<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
CANDLEWOOD HOTEL COMPANY, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement no.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
[CANDLEWOOD LOGO]
----------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
May 16, 2000
----------------------
The 2000 Annual Meeting of the Stockholders of Candlewood Hotel
Company, Inc. (the "Company") will be held at 10:00 a.m. local time, on May 16,
2000, at the Hotel at Old Town Conference Center, located at 210 North Mosley,
Wichita, Kansas 67202, for the following purposes:
1. To elect a board of twelve directors for the ensuing year or until
the election and qualification of their respective successors; and
2. To transact such other business as may properly come before the
meeting.
Only stockholders of record at the close of business on April 6, 2000,
the record date, will be entitled to notice of, and to vote at, the 2000 Annual
Meeting of Stockholders and any adjournment thereof.
By Order of the Board of Directors,
/s/ WARREN D. FIX
--------------------
Warren D. Fix
Secretary
Wichita, Kansas
Dated: April 14, 2000
<PAGE> 3
[CANDLEWOOD LOGO]
8621 East 21st Street North, Suite 200
Wichita, Kansas 67206
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD
MAY 16, 2000
-----------------
PROXY STATEMENT
-----------------
SOLICITATION OF PROXIES
The accompanying proxy is solicited on behalf of the Board of Directors
of Candlewood Hotel Company, Inc., a Delaware corporation (the "Company"), for
use at the Annual Meeting of Stockholders to be held at the Hotel at Old Town
Conference Center, located at 210 North Mosley, Wichita, Kansas 67202, on May
16, 2000 at 10:00 a.m. local time, and at any and all adjournments or
postponements thereof (the "Meeting").
All shares represented by each properly executed, unrevoked proxy
received in time for the Meeting will be voted in the manner specified therein.
If the manner of voting is not specified in an executed proxy received by the
Company, the proxy will be voted FOR the election of the twelve nominees to the
Board of Directors listed herein.
Any stockholder has the power to revoke his or her proxy at any time
before it is voted. A proxy may be revoked by delivering a written notice of
revocation to the Secretary of the Company at the address set forth above, by
presenting a later-dated proxy executed by the person who executed the prior
proxy, or by attendance at the meeting and voting in person by the person who
executed the prior proxy.
This proxy statement is being mailed to the Company's stockholders on
or about April 14, 2000. The expense of soliciting proxies will be borne by the
Company. Expenses include reimbursement paid to brokerage firms and others for
their expenses incurred in forwarding solicitation material regarding the
Meeting to beneficial owners of the Company's voting stock. Solicitation of
proxies will be made by mail. Further solicitation of proxies may be made by
telephone or oral communication by the Company's regular employees, who will not
receive additional compensation for such solicitation.
1
<PAGE> 4
OUTSTANDING SHARES AND VOTING RIGHTS
Only holders of record of the 9,025,000 shares of the Company's common
stock (the "Common Stock"), the 65,000 shares of the Company's Series A
Preferred Stock (the "Series A Preferred Stock") and the 42,000 shares of the
Company's Series B Preferred Stock (the "Series B Preferred Stock", together
with the Series A Preferred Stock, the "Preferred Stock") outstanding at the
close of business on the record date, April 6, 2000, will be entitled to notice
of and to vote at the Meeting or any adjournment or postponement thereof. On
each matter to be considered at the Meeting, each stockholder will be entitled
to cast one vote for each share of the Company's Common Stock and 105.26316
votes for each share of Preferred Stock held of record by such stockholder on
April 6, 2000 (the "Record Date"). Accordingly, an aggregate of 20,288,158 votes
may be cast on each matter to be considered at the Meeting.
In order to constitute a quorum for the conduct of business at the
Meeting, shares representing a majority of the votes entitled to be cast at the
Meeting must be represented at the Meeting. Shares represented by proxies that
reflect abstentions or "broker non-votes" (i.e., shares held by a broker or
nominee which are represented at the meeting, but with respect to which such
broker or nominee is not empowered to vote on a particular proposal) will be
counted as shares that are present and entitled to vote for purposes of
determining the presence of a quorum.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
The following table sets forth, as of March 17, 2000, the amount and
percentage of the outstanding shares of the Company's Common Stock, Preferred
Stock and Common Share Equivalents (the Common Stock together with the Preferred
Stock on an as-converted basis) which, according to the information supplied to
the Company, are beneficially owned by:
o each person who, to the knowledge of the Company, is the beneficial
owner of more than 5% of such securities,
o each person who is currently a director of the Company (each of whom
is also a nominee for election as a director of the Company),
o each Named Executive Officer (as defined on page 9), and
o all current directors and executive officers of the Company as a
group. Except to the extent indicated in the footnotes to the
following table, the person or entity listed has sole voting or
dispositive power with respect to the shares that are deemed
beneficially owned by such person or entity.
2
<PAGE> 5
<TABLE>
<CAPTION>
Shares Beneficially Owned
--------------------------------------------------------------------------
Series A Preferred Series B Preferred Common
--------------------- --------------------- ---------------------
NAME AND ADDRESS OF Percent Percent Percent
BENEFICIAL OWNER(1) Number of Class Number of Class Number(2) of Class
- ------------------- ------ -------- ------ -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
DIRECTORS/NOMINEES AND
NAMED EXECUTIVE OFFICERS:
Mariel C. Albrecht (4) .................... 0 -- 0 -- 0 --
Gary E. Costley (5) ....................... 0 -- 0 -- 10,500 *
Robert J. Cresci (6)(7) ................... 0 -- 0 -- 5,000 *
Jack P. DeBoer (7)(8) ..................... 1,000 1.54% 0 -- 2,128,649 23.52%
Warren D. Fix (7)(9) ...................... 250 * 0 -- 326,215 3.59
Jeffrey F. Hitz (10) ...................... 0 -- 0 -- 29,300 *
Thomas L. Keltner (4)(7) .................. 0 -- 0 -- 0 --
Robert S. Morris (7)(11) .................. 0 -- 0 -- 5,000 *
Thomas H. Nielsen (12) .................... 0 -- 0 -- 2,500 *
Frank J. Pados, Jr. (7)(13) ............... 0 -- 0 -- 5,000 *
William L. Perocchi (14) .................. 0 -- 0 -- 5,500 *
David A. Redfern (15) ..................... 0 -- 0 -- 23,230 *
James E. Roos (16) ........................ 0 -- 0 -- 63,750 *
Tony M. Salazar (17) ...................... 0 -- 0 -- 9,500 *
Thomas L. Storey (7) ...................... 0 -- 0 -- 0 --
All directors and executive officers
as a group (20 persons)(4)(5)(6)(8)
(9)(10)(11)(12)(13)(14)(15)(16)(17) ..... 1,250 1.92 0 -- 2,669,394 28.70
5% BENEFICIAL HOLDERS:
Stockholders Group (7) .................... 64,250 98.85 41,790 99.50% 5,482,210 58.10
Doubletree Corporation (7) ................ 0 -- 0 -- 2,587,500 28.67
Hilton Hotels Corporation
World Headquarters
9336 Civic Center Drive
Beverly Hills, California 90210
Olympus Growth Fund, II, L.P. (7)(18) .... 9,900 15.23 4,841 11.53 38,728 *
One Station Place
Stamford, Connecticut 06430
Whiting & Co. (7)(19) .................... 10,000 15.38 0 -- 0 --
c/o J.P. Morgan Investment Mgmt.
522 Fifth Avenue, 6th Floor
New York, New York 10036
Chase Venture Capital Associates (7)(19)... 7,000 10.77 0 -- 0 --
380 Madison Avenue, 12th Floor
New York, New York 10017
Arbor Lake Club, Ltd. (7)(20) ............. 7,000 10.77 0 -- 0 --
760 N.W. 107th Avenue, Suite 300
Miami, Florida 33172
Pecks Management Partners Ltd.(7)(21) ..... 7,000 10.77 7,900 18.81 63,200 *
One Rockefeller Plaza, Suite 900
New York, New York 10020
Private Equity Investors III, L.P.(7)(22) . 3,500 5.38 12,000 28.57 96,000 1.05
540 Madison Avenue, 36th Floor
New York, New York 10022
Equity-Linked Investors-II, L.P.(7)(23) ... 3,500 5.38 12,000 28.57 96,000 1.05
540 Madison Avenue, 36th Floor
New York, New York 10022
Advance Capital Associates, L.P.(24) ...... 3,250 5.00 2,000 4.77 16,000 *
660 Madison Avenue, 15th Floor
New York, New York 10021
The FFJ Nominee Trust(7)(19) .............. 3,250 5.00 0 -- 0 --
Samuel T. Byrne, Trustee
c/o Boston Capital Institutional
Advisors
One Boston Place
Boston, Massachusetts 02108-4406
Mutual Life Insurance Company of
New York(7)(25) ........................ 3,250 5.00 3,000 7.14 24,000 *
1740 Broadway
New York, New York 10019
Allied Capital Corporation (26) .......... 3,250 5.00 0 -- 0 --
1666 K. Street, N.W. 9th Floor
Washington, DC 20006
</TABLE>
<TABLE>
<CAPTION>
Common Share
Equivalents(3)
----------------------------
NAME AND ADDRESS OF Percent
BENEFICIAL OWNER(1) Number of Class
- ------------------- --------- ---------
<S> <C> <C>
DIRECTORS/NOMINEES AND
NAMED EXECUTIVE OFFICERS:
Mariel C. Albrecht (4) .................... 0 --
Gary E. Costley (5) ....................... 10,500 *
Robert J. Cresci (6)(7) ................... 5,000 *
Jack P. DeBoer (7)(8) ..................... 2,233,912 11.00%
Warren D. Fix (7)(9) ...................... 352,531 1.73
Jeffrey F. Hitz (10) ...................... 29,300 *
Thomas L. Keltner (4)(7) .................. 0 --
Robert S. Morris (7)(11) .................. 5,000 *
Thomas H. Nielsen (12) .................... 2,500 *
Frank J. Pados, Jr. (7)(13) ............... 5,000 *
William L. Perocchi (14) .................. 5,500 *
David A. Redfern (15) ..................... 23,230 *
James E. Roos (16) ........................ 63,750 *
Tony M. Salazar (17) ...................... 9,500 *
Thomas L. Storey (7) ...................... 0 --
All directors and executive officers
as a group (20 persons)(4)(5)(6)(8)
(9)(10)(11)(12)(13)(14)(15)(16)(17) ..... 2,800,973 13.62
5% BENEFICIAL HOLDERS:
Stockholders Group (7) .................... 16,644,315 80.41
Doubletree Corporation (7) ................ 2,587,500 12.75
Hilton Hotels Corporation
World Headquarters
9336 Civic Center Drive
Beverly Hills, California 90210
Olympus Growth Fund, II, L.P. (7)(18) .... 1,590,412 7.82
One Station Place
Stamford, Connecticut 06430
Whiting & Co. (7)(19) .................... 1,052,632 5.19
c/o J.P. Morgan Investment Mgmt.
522 Fifth Avenue, 6th Floor
New York, New York 10036
Chase Venture Capital Associates (7)(19)... 736,842 3.63
380 Madison Avenue, 12th Floor
New York, New York 10017
Arbor Lake Club, Ltd. (7)(20) ............. 736,842 3.63
760 N.W. 107th Avenue, Suite 300
Miami, Florida 33172
Pecks Management Partners Ltd.(7)(21) ..... 1,631,621 8.02
One Rockefeller Plaza, Suite 900
New York, New York 10020
Private Equity Investors III, L.P.(7)(22) . 1,727,579 8.48
540 Madison Avenue, 36th Floor
New York, New York 10022
Equity-Linked Investors-II, L.P.(7)(23) ... 1,727,579 8.48
540 Madison Avenue, 36th Floor
New York, New York 10022
Advance Capital Associates, L.P.(24) ...... 568,631 2.80
660 Madison Avenue, 15th Floor
New York, New York 10021
The FFJ Nominee Trust(7)(19) .............. 342,105 1.69
Samuel T. Byrne, Trustee
c/o Boston Capital Institutional
Advisors
One Boston Place
Boston, Massachusetts 02108-4406
Mutual Life Insurance Company of
New York(7)(25) ........................ 681,895 3.36
1740 Broadway
New York, New York 10019
Allied Capital Corporation (26) .......... 342,106 1.68
1666 K. Street, N.W. 9th Floor
Washington, DC 20006
</TABLE>
3
<PAGE> 6
- -------------
* Less than one percent.
(1) The address of each of the directors and officers listed in the table is
c/o Candlewood Hotel Company, 8621 E. 21st Street North, Suite 200,
Wichita, Kansas 67206.
(2) Includes options exercisable within 60 days of March 17, 2000 and assumes
the conversion of certain warrants issued by the Company in connection
with the issuance of the Series B Preferred Stock (the "Series B
Warrants") for Common Stock on a one-to-one basis.
(3) Includes Common Stock (including options exercisable within 60 days of
March 17, 2000), shares of Series A Preferred Stock and Series B Preferred
Stock after giving effect to the conversion at an initial ratio of
105.26316 shares of Common Stock per share of Preferred Stock, and the
conversion of the Series B Warrants on a one-to-one basis into shares of
Common Stock.
(4) Excludes 2,587,500 shares of Common Stock held by Doubletree Corporation
("Doubletree"), a wholly-owned subsidiary of Hilton Hotels Corporation
("Hilton"). Ms. Albrecht and Mr. Keltner are officers of Hilton and
disclaim beneficial ownership of such shares.
(5) Includes 7,500 shares of Common Stock subject to options exercisable
within 60 days of March 17, 2000.
(6) Represents 5,000 shares of Common Stock subject to options exercisable
within 60 days of March 17, 2000. Excludes 7,000 shares of Series A
Preferred Stock, 7,900 shares of Series B Preferred Stock and 63,200
Series B Warrants beneficially owned by Pecks Management Partners, Ltd.
("Pecks"). Mr. Cresci is a Managing Director of Pecks and disclaims
beneficial ownership of such shares.
(7) On July 10, 1998, an Amended and Restated Stockholders Agreement (the
"Stockholders Agreement") was executed by and between the Company, Messrs.
DeBoer and Fix, Doubletree and certain other parties signatory thereto in
connection with the issuance of the Company's Series B Preferred Stock
(collectively, the "Stockholders Group"). The Stockholders Group may be
deemed to be a "group" for purposes of 13(d)(3) of the Securities Exchange
Act of 1934, as amended. Messrs. DeBoer, Fix, Cresci (through his
association with Pecks), Morris (through his association with Olympus
Growth Fund II, L. P. ("OGF-II") and Olympus Executive Fund, L.P.
("OEF")), Pados (through his association with Private Equity Investors
III, L.P. ("PEI-III") and Equity-Linked Investors-II ("ELI-II")), and
Albrecht and Keltner (through their association with Hilton), Doubletree
and the other parties to the Stockholders Agreement may therefore be
deemed to beneficially own those shares listed as beneficially owned by
the Stockholders Group. The Stockholders Agreement provides for certain
rights and obligations regarding the nomination and election of directors.
See "Stockholders Agreement." The listed holders disclaim beneficial
ownership of the shares except to the extent that they have a pecuniary
interest therein.
(8) Includes 25,000 shares of Common Shares subject to options exercisable
within 60 days of March 17, 2000. Excludes 99,676 shares of Common Stock
held by the Alexander John DeBoer Trust dated March 14, 1995 and the
Christopher Scott DeBoer Trust dated March 14, 1995 (collectively, the
"DeBoer Trusts"). Mr. DeBoer has no interest in the DeBoer Trusts and
disclaims beneficial ownership of such shares.
(9) Includes 250 shares of Series A Preferred Stock held by Mr. Fix as Trustee
for the Warren D. Fix Defined Benefit Plan Trust. Includes 274,965 shares
of Common Stock held by the Warren D. Fix Family Partnership, L.P. (the
"Fix Partnership"). Mr. Fix disclaims beneficial ownership of these shares
except to the extent of his interest in the Fix Partnership. Includes
51,2500 shares of Common Stock subject to options exercisable within 60
days of March 17, 2000.
(10) Includes 27,500 shares of Common Stock subject to options exercisable
within 60 days of March 17, 2000.
(11) Represents 5,000 shares of Common Stock subject to options exercisable
within 60 days of March 17, 2000. Excludes 100 shares of Series A
Preferred Stock, 49 shares of Series B Preferred Stock and 392 Series B
Warrants beneficially owned by OEF. Excludes 9,900 shares of Series A
Preferred Stock, 4,841 shares of Series B Preferred Stock and 38,728
Series B Warrants beneficially owned by OGF-II. Mr. Morris is an executive
officer of the general partners of both OEF and OGF-II and disclaims
beneficial ownership of the shares held by such entities.
(12) Represents 2,500 shares of Common Stock subject to options exercisable
within 60 days of March 17, 2000.
4
<PAGE> 7
(13) Represents 5,000 shares of Common Shares subject to options exercisable
within 60 days of March 17, 2000. Excludes 3,500 shares of Series A
Preferred Stock, 12,000 shares of Series B Preferred Stock and 96,000
Series B Warrants beneficially owned by ELI-II. Excludes 3,500 shares of
Series A Preferred Stock, 12,000 shares of Series B Preferred Stock and
96,000 Series B Warrants beneficially owned by PEI-III. Mr. Pados is an
executive officer of Desai Capital Management Incorporated ("DCMI") and
disclaims beneficial ownership of such shares. DCMI acts as an investment
advisor to PEI-III and ELI-II and, with the respective general partners of
PEI-III and ELI-II, has the power to vote or to direct the vote and to
dispose or to direct the disposition of such shares under an investment
and advisory agreement between PEI-III and ELI-II.
(14) Includes 2,500 shares of Common Stock subject to options exercisable
within 60 days of March 17, 2000.
(15) Includes 22,875 shares of Common Stock subject to options exercisable
within 60 days of March 17, 2000.
(16) Represents 63,750 shares of Common Stock subject to options exercisable
within 60 days of March 17, 2000.
(17) Includes 7,500 shares of Common Stock subject to options exercisable
within 60 days of March 17, 2000.
(18) Based on Schedule 13D filed October 23, 1997 and Schedule 13D/A filed
December 11, 1998 by OGF-II and OEF. OEF, an affiliate of OGF-II,
beneficially owns an additional 100 shares of Series A Preferred Stock, 49
shares of Series B Preferred Stock and 392 Series B Warrants, and, as a
party to the Stockholders Agreement, may therefore be deemed to
beneficially own those shares listed as beneficially owned by the
Stockholders Group.
(19) The listed holder is known by the Company to have purchased shares of the
Company's Preferred Stock and to have entered into the Stockholders
Agreement. The Company is unaware of any other stockholdings of the
holder.
(20) Based on Schedule 13D filed on June 4, 1998 and Schedule 13D/A filed on
September 10, 1998 by LNR Candlewood Holdings, Inc. ("LNR"), Leisure
Colony Management Corp. and LNR Property Corporation ("LNR Property").
According to information provided to the Company by its stock transfer
agent, the shares issued to LNR were transferred to Arbor Lake Club, Ltd.
("Arbor"). Both LNR and Arbor are indirectly wholly-owned and controlled
by LNR Property.
(21) Based on Schedule 13D filed on June 4, 1998, and Schedule 13D/A filed on
September 10, 1998 by Pecks Management Partners, Ltd.
(22) Based on Schedule 13D filed on June 4, 1998 and Schedule 13D/A filed on
September 10, 1998 by ELI-II, PEI-III, DCMI and Rohit Mujilal Desai ("Mr.
Desai"). The power to vote or to direct the vote and to dispose of, or to
direct the disposition of, the shares held by PEI-III is vested in its
general partner Rohit M. Desai Associates-III, LLC ("RMDA-III"), however,
such decisions may also be made by DCMI under an investment and advisory
agreement between PEI-III and DCMI. Accordingly, RMDA-III and DCMI may be
deemed to beneficially own the shares held by PEI-III. Mr. Desai is the
managing member of RMDA-III and the Chairman, President and Treasurer of
DCMI, and may be deemed to share the power to vote or to direct the vote
and to dispose of, or to direct the disposition of, the shares held by
PEI-III.
(23) Based on Schedule 13D filed on June 4, 1998 and Schedule 13D/A filed on
September 10, 1998 by ELI-II, PEI-III, DCMI and Mr. Desai. The power to
vote or to direct the vote and to dispose of, or to direct the disposition
of, the shares held by ELI-II is vested in general partner Rohit M. Desai
Associates-II ("RMDA-II"), however, such decisions may also be made by
DCMI under an investment and advisory agreement between ELI-II and DCMI.
Accordingly, RMDA-II and DCMI may be deemed to beneficially own the shares
held by ELI-II. Mr. Desai is the general partner of RMDA-II and the
Chairman, President and Treasurer of DCMI, and may be deemed to share the
power to vote or to direct the vote and to dispose of, or to direct the
disposition of, the shares held by ELI-II.
(24) Based on Schedule 13D filed on June 4, 1998 and Schedule 13D/A filed on
September 10, 1998 by Advance Capital Associates L.P. ("Advance L.P."),
Advance Capital Management, LLC ("Advance LLC"), Advance Capital Partners,
L.P. ("Advance Capital") and Advance Capital Offshore Partners, L.P.
("Advance Offshore"). The shares beneficially owned by Advance L.P. and
Advance LLC are held by Advance Capital (2,457 shares of Series A
Preferred Stock, 1,523 shares of Series B Preferred Stock and 12,184
Series B Warrants) and Advance Offshore (793 shares of Series A Preferred
Stock, 477 shares of Series B Preferred Stock and 3,816 Series B
Warrants). With respect to the shares issued to them, respectively,
Advance Capital and Advance Offshore each has shared power to vote or to
direct the vote and to dispose of, or to direct the disposition of, the
shares beneficially owned by Advance L.P. and Advance LLC.
(25) Based on Schedule 13D filed on June 4, 1998 and Schedule 13D/A filed on
September 10, 1998 by The Mutual Life Insurance Company of New York
("MONY"). The shares beneficially owned by MONY are held by J. Romeo & Co.
(26) Based on Schedule 13D filed on June 4, 1998 and Schedule 13D/A filed on
September 10, 1998 by Allied Capital Corporation.
5
<PAGE> 8
REGISTRATION RIGHTS
In connection with the issuance and sale of the Company's Series B
Preferred Stock in July, 1998 (the "Series B Private Placement"), the Company,
Mr. Jack P. DeBoer, Doubletree, the Alexander John DeBoer Trust dated March 14,
1995 and the Christopher Scott DeBoer Trust dated March 14, 1995 (the "DeBoer
Trusts"), the Warren D. Fix Family Partnership, L.P. (the "Fix Partnership")
(collectively, the "Initial Stockholders") and certain other purchasers of the
Preferred Stock, entered into that certain Amended and Restated Registration
Rights Agreement dated as of July 10, 1998 (the "Registration Rights
Agreement"). The Registration Rights Agreement replaced that certain
Registration Rights Agreement dated as of September 22, 1997.
Pursuant to the terms of the Registration Rights Agreement, the parties
have two demand registration rights under which they may require (subject to
certain limitations) the Company to register under the Securities Act of 1933,
as amended, certain shares of Common Stock owned by the parties. The Company is
not required to file a registration statement upon exercise of these demand
registration rights within 180 days following any underwritten public offering
of Common Stock or securities, convertible into or exercisable or exchangeable
for Common Stock. The Company is also obligated to allow the parties to
participate in underwritten offerings originated by the Company, subject to
certain limitations. All expenses of any registration relating to securities as
provided in the Registration Rights Agreement (other than underwriting discounts
and commissions and fees and expenses of counsel for selling stockholders) are
to be borne by the Company.
STOCKHOLDERS AGREEMENT
Following the completion of the Series B Private Placement, the Initial
Stockholders and certain holders of Preferred Stock entered into an Amended and
Restated Stockholders Agreement dated as of July 10, 1998 (the "Stockholders
Agreement"). The Stockholders Agreement replaced that certain Stockholders
Agreement dated as of September 22, 1997. The Stockholders Agreement provides
that, subject to certain conditions described below and so long as each entity
holds at least 20% of the Series A Preferred Stock that it originally purchased,
Olympus Growth Fund II, L.P. ("Olympus"), Desai Capital Management, Inc.
("Desai") and Pecks Management Partners Ltd. ("Pecks", collectively, the "Series
A Purchase Group") are each entitled to designate a single individual for
nomination to stand for election to the Board of Directors (for a total of three
directors selected by the Series A Purchaser Group). In addition, subject to
certain conditions described below and so long as each entity holds at least 20%
of the Series B Preferred Stock originally purchased, the holders of at least a
majority of the Series B Preferred Stock are entitled to designate a single
individual for nomination to stand for election to the Board of Directors. The
Stockholders Agreement also provides that, subject to certain conditions,
Doubletree shall be entitled to designate two individuals for nomination to
stand for election to the Board of Directors, and that Mr. DeBoer, the DeBoer
Trusts and the Fix Partnership (collectively, the "DeBoer/Fix Holders") (or a
permitted transferee) are entitled to collectively designate two individuals for
nomination to stand for election to the Board of Directors. Finally, the
Stockholders Agreement permits, subject to certain conditions, Doubletree,
together with the DeBoer/Fix Holders to designate the remaining independent
directors for nomination to stand for election to the Board of Directors and to
designate the president of the Company for nomination to stand for election to
the Board of Directors. Each of the parties to the Stockholders Agreement have
agreed to vote its shares in favor of the individuals nominated by the other
parties to the Stockholders Agreement.
The rights and obligations of the holders of the Preferred Stock under
the Stockholders Agreement terminate as follows:
o In the case of the holders of the Series A Preferred Stock, upon the
failure of all such holders to collectively hold, beneficially or of
record, at least 20% of the Series A Preferred Stock or Common Stock
equivalents purchased in the initial offering of the Series A
Preferred Stock.
o In the case of the holders of the Series B Preferred Stock, upon the
failure of all such holders to collectively hold, beneficially or of
record, at least 20% of the Series B Preferred Stock or Common Stock
equivalents purchased in the initial offering of the Series B
Preferred Stock.
o In the case of any holder of Preferred Stock, on the date that the
Common Stock resulting from the conversion of Preferred Stock held
by such holders into Common Stock have been sold pursuant to an
effective registration statement in accordance with the rules and
regulations of the Securities and Exchange Commission or a sale
pursuant to Rule 144 thereof.
o In addition, the rights and obligations of any of Olympus, Desai or
Pecks under the Stockholders Agreement terminate if such entity
holds, beneficially or of record, less than 20% of the Series A
Preferred Stock or Common Stock equivalents purchased by such entity
in the initial offering of the Series A Preferred Stock.
o Finally, the rights and obligations of Doubletree and the DeBoer/Fix
Holders under the Stockholders Agreement terminate upon both the
failure of such holders or their permitted transferees,
collectively, to hold, beneficially or of record, at least 20% of
the outstanding voting interests of the Company, and the termination
of the rights of the holders of the Series A Preferred Stock and the
Series B Preferred Stock.
6
<PAGE> 9
EXECUTIVE OFFICERS OF THE COMPANY
The executive officers of the Company as of April 6, 2000 are as
follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Jack P. DeBoer.................... 69 Chief Executive Officer and Chairman of the Board
James E. Roos..................... 48 President and Chief Operating Officer
Warren D. Fix..................... 61 Executive Vice President, Chief Financial Officer,
Secretary and Director
Jeffrey F. Hitz................... 54 Senior Vice President - Development
Charles H. Armstrong, Jr.......... 42 Vice President - Franchise Sales
Tim D. Johnson.................... 32 Vice President-Treasurer and Assistant Secretary
Thomas Kennalley.................. 43 Vice President-Controller
H. Steven Meadows................. 46 Vice President - Operations
David A. Redfern.................. 34 Vice President - Sales and Marketing
Gina-Lynne Scharoun............... 29 Vice President - Franchise Services
</TABLE>
For a description of the business background of Messrs. DeBoer and Fix,
see "Proposal 1--ELECTION OF DIRECTORS."
James E. Roos has served as President and Chief Operating Officer of the
Company since June 1997. From 1993 to 1997, Mr. Roos was Executive Vice
President of Posadas USA, Inc., a division of Grupo Posadas, S.A. de C.V., a
Mexico City-based Latin American hotel company. From 1991 to 1993, Mr. Roos
served as Vice President of Operations for the Western Region of Holiday Inns,
Inc. From 1987 to 1991, Mr. Roos was Vice President of Operations and
Development for Hampton Inns, Inc., a division of Promus Companies/Holiday Inns,
Inc. From 1981 to 1987, Mr. Roos was Director of Operations for Holiday Inns,
Inc.
Jeffrey F. Hitz has served as Senior Vice President of Development of
the Company since February 1998. From May 1996 to February 1998, Mr. Hitz served
as Vice President of Real Estate of the Company. From July 1995 to March 1996,
Mr. Hitz was a consultant to several retail chains on site selection and concept
development. From October 1994 to July 1995, Mr. Hitz was Senior Vice President,
Operations for EZCorp, Inc., a publicly traded retail chain. From August 1989 to
October 1994, Mr. Hitz held several positions with THORN Americas, Inc., an
operator of a national chain of rent-to-own stores, including Vice President,
Development. From 1986 to 1989, Mr. Hitz was a multi-unit franchisee of two
restaurant concepts in California and Arizona.
7
<PAGE> 10
Charles H. Armstrong, Jr. has served as Vice President of Franchise
Sales of the Company since May 1999. From September 1997 to April 1999, he was
Vice President of Franchise Sales for Wingate Inns, a subsidiary of Cendant
Corporation. From May 1995 to August 1997, Mr. Armstrong was Director of
Franchise Sales for Wingate Inns. From April 1993 to April 1995, he was Director
of Franchise Sales for Hospitality Franchise Systems, which offers the Days Inn,
Ramada Inn and Howard Johnson brands.
Tim D. Johnson has served as Vice President-Treasurer and Assistant
Secretary of the Company since November 1999. From July 1998 to November 1999,
Mr. Johnson was Director of Strategic and Financial Planning of the Company.
From March 1997 to July 1998, he held the position of Manager of Financial
Reporting of the Company. From May 1995 to March 1997, Mr. Johnson was a
Financial Analyst for THORN Americas, Inc., an operator of a national chain of
rent-to-own stores. From January 1995 to May 1995, he was an accountant for RCM,
a regional public accounting firm. From May 1994 to December 1994, Mr. Johnson
was an Adjunct Instructor at the University of Oklahoma.
Thomas Kennalley has served as Vice President-Controller of the Company
since December 1997. From 1996 to 1997, Mr. Kennalley was Director of Financial
Reporting for THORN Americas, Inc., an operator of a national chain of
rent-to-own stores. From 1991 to 1996, he held the position of Treasurer of
Advantage Companies, Inc., the largest publicly held franchisor of Rent-A-Center
stores. Mr. Kennalley also has ten years of experience in the audit department
of a national firm of certified public accountants.
H. Steven Meadows has served as Vice President of Operations since
November 1998. From August 1993 to November 1998, Mr. Meadows held several
positions with Posadas USA, Inc., a division of Grupo Posadas, S.A. de C.V., a
Mexico City-based Latin American hotel company, including most recently Vice
President, Operations. From August 1991 to August 1993, he served as a General
Manager for a hotel operated by Holiday Inns, Inc. From November 1990 to August
1991, Mr. Meadows served as a General Manager of a Ramada Hotel, a hotel
operated by Hospitality Unlimited Investments.
David A. Redfern has served as Vice President of Sales and Marketing of
the Company since December 1995. From August 1994 to December 1995, Mr. Redfern
served as the National Sales Director for the Summerfield Suites Hotel chain, an
up-scale extended-stay hotel chain. From June 1993 to January 1995, Mr. Redfern
served as a Task Force Manager for Summerfield Suites. From September 1991 to
June 1993, Mr. Redfern attended the University of California - Irvine, where he
received his M.B.A. degree. From January to June 1993, Mr. Redfern was also
employed by Cruttenden & Co., Inc., an investment banking firm, as a research
analyst. From August 1990 to September 1991, Mr. Redfern served as Director of
Sales for the Summerfield Suites hotel in San Francisco, California. From 1988
to August 1990, Mr. Redfern was a Sales Manager for the Residence Inn by
Marriott in La Jolla, California.
Gina-Lynne Scharoun has served as Vice President of Franchise Services
of the Company since May 1999. From August 1997 to April 1999, she held the
position of Vice President of Franchise Development of the Company. From June
1996 to July 1997, she held the position of Director of Franchise Development of
the Company. From January 1996 until May 1996, Ms. Scharoun held various
positions in the Company's Corporate and Franchise Development Departments. From
September 1993 to December 1995, Ms. Scharoun served in various positions,
including Assistant Vice President of Community Reinvestment, for Fourth
Financial Corporation, a financial institution.
8
<PAGE> 11
EXECUTIVE COMPENSATION
The following table sets forth certain information regarding the annual
and long-term compensation for services in all capacities to the Company for the
fiscal years ended December 31, 1997, December 31, 1998 and December 31, 1999 of
those persons who were either:
o the chief executive officer of the Company,
o one of the other four most highly compensated executive officers of
the Company whose annual salary and bonuses exceeded $100,000, or
o any other executive officer who would have qualified under the
previous two categories but for the fact that the individual was not
serving as an executive officer of the registrant at the end of the
1999 fiscal year (collectively, the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION(1) COMPENSATION
----------------------------- AWARDS STOCK ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS (SHARES) COMPENSATION(2)
- ------------------------------- ---- -------- -------- ---------------- ---------------
<S> <C> <C> <C> <C> <C>
Jack P. DeBoer 1999 $350,000 $115,500 70,000 $1,718
Chief Executive Officer 1998 211,795 75,000 30,000 1,765
and Chairman of the Board 1997 135,500 75,000 -- 1,425
James E. Roos 1999 205,000 75,000 43,000 1,336
President and Chief 1998 173,658 50,000 12,000 1,637
Operating Officer 1997 82,500(3) 118,675 100,000 5,541(4)
Warren D. Fix 1999 205,000 75,000 43,000 1,222
Executive Vice President, 1998 157,986 50,000 12,000 1,540
Chief Financial Officer 1997 120,000 50,000 -- 1,425
and Secretary
Jeffrey F. Hitz 1999 150,000 27,000 28,500 1,553
Senior Vice President - 1998 121,233 50,000 6,500 1,375
Development 1997 89,538 16,000 -- 1,187
David A. Redfern 1999 120,000 27,500 16,500 1,261
Vice President - Sales 1998 90,000 16,000 -- 1,273
and Marketing 1997 70,766 7,500 -- 1,015
</TABLE>
- ----------------
(1) Amounts of other annual compensation are not shown because such
compensation did not exceed the lesser of $50,000 or 10% of the total
salary and bonus of the Named Executive Officer.
(2) For fiscal year 1999, represents matching contributions paid by the
Company under the Company's 401(k) plan of $1,718, $1,336, $1,222, $1,553
and $1,261 for Messrs. DeBoer, Roos, Fix, Hitz and Redfern, respectively.
For fiscal year 1998, represents matching contributions paid by the
Company under the Company's 401(k) plan of $1,765, $1,637, $1,540, $1,375
and $1,273 for Messrs. DeBoer, Roos, Fix, Hitz and Redfern, respectively.
For fiscal year 1997, represents matching contributions paid by the
Company under the Company's 401(k) plan of $1,425, $1,425, $1,187 and
$1,015 for Messrs. DeBoer, Fix, Hitz and Redfern, respectively.
(3) Represents a base salary of $165,000 on an annualized basis. Mr. Roos
commenced employment with the Company in June 1997 as President and Chief
Operating Officer.
(4) Includes $5,181 for lodging expense.
9
<PAGE> 12
The following table sets forth certain information with respect to grants
of stock options during 1999 to the Named Executive Officers pursuant to the
Company's 1996 Equity Plan.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL
PERCENTAGE REALIZABLE VALUE AT
OF TOTAL ASSUMED ANNUAL
NUMBER OF OPTIONS RATES OF STOCK PRICE
SECURITIES GRANTED TO EXERCISE APPRECIATION
UNDERLYING EMPLOYEES OR BASE FOR OPTION TERM(1)
OPTIONS IN FISCAL PRICE EXPIRATION ----------------------
NAME GRANTED YEAR (PER SHARE) DATE 5% 10%
- ---- ---------- ---------- ----------- ----------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Jack P. DeBoer 70,000 12.6% $4.81 2/08/09 $211,749 $536,613
James E. Roos 43,000 7.7 4.81 2/08/09 130,074 329,634
Warren D. Fix 43,000 7.7 4.81 2/08/09 130,074 329,634
Jeffrey F. Hitz 28,500 5.1 4.81 2/08/09 86,212 218,478
David A. Redfern 16,500 3.0 4.81 2/08/09 49,912 126,487
</TABLE>
- ---------------
(1) Assumed annual rates of return are for illustrative purposes only. Actual
stock price will vary from time to time based upon market factors and the
Company's financial performance. No assurance can be given that such rates
will be achieved.
The following table sets forth certain information with respect to
unexercised options held by the Named Executive Officers as of December 31, 1999
pursuant to the Company's 1996 Equity Plan. No options were exercised by any of
the Named Executive Officers during 1999.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR-END OPTION VALUE
<TABLE>
<CAPTION>
Value of Unexercised
Number of Unexercised In-the-Money
Options at Options at
December 31, 1999 December 31, 1999(1)
---------------------------- -----------------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Jack P. DeBoer..................... 7,500 92,500 -- --
James E. Roos...................... 53,000 102,000 -- --
Warren D. Fix...................... 40,500 64,500 -- --
Jeffrey F. Hitz.................... 20,375 39,625 -- --
David A. Redfern................... 18,750 22,750 -- --
</TABLE>
- -------------
(1) Based on the closing sales price of the Company's Common Stock on the
Nasdaq National Stock Market on December 31, 1999 ($1.75), minus the
exercise price of the option, multiplied by the number of shares to which
the option relates.
AGREEMENTS RELATING TO EMPLOYMENT
The Company has entered into an employment agreement with Mr. DeBoer
under which he has agreed, subject to certain conditions, to continue to serve
as the Company's Chief Executive Officer. The contract renews annually unless
earlier terminated. Mr. DeBoer will receive annual cash compensation and shall
be eligible for a bonus to be set by the Compensation Committee. The contract
provides that upon a change of control of the Company or termination of
employment under certain circumstances, Mr. DeBoer will be entitled to a payment
equal to three times his average annual salary
10
<PAGE> 13
for the previous three years. The contract provides that, during the term of the
contract, except with respect to certain passive investments in lodging
companies and hotel properties and activities related to properties held at the
time of the offering, Mr. DeBoer will not engage in the acquisition, founding,
development, operation or management of any hotel company or chain. For two
years after Mr. DeBoer's contract ends, subject to the aforementioned
exceptions, Mr. DeBoer will not engage in the acquisition, founding,
development, operation, or management of any new hotel company or chain.
In June of 1997, the Company entered into an employment agreement with
Mr. James E. Roos under which he agreed to serve as the Company's President.
Under the agreement, Mr. Roos receives annual cash compensation and certain
bonuses.
COMPENSATION COMMITTEE REPORT ON COMPENSATION
Compensation and benefit practices of the Company are established and
governed by the Compensation Committee comprised exclusively of independent
members of the Board of Directors. From January 1999 through May 1999, the
Compensation Committee consisted of Gary E. Costley, Frank J. Pados, Jr., and
Tony M. Salazar. From June 1999 through December 1999, the Compensation
Committee consisted of Messrs. Costley and Pados and Robert S. Morris and
William L. Perocchi. Mr. Fix is a non-voting ex officio member of the
Compensation Committee. Mr. Costley served as Chairman of the Committee during
1999.
The Compensation Committee establishes the general compensation policy
of the Company, reviews and approves compensation of the senior executive
officers of the Company and administers the Company's 1996 Equity Plan and any
other employee benefit plans established by the Company. The Compensation
Committee reviews the overall compensation program of the Company to assure that
the Company:
o has set management compensation at levels that are reasonable in
consideration of all the facts, including practices of comparably
sized corporations engaged in the hotel business,
o adequately recognizes performance tied to creating shareholder
value,
o is responsive to current tax, accounting and Securities and Exchange
Commission guidelines, and
o meets overall Company compensation and business objectives.
The Compensation Committee attempts to promote financial and operational
success by attracting, motivating and assisting in the retention of key
employees who demonstrate the highest levels of ability and talent. In addition,
the Compensation Committee attempts to promote teamwork, initiative and
resourcefulness on the part of key employees whose performance and
responsibilities directly affect Company profits. To this end, the compensation
program has been designed to balance short and long-term incentive compensation
to achieve desired results and pay for performance. The Company's compensation
policy is to reward performance as measured by the creation of value for
stockholders. The Compensation Committee utilizes base salary, certain annual
bonus awards and long-term incentive compensation pursuant to the 1996 Equity
Plan as part of its program. The hotel and hospitality industry is characterized
by substantial competition for skilled employees. The ability of the Company to
attract, motivate and retain high caliber individuals is dependent in large part
on the compensation packages it offers.
11
<PAGE> 14
Under the 1993 Omnibus Budget Reconciliation Act ("OBRA"), income tax
deductions of publicly-traded companies in tax years beginning on or after
January 1, 1994 may be limited to the extent total compensation (including base
salary, annual bonus, stock option exercises and non-qualified benefits) for
certain executive officers exceeds $1 million (less the amount of any "excess
parachute-payments" as defined in Section 280G of the Code) in any one year.
Under OBRA, the deduction limit does not apply to payments which qualify as
"performance-based." To qualify as "performance-based," compensation payments
must be based solely upon the achievement of objective performance goals and
made under a plan that is administered by a committee of outside directors. In
addition, the material terms of the plan must be disclosed to and approved by
shareholders, and the Compensation Committee must certify that the performance
goals were achieved before payments can be made. The Compensation Committee
attempts to design the Company's compensation programs to conform with the OBRA
legislation and related regulations so that total compensation paid to any
employee will not exceed $1 million in any one year, except for compensation
payments which qualify as "performance-based." Candlewood may, however, pay
compensation which is not deductible in limited circumstances when sound
management of the Company so requires.
Base Salary
Salaries for executive officers are reviewed annually by the
Compensation Committee based upon a variety of factors, including individual
performance, general levels of market salary increases and the Company's overall
financial results. In 1999, the Compensation Committee chartered two studies
relating to the compensation of the Company's senior officers. Each study was
performed by an independent benefits consultant and identified a shortfall in
the overall compensation of the Company's senior officers. Based in part on this
study and in an attempt to meet the median overall compensation of the Company's
peer group, the base salary for each of the five highest paid officers for 1999
was reviewed and established by the Compensation Committee. The Compensation
Committee may further adjust these salaries in 2000 based on a finding that
adjustment was reasonable in view of competitive practices, the Company's
performance and the contribution of those officers to that performance.
Incentive Compensation Plan
The Company has established an incentive compensation plan for officers
and key employees of the Company. This plan provides for the payment of an
annual bonus to participating officers and key employees if certain performance
objectives established for each individual are achieved. Each participant's
performance objectives, which are reviewed and established at the beginning of
the year by the Compensation Committee, vary from year to year and are based,
among other things, on measures of profitability, cash flow and other measures
of the Company's performance, as well as upon each individual's specific role
within the Company. Pursuant to the Company's Employment Agreement with Mr.
DeBoer, Mr. DeBoer is eligible for an annual bonus to be set by the Compensation
Committee. The bonus levels for 1999 were established based in large part on the
compensation studies chartered by the Compensation Committee.
Long-term Incentive Compensation
1996 Equity Participation Plan
The Company has established the 1996 Equity Participation Plan to
provide an additional incentive for executive officers, other key employees, the
Company's non-employee Directors
12
<PAGE> 15
("Independent Directors") and consultants of the Company through granting of
options, restricted stock and other awards, thereby stimulating their personal
and active interests in the Company's development and financial success, and
inducing them to remain in the Company's employ.
Based in part on the compensation studies chartered by the Compensation
Committee, in 1998 the Compensation Committee established annual option grant
award targets for the Company's executive officers. The annual award targets are
designed to bring executive compensation in line with the median compensation
paid by the Company's peer group of companies. The option award targets do not
obligate the Compensation Committee to award any options.
During 1999, the Company granted to executive officers, other Company
employees, Independent Directors and consultants of the Company options to
purchase approximately 565,300 shares of Common Stock pursuant to the 1996
Equity Participation Plan. Of the 565,300 options issued during 1999, 10,000
were issued to directors (pursuant to formula grants under the 1996 Equity
Participation Plan), 277,000 were issued to executives and 278,300 were issued
to other Company employees. The options are exercisable at prices per share
ranging from $2.44 to $4.82. The total number of options granted to each
individual was determined primarily by the position of the participant. The
Company has historically granted options to all employees of the Company
regardless of position. Of the 1,187,823 options issued and outstanding as of
December 31, 1999, 70,000 were issued to directors (pursuant to formula grants
under the 1996 Equity Participation Plan), 619,500 were issued to executives and
498,323 were issued to other Company employees.
401(k) Profit Sharing Plan
The Company administers the Candlewood Hotel Company 401(k) Profit
Sharing Plan (the "401(k) Plan"), which is designed to be qualified under
applicable provisions of the Internal Revenue Code of 1986, as amended. The
401(k) Plan covers all employees of the Company who have attained age 21 and
have completed ninety days of service. Participants receive service credit for
employment with the predecessor of the Company.
A participant in the 401(k) Plan may contribute up to 15% of his or her
compensation on a pre-tax basis under the 401(k) Plan. The Company may, but is
not obligated to, make contributions on behalf of each participant. Effective
October 1, 1999, the Company match rate was increased from 25% to 50% of all
participants' contributions, not to exceed 6% of the employee's compensation.
For the year ended December 31, 1999, the Company matched employee contributions
in the aggregate amount of $201,000.
Chief Executive Compensation
In 1999, Mr. DeBoer, the Company's Chief Executive Officer and Chairman
of the Board, received base compensation of $350,000. The Compensation Committee
increased Mr. DeBoer's salary $260,000 to $350,000 effective January 1, 1999.
The Compensation Committee increased Mr. DeBoer's salary from $350,000 to
$365,000 effective January 1, 2000. As part of his compensation for 1999, Mr.
DeBoer also received a bonus of $115,500 and 70,000 stock options pursuant to
the 1996 Equity Plan.
In establishing Mr. DeBoer's compensation, the Compensation Committee
followed its established compensation philosophy and process described above. In
particular, the Compensation Committee noted the Company's hotel operating
results and Mr. DeBoer's several initiatives to focus
13
<PAGE> 16
and align the Company's strengths and objectives to varying market conditions.
In addition, the Compensation Committee also considered the compensation paid by
a peer group of companies as well as market trends as they related to
compensation of chief executive officers in the industry.
The foregoing report has been approved by all the members of the
Compensation Committee.
Date: April 12, 2000 Gary E. Costley
Frank J. Pados, Jr.
Robert S. Morris
William L. Perocchi
The above report of the Compensation Committee will not be deemed to be
incorporated by reference to any filing by the Company under the Securities Act
of 1933 or the Securities Exchange Act of 1934, except to the extent that the
Company specifically incorporates the same by reference.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company has implemented a policy requiring any material transaction
or agreement with a related party to be approved by a majority of the directors
not interested in such transaction or agreement, provided that they determine
that the terms of any such transaction or agreement are no less favorable to the
Company than those that could be obtained from an unaffiliated third party. Mr.
Fix is a non-voting ex officio member of the Audit and Compensation Committees.
14
<PAGE> 17
STOCKHOLDER RETURN PERFORMANCE GRAPH
The graph below provides an indicator of cumulative total shareowner
returns for Candlewood as compared with the S&P 500 Stock Index and the S&P
Hotel-Motel index. This graph covers the period of time beginning November 5,
1996, when Candlewood's shares were first traded, through December 31, 1999.
COMPARISON OF 38 MONTH CUMULATIVE TOTAL RETURN*
AMONG CANDLEWOOD HOTEL COMPANY, INC., THE S&P 500 INDEX
AND THE S&P LODGING-HOTELS INDEX
[PERFORMANCE GRAPH]
Cumulative Total Return
-----------------------------------------------
11/5/96 12/96 12/97 12/98 12/99
------- ------- ------- ------- -------
CANDLEWOOD HOTEL COMPANY, INC. 100.000 96.250 87.500 52.500 17.500
S & P 500 100.000 105.428 140.603 180.782 218,826
S & P LODGING--HOTELS 100.000 95.037 132.988 108.264 108.257
- -------------
* $100 Invested on November 5, 1996 in stock or on
October 31, 1996 in Index - including reinvestment
of dividends. Fiscal year ending December 31.
15
<PAGE> 18
CERTAIN TRANSACTIONS
Prior to March 15, 1999, the Company leased office space for a portion
of its corporate headquarters in Wichita, Kansas from MSI Building, LLC ("MSI
Building"). Mr. DeBoer is a minority member of MSI Building. The Company began
occupying this office space on February 23, 1996 and incurred rent expenses in
the amounts of $16,000, $111,000 and $108,000 during 1999, 1998 and 1997
respectively. The lease was terminated on March 15, 1999. In addition, the
Company leased certain office equipment from MSI Building and has reimbursed MSI
Building for certain leasehold improvements for the Company's office space.
Costs incurred for 1999, 1998 and 1997 totaled $4,000, $7,000 and $9,000,
respectively.
The Company purchases property and casualty insurance, worker's
compensation coverage and builders risk insurance through Manning & Smith
Insurance, an insurance agency in which Mr. DeBoer owns a minority interest. The
insurance contracts were awarded through a competitive bid process. For 1999,
1998 and 1997 the Company paid insurance premiums to Manning & Smith Insurance
for such coverages in the amount of $1,213,000, $1,134,000 and $167,000,
respectively.
The Company purchases corporate air travel through Wichita Air Services,
a Wichita, Kansas based air travel service, owned by Mr. DeBoer. In February
1999, the Company purchased a 0.1% interest in Wichita Air Services for a
nominal amount of cash. In addition, the Company has entered into a contract to
purchase corporate travel through Wichita Air Services for a three-year period
which expires in February 2002. For the years ended 1999, 1998 and 1997 the
Company incurred costs from Wichita Air Services in the amount of $199,000,
$396,000 and $41,000, respectively.
The Company entered into an agreement with Wichita Downtown Residence
Associates in April 1997, to provide management services to Cambridge Suites by
Candlewood, located in Wichita, Kansas. In exchange for providing all management
services as specified in the agreement, the Company receives management fees
equal to 3.0% of room revenue and 4.5% of gross operating profit. In addition,
the Company receives accounting fees equal to $500 per month. The current
agreement expires in April 2003 and is renewable for five-year terms upon mutual
consent. Mr. DeBoer is a majority partner in Wichita Downtown Residence
Associates. For 1999, 1998 and 1997 the Company received fees of $69,000,
$52,000 and $47,000, respectively.
In April 1998, the Company entered into a management agreement with The
Hotel At Old Town, Inc., located in Wichita, Kansas to provide management
services to The Hotel At Old Town. The hotel opened in March 1999. In exchange
for providing all management services as specified in the agreement, the Company
receives management fees equal to 3.0% of room revenue and 4.5% of gross
operating profit. In addition, the Company receives accounting fees equal to
$500 per month. The term of the agreement is five years and expires in March
2004. The agreement is renewable for additional multi-year terms upon mutual
consent of the parties. Mr. DeBoer is a majority partner in The Hotel at Old
Town, Inc. For 1999, the Company received fees of $81,000.
Doubletree, a wholly-owned subsidiary of Hilton Hotels Corporation, has
agreed to guarantee portions of certain loans made to the Company and its
franchisees in excess of 56.25% of the hotel cost, up to a maximum of 80% of the
cost of hotels that the Company manages and 75% of the costs of hotels not
managed by the Company. It is anticipated that the guarantee will remain in
effect until the loan has been repaid. Upon an event of default, Doubletree will
have the option to meet any shortfalls or pay down the loan principal. In
exchange for the guarantee, Doubletree will receive a 5% interest in the cash
16
<PAGE> 19
flows of the hotels and a 0.25-0.50% fee on the total loan amount outstanding.
During 1999, Thomas L. Keltner, a director of the Company, served as Executive
Vice President of Hilton Hotels Corporation. Mariel C. Albrecht, a director of
the Company, served as Vice President of Corporate Finance for Hilton during
1999.
Doubletree has extended to the Company a $15 million subordinated credit
facility. The credit facility is subordinated to debt incurred in the
development of hotels and will be subordinated to the Company's line of credit,
if any. Amounts outstanding under the credit facility bear interest at rates of
7% per annum for the first 12 months following contribution, 10% per annum for
the second 12 months following contribution and 15% per annum thereafter. The
Company has drawn down the full amount of this facility with principal of $12.5
million and $2.5 million payable at maturity in November 2001 and July 2002,
respectively. The amount bears interest at a rate calculated based on the date
amounts were advanced to the Company or its predecessors. As of December 31,
1999, the full amount of the facility bears interest at 15%. During 1999, the
Company incurred interest totaling approximately $2.2 million related to the
credit facility. A portion of this amount was capitalized as construction period
interest.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended
("Exchange Act"), requires the Company's directors and executive officers and
persons who own more than 10% of a registered class of the Company's equity
securities to file initial reports of ownership and reports of changes in
ownership with the Securities and Exchange Commission (the "SEC") and The Nasdaq
Stock Market. Such persons are required by SEC regulations to furnish the
Company with copies of all Section 16(a) forms they file.
Based solely on its review of copies of such forms received by it with
respect to fiscal year 1999, or written representations from certain reporting
persons, the Company believes that all of its directors and executive officers
and persons who own more than 10% of the Company's Common Stock have complied
with the reporting requirements of Section 16(a), except, (i) Jack P. DeBoer
failed to timely file a Form 4 reporting his acquisition of 11,000 shares of the
Company's Common Stock and (ii) Gina-Lynne Scharoun failed to timely file a Form
4 reporting her acquisition of 3,000 shares of the Company's Common Stock.
17
<PAGE> 20
PROPOSAL 1
ELECTION OF DIRECTORS
Directors are elected at each Annual Meeting of Stockholders and hold
office until their successors are duly elected and qualified at the next Annual
Meeting of Stockholders, unless they resign or are removed. The Company's Bylaws
authorize a Board of Directors comprised of at least seven directors and no more
than twelve directors, with the exact number set by resolution of the Board.
Pursuant to a resolution adopted by the Board of Directors, the authorized
number of members of the Board of Directors has been set at twelve. There are
currently no vacancies and, accordingly, there are twelve nominees for election
to the Board of Directors.
In November 1999, Richard J. Ferris resigned from the Board of
Directors. In February 2000, Mariel C. Albrecht was appointed to fill the
vacancy left by Mr. Ferris' resignation.
As described above, the Stockholders Agreement provides that, subject to
certain conditions, Olympus, Desai and Pecks are each entitled to designate a
single director for election to the Board of Directors. The Stockholders
Agreement also provides that, subject to certain conditions, a majority of the
holders of the Series B Preferred Stock are entitled to designate a single
director for election to the Board of Directors. The Stockholders Agreement also
provides that, subject to certain conditions, Doubletree shall be entitled to
designate two directors, and allows the DeBoer/Fix Holders to collectively
designate two directors for election to the Board. Finally, the Stockholders
Agreement permits, subject to certain conditions, Doubletree, together with the
DeBoer/Fix Holders to designate the remaining independent directors for
election. Pursuant to the Stockholders Agreement, the holders of the Series A
Preferred Stock have nominated Robert J. Cresci, Robert S. Morris and Frank J.
Pados, Jr. to serve as directors. Doubletree has nominated Mr. Keltner and Ms.
Albrecht. The DeBoer/Fix Holders have nominated Messrs. DeBoer and Fix to serve
as directors. Doubletree, together with the DeBoer/Fix Holders, have nominated
the remaining unaffiliated directors: Gary E. Costley, William L. Perocchi, Tony
M. Salazar, Thomas H. Nielsen and Thomas W. Storey. Messrs. Perocchi and Storey
were formerly nominees of Doubletree. The holders of Series B Preferred Stock
have temporarily waived their right to nominate an individual to serve as a
member of the Board of Directors. The purchasers of the Preferred Stock,
Doubletree and Messrs. DeBoer and Fix have agreed to vote for each other's
nominees for the Board of Directors pursuant to the Stockholders Agreement.
Each of the Company's nominees for election to the Board of Directors
currently serves as a director of the Company and was elected or appointed to
his present term of office in accordance with the Bylaws of the Company. Each
nominee first became a director of the Company in the year set forth below and
has continually served as a director of the Company since that time.
<TABLE>
<CAPTION>
FIRST BECAME
NAME AGE PRINCIPAL OCCUPATION OR POSITION A DIRECTOR
- ---- --- -------------------------------- ------------
<S> <C> <C> <C>
Jack P. DeBoer 69 Chief Executive Officer and Chairman of the Board of 1996
the Company
Warren D. Fix 61 Executive Vice President, Chief Financial Officer, 1996
Secretary and Treasurer of the Company
Tony M. Salazar 48 Executive Vice President and Director of McCormack 1997
Baron & Associates, Inc.
Gary E. Costley 56 Chairman of the Board, President and Chief Executive 1997
Officer of International Multifoods Corporation
Robert J. Cresci 56 Managing Director of Pecks Management Partners Ltd. 1997
Robert S. Morris 45 Managing Partner of Olympus Partners 1997
Frank J. Pados, Jr. 56 Executive Vice President of Desai Capital Management 1997
Inc.
William L. Perocchi 42 Chief Executive Officer and Director of Pebble Beach 1997
Company
Thomas H. Nielsen 69 Consulting Director of U.S. Trust of California 1998
Thomas L. Keltner 53 Executive Vice President of Hilton Hotels Corporation 1999
Thomas W. Storey 43 Chief Executive Officer of Delta Squared Partners 1999
Mariel C. Albrecht 34 Senior Vice President and Treasurer of Hilton Hotels 2000
Corporation
</TABLE>
18
<PAGE> 21
Jack P. DeBoer has served as Chairman of the Board and Chief Executive
Officer of the Company since its inception. From October 1993 to September 1995,
Mr. DeBoer was self-employed and was engaged in the development of the
Candlewood extended-stay hotel concept. From 1988 to 1993, Mr. DeBoer co-founded
and developed Summerfield Hotel Corporation, an upscale extended-stay hotel
chain. In 1975, Mr. DeBoer founded the Residence Inn Company, an upscale
extended-stay chain which he built to 100 hotels before selling the company to
Marriott Corporation in 1987. Mr. DeBoer is a member of the Board of Trustees of
Innkeepers USA Trust, a publicly-held lodging real estate investment trust.
Warren D. Fix has served as a director and the Executive Vice President,
Chief Financial Officer and Secretary of the Company since its inception. From
July 1994 to October 1995, Mr. Fix was a consultant to Doubletree, primarily
developing debt and equity sources of capital for hotel acquisitions and
refinancings. Additionally, Mr. Fix was a partner in The Contrarian Group, a
business management company, from December 1992 to October 1995. From 1989 to
December 1992, Mr. Fix served as President of the Pacific Company, a real estate
investment and development company. From 1964 to 1989, Mr. Fix held numerous
positions within The Irvine Company, a California-based real estate and
development company, including most recently, Chief Financial Officer.
Tony M. Salazar has served as a director of the Company since February
1997. Mr. Salazar is the Executive Vice President and Director of McCormack
Baron & Associates, Inc., a privately held real estate development and property
management company, a position which he has held since 1985. He previously
served as the Executive Director of the Kansas City Neighborhood Alliance, a
community development and financing agency.
Gary E. Costley has served as a director of the Company since March
1997. Since January 1997, Dr. Costley has served as the Chairman of the Board,
President and Chief Executive Officer of International Multifoods Corporation, a
foodservice distribution and manufacturing company. From 1995 to 1996, he served
as Dean and Professor of the Babcock Graduate School of Management at Wake
Forest University. From 1970 to 1994, Dr. Costley held numerous positions within
the Kellogg Company, including most recently, Executive Vice President and
President of Kellogg North America, President and Chairman of Kellogg USA,
Chairman of Kellogg Canada and Executive Vice President of Kellogg Company. Dr.
Costley serves on the boards of directors of International Multifoods
Corporation, Pharmacopeia, Inc. and ecFood.com.
19
<PAGE> 22
Robert J. Cresci has served as a director of the Company since November
1997. Mr. Cresci is the Managing Director of Pecks Management Partners Ltd., an
investment management firm, a position he has held since September 1990. Mr.
Cresci currently serves on the board of directors of Sepracor, Inc., Aviva
Petroleum Ltd., Film Roman, Inc., Quest Education Corporation, Castle Dental
Centers, Inc., Jfax.Com.Inc., SeraCare, Inc., E-Stamp Corporation and several
private companies.
Robert S. Morris has served as a director of the Company since November
1997. Mr. Morris founded Olympus Partners in 1989 and serves as the Managing
Partner of Olympus Private Placement Fund, L.P., Olympus Growth Fund II, L.P.,
Olympus Executive Fund, and Olympus Growth Fund III, L.P. Olympus manages
approximately $1 billion in capital. Mr. Morris is currently a director of
several Olympus portfolio companies, including Shemin Acquisition Corporation,
Client Distribution Services, Inc. and enCommerce, Inc. He has served on the
boards of several divested Olympus portfolio companies. He also serves on the
Board of Directors of Hamilton College Endowment Fund. Mr. Morris received his
A.B. from Hamilton College and his M.B.A. from the Amos Tuck School of Business
at Dartmouth College.
Frank J. Pados, Jr. has served as a director of the Company since
November 1997. Mr. Pados is the Executive Vice President of Desai Capital
Management Inc., an institutionally funded private equity investment firm with
approximately $1.5 billion under management, a position he has held since
September 1995. From October 1983 to September 1995, he served as Managing
Director of Trust Company of the West and Senior Partner of TCW Capital, an
investment management firm. Mr. Pados serves on the board of directors of
Lender's Service, Inc. and Brown Jordan Company.
William L. Perocchi has served as a director of the Company since
November 1997. Presently, Mr. Perocchi is the Chief Executive Officer and
Director of Pebble Beach Company. From December 1997 to January 1999, Mr.
Perocchi served as the Executive Vice President and Chief Financial Officer of
Promus Hotel Corporation. From 1993 to 1997, Mr. Perocchi served as Executive
Vice President and Chief Financial Officer of Doubletree Corporation and served
as director of Doubletree Corporation from 1996 to 1997. From 1992 to 1993, Mr.
Perocchi was Executive Vice President and Chief Financial Officer of Guest
Quarters Hotel Partnership, a predecessor company of Doubletree. Previously, Mr.
Perocchi was an executive with General Electric Company.
Thomas H. Nielsen has served as a director of the Company since his
appointment in December 1998. Mr. Nielsen currently serves as Consulting
Director of U.S. Trust of California, an investment management and private
banking firm, a position he has held since 1996. From 1993 to 1996, Mr. Nielsen
served as Managing Director of U.S. Trust of California. In 1978, Mr. Nielsen
joined the Irvine Company, a California-based real estate and development
company, and held several positions including President and Vice Chairman. He
remains active with the Irvine Company as a member of its Board of Directors.
Thomas L. Keltner has served as director of the Company since his
appointment in March 1999. Mr. Keltner currently serves as Executive Vice
President of Hilton Hotels Corporation and President, Franchise Hotel Group.
From February 1999 to November 1999, Mr. Keltner served as President, Brand
Performance and Development Group of Promus Hotel Corporation. From July 1997 to
January 1999, Mr. Keltner served as Executive Vice President and Chief
Development Officer of Promus. From 1993 to 1995, he served as Senior Vice
President, Development of Promus. From 1993 to 1995, he served as Senior Vice
President, Development of the Hotel Division of Promus Companies Incorporated.
From 1991 to 1993, Mr. Keltner served as President, Golf Training Systems, Inc.,
a company organized to manufacture and distribute golf training and fitness
products. From 1990 to 1991, Mr. Keltner served as Senior Vice President and
Chief Operating Officer, Franchise Division of Holiday Inn Worldwide. From 1988
to 1990, Mr. Keltner served as President and Managing Director of Holiday Inns
International.
20
<PAGE> 23
Thomas W. Storey has served as a director of the Company since March
1999. Mr. Storey currently serves as Chief Executive Officer of Delta Squared
Partners, an internet strategy firm. Mr. Storey has a long history in the hotel
industry. Mr. Storey served as Executive Vice President of Corporate Strategic
Planning and Venture Operations for Promus Hotel Corporation. From 1997 to 1999,
Mr. Storey served as Executive Vice president of Sales, Marketing and
Reservations of Promus. Mr. Storey served as Executive Vice President, Sales and
Marketing of Doubletree Hotels Corporation from 1994 to 1997 and Radisson Hotels
International from 1989 to 1994.
Mariel C. Albrecht has served as a director of the Company since her
appointment in February 2000. Ms. Albrecht currently serves as Senior Vice
President and Treasurer for Hilton Hotels Corporation, a position she has held
since November 1999. From March 1998 to November 1999, she held the position of
Vice President of Corporate Finance for Hilton. From April 1996 to March 1998,
Ms. Albrecht served as Vice President and Relationship Manager for Wachovia Bank
in Atlanta, Georgia. From December 1989 to April 1996, Ms. Albrecht served as
Assistant Vice President and Relationship Manager for Corestates Bank in
Philadelphia, Pennsylvania.
The Board of Directors held five meetings during the fiscal year ended
December 31, 1999. Each director attended at least 75% of the aggregate of the
total number of meetings of the Board of Directors held during such period (and
for which he or she served as a director) except for Mr. Cresci, who attended
three meetings.
The Company has an Audit Committee and a Compensation Committee, but has
not established a Nominating Committee.
From January 1999 to May 1999, Messrs. Cresci, Morris and Perocchi
comprised the membership of the Audit Committee. In May 1999, Mr. Nielsen
replaced Mr. Morris as a member of the Audit Committee. Mr. Fix is a non-voting,
ex officio member of the Audit Committee. In accordance with its written policy,
the Audit Committee's responsibilities include:
o recommending the selection of the Company's independent public
auditors to the Board of Directors,
o consulting with the independent auditors with regard to the plan and
scope of audit,
o reviewing in consultation with the independent auditors, their
report of audit, or proposed report of audit, and the accompanying
management letter, if any, and
o consulting with the independent auditors with regard to the adequacy
of internal controls, and, if need be, consulting with management
regarding the same.
The Audit Committee held four meetings during the fiscal year ended December 31,
1999. Each director attended at least 75% of the aggregate number of meetings of
the Audit Committee for which he was a member.
21
<PAGE> 24
From January 1999 to May 1999, Messrs. Costley, Pados and Salazar
comprised the Compensation Committee. In May 1999, Mr. Morris and Mr. Perocchi
became members of the Compensation Committee and Mr. Salazar resigned as a
member of the Compensation Committee. Mr. Fix is a non-voting, ex officio member
of the Compensation Committee. The Compensation Committee reviews and approves
executive salaries, considers awards to be granted under the Company's officer
bonus plan and performs other related functions upon request of the Board of
Directors. The Compensation Committee held seven meetings (including two held by
written consent) during the fiscal year ended December 31, 1999, of which each
member attended at least 75% of the aggregate number of meetings of the
Compensation Committee for which he was a member.
BOARD COMPENSATION AND BENEFITS
The Company's Independent Directors receive directors' fees of $4,000
for each Board of Directors meeting attended; provided, however, that no
Independent Director receives a fee for any Board of Directors meeting conducted
by unanimous written consent. In addition, each Independent Director receives
$500 for each committee meeting attended on a day the Board of Directors is not
otherwise meeting. Mr. Keltner waived his right to receive directors fees in
1999. The Company expects Mr. Keltner and Ms. Albrecht to continue to waive
their right to receive directors fees during 2000. Pursuant to the Company's
1996 Equity Plan, each of the Company's existing directors (other than Messrs.
DeBoer and Fix) was entitled to receive immediately prior to the commencement of
the Company's initial public offering a grant of non-qualified stock options to
purchase 10,000 shares of Common Stock at the initial public offering price.
Also pursuant to the 1996 Equity Plan, each person who became a director
subsequent to the Company's initial public offering will receive a grant of
non-qualified stock options to purchase 10,000 shares of Common Stock at the
fair market value of the Common Stock on the date such person becomes a member
of the Board of Directors. In February 2000, Ms. Albrecht waived her right to
receive this grant. Each director may be reimbursed for certain expenses
incurred in connection with attendance at Board and committee meetings.
VOTE AND RECOMMENDATION
Directors will be elected by a favorable vote of a majority of the
shares of voting stock present and entitled to vote, in person or by proxy, at
the Meeting. Abstentions or broker non-votes as to the election of directors
will not affect the election of the candidates receiving the plurality of votes.
Unless instructed to the contrary, the shares represented by the proxies will be
voted FOR the election of the twelve nominees named above as directors. Although
it is anticipated that each nominee will be able to serve as a director, should
any nominee become unavailable to serve, the proxies will be voted for such
other person or persons as may be designated by the Company's Board of
Directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL TWELVE NOMINEES.
22
<PAGE> 25
STOCKHOLDER PROPOSALS FOR 2001 ANNUAL MEETING
It is currently contemplated that Candlewood's 2001 Annual Meeting of
Stockholders will be held on or about May 15, 2001. In the event that a
stockholder desires to have a proposal considered for presentation at
Candlewood's 2001 Annual Meeting of Stockholders, and inclusion in the proxy
statement and form of proxy used in connection with such meeting, the proposal
must be forwarded in writing to the Secretary of Candlewood so that it is
received no later than December 15, 2001. Any such proposal must comply with the
requirements of Rule 14a-8 promulgated under the Securities Exchange Act of
1934.
If a stockholder, rather than placing a proposal in Candlewood's proxy
statement as discussed above, commences his or her own proxy solicitation for
the 2001 Annual Meeting of Stockholders or seeks to nominate a candidate for
election or propose business for consideration at such meeting, Candlewood must
receive notice of such proposal by at least 60 days prior to the date of the
2001 Annual Meeting of Stockholders, which is expected to be held on or about
May 15, 2001. If such notice is not received on a timely basis, such proposal
will not be acted upon at the meeting, including information regarding such
proposal in its proxy materials. Proposals should be directed to the attention
of the Secretary, Candlewood Hotel Company, Inc., 8621 East 21st Street North,
Suite 200, Wichita, Kansas 67206.
OTHER MATTERS
As of the date of this Proxy Statement the Board of Directors knows of
no other matters which may be presented for consideration at the Meeting.
However, if any other matter is presented properly for consideration and action
at the Meeting, or any adjournment or postponement thereof, it is intended that
the Proxies will be voted with respect thereto in accordance with the best
judgment and in the discretion of the proxy holders.
By Order of the Board of Directors,
/s/ WARREN D. FIX
--------------------
Warren D. Fix
Secretary
Dated: April 14, 2000
23
<PAGE> 26
CANDLEWOOD HOTEL COMPANY, INC.
PROXY FOR 2000 ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 16, 2000
THIS PROXY IS SOLICITED BY AND ON BEHALF OF
THE BOARD OF DIRECTORS OF CANDLEWOOD HOTEL COMPANY, INC.
The undersigned stockholder of Candlewood Hotel Company, Inc., a
Delaware corporation, hereby appoints each of Jack P. DeBoer and Warren D.
Fix, with full power to act without the other and to appoint his substitute,
as Proxy and attorney-in-fact and hereby authorizes the Proxy to represent and
to vote, as designated on the reverse side, all the shares of voting stock of
Candlewood Hotel Company, Inc. held of record by the undersigned on April 6,
2000, at the 2000 Annual Meeting of Stockholders to be held on May 16, 2000,
or any adjournment or postponement thereof, with respect to:
(Continued and to be signed on reverse side)
<PAGE> 27
Please mark your
A [X] votes as in this
example
FOR all twelve nominees listed WITHHOLD AUTHORITY
at the right (except as to vote for all twelve
marked to the contrary) nominees listed at the right
1. Election of [ ] [ ]
Directors:
(INSTRUCTION: To withhold authority to vote for any nominee, draw a line through
(or otherwise strike out) his or her name in the list at right.)
NOMINEES:
Ms. Mariel C. Albrecht Mr. Robert S. Morris
Mr. Gary Costley Mr. Thomas H. Nielsen
Mr. Robert J. Cresci Mr. Frank J. Pados, Jr.
Mr. Jack P. DeBoer Mr. William L. Perocchi
Mr. Warren D. Fix Mr. Tony M. Salazar
Mr. Thomas L. Keltner Mr. Thomas W. Storey
2. Such other matters as may come before the meeting or any adjournment of
the meeting, as to which discretionary authority is granted to said Proxy.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF THIS PROXY IS EXECUTED AND NO
DIRECTION IS MADE, THIS PROXY WILL BE VOTED "FOR" ALL TWELVE NOMINEES LISTED
UNDER PROPOSAL 1 AND AS THE PROXY DEEMS ADVISABLE ON SUCH OTHER MATTERS AS MAY
PROPERLY COME BEFORE THE MEETING.
A majority of the proxies or substitutes as shall be present and shall act at
said meeting or any adjournment (or if only one shall be present and act, then
that one) shall have and may exercise all of the powers of said proxies
hereunder.
THE UNDERSIGNED ACKNOWLEDGE RECEIPT OF THE NOTICE OF MEETING AND PROXY
STATEMENT DATED APRIL 14, 2000 AND THE 1999 ANNUAL REPORT OF CANDLEWOOD HOTEL
COMPANY, INC.
Signature:_______________________________ Signature: ________________ Dated:____
NOTE: (PLEASE SIGN EXACTLY AS NAME APPEARS ON YOUR CANDLEWOOD HOTEL COMPANY,
INC. STOCK CERTIFICATE. IF YOU ARE UNSURE HOW YOUR NAME APPEARS, PLEASE
CONTACT CANDLEWOOD HOTEL COMPANY, INC. WHEN SHARES ARE HELD BY JOINT
TENANTS, BOTH MUST SIGN. WHEN SIGNING AS ATTORNEY, EXECUTOR,
ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE GIVE FULL TITLE AS SUCH. IF A
CORPORATION, PLEASE SIGN IN FULL CORPORATE NAME BY THE PRESIDENT OR OTHER
AUTHORIZED OFFICER. IF A PARTNERSHIP, PLEASE SIGN IN PARTNERSHIP NAME BY
AUTHORIZED PERSON.)
