Corporation will enter into an underwriting agreement
containing representations, warranties and agreements not substantially
different from those customarily included by an issuer in underwriting
agreements with respect to secondary distribution; PROVIDED, HOWEVER,
that
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Investor shall be entitled to negotiate the underwriting discounts and
commission and other fees of such underwriter.
5.3 TIMING OF REGISTRATION STATEMENT. The Corporation shall be
entitled to postpone the filing of any Registration Statement otherwise
required to be prepared and filed by it if, at any time prior to the
filing of such Registration Statement, the Corporation determines in
good faith that such registration might interfere with, or affect the
negotiation or completion of, any transaction that is being
contemplated by the Corporation or involve initial or continuing
disclosure obligations that might not be in the best interest of the
Corporation's shareholders; PROVIDED, that the duration of such delay
shall not exceed 90 days from the date the Corporation became aware of
such material business information; PROVIDED FURTHER, that the
Corporation shall promptly make such filing as soon as the conditions
which permit it to delay such filing no longer exist; and PROVIDED
FURTHER that in the event of any such deferral, Investor shall have the
right to withdraw its request for registration and such withdrawn
request shall not be considered one of Investor's two permitted
requests for registration under Section 5.1.
5.4 COVENANTS OF INVESTOR. Any request for registration made
by Investor shall specify the number of Shares as to which such request
relates, express Investor's present intention to offer such Shares for
distribution, contain an undertaking to provide all such information
and materials, and take all such actions and execute all such documents
as may be required in order to permit the Corporation to comply with
all applicable requirements of the Securities and Exchange Commission
and to obtain acceleration of the effective date of the Registration
Statement.
5.5 COVENANTS OF THE CORPORATION. So long as the Corporation
is under an obligation pursuant to the provisions of this Section 5,
the Corporation shall:
5.5.1 Prepare and file with the Securities and
Exchange Commission such amendments and supplements to such
Registration Statement, and the prospectus used in connection
therewith, as may be necessary to keep such Registration
Statement effective for such period as shall be necessary to
complete the marketing of the Shares included therein, but in
no event for more than 120 days after the date the Shares may
first be sold;
5.5.2 Furnish to Investor such number of copies of a
prospectus, including, without limitation, a preliminary
prospectus, in conformity with the requirements of the Act,
and such other documents as Investor may reasonably request in
order to facilitate the public sale or other disposition of
such Shares;
5.5.3 Use its best efforts to register or qualify,
not later than the effective date of any Registration
Statement filed pursuant to this Agreement, the Shares covered
by such Registration Statement under the securities or Blue
Sky laws of such jurisdictions within the United States as
Investor may reasonably request, and do any
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and all other acts or things which may be necessary or
advisable to enable Investor to consummate the public sale or
other disposition in such jurisdiction of such Shares;
5.5.4 Promptly notify Investor at any time when a
prospectus relating to the Shares being distributed is
required to be delivered under the Act, of the happening of
any event as a result of which the prospectus included in such
Registration Statement, as then in effect, includes an untrue
statement of material fact or omits to state a material fact
required to be stated therein or necessary to make the
statements therein not misleading in the light of the
circumstances then existing and, at the request of Investor,
promptly prepare, file with the Securities and Exchange
Commission, and furnish to Investor, a reasonable number of
copies of a supplement to, or an amendment of, such prospectus
as may be necessary so that, as thereafter delivered to the
purchasers of such Shares, such prospectus shall not include
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;
5.5.5 Use its best efforts to furnish, at the request
of Investor or any underwriter of any distribution of the
Shares, an opinion of legal counsel to the Corporation,
covering such matters as are typically covered by opinions of
issuer's counsel in underwritten offerings under the Act;
5.5.6 Use its best efforts to cause all of the Shares
as to which Investor shall have requested registration to be
listed on any recognized securities exchange, including,
without limitation, the National Association of Securities
Dealers Automated Quotation System, on which the Shares are
then listed and to maintain the currency and effectiveness of
any such listings; and
5.5.7 Enter into an agreement with the underwriters
for such offering in which the Corporation shall provide
indemnities similar to those described in Section 5.7 hereof
to the underwriters and in which the Corporation shall make
the usual representations and warranties made by issues of
equity securities to underwriters.
5.6 COSTS AND EXPENSES. Except for expenses referred to in the
following sentence, the Corporation shall bear the entire cost and
expense of any registration made pursuant to this Agreement, including,
without limitation, all registration and filing fees, printing
expenses, the fees and expenses of the Corporation's counsel and its
independent accountants and all other out-of-pocket expenses incident
to the preparation, printing and filing under the Act of the
Registration Statement and all amendments and supplements thereto, the
cost of furnishing copies of each preliminary prospectus, each final
prospectus and each amendment or supplement thereto to, underwriters,
brokers and dealers and other purchasers of the securities so
registered, and the costs and expenses incurred in connection with the
qualification of the securities so registered under "blue sky" or other
state securities
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laws. Notwithstanding the foregoing, the Corporation shall not be
liable or responsible for the fees and expenses of counsel and
accountants of Investor, all underwriting discounts and commissions
attributable to Shares registered at the request of Investor.
5.7 INDEMNIFICATION.
5.7.1 The Corporation will indemnify Investor, its officers,
directors and each underwriter of Shares as well as any person who
controls Investor or such underwriters against all claims, losses,
damages, liabilities and expenses resulting from any untrue statement
or alleged untrue statement of a material fact contained in a
prospectus or in any related Registration Statement, notification or
similar filing under securities laws of any jurisdiction, or from any
omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading, except insofar as the same may have been based upon
information furnished in writing to the Corporation by Investor or such
underwriter expressly for use therein and used in accordance with such
writing.
5.7.2 Investor, by requesting any such registration, agrees to
furnish to the Corporation such information concerning it as may be
requested by the Corporation and which is necessary in connection with
any Registration or qualification of the Shares and to indemnify the
Corporation against all claims, losses, damages, liabilities and
expenses resulting from the utilization of such information furnished
in writing to the Corporation expressly for use therein and used in
accordance with such writing.
5.7.3 If any action is brought or any claim is made against a
party indemnified pursuant to this Section 5.7 in respect of which
indemnity may be sought against the indemnitor, such party shall
promptly notify the indemnitor in writing of the institution of such
action or the making of such claim and the indemnitor shall assume the
defense of such action or claim, including the employment of counsel
and payment of expenses. Such party shall have the right to employ its
or their own counsel in any such case, but the fees and expenses of
such counsel shall be at the expense of such party unless the
employment of such counsel shall have been authorized in writing by the
indemnitor in connection with the defense of such action or claim, or
such indemnified party or parties shall have reasonably concluded that
there may be defenses available to it or them which are different from
or additional to those available to the indemnitor (in which case the
indemnitor shall not have the right to direct any different or
additional defense of such action or claim on behalf of the indemnified
party or parties), in any of which events such fees and expenses of not
more than one additional counsel for the indemnified parties shall be
borne by the indemnitor. Except as expressly provided above, the
indemnitor shall not previously have assumed the defense of any such
action or claim, at such time as the indemnitor does not assume the
defense of such action or claim, the indemnitor shall thereafter be
liable to any person indemnified pursuant to this Agreement for any
legal or other expenses subsequently incurred by such person in
investigating, preparing or defending against such action or
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claim. Anything in this paragraph to the contrary notwithstanding, the
indemnitor shall not be liable for any settlement of any such claim or
action effected without its written consent.
6. ADJUSTMENTS FOR OTHER ISSUANCES.
6.1 If the Corporation issues and sells through a publicly
underwritten offering at least $1 million of convertible preferred
shares prior to January 1, 1998, the terms of the Series A Convertible
Preferred Shares as expressed on the attached Certificate of
Designation, will be amended by the Board of Directors so that they
will be the same as provided for such publicly issued convertible
preferred shares.
6.2 If at any time prior to January 1, 1998, the Corporation
issues and sells through a publicly underwritten offering at least $1
million of Shares, the conversion price contained in the attached
Certificate of Designation will be changed so that it is 120% of the
public offering price for such Shares.
7. MISCELLANEOUS.
7.1 NOTICES. Notices given under this Agreement shall be
deemed given when received at the addresses for the parties set forth
below and may be delivered by facsimile or other telecommunications
device producing a document setting forth such notice.
If to the Corporation: Meritage Hospitality Group Inc.
00 Xxxxx Xxxxxx, X.X., Xxxxx 000
Xxxxx Xxxxxx, XX 00000
Attention: President
Facsimile - (000) 000-0000
If to Investor:
7.2 BINDING AGREEMENT. This Agreement shall be binding upon,
and shall inure to the benefit of, the parties hereto and their
respective successors and assigns.
7.3 ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement between the parties with respect to the subject matter
hereof, and supersedes and cancels any and all prior negotiations,
arrangements, agreements and understandings, whether oral or written,
between them, respecting the subject matter hereof.
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7.4 GOVERNING LAW. This Agreement shall be governed by and
construed under the laws of the State of Michigan.
7.5 ASSIGNABILITY. The rights and obligations of Investor
hereunder may be assigned by it to any corporation or other entity
controlled by it or controlling it.
7.6 SUCCEEDING SECURITIES. If either the Series A Convertible
Preferred Shares or the Common Shares of the Corporation covered by
this Agreement is converted into any other security of the Corporation
or any other corporation, the terms of this Agreement shall apply with
full force and effect to any such other security and the obligations of
the Corporation to effect registration shall include such other
filings, qualifications, notices and similar acts as may be necessary
to enable Investor to realize the benefits of registration provided by
this Agreement.
7.7 COUNTERPARTS. 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 agreement.
7.8 CONDITION TO ACCEPTANCE. Acceptance of this Agreement is
subject to the approval of the Board of Directors of the Corporation.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
Witnessed by:
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Signature of Investor
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MERITAGE HOSPITALITY GROUP INC.
_____________________________ By:_________________________________
Xxxxxxxxxxx X. Xxxxxx
President
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392829.4
