<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------------------------
SCHEDULE 13D
(Rule 13d-101)
INFORMATION TO BE INCLUDED IN STATEMENTS FILED
PURSUANT TO RULE 13d-1(a) AND AMENDMENTS THERETO
FILED PURSUANT TO RULE 13-2(a)
CANDLEWOOD HOTEL COMPANY, INC.
------------------
(Name of Issuer)
Common Stock, Par Value $0.01 Per Share
---------------------------
(Title of Class of Securities)
000102280
---------------
(CUSIP Number)
Jack P. DeBoer
Chief Executive Officer
Lakepoint Office Park
9342 East Central
Wichita, Kansas 67206
(316) 631-1300
----------------------------------------------
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
Copies to:
Charles K. Ruck, Esq.
Latham & Watkins
650 Town Center Drive
Twentieth Floor
Costa Mesa, California 92626-1925
September 22, 1997
--------------------------------------------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is subject of this Schedule 13D, and is filing this
statement because of Rule 13d-1(b)(3) or (4), check the following box: [X]
Page 1 of 29 Pages
Exhibit Index is on Page 17
<PAGE> 2
SCHEDULE 13D
- ------------------------ ------------------
CUSIP NO. 000102280 PAGE 2 OF 29 PAGES
- ------------------------ ------------------
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
DOUBLETREE CORPORATION
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (A) [X]
(B) [ ]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
NOT APPLICABLE
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEM 2(d) OR 2(e) [ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
DELAWARE
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
2,587,500 SHARES OF COMMON STOCK (SEE ITEMS 2 - 5)
---------------------------------------------------------------
Number of 8 SHARED VOTING POWER
Shares
Beneficially 12,012,505 SHARES OF COMMON STOCK (SEE ITEMS 2 - 5)
Owned By ---------------------------------------------------------------
Each 9 SOLE DISPOSITIVE POWER
Reporting
Person 2,587,500 SHARES OF COMMON STOCK (SEE ITEMS 2 - 5)
With ---------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
0 SHARES OF COMMON STOCK (SEE ITEMS 2 - 5)
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
SEE ITEM 5
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
[ ]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
SEE ITEM 5
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
CO
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE> 3
SCHEDULE 13D
- ------------------------ ------------------
CUSIP NO. 000102280 PAGE 3 OF 29 PAGES
- ------------------------ ------------------
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
WARREN D. FIX, ON BEHALF OF HIMSELF, AND AS THE GENERAL PARTNER OF THE
WARREN D. FIX FAMILY PARTNERSHIP, L.P. AND AS TRUSTEE FOR THE WARREN D.
FIX DEFINED BENEFIT PLAN TRUST DATED JANUARY 1, 1989
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (A) [X]
(B) [ ]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
NOT APPLICABLE
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEM 2(d) OR 2(e) [ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
UNITED STATES
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
414,400 SHARES OF COMMON STOCK(SEE ITEMS 2 - 5)
---------------------------------------------------------------
Number of 8 SHARED VOTING POWER
Shares
Beneficially 12,012,505 SHARES OF COMMON STOCK (SEE ITEMS 2 - 5)
Owned By ---------------------------------------------------------------
Each 9 SOLE DISPOSITIVE POWER
Reporting
Person 414,440 SHARES OF COMMON STOCK (SEE ITEMS 2 - 5)
With ---------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
0 SHARES OF COMMON STOCK (SEE ITEMS 2 - 5)
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
SEE ITEM 5
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
[ ]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
SEE ITEM 5
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
IN
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE> 4
SCHEDULE 13D
- ------------------------ ------------------
CUSIP NO. 000102280 PAGE 4 OF 29 PAGES
- ------------------------ ------------------
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
WARREN D. FIX FAMILY PARTNERSHIP, L.P.
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (A) [X]
(B) [ ]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
NOT APPLICABLE
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEM 2(d) OR 2(e) [ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
KANSAS
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
388,125 SHARE OF COMMON STOCK (SEE ITEMS 2 - 5)
---------------------------------------------------------------
Number of 8 SHARED VOTING POWER
Shares
Beneficially 12,012,505 SHARES OF COMMON STOCK (SEE ITEMS 2 - 5)
Owned By ---------------------------------------------------------------
Each 9 SOLE DISPOSITIVE POWER
Reporting
Person 388,125 SHARES OF COMMON STOCK (SEE ITEMS 2 - 5)
With ---------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
0 SHARES OF COMMON STOCK (SEE ITEMS 2 - 5)
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
SEE ITEM 5
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
[ ]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
SEE ITEM 5
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
PN
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE> 5
SCHEDULE 13D
- ------------------------ ------------------
CUSIP NO. 000102280 PAGE 5 OF 29 PAGES
- ------------------------ ------------------
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
JACK P. DE BOER
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (A) [X]
(B) [ ]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
NOT APPLICABLE
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEM 2(d) OR 2(e) [ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
UNITED STATES
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
2,189,812 SHARES OF COMMON STOCK (SEE ITEMS 2 - 5)
---------------------------------------------------------------
Number of 8 SHARED VOTING POWER
Shares
Beneficially 12,012,505 SHARES OF COMMON STOCK (SEE ITEMS 2 - 5)
Owned By ---------------------------------------------------------------
Each 9 SOLE DISPOSITIVE POWER
Reporting
Person 2,189,812 SHARES OF COMMON STOCK (SEE ITEMS 2 - 5)
With ---------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
0 SHARES OF COMMON STOCK (SEE ITEMS 2 - 5)
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
SEE ITEM 5
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
[ ]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
SEE ITEM 5
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
IN
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE> 6
SCHEDULE 13D
- ------------------------ ------------------
CUSIP NO. 000102280 PAGE 6 OF 29 PAGES
- ------------------------ ------------------
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
SKYLER SCOTT DE BOER, CO-TRUSTEE OF THE ALEXANDER JOHN DE BOER TRUST
DATED MARCH 14, 1995, CO-TRUSTEE OF THE CHRISTOPHER SCOTT DE BOER TRUST
DATED MARCH 14, 1995
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (A) [X]
(B) [ ]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
NOT APPLICABLE
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEM 2(d) OR 2(e) [ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
UNITED STATES
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
0 SHARES OF COMMON STOCK (SEE ITEMS 2 - 5)
---------------------------------------------------------------
Number of 8 SHARED VOTING POWER
Shares
Beneficially 12,012,505 SHARES OF COMMON STOCK (SEE ITEMS 2 - 5)
Owned By ---------------------------------------------------------------
Each 9 SOLE DISPOSITIVE POWER
Reporting
Person 0 SHARES OF COMMON STOCK (SEE ITEMS 2 - 5)
With ---------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
94,726 SHARES OF COMMON STOCK (SEE ITEMS 2 - 5)
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
SEE ITEM 5
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
[ ]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
SEE ITEM 5
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
OO
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE> 7
SCHEDULE 13D
- ------------------------ ------------------
CUSIP NO. 000102280 PAGE 7 OF 29 PAGES
- ------------------------ ------------------
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
LYNN A. DE BOER, CO-TRUSTEE OF THE ALEXANADER JOHN DE BOER TRUST DATED
MARCH 14, 1995, CO-TRUSTEE OF THE CHRISTOPHER SCOTT DE BOER TRUST DATED
MARCH 14, 1995
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (A) [X]
(B) [ ]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
NOT APPLICABLE
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEM 2(d) OR 2(e) [ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
UNITED STATES
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
0 SHARES OF COMMON STOCK (SEE ITEMS 2 - 5)
---------------------------------------------------------------
Number of 8 SHARED VOTING POWER
Shares
Beneficially 12,012,505 SHARES OF COMMON STOCK (SEE ITEMS 2 - 5)
Owned By ---------------------------------------------------------------
Each 9 SOLE DISPOSITIVE POWER
Reporting
Person 0 SHARES OF COMMON STOCK (SEE ITEMS 2 - 5)
With ---------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
94,726 SHARES OF COMMON STOCK (SEE ITEMS 2 - 5)
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
SEE ITEM 5
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
[ ]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
SEE ITEM 5
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
OO
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE> 8
Item 1. Security and Issuer.
The title of the classes of equity securities to which this Schedule
13D relates are Common Stock, par value $0.01 per share (the "Common Shares"),
and Series A Cumulative Convertible Preferred Stock, par value $0.01 per share
(the "Preferred Shares"), of Candlewood Hotel Company, Inc., a Delaware
corporation (the "Company"). The address of the Company is 9342 East Central,
Wichita, Kansas 67206.
The entities identified in the first paragraph of the response to Item
2 have entered into a Joint Filing Agreement, dated April 30, 1998, a copy of
which is attached hereto as Exhibit 1.
Item 2. Identity and Background.
This Schedule 13D is filed by (i) Doubletree Corporation, a Delaware
corporation ("Doubletree"), (ii) Warren D. Fix ("Fix") on behalf of himself and
as the General Partner of the Fix Partnership (as defined below), and as Trustee
for the Warren D. Fix Defined Benefit Plan Trust dated January 1, 1989, (iii)
the Warren D. Fix Family Partnership, L.P., a Kansas limited partnership (the
"Fix Partnership"), (iv) Jack P. DeBoer ("DeBoer"), (v) Skyler Scott DeBoer as
Co-Trustee of the Alexander John DeBoer Trust dated March 14, 1995 (the
"Alexander Trust"), and as Co-Trustee of the Christopher Scott DeBoer Trust
dated March 14, 1995 (the "Christopher Trust"), and (vi) Lynn A. DeBoer as
Co-Trustee of the Alexander Trust and as Co-Trustee of the Christopher Trust
(collectively, the "Reporting Persons"). (Fix and DeBoer are collectively
referred to herein as the "Reporting Preferred Holders," while the remaining
Reporting Persons are collectively referred to herein as the "Other Reporting
Holders".)
This Schedule 13D is filed by the Reporting Persons to report (i) the
execution of and agreement to be bound by the Stockholders Agreement dated
September 22, 1997 by and among the Reporting Persons, the Company and the
parties listed on Schedule III (the "Stockholders Agreement"), a copy of which
is attached hereto as Exhibit 2, and (ii) the acquisition by the Reporting
Preferred Holders of Preferred Shares on October 3, 1997. This Schedule 13D
replaces the Schedule 13G filed by the Reporting Persons on February 14, 1997.
(a)-(c), (f) Schedule I attached hereto and incorporated herein by
reference herein lists the name, state or other place of organization, principal
business and the address of the principal office for each corporation, general
partnership or limited partnership that is a Reporting Person and, for each
natural person, lists the name, business address, present principal occupation
or employment and the name, principal business and address of any corporation or
other organization in which such employment is conducted, and the citizenship of
such person.
Schedule II attached hereto and incorporated herein by reference herein
is a list of each corporation or person that controls a Reporting Person, and
lists the name, state or other place of organization, principal business and the
address of the principal office for each such corporation. Schedule II also
lists the directors and executive officers of each Reporting Person that is a
corporation and of each such controlling corporation and lists all natural
persons that are general partners of any Reporting Person and contains the
following information with respect to
8
<PAGE> 9
each such director, executive officer and general partner: (a) name; (b)
business address; (c) present principal occupation or employment and the name,
principal business and address of any corporation or other organization in which
such employment is conducted; and (d) citizenship.
(d) and (e). During the last five years, none of the Reporting Persons,
nor to the best knowledge of the Reporting Persons, any other person named in
this Item 2 or on Schedule II has (i) been convicted in a criminal proceeding
(excluding traffic violations or similar misdemeanors) or (ii) been a party to a
civil proceeding of a judicial or administrative body of competent jurisdiction
and as a result of such proceeding was or is subject to a judgment, decree or
final order enjoining future violations of, or prohibiting or mandating
activities subject to, federal or state securities laws or finding any violation
with respect to such laws.
Item 3. Source and Amount of Funds or Other Consideration.
The Reporting Preferred Holders file this Schedule 13D both to report
their execution and delivery of the Stockholders Agreement and to report their
acquisition of Preferred Shares. On October 3, 1997, DeBoer used personal funds
in the amount of $1,000,000 to purchase 1,000 Preferred Shares (convertible into
105,263 Common Shares). On October 3, 1997, Fix used personal funds in the
amount of $250,000 to purchase 250 Preferred Shares (convertible into 26,315
Common Shares) that were issued in the name of Fix as Trustee for the Warren D.
Fix Defined Benefit Plan Trust dated January 1, 1989.
The Other Reporting Holders did not participate in the Preferred Stock
Offering (as defined in Item 4 hereof) and did not acquire any Preferred Shares.
As a result, the Other Reporting Holders file this Schedule 13D only to report
their execution and delivery of the Stockholders Agreement. Although all of the
parties to the Stockholders Agreement may constitute a group for Section 13(d)
purposes, this Schedule 13D is filed only by the Reporting Persons.
Item 4. Purpose of Transaction.
On September 23, 1997 and October 3, 1997, the Company sold an
aggregate of 65,000 shares of Series A Cumulative Convertible Preferred Stock
(the "Preferred Stock Offering") to DeBoer, Fix, and the parties listed on
Schedule III (collectively the "Preferred Holders") for a purchase price per
share of $1,000 and an aggregate purchase price of $65 million. The Company has
expressed its intent to use the proceeds from the Preferred Stock Offering to
fund the Company's national expansion of Candlewood hotels primarily through the
development of Company-owned Candlewood hotels, and to a lesser extent through
Company investment in the development of Candlewood hotels by its franchisees.
Each Preferred Share is convertible into Common Shares at an initial
ratio of approximately 105.26316 Common Shares per Preferred Share, subject to
adjustment in the event of certain issuances of Common Shares, options, rights
or convertible securities, or certain dividends, distributions,
reclassifications, mergers, sales, consolidations, or other reorganizations. The
holders of Preferred Shares vote, on an as converted basis, with the holders of
Common Shares, as a single class, on all matters submitted to the Company's
stockholders for
9
<PAGE> 10
approval. The outstanding Preferred Shares currently represent a total of
6,842,105 Common Shares on as-converted basis, or 43.2% of the voting power of
the Company. (See Item 5.) In addition, the holders of Preferred Shares have
separate class voting rights with respect to certain transactions as enumerated
in the Company's Certificate Of Designations, Preferences And Relative,
Participating, Optional And Other Special Rights Of Preferred Stock And
Qualifications, Limitations And Restrictions Thereof filed September 22, 1997
with the office of the Secretary of State for the State of Delaware (the
"Certificate of Designation") and attached hereto as Exhibit 3.
In connection with the Preferred Stock Offering, the authorized number
of members of the Company's Board of Directors (the "Board") was changed from
seven to ten. The Stockholders Agreement provides that, subject to certain
conditions described below and so long as each entity holds at least 20% of the
Preferred Shares that it originally purchased, Olympus Growth Fund II, L.P.
("Olympus"), Desai Capital Management, Inc. ("Desai") and Pecks Management
Partners Ltd. ("Pecks") (collectively, the "Purchaser Group") are each entitled
to designate a single individual for nomination to stand for election to the
Board (for a total of three director nominees selected by the Purchaser Group).
The Stockholders Agreement also provides that, subject to certain conditions
described below, Doubletree (or a permitted transferee) shall be entitled to
designate two individuals for nomination to stand for election to the Board, and
DeBoer, the Christopher Trust, the Alexander Trust and Fix (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. The
Stockholders Agreement permits, subject to certain conditions described below,
Doubletree together with the DeBoer/Fix Holders to designate the remaining
independent directors for nomination to stand for election to the Board and to
designate the president of the Company for appointment by the Board. Each of the
parties to the Stockholders Agreement have agreed to vote all of its shares in
favor of the individuals nominated to the Board by the other parties to the
Stockholders Agreement. Finally, pursuant to the Stockholders Agreement, the
Christopher Trust, the Alexander Trust and the Fix Partnership granted DeBoer an
irrevocable proxy to vote their respective shares in certain circumstances.
Except as set forth above with respect to their agreement to vote their
shares in favor of the designated nominees to the Board, the parties to the
Stockholders Agreement retain voting power as to all other matters that may be
subject to the vote of stockholders from time to time.
The rights and obligations of any of Preferred Holder under the
Stockholders Agreement shall terminate (a) upon failure of all Preferred Holders
to collectively hold, beneficially or of record, at least 20% of the Preferred
Shares or Common Share equivalents (a "Termination") or (b) on the date that the
Common Shares resulting from the conversion of Preferred Shares into Common
Shares have been sold as permitted under the Stockholders Agreement. 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 Preferred Shares or Common Share equivalents
purchased by such entity in the Preferred Stock Offering. The rights and
obligations of Doubletree and the DeBoer/Fix Holders under the
10
<PAGE> 11
Stockholders Agreement as to their Common Shares 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.
Pursuant to the terms of the Stockholders Agreement and following the
Preferred Stock Offering, Robert J. Cresci (as nominee of Pecks), Robert S.
Morris (as nominee of Olympus) and Frank J. Pados, Jr. (as nominee of Desai)
were elected to serve as directors, joining DeBoer and Fix (as nominees of the
DeBoer/Fix Holders), Richard J. Ferris and Peter V. Ueberroth (as nominees of
Doubletree), and Tony M. Salazar and Gary E. Costly (as nominees of Doubletree
and the DeBoer/Fix Holders). Additionally, following the resignation of Mr.
Ueberroth in October 1997 and under the terms of the Stockholders Agreement,
William L. Perocchi (as a nominee of Doubletree) was appointed to serve as a
director. There are currently nine directors on the Board with one vacancy.
Doubletree and the DeBoer/Fix Holders are entitled to nominate the person to
fill this vacancy. James E. Roos, as designee of Doubletree and the DeBoer/Fix
Holders, serves as president of the Company.
Pursuant to the Certificate of Designation, the Preferred Holders are
entitled, upon the failure of the Company to redeem the Preferred Shares in
accordance with the mandatory redemption provisions of the Certificate of
Designation, to receive warrants to purchase additional Common Shares upon terms
and conditions stated in the Form of Warrant attached hereto as Exhibit 4. In
addition, if the Company grants, issues or sells any rights or options to
purchase stock, warrants or other property ("Purchase Rights") pro rata to the
holders of Common Shares, the Preferred Holders are entitled to a right at their
option, either to have the conversion price of their Preferred Shares adjusted
or to acquire such Purchase Rights as they could have acquired if they held the
number of Common Shares issuable upon conversion of Preferred Shares held by
them immediately prior to the time the Company granted, issued or sold such
Purchase Rights.
Other than as described herein, the Reporting Persons have no present
plans or proposals which relate to or would result in: (i) the acquisition by
any person of additional securities of the Company, or the disposition of
securities of the Company; (ii) an extraordinary corporate transaction, such as
a merger, reorganization or liquidation, involving the Company or any of its
subsidiaries; (iii) a sale or transfer of a material amount of assets of the
Company or any of its subsidiaries; (iv) any change in the present Board or
management of the Company, including any plans or proposals to change the number
or term of directors or to fill any existing vacancies on the Board; (v) any
material change in the present capitalization or dividend policy of the Company;
(vi) any other material change in the Company's business or corporate structure;
(vii) changes in the Company's certificate of incorporation or by-laws or other
actions which may impede the acquisition of control of the Company by any
persons; (viii) causing a class of securities of the Company to be delisted from
a national securities exchange or to cease to be authorized to be quoted in an
inter-dealer quotation system of a registered national securities association;
(ix) a class of equity securities of the Company becoming eligible for
termination of registration pursuant to Section 12(g)(4) of the Securities
Exchange Act of 1934, as amended; or (x) any action similar to those enumerated
above.
11
<PAGE> 12
Item 5. Interest in Securities of the Company.
(a) The following table sets forth as of April 15, 1998 the name of
each Reporting Person, the aggregate number of Common Shares beneficially owned
by each such Reporting Person, and the percentage of the Common Shares
beneficially owned by each such Reporting Person, in each case after giving
effect to the conversion of the Company's Preferred Shares into Common Shares.
<TABLE>
<CAPTION>
PERCENT OF EQUITY PERCENTAGE OF
EQUITY EQUITY SECURITIES EQUITY-SECURITIES
SECURITIES SECURITIES BENEFICIALLY BENEFICIALLY
BENEFICIALLY BENEFICIALLY OWNED OWNED
OWNED OWNED INCLUDING INCLUDING
REPORTING PERSON EXCLUDING EXCLUDING OWNERSHIP OWNERSHIP
OWNERSHIP VIA OWNERSHIP VIA VIA
STOCKHOLDERS VIA STOCKHOLDERS STOCKHOLDERS
AGREEMENT STOCKHOLDERS AGREEMENT AGREEMENT
(1)(2)(3) AGREEMENT(1)(2) (1)(3)(4) (1)(4)
-------------- --------------- ------------ ----------------
<S> <C> <C> <C> <C>
Doubletree Corporation 2,587,500 16.3% 12,012,505 75.4%
Warren D. Fix Family 388,125 2.5% 12,012,505 75.4%
Partnership, L.P.
Warren D. Fix, on behalf of 426,941 2.7% 12,012,505 75.4%
himself and as the General
Partner of the Warren D. Fix
Family Partnership, L.P. and
as Trustee for the Warren D.
Fix Defined Benefit Plan Trust
dated 1/1/89(5)
Jack P. DeBoer (6) 2,189,812 13.80% 12,012,505 75.4%
Skyler Scott DeBoer (7), 94,726 * 12,012,505 75.4%
Co-Trustee of the Alexander
Trust and Co-Trustee of the
Christopher Trust
Lynn A. DeBoer (7), Co-Trustee 94,726 * 12,012,505 75.4%
of the Christopher Trust and
Co-Trustee of the Alexander
Trust
</TABLE>
- ------------------
* Indicates less than 1%.
(1) Gives effect to the conversion of the Company's Preferred Shares into
Common Shares. After giving effect to such conversion, the total number of
outstanding Common Shares is 15,867,105.
(2) Excludes all securities that the Reporting Person may be deemed to
beneficially own solely through its execution of the Stockholders
Agreement.
(3) Includes options exercisable within 60 days of April 15, 1998.
(4) Includes all securities that the Reporting Person may be deemed to
beneficially own solely through its execution of the Stockholders
Agreement. Each Reporting Person is a party to the Stockholders Agreement
and therefore may be deemed to have acquired beneficial ownership, for
purposes of Sections 13(d) and 13(g) of the Securities Exchange Act of
1934, as amended, of all equity securities of the Company beneficially
owned by all other parties to the Stockholders Agreement. The Reporting
Persons are unaware of all of the holdings of the parties to the
Stockholders Agreement that are not Reporting Persons and have thus
included only the Preferred Shares issued to such other parties in the
Preferred Stock Offering. The Reporting Persons disclaim beneficial
ownership of the listed shares except to the extent that they have a
pecuniary interest therein.
12
<PAGE> 13
(5) Includes 388,125 Common Shares that Fix may be deemed to beneficially own
as the General Partner of the Fix Partnership. Includes 26,316 Common
Shares (250 shares of Preferred Stock on an as-converted basis) held as
Trustee for the Warren D. Fix Defined Benefit Plan Trust dated January 1,
1989. Includes 12,500 Common Shares subject to options exercisable in 60
days following April 15, 1998. Fix disclaims beneficial ownership of the
listed shares except to the extent he has a pecuniary interest therein.
(6) Includes 2,083,049 Common Shares beneficially owned directly by DeBoer, and
105,263 Common Shares which represent 1,000 Preferred Shares beneficially
owned directly by DeBoer on an as-converted basis. Includes 1,500 Common
Shares owned by DeBoer's wife. Excludes shares subject to proxy granted to
DeBoer by Fix and the Christopher Trust and Alexander Trust in the
Stockholders Agreement.
(7) Includes 2,250 Common Shares held by Skyler Scott DeBoer, Lynn A. DeBoer's
husband. Skyler Scott DeBoer and Lynn A. DeBoer have shared voting and
dispositive power as to the 46,238 Common Shares held in the Christopher
Trust and the 46,238 Common Shares held in the Alexander Trust.
(b) See the response to Items 5(a) above, and numbers 7-11 and 13 set
forth on the cover pages hereto, for information with respect to each Reporting
Person regarding the number of equity securities of the Company to which this
Schedule 13D relates as to which there is sole power to vote or to direct the
vote, shared power to vote or to direct the vote, sole power to dispose or
direct disposition or shared power to dispose or to direct the disposition.
With respect to the responses to Items 7 and 8 set forth on the cover
pages hereto, the Reporting Persons have assumed that each Reporting Person has
sole power to vote the equity securities of the Company directly owned by such
Reporting Person, but shared power to vote the Equity Securities beneficially
owned by each of the other Reporting Persons as a result of the terms of the
Stockholders Agreement.
Except as described in Item 4 with respect to their agreement to vote
their shares in favor of the designated nominees to the Board of Directors, the
parties to the Stockholders Agreement retain voting power as to all other
matters that may be subject to the vote of stockholders from time to time.
(c) Schedule IV attached hereto sets forth all transactions in the
Company's equity securities effected by or for the account of any of the
Reporting Persons or the persons set forth on Schedule II during the past 60
days.
(d) No person other than the Reporting Persons, the limited partners of
the Fix Partnership or the beneficiaries of the Alexander Trust and the
Christopher Trust is known to the Reporting Persons to have the right to receive
or the power to direct the receipt of dividends from, or the proceeds from the
sale of, Common Shares owned by such Reporting Person. The limited partners of
the Fix Partnership have the right to receive and the power to direct the
receipt of dividends from and the proceeds from the sale of Common Shares owned
by the Fix Partnership. The beneficiaries of the Alexander Trust and the
Christopher Trust have the right to receive and the power to direct the receipt
of dividends from and the proceeds from the sale of Common Shares owned by the
respective trusts under certain circumstances.
(e) Not applicable.
13
<PAGE> 14
Item 6. Contracts, Arrangements, Understandings or Relationships with Respect
to Securities of the Company.
The Reporting Persons have filed this Schedule 13D to report the
execution and delivery of the Stockholders Agreement, pursuant to which the
members of the Reporting Group have agreed, among other things, to vote the
equity securities of the Company held by them for the nominees for the Board of
the other parties to the Stockholders Agreement in accordance with the terms and
upon the conditions set forth therein. As a result of their agreement to act
together for the purpose of voting the equity securities of the Company in
accordance with the terms of the Stockholders Agreement, each Reporting Person
is deemed to have acquired beneficial ownership, for purposes of Sections 13(d)
and 13(g) of the Securities Exchange Act of 1934, as amended, as of the date of
the Stockholders Agreement, of all equity securities of the Company beneficially
owned by each Reporting Person. Accordingly, each of the Reporting Persons has
filed this Schedule 13D to report the "acquisition" of beneficial ownership of
more than five percent of the equity securities of the Company to which this
Schedule 13D relates. However, each Reporting Person disclaims beneficial
ownership of the equity securities of every other party to the Stockholders
Agreement except to the extent that the Reporting Person has a pecuniary
interest therein.
The Stockholders Agreement replaces in its entirety that certain
Stockholders Agreement dated September 30, 1996 described in the Schedule 13G
filed on February 14, 1997 by the Reporting Persons.
Additionally, the Company, the Reporting Persons and the other
Preferred Holders have entered into a Registration Rights Agreement dated
September 22, 1997 (the "Registration Rights Agreement"), a copy of which is
attached hereto as Exhibit 5. The Registration Rights Agreement terminates that
certain Incorporation and Registration Rights Agreement dated September 1, 1996
among the Company, Doubletree, DeBoer and the Fix Partnership. Pursuant to the
terms of the Registration Rights Agreement, the Reporting Persons 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 Common Shares owed 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
Shares or securities, convertible into or exercisable or exchangeable for Common
Shares. 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.
The Certificate of Designation provides the holders of Preferred Shares
with certain rights described above in Items 1-4 above.
Item 7. Material to be Filed as Exhibits.
Exhibit 1. Joint Filing Agreement dated as of April 30, 1998.
14
<PAGE> 15
Exhibit 2. Stockholders Agreement dated September 22, 1997.
Exhibit 3. Certificate of Designation filed September 22, 1997.
Exhibit 4. Warrant Form.
Exhibit 5. Registration Rights Agreement dated September 22, 1997.
SIGNATURE
After reasonable inquiry and to the best of the undersigned's knowledge
and belief, the undersigned certify that the information set forth in this
statement is true, complete and correct.
Dated: April 30, 1998 DOUBLETREE CORPORATION
By: /s/ RALPH B. LAKE
--------------------------------
Name: Ralph B. Lake
Title: Executive Vice President,
General Counsel and Secretary
WARREN D. FIX FAMILY PARTNERSHIP, L.P.
By: /s/ WARREN D. FIX
--------------------------------------
Name: Warren D. Fix
Title: General Partner
WARREN D. FIX, for himself and on behalf
of the WARREN D. FIX DEFINED BENEFIT PLAN
TRUST DATED JANUARY 1, 1989
/s/ WARREN D. FIX
------------------------------------------
Name: Warren D. Fix
/s/ JACK P. DEBOER
------------------------------------------
JACK P. DeBOER
15
<PAGE> 16
THE ALEXANDER JOHN DeBOER TRUST DATED
MARCH 14, 1995
By: /s/ SKYLER SCOTT DEBOER
--------------------------------------
Name: Skyler Scott DeBoer, Co-Trustee
By: /s/ LYNN A. DEBOER
--------------------------------------
Name: Lynn A. DeBoer, Co-Trustee
THE CHRISTOPHER SCOTT DeBOER TRUST DATED
MARCH 14, 1995
By: /s/ SKYLER SCOTT DEBOER
--------------------------------------
Name: Skyler Scott DeBoer, Co-Trustee
By: /s/ LYNN A. DEBOER
--------------------------------------
Name: Lynn A. DeBoer, Co-Trustee
16
<PAGE> 17
EXHIBIT INDEX
PAGE NUMBER
-----------
Exhibit 1. Joint Filing Agreement dated as of April 30, 1998.
Exhibit 2. Stockholders Agreement dated September 22, 1997.
Exhibit 3. Certificate of Designation filed September 22, 1997.
Exhibit 4. Warrant Form.
Exhibit 5. Registration Rights Agreement.
17
<PAGE> 18
SCHEDULE I
REPORTING PERSONS
<TABLE>
<S> <C>
Name: Doubletree Corporation
State of Organization: Delaware
Address of Principal Office: 755 Crossover Lane, Memphis, TN 38117
Office:
Principal Business: Hotel Company
Name: Warren D. Fix Family Partnership, L.P.
State of Organization: Kansas
Address of Principal Office: Lakepoint Office Park, 9342 East Central, Wichita, Kansas 67206
Principal Business: Investment
Name: Skyler Scott DeBoer, Co-Trustee of the Alexander Trust and
Co-Trustee of the Christopher Trust
Business Address: 2730 Snowmass Creek Road, Snowmass Village, CO 81654
Occupation: Owner
Name, Address and
Principal Business of
Employer: Rocky Mountain Wetland, 2730 Snowmass Creek Road, Snowmass
Village, CO 81654, Ecology Business
Citizenship: United States
Name: Lynn A. DeBoer, Co-Trustee of the Christopher Trust and
Co-Trustee of the Alexander Trust
Business Address: 2730 Snowmass Creek Road, Snowmass Village, CO 81654
Occupation: Homemaker
Name, Address and
Principal Business of
Employer: N/A
Citizenship: United States
Name: Jack P. DeBoer
Business Address: Lakepoint Office Park, 9342 East Central, Wichita, Kansas 67206
Occupation: Chief Executive Officer and Director of the Company
Name, Address and
Principal Business of
Employer: Candlewood Hotel Company, Inc., Hotel/Lodging business,
Lakepoint Office Park, 9342 East Central, Wichita, Kansas 67206
Citizenship: United States
</TABLE>
18
<PAGE> 19
SCHEDULE I
REPORTING PERSONS
<TABLE>
<S> <C>
Name: Warren D. Fix
Business Address: Lakepoint Office Park, 9342 East Central, Wichita, Kansas 67206
Occupation: Executive Vice President, Chief Financial Officer and Secretary
Name, Address and
Principal Business of
Employer: Candlewood Hotel Company, Inc., Hotel/Lodging business,
Lakepoint Office Park, 9342 East Central, Wichita, Kansas 67206
Citizenship: United States
</TABLE>
19
<PAGE> 20
SCHEDULE II
DIRECTORS AND OFFICERS
OF EACH REPORTING PERSON
THAT IS A CORPORATION
OR A GENERAL OR LIMITED PARTNERSHIP
AND OF EACH PERSON CONTROLLING
A REPORTING PERSON
<TABLE>
<S> <C>
Name: Promus Hotel Corporation (owner of Doubletree Corporation)
State of Organization: Delaware
Address of Principal Office: 755 Crossover Lane, Memphis, TN 38117
Principal Business: Hotel Company
OFFICERS OF DOUBLETREE CORPORATION AND PROMUS HOTEL CORPORATION (OWNER OF
DOUBLETREE CORPORATION):
Name: James T. Harvey
Business Address: 755 Crossover Lane, Memphis, TN 38117
Principal Occupation or
Employment: Senior Vice President and Chief Information Officer of Promus
Hotel Corporation ("Promus") and Doubletree Corporation
("Doubletree")
Name, Address and Principal
Business of Employer: Promus and Doubletree, 755 Crossover Lane, Memphis, TN 38117
(Hotel Business)
Citizenship: United States
Name: Richard M. Kelleher
Business Address: 755 Crossover Lane, Memphis, TN 38117
Principal Occupation or
Employment: President and Chief Operating Officer of Promus and Doubletree
Name, Address and Principal
Business of Employer: Promus and Doubletree, 755 Crossover Lane, Memphis, TN 38117
(Hotel Business)
Citizenship: United States
Name: Thomas L. Keltner
Business Address: 755 Crossover Lane, Memphis, TN 38117
Principal Occupation or
Employment: Executive Vice President and Chief Development Officer of Promus
and Doubletree
Name, Address and Principal
Business of Employer: Promus and Doubletree, 755 Crossover Lane, Memphis, TN 38117
(Hotel Business)
Citizenship: United States
</TABLE>
20
<PAGE> 21
SCHEDULE II
DIRECTORS AND OFFICERS
OF EACH REPORTING PERSON
THAT IS A CORPORATION
OR A GENERAL OR LIMITED PARTNERSHIP
AND OF EACH PERSON CONTROLLING
A REPORTING PERSON
<TABLE>
<S> <C>
Name: Ralph B. Lake
Business Address: 755 Crossover Lane, Memphis, TN 38117
Principal Occupation or
Employment: Executive Vice President, General Counsel and Secretary of
Promus and Doubletree
Name, Address and Principal
Business of Employer: Promus and Doubletree, 755 Crossover Lane, Memphis, TN 38117
(Hotel Business)
Citizenship: United States
Name: William L. Perocchi
Business Address: 755 Crossover Lane, Memphis, TN 38117
Principal Occupation or
Employment: Executive Vice President and Chief Financial Officer of Promus
and Doubletree
Name, Address and Principal
Business of Employer: Promus and Doubletree, 755 Crossover Lane, Memphis, TN 38117
(Hotel Business)
Citizenship: United States
Name: M. Ann Rhoades
Business Address: 755 Crossover Lane, Memphis, TN 38117
Principal Occupation or
Employment: Executive Vice President, Team Services of Promus and Doubletree
Name, Address and Principal
Business of Employer: Promus and Doubletree, 755 Crossover Lane, Memphis, TN 38117
(Hotel Business)
Citizenship: United States
Name: Raymond E. Schultz
Business Address: 755 Crossover Lane, Memphis, TN 38117
Principal Occupation or
Employment: Chairman of the Board and Chief Executive Officer of Promus and
Doubletree
Name, Address and Principal
Business of Employer: Promus and Doubletree, 755 Crossover Lane, Memphis, TN 38117
(Hotel Business)
Citizenship: United States
</TABLE>
21
<PAGE> 22
SCHEDULE II
DIRECTORS AND OFFICERS
OF EACH REPORTING PERSON
THAT IS A CORPORATION
OR A GENERAL OR LIMITED PARTNERSHIP
AND OF EACH PERSON CONTROLLING
A REPORTING PERSON
<TABLE>
<S> <C>
Name: Thomas W. Storey
Business Address: 755 Crossover Lane, Memphis, TN 38117
Principal Occupation or
Employment: Executive Vice President, Marketing of Promus and Doubletree
Name, Address and Principal
Business of Employer: Promus and Doubletree, 755 Crossover Lane, Memphis, TN 38117
(Hotel Business)
Citizenship: United States
DIRECTORS OF DOUBLETREE CORPORATION
Name: Richard M. Kelleher
Business Address: 755 Crossover Lane, Memphis, TN 38117
Principal Occupation or
Employment: President, Chief Operating Officer and Director of Promus Hotel
Corporation
Name, Address and Principal
Business of Employer: Promus Hotel Corporation, 755 Crossover Lane, Memphis, TN 38117
(Hotel Business)
Citizenship: United States
Name: Raymond E. Schultz
Business Address: 755 Crossover Lane, Memphis, TN 38117
Principal Occupation or
Employment: Chairman of the Board and Chief Executive Officer of Promus
Hotel Corporation
Name, Address and Principal
Business of Employer: Promus Hotel Corporation, 755 Crossover Lane, Memphis, TN 38117
(Hotel Business)
Citizenship: United States
</TABLE>
22
<PAGE> 23
SCHEDULE II
DIRECTORS AND OFFICERS
OF EACH REPORTING PERSON
THAT IS A CORPORATION
OR A GENERAL OR LIMITED PARTNERSHIP
AND OF EACH PERSON CONTROLLING
A REPORTING PERSON
DIRECTORS OF PROMUS HOTEL CORPORATION (OWNER OF DOUBLETREE CORPORATION)
<TABLE>
<S> <C>
Name: Richard J. Ferris
Business Address: 755 Crossover Lane, Memphis, TN 38117
Principal Occupation or
Employment: Private Investor
Name, Address and Principal
Business of Employer: None
Citizenship: United States
Name: Priscilla B. Florence
Business Address: 755 Crossover Lane, Memphis, TN 38117
Principal Occupation or
Employment: President and Owner of Priscilla Florence & Associates and
Boston's Card Stores
Name, Address and Principal
Business of Employer: Boston's Hallmark, 5317 West Centinela Avenue, Los Angeles, CA
90045 (Retail)
Citizenship: United States
Name: Dale F. Frey
Business Address: 755 Crossover Lane, Memphis, TN 38117
Principal Occupation or
Employment: Private Investor
Name, Address and Principal
Business of Employer: None
Citizenship: United States
Name: Christopher W. Hart
Business Address: 755 Crossover Lane, Memphis, TN 38117
Principal Occupation or
Employment: President of Spire Group, Ltd.
Name, Address and Principal
Business of Employer: Spire Group, Ltd., 1081 Beacon Street, Brookline, MA 02146
(Consulting Firm)
Citizenship: United States
</TABLE>
23
<PAGE> 24
SCHEDULE II
DIRECTORS AND OFFICERS
OF EACH REPORTING PERSON
THAT IS A CORPORATION
OR A GENERAL OR LIMITED PARTNERSHIP
AND OF EACH PERSON CONTROLLING
A REPORTING PERSON
<TABLE>
<S> <C>
Name: Richard M. Kelleher
Business Address: 755 Crossover Lane, Memphis, TN 38117
Principal Occupation or
Employment: President, Chief Operating Officer and Director of Promus Hotel
Corporation
Name, Address and Principal
Business of Employer: Promus Hotel Corporation, 755 Crossover Lane, Memphis, TN 38117
(Hotel Business)
Citizenship: United States
Name: Michael W. Michelson
Business Address: 755 Crossover Lane, Memphis, TN 38117
Principal Occupation or
Employment: Member of KKR & Co., LLC
Name, Address and Principal
Business of Employer: KKR & Co., LLC, 2800 Sand Hill Road, Suite 200, Menlo Park, CA
94025 (Investment Banking)
Citizenship: United States
Name: John H. Myers
Business Address: 755 Crossover Lane, Memphis, TN 38117
Principal Occupation or
Employment: Chairman of the Board, President and CEO of both General
Electric Investment Corporation and GE Investment Management Inc.
Name, Address and Principal
Business of Employer: General Electric Investment Corporation and
GE Investment Management Inc., P.O. Box 7900, 3003 Summer
Street, Stamford, CT 06904-2348 (Investment Company)
Citizenship: United States
</TABLE>
24
<PAGE> 25
SCHEDULE II
DIRECTORS AND OFFICERS
OF EACH REPORTING PERSON
THAT IS A CORPORATION
OR A GENERAL OR LIMITED PARTNERSHIP
AND OF EACH PERSON CONTROLLING
A REPORTING PERSON
<TABLE>
<S> <C>
Name: C. Warren Neel
Business Address: 755 Crossover Lane, Memphis, TN 38117
Principal Occupation or
Employment: Dean of the College of Business Administration at the University
of Tennessee, Knoxville
Name, Address and Principal
Business of Employer: University of Tennessee, Knoxville, College of Business
Administration, 716 Stokely Management Center, Knoxville, TN
37996 (Education)
Citizenship: United States
Name: Michael D. Rose
Business Address: 755 Crossover Lane, Memphis, TN 38117
Principal Occupation or
Employment: Private Investor
Name, Address and Principal
Business of Employer: None
Citizenship: United States
Name: Michael I. Roth
Business Address: 755 Crossover Lane, Memphis, TN 38117
Principal Occupation or
Employment: Chairman of the Board and Chief Executive Officer of Mutual of
New York
Name, Address and Principal
Business of Employer: Mutual of New York, E. Floor - 13th, 1740 Broadway, New York,
NY 10019 (Insurance)
Citizenship: United States
Name: Raymond E. Schultz
Business Address: 755 Crossover Lane, Memphis, TN 38117
Principal Occupation or
Employment: Chairman of the Board and Chief Executive Officer of Promus
Hotel Corporation
Name, Address and Principal
Business of Employer: Promus Hotel Corporation, 755 Crossover Lane, Memphis, TN 38117
(Hotel Business)
Citizenship: United States
</TABLE>
25
<PAGE> 26
SCHEDULE II
DIRECTORS AND OFFICERS
OF EACH REPORTING PERSON
THAT IS A CORPORATION
OR A GENERAL OR LIMITED PARTNERSHIP
AND OF EACH PERSON CONTROLLING
A REPORTING PERSON
<TABLE>
<S> <C>
Name: Jay Stein
Business Address: 755 Crossover Lane, Memphis, TN 38117
Principal Occupation or
Employment: Chairman of the Board and Chief Executive Officer of Stein Mart,
Inc.
Name, Address and Principal
Business of Employer: Stein Mart, Inc., 1200 Riverplace Blvd., Jacksonville, FL 32207
(Retail)
Citizenship: United States
Name: Ronald Terry
Business Address: 755 Crossover Lane, Memphis, TN 38117
Principal Occupation or
Employment: Private Investor
Name, Address and Principal
Business of Employer: None
Citizenship: United States
Name: Peter V. Ueberroth
Business Address: 755 Crossover Lane, Memphis, TN 38117
Principal Occupation or
Employment: Managing Director and Principal of the Contrarian Group
Name, Address and Principal
Business of Employer: The Contrarian Group, 500 Newport Center Drive, Suite 900,
Newport Beach, CA 92660 (Business Management)
Citizenship: United States
WARREN D. FIX FAMILY PARTNERSHIP, L.P.
Name: Warren D. Fix, General Partner
Business Address: Lakepoint Office Park, 9342 East Central, Wichita, Kansas 67206
Principal Occupation or
Employment: Executive Vice President, Chief Financial Officer and Secretary
Name, Address and Principal
Business of Employer: Candlewood Hotel Company, Inc., Lakepoint Office Park, 9342 East
Central, Wichita, Kansas 67206 (Hotel Business)
Citizenship: United States
</TABLE>
26
<PAGE> 27
SCHEDULE III
OTHER PURCHASERS OF PREFERRED STOCK
AND PARTIES TO THE STOCKHOLDERS AGREEMENT
Olympus Growth Fund II, L.P.
Olympus Executive Fund, L.P.
Morgan Guaranty Trust Company of
New York, as Trustee of the Commingled
Pension Trust Fund (Multi-Market Special
Investment Fund II) of Morgan Guaranty Trust
Company of New York
Morgan Guaranty Trust Company of
New York, as Trustee of the Multi-Market
Special Investment Trust Fund of
Morgan Guaranty Trust Company of
New York
Morgan Guaranty Trust Company of
New York, as Investment Manager and
Agent for the Alfred P. Sloan Foundation
(Multi-Market Account)
Chase Venture Capital Associates, L.P.
Private Equity Investors III, L.P.
Equity-Linked Investors-II
LNR Candlewood Holdings, Inc.
Delaware State Employees' Retirement Funds
Declaration of Trust for the Defined Benefit Plan of Zeneca Holdings Inc.
Declaration of Trust for the Defined Benefit Plan of ICI American Holdings Inc.
J.W. McConnell Family Trust
Advance Capital Partners, L.P.
Advance Capital Offshore Partners, L.P.
Allied Capital Corporation
Allied Capital Corporation II
The FFJ 1997 Nominee Trust
The Mutual Life Insurance Company Of New York
27
<PAGE> 28
SCHEDULE III
OTHER PURCHASERS OF PREFERRED STOCK
AND PARTIES TO THE STOCKHOLDERS AGREEMENT
Harbor Investments Ltd.
Strong Special Investment Limited Partnership
Strong Quest Limited Partnership
William J. Abrams
Joseph P. Adams, Jr.
Eric Anderson
Robert P. Brennan, Jr.
Robert Brody
Vanessa Burgess
Craig Callen
Michael Dana
Peter Deeks
Robert E. Diemar, Jr.
David Hurwitz
Steve Kantor
Louis Klevan
Larry Lavine
Daniel J. Mackell
Patrick McMullan
Andrew J. McSpadden
David R. Smith
Phil Tager
Douglas M. Weill
28
<PAGE> 29
SCHEDULE IV
INFORMATION WITH RESPECT TO
TRANSACTIONS EFFECTED DURING THE PAST SIXTY DAYS
<TABLE>
<CAPTION>
SHARES
PURCHASED AVERAGE
NAME DATE SOLD PRICE
- ---- ---- ------------ -------
<S> <C> <C> <C>
Jack P. DeBoer 3/17/98 Transferred Gift
4,500 Common
Shares
Marilyn S. DeBoer (Mr. DeBoer's spouse) 3/17/98 Transferred Gift
4,500 Common
Shares
Skyler Scott DeBoer 3/17/98 Acquired 2,250 Gift
Common Shares
The Alexander John DeBoer Trust, Dated March 3/17/98 Acquired 2,250 Gift
14, 1995 Common Shares
The Christopher Scott DeBoer Trust, Dated 3/17/98 Acquired 2,250 Gift
March 14, 1995 Common Shares
</TABLE>
29
<PAGE> 1
EXHIBIT 1
JOINT FILING AGREEMENT
In accordance with Rule 13d-1(f) promulgated under the Securities
Exchange Act of 1934, as amended, the undersigned hereby agree to the joint
filing with all other Reporting Persons (as such term is defined in the Schedule
13D referred to below) on behalf of each of them of a statement on Schedule 13D
(including amendments thereto) with respect to the Common Stock, par value $0.01
per share, and the Series A Cumulative Convertible Preferred Stock, par value
$0.01 per share, of CANDLEWOOD HOTEL COMPANY, INC., a Delaware corporation, and
that this Agreement may be included as an Exhibit to such joint filing. This
Agreement may be executed in any number of counterparts, all of which taken
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the undersigned hereby execute this Joint Filing
Agreement as of the 30th day of April, 1998.
Dated: April 30, 1998 DOUBLETREE CORPORATION
By: /s/ Ralph B. Lake
--------------------------------------
Name: Ralph B. Lake
Title: Executive Vice President,
General Counsel and Secretary
WARREN D. FIX FAMILY PARTNERSHIP, L.P.
By: /s/ WARREN D. FIX
--------------------------------------
Name: Warren D. Fix
Title: General Partner
WARREN D. FIX, for himself and on behalf
of the WARREN D. FIX DEFINED BENEFIT PLAN
TRUST DATED JANUARY 1, 1989
/s/ WARREN D. FIX
------------------------------------------
Name: Warren D. Fix
/s/ JACK P. DEBOER
------------------------------------------
JACK P. DeBOER
1
<PAGE> 2
THE ALEXANDER JOHN DeBOER TRUST DATED
MARCH 14, 1995
By: /s/ SKYLER SCOTT DEBOER
--------------------------------------
Name: Skyler Scott DeBoer, Co-Trustee
By: /s/ LYNN A. DEBOER
--------------------------------------
Name: Lynn A. DeBoer, Co-Trustee
THE CHRISTOPHER SCOTT DeBOER TRUST DATED
MARCH 14, 1995
By: /s/ SKYLER SCOTT DEBOER
--------------------------------------
Name: Skyler Scott DeBoer, Co-Trustee
By: /s/ LYNN A. DEBOER
--------------------------------------
Name: Lynn A. DeBoer, Co-Trustee
2
<PAGE> 1
EXHIBIT 2
STOCKHOLDERS AGREEMENT
This Stockholders Agreement dated September 22, 1997 (this
"Agreement") by and among Candlewood Hotel Company, Inc. (the "Company"), a
Delaware corporation, Doubletree Corporation, a Delaware corporation (together
with its subsidiaries, "Doubletree"), the Warren D. Fix Family Partnership,
L.P., a Kansas limited partnership (the "Fix Partnership") and Jack P. DeBoer
("DeBoer"), on behalf of himself and as representative of the Alexander John
DeBoer Trust dated March 14, 1995 and the Christopher Scott DeBoer Trust dated
March 14, 1995 (collectively, the "Trusts") (collectively, the "Initial
Holders") and each of the individuals or entities set forth in Schedule A hereto
(each a "Preferred Holder" and together the "Preferred Holders") (collectively,
the parties to this Agreement other than the Company are referred to as the
"Holders").
W I T N E S S E T H:
WHEREAS, the Initial Holders had previously entered into that
certain Stockholders Agreement dated as of September 30, 1996 relating to the
governance of the Company, including procedures for the election of directors,
the approval of certain significant corporate actions and rights relating to the
purchase of capital stock of the Company and the Initial Holders desire to
terminate the former agreement and enter into this Agreement;
WHEREAS, pursuant to the terms and conditions of the Stock
Purchase Agreement (the "Stock Purchase Agreement") dated as of August 27, 1997
between the Company and the Preferred Holders, the Company has agreed to issue
and sell, and the Purchasers have severally agreed to purchase, shares of Series
A Cumulative Convertible Preferred Stock of the Company (the "Purchased Shares")
in the aggregate amount of 65,000 shares for an aggregate purchase price of
$65,000,000;
WHEREAS, it is a condition precedent to the obligation of the
Preferred Holders to purchase the Purchased Shares pursuant to the Stock
Purchase Agreement that the parties hereto enter into this Agreement;
NOW, THEREFORE, in consideration of the agreement of the
Preferred Holders to purchase the Purchased Shares and other good and valuable
consideration the receipt and adequacy of which are hereby acknowledged, the
parties hereto agree as follows:
<PAGE> 2
ARTICLE 1
DEFINITIONS
1.1 Defined Terms. All terms capitalized but not defined herein
shall have the meanings attributable to such terms in the Stock Purchase
Agreement, except where the context otherwise requires. The following additional
terms when used in this Agreement, including its preamble and recitals, shall,
except where the context otherwise requires, have the following meanings, such
meanings to be equally applicable to the singular and plural forms thereof:
"Affiliate" of a Holder means any Person, other than the Company,
controlling, controlled by or under common control with such Holder.
"Board" means the Board of Directors of the Company.
"Common Stock" means and includes the Company's currently
authorized common stock, $.01 par value per share.
"DeBoer/Fix Holders" means DeBoer, the Trusts and the Fix
Partnership (so long as each is a Holder) and each Permitted Transferee, other
than the Company, who becomes a Holder.
"DeBoer/Fix Shares" means the shares of Common Stock owned of
record or beneficially by DeBoer, the Trusts and the Fix Partnership on the
Effective Date.
"DeBoer Holders" means DeBoer and the Trusts (so long as each is
a Holder) and each Permitted Transferee of DeBoer, other than the Company, who
becomes a Holder.
"DeBoer Shares" means the shares of Common Stock owned of record
or beneficially by DeBoer and the Trusts on the Effective Date.
"Director" means a director of the Company.
"Doubletree Holders" means Doubletree (so long as it is a Holder)
and each Permitted Transferee of Doubletree, other than the Company, who becomes
a Holder.
"Doubletree Shares" means the Shares of Common Stock owned of
record or beneficially by Doubletree on the Effective Date.
"Effective Date" means the date on which the Doubletree Shares,
the DeBoer Shares and the Fix Partnership Shares were issued to Doubletree,
DeBoer, the Trusts and the Fix Partnership.
"Fix Partnership Holders" means the Fix Partnership (so long as
it is a
2
<PAGE> 3
Holder) and each Permitted Transferee of the Fix Partnership, other than the
Company, who becomes a Holder.
"Fix Partnership Shares" means the shares of Common Stock owned
of record or beneficially by the Fix Partnership on the Effective Date.
"Holder" shall have the meaning set forth in the preamble hereto.
"Initial Holder" means a record or beneficial owner of any
Subject Shares.
"Permitted Transferee" of a Holder means (i) a successor to such
Holder by operation of law pursuant to a statutory merger, consolidation,
dissolution or liquidation, (ii) a purchaser of all or substantially all of such
Holder's assets, (iii) a Person owning, directly or indirectly, a majority of
the voting interests or other comparable equity interests of such Holder, a
Person under common control with such Person (including, in the case of an
individual, a family member or a trust controlled by a family member) or a
Person of which such Holder owns, directly or indirectly, a majority of the
outstanding voting securities or other comparable equity interests, (iv) a
successor to such Holder by will or through the laws of descent, or through a
gift or other contribution made in anticipation of the death of such Holder or
(v) as to any Series A Preferred Stock or Share Equivalent, any transferee
permitted by the terms of the Stock Purchase Agreement other than (x) a
competitor in the extended stay hotel business or (y) an entity owning more than
20% of the equity securities of such competitor or represented on the board of
directors of such competitor, including in each case in connection with this
clause (y), Affiliates of such competitor; provided, however, that in each case
the successor, purchaser or Person referred to in clauses (i), (ii) or (iii) of
this definition was an Affiliate of such Holder prior to such merger,
consolidation, dissolution, liquidation, purchase of assets or acquisition of
voting securities or other comparable equity interests and, in each case
referred to in clauses (i), (ii), (iii), (iv) or (v) of this definition, the
Permitted Transferee has become a party to and agreed to be bound by this
Agreement as to all Subject Shares or shares of Series A Preferred Stock then
being transferred to it. "Permitted Transferee" includes successive transferee
in transactions described in the preceding sentence.
"Person" means and includes an individual, a corporation, a
limited liability company, an association, a partnership, a trust or estate, a
government or any department or agency thereof.
"Preferred Holder" means each of the parties listed on Schedule A
hereto (so long as it is a Holder) and each Permitted Transferee of such
Preferred Holder, other than the Company, who becomes a Holder.
"Public Sale" means a sale of Subject Shares pursuant to an
effective registration statement in accordance with the rules and regulations of
the Securities and Exchange Commission (the "Commission") or a sale pursuant to
Rule 144 thereof.
3
<PAGE> 4
"Purchaser Group" means (i) Olympus Growth Fund II, L.P. with
respect to one nominee for director of the Company, (ii) Desai Capital with
respect to one nominee for director of the Company and (iii) Pecks Management
with respect to one nominee for director of the Company (each a "Significant
Purchaser"), so long as such Significant Purchaser shall hold at least 20% of
the shares of Series A Preferred Stock or Share Equivalents purchased by such
Significant Purchaser pursuant to the Stock Purchase Agreement, and, if at any
time such Significant Purchaser shall waive its rights hereunder or shall hold
less than 20% of the shares of Series A Preferred Stock or Share Equivalents
purchased by such Significant Purchaser pursuant to the Stock Purchase
Agreement, the designee formerly designated by such Significant Purchaser shall
henceforth be designated by all of the Preferred Holders holding shares of
Series A Preferred Stock or Share Equivalents.
"Series A Preferred Stock" means the Series A Cumulative
Convertible Preferred Stock, par value $.01 per share, of the Company.
"Share Equivalents" of the Series A Preferred Stock means the
number of shares of Common Stock that are issued or issuable upon conversion of
the Series A Preferred Stock but excluding any shares sold in a Public Sale.
"Stock Purchase Agreement" shall have the meaning set forth in
the first WHEREAS clause.
"Subject Shares" means the Doubletree Shares, the DeBoer Shares
and the Fix Partnership Shares; provided, however, that at all times, such term
shall include all Subject Shares that have been transferred by a Holder to a
Permitted Transferee of such Holder. Notwithstanding the foregoing, upon (A) the
disposition of any Subject Shares pursuant to a Public Sale to any Person, or
(B) the disposition of any Subject Shares other than pursuant to a Public Sale
to any Person other than a Permitted Transferee of the Holder thereof, the
shares so canceled or disposed of shall cease to be Subject Shares and
thereafter shall not be subject to any of the terms and conditions of this
Agreement.
ARTICLE 2
VOTING AGREEMENT
2.1 Board Nominations. The Company and the Holders have agreed
(i) that the Purchaser Group shall be entitled, through a nominating committee
or other procedure adopted by the Board, to designate for nomination by the
Board three nominees for election to the Board, (ii) that the Doubletree Holders
shall be entitled, through a nominating committee or other procedure adopted by
the Board, to designate for nomination by the Board two nominees for election to
the Board, (iii) that the DeBoer/Fix Holders shall be entitled, through a
nominating committee or other procedure adopted by the Board, to designate for
nomination by the Board two nominees for election to the Board and (iv) that the
Doubletree Holders together with the DeBoer/Fix
4
<PAGE> 5
Holders shall be entitled, through a nominating committee or other procedure
adopted by the Board of Directors, to designate for nomination by the Board the
President of the Company and/or such number of independent directors for
election to the Board as shall constitute the remainder of the Board.
2.2 Board of Directors of the Company. (a) So long as it shall
hold any shares of Series A Preferred Stock, Share Equivalents or Subject
Shares, each Holder agrees to vote all of its shares of Series A Preferred
Stock, Share Equivalents or Subject Shares, as applicable, as to which it has
voting rights for the election of all directors nominated pursuant to the
immediately preceding paragraph hereof. The nominees designated by the Preferred
Holders shall be identified in a proxy statement delivered to the Company
stockholders in connection with an annual or special meeting.
(b) The Holders shall appear in person or by proxy at any annual
or special meeting of stockholders for the purpose of obtaining a quorum and
shall vote or cause the vote of the Series A Preferred Stock, Share Equivalents
or Subject Shares, as applicable, owned by such Holder or by any Affiliate of
such Holder, either in person or by proxy, to be cast in accordance with the
provisions of this Article 2.
(c) Each Holder further agrees to vote all the Series A Preferred
Stock, Share Equivalents or Subject Shares, as applicable, with respect to which
it has direct or indirect voting rights, in favor of removal from the Board,
upon notice by the DeBoer/Fix Holders, the Preferred Holders or the Doubletree
Holders that an individual designated by them pursuant to Section 2.1 should be
removed, and to use its best efforts to cause the Board to fill the vacancy so
vacated with another person designated by the party providing such notice. Each
Holder further agrees to cooperate fully in connection with the nomination of
Directors, the voting of its shares of Series A Preferred Stock, Share
Equivalents or Subject Shares, as applicable, the execution of written consents
(if then permissable under the Certificate of Incorporation of the Company), the
calling of meetings and other stockholder matters to effect the provisions of
this Article.
(d) If any director is unable to serve, or once having commenced
to serve, is removed or withdraws from the Board, the party or parties who
designated such director will be entitled to designate a person to fill the
vacany on the Board so created and each Holder will use its best efforts to
cause the Board to fill the vacany so created with the person so designated, in
accordance with the Company's By-laws.
(e) Each Holder agrees not to and not to permit any Affiliate to
grant any proxy or enter into or be bound by any voting trust with respect to
its Series A Preferred Stock, Share Equivalents or Subject Shares, as
applicable, or enter into any arrangements of any kind with any person with
respect to its Series A Preferred Stock, Share Equivalents or Subject Shares, as
applicable, in any such case in a manner that is inconsistent with the
provisions of this Agreement.
2.3 Holder Representation. Each Holder represents and warrants as
to itself that as of the date hereof (after giving effect to all transactions
occurring in
5
<PAGE> 6
connection with the sale of the Purchased Shares) such Holder is not a party
with any other Person to any other agreement with respect to the holding,
voting, acquisition or disposition of shares of Series A Preferred Stock, Share
Equivalents or Subject Shares, as applicable.
2.4 Agent for Affiliated Holders. If a portion or all of the
Subject Shares held by Doubletree, DeBoer, the Trusts or the Fix Partnership
shall be transferred to one or more Permitted Transferees, resulting in the
Subject Shares which were theretofore held by such Holder being held by more
than one Holder, then Doubletree, DeBoer, the Trusts or the Fix Partnership, as
the case may be, shall: (i) act, or shall cause one of such Holders, to act, as
agent and proxy for all purposes of this Agreement (including without limitation
the voting of Subject Shares, the nomination of Directors, the giving of
consents, the approval of amendments, the receipt of notices, etc.) for all of
the Doubletree Holders, DeBoer Holders or the Fix Partnership Holders, as the
case may be, and (ii) specify in writing to the other parties that it (or such
other Holder) is to act as such agent and proxy, and thereafter the other
parties shall be entitled to look solely to, and to deal solely with, the person
so specified for all purposes of this Agreement as if such Holder held all the
Subject Shares held by the party providing such notice and its Permitted
Transferees.
2.5 Irrevocable Proxy. The Fix Partnership Holders and the Trusts
hereby appoint DeBoer as its and their proxy to exercise in DeBoer's sole
discretion all rights of the Fix Partnership Holders and the Trusts to designate
persons for nomination, removal or the filling of vacancies and to exercise all
rights pursuant to Article 2 hereof. This proxy is coupled with an interest in
the Company and shall be irrevocable. Except as set forth below in this
paragraph, this proxy may be invoked by DeBoer at any time by notice to the
other Holders but, unless and until invoked, such rights may be exercised by the
Fix Partnership Holders and the Trusts; provided, however, that upon the death
of Warren D. Fix all such rights shall automatically vest in DeBoer which shall
thereafter have the sole right to exercise all such rights of the Fix
Partnership Holders. Notwithstanding the foregoing, this proxy may not be
invoked or exercised after the death of Jack DeBoer.
2.6 Termination. The rights and obligations of any holder of
Series A Preferred Stock, Share Equivalents or Subject Shares pursuant to this
Agreement shall terminate (a) as to any Significant Purchaser, if such
Significant Purchaser shall hold, beneficially or of record, less than 20% of
the shares of Series A Preferred Stock or Share Equivalents purchased by such
Significant Purchaser pursuant to the Stock Purchase Agreement, (b) as to any
rights of any holder of Series A Preferred Stock or Share Equivalents, upon
waiver of such rights in writing, (c) as to any holder of Share Equivalents,
upon transfer of such Share Equivalents pursuant to a registered public
offering, block trade or other public sale, including pursuant to Rule 144 under
the Securities Act of 1933, as amended, (d) as to all holders of Series A
Preferred Stock or Share Equivalents, upon failure of such holders or their
Permitted Transferees, collectively, to hold, beneficially or of record, at
least 20% of the shares of Series A
6
<PAGE> 7
Preferred Stock or Share Equivalents, and (e) as to the holders of the
Doubletree Shares or the DeBoer/Fix Shares, 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 Preferred Holders pursuant to subsection
(d) hereof.
7
<PAGE> 8
ARTICLE 3
GENERAL PROVISIONS
3.1 Legend on Share Certificates. (a) All certificates for shares
of Series A Preferred Stock, Share Equivalents or Subject Shares which are
subject to the terms and provisions of Article 2, in addition to such other
legends as may be required by law, shall bear the legend set forth in Article
VII of the Stock Purchase Agreement and the following legend:
The shares represented by this certificate are also subject to
certain requirements as to voting contained in the Stockholders
Agreement dated September 22, 1997 among the Company, and certain
stockholders, a copy of which is on file with the Secretary of
the Company.
(b) Upon the termination of this Agreement with respect to any
shares of Series A Preferred Stock, Share Equivalents or Subject Shares pursuant
to Section 2.6, each Holder shall be entitled to receive, in exchange for any
certificate bearing the legend described in subsection (a) of this Section 3.1,
a certificate only bearing the legend set forth in Article VII of the Stock
Agreement, unless the Company shall have determined (based upon advice of legal
counsel) that such legend is no longer required by law.
ARTICLE 4
MISCELLANEOUS
4.1 Injunctive Relief. It is acknowledged that it will be
impossible to measure in money the damages that would be suffered if the parties
fail to comply with certain of the obligations imposed on them by this Agreement
and that, in the event of any such failure, an aggrieved Person will be
irreparably damaged and will not have an adequate remedy at law. Any such Person
shall, therefore, be entitled to injunctive relief and/or specific performance
to enforce such obligations, and if any action should be brought in equity to
enforce any of such provisions of this Agreement, none of the parties hereto
shall raise the defense that there is an adequate remedy at law.
4.2 Further Assurances. Each party hereto shall do and perform or
cause to be done and performed all such further acts and things and shall
execute and deliver all such other agreements, certificates, instruments and
documents as any other party hereto reasonably may request in order to carry out
the intent and accomplish the purposes of this Agreement and the consummation of
the transactions contemplated hereby.
4.3 Governing Law. This Agreement shall be construed and enforced
8
<PAGE> 9
in accordance with, and the rights of the parties shall be governed by, the laws
of the State of Delaware.
4.4 Entire Agreement; Amendment; Waiver. This Agreement (i)
contains the entire agreement among the parties hereto with respect to the
subject matter hereof, (ii) may not be amended or supplemented except by an
instrument or counterparts thereof in writing signed by at least 66-2/3% of the
Holders or their Agent or Proxy and, if such amendment or supplement adversely
affects any holder of Series A Preferred Stock or Share Equivalents, 100% of the
Preferred Holders and (iii) may not be discharged except by such written
instrument or by performance. Any such amendment so approved shall be binding on
all Holders. No waiver of any term or provision shall be effective unless in
writing signed by the party to be charged. The Stockholders Agreement, as in
existence prior to the execution hereof, among the Initial Holders, is and shall
be after the date hereof null and void and of no further force and effect.
4.5 Binding Effect. This Agreement shall be binding on and inure
to the benefit of the parties hereto and, subject to the terms and provisions
hereof, their respective legal representatives, successors and assigns.
4.6 Invalidity of Provision. The invalidity or unenforceability
of any provision of this Agreement in any jurisdiction shall not affect the
validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of this Agreement, including that
provision, in any other jurisdiction.
4.7 Counterparts. This Agreement may be executed simultaneously
in two or more counterparts, all of which shall be deemed but one and the same
instrument and each of which shall be deemed an original, and it shall not be
necessary in making proof of this Agreement to produce or account for more than
one such counterpart.
4.8 Notices. All notices and other communications provided for or
given or made hereunder shall be in writing (including delivery by facsimile
transmission) and, unless otherwise provided herein, shall be deemed to have
been given when received by the party to whom such notice is to be given at its
address set forth in the Stock Purchase Agreement, or such other address for the
party as shall be specified by notice given pursuant hereto.
4.9 Headings. The descriptive headings of the several paragraphs
of this Agreement are inserted for convenience only and do not constitute part
of this Agreement.
9
<PAGE> 10
4.10 Termination. Notwithstanding any other provision of this
Agreement, the rights of the Preferred Holders to nominate and elect directors
and the obligations of the other parties related thereto shall terminate on the
date that the Purchased Shares are converted into Common Stock or purchased by
the Company pursuant to Section (vi)(r) of the Company's Certificate of
Designation filed September 22, 1997.
10
<PAGE> 11
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed by their respective officers thereunto duly authorized as of the
day and year first above written.
CANDLEWOOD HOTEL COMPANY, INC.
By: /s/ JACK P. DEBOER
---------------------------------------
Name: Jack P. DeBoer
Title: Chief Executive Officer
DOUBLETREE CORPORATION
By: /s/ DAVID L. STIVERS
---------------------------------------
Name: David L. Stivers
Title: Senior Vice President, General
Counsel and Secretary
WARREN D. FIX FAMILY PARTNERSHIP, L.P.
By: /s/ WARREN D. FIX
---------------------------------------
Name: Warren D. Fix
Title: General Partner
/s/ WARREN D. FIX
------------------------------------------
Warren D. Fix
JACK P. DeBOER, for himself and on
behalf of the ALEXANDER DeBOER
TRUST DATED MARCH 14, 1995 and the
CHRISTOPHER SCOTT DeBOER TRUST
DATED MARCH 14, 1995
/s/ JACK P. DEBOER
-----------------------------------------
<PAGE> 12
Name: Jack P. DeBoer
OLYMPUS GROWTH FUND II, L.P.
By: OGP II, L.P., its General Partner
By: Conroy, L.L.C., its General Partner
By: /s/ JAMES A. CONROY
----------------------------------
Name: James A. Conroy
Title: General Partner
OLYMPUS EXECUTIVE FUND, L.P.
By: OEF, L.P., its General Partner
By: Conroy, L.L.C., its General Partner
By: /s/ JAMES A. CONROY
---------------------------------
Name: James A. Conroy
Title: General Partner
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK, AS
TRUSTEE OF THE COMMINGLED
PENSION TRUST FUND (MULTI-
MARKET SPECIAL INVESTMENT
FUND II) OF MORGAN GUARANTY
TRUST COMPANY OF NEW YORK
By: /s/ RONALD G. HODGE, II
--------------------------------------
Name: Ronald G. Hodge, II
Title: Vice President
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK, AS
TRUSTEE OF THE MULTI-MARKET
SPECIAL INVESTMENT TRUST FUND
OF MORGAN GUARANTY TRUST
COMPANY OF NEW YORK
By: /s/ RONALD G. HODGE, II
--------------------------------------
<PAGE> 13
Name: Ronald G. Hodge, II
Title: Vice President
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK, AS
INVESTMENT MANAGER AND AGENT
FOR THE ALFRED P. SLOAN
FOUNDATION (MULTI-MARKET
ACCOUNT)
By: /s/ RONALD G. HODGE, II
--------------------------------------
Name: Ronald G. Hodge, II
Title: Vice President
CHASE VENTURE CAPITAL ASSOCIATES, L.P.
By: Chase Capital Partners, its General Partner
By: /s/ JAMES D. KALLMAN
--------------------------------------
Name: James D. Kallman
Title:
PRIVATE EQUITY
INVESTORS III, L.P.
By: Rohit M. Desai Associates III, LLC
General Partner
By: /s/ ROHIT M. DESAI
--------------------------------------
Name: Rohit M. Desai
Title: Managing Member
<PAGE> 14
EQUITY-LINKED INVESTORS-II
By: Rohit M. Desai Associates-II
General Partner
By: /s/ ROHIT M. DESAI
--------------------------------------
Name: Rohit M. Desai
Title: Managing General Partner
LNR CANDLEWOOD HOLDINGS, INC.
By: /s/ MARGARET A. JORDAN
--------------------------------------
Name: Margaret A. Jordan
Title: Treasurer
DELAWARE STATE EMPLOYEES' RETIREMENT FUNDS
By: Pecks Management Partners Ltd.
its Investment Advisor
By: /s/ ROBERT J. CRESCI
--------------------------------------
Name: Robert J. Cresci
Title: Managing Director
DECLARATION OF TRUST FOR THE
DEFINED BENEFIT PLAN OF ZENECA
HOLDINGS INC.
By: Pecks Management Partners Ltd.
its Investment Advisor
By: /s/ ROBERT J. CRESCI
--------------------------------------
Name: Robert J. Cresci
Title: Managing Director
<PAGE> 15
DECLARATION OF TRUST FOR THE
DEFINED BENEFIT PLAN OF ICI
AMERICAN HOLDINGS INC.
By: Pecks Management Partners Ltd.
its Investment Advisor
By: /s/ ROBERT J. CRESCI
----------------------------------
Name: Robert J. Cresci
Title: Managing Director
J.W. McCONNELL FAMILY TRUST
By: Pecks Management Partners Ltd.
its Investment Advisor
By: /s/ ROBERT J. CRESCI
----------------------------------
Name: Robert J. Cresci
Title: Managing Director
ADVANCE CAPITAL PARTNERS, L.P.
By: Advance Capital Associates, L.P.
By: Advance Capital Management, LLC
By: /s/ ROBERT A. BERNSTEIN
------------------------------
Name: Robert A. Bernstein
Title: Principal
<PAGE> 16
ADVANCE CAPITAL OFFSHORE PARTNERS, L.P.
By: Advance Capital Offshore Associates, LDC
By: Advance Capital Associates, L.P.
By: Advance Capital Management, LLC
By: /s/ ROBERT A. BERNSTEIN
--------------------------------
Name: Robert A. Bernstein
Title: Principal
ALLIED CAPITAL CORPORATION
By: /s/ G. CABEL WILLIAMS
--------------------------------------
Name: G. Cabel Williams
Title: Managing Director
ALLIED CAPITAL CORPORATION II
By: /s/ G. CABEL WILLIAMS
--------------------------------------
Name: G. Cabel Williams
Title: Managing Director
THE FFJ 1997 NOMINEE TRUST
By: /s/ SAMUEL T. BYRNE
--------------------------------------
Name: Samuel T. Byrne
Title: Trustee
<PAGE> 17
THE MUTUAL LIFE INSURANCE
COMPANY OF NEW YORK
By: /s/ SUZANNE E. WALTON
------------------------------------
Name: Suzanne E. Walton
Title: Managing Director
HARBOR INVESTMENTS LTD.
By: Strong Capital Management, Inc.,
its Investment Advisor
By: /s/ STEPHEN J. SHENKENBERG
------------------------------------
Name: Stephen J. Shenkenberg
Title: Vice President
STRONG SPECIAL INVESTMENT LIMITED
PARTNERSHIP
By: Strong Capital Management, Inc.
its General Partner
By: /s/ STEPHEN J. SHENKENBERG
------------------------------------
Name: Stephen J. Shenkenberg
Title: Vice President
STRONG QUEST LIMITED
PARTNERSHIP
By: Strong Capital Management, Inc.
its General Partner
By: /s/ STEPHEN J. SHENKENBERG
------------------------------------
Name: Stephen J. Shenkenberg
Title: Vice President
<PAGE> 18
/s/ WILLIAM J. ABRAMS
------------------------------------
William J. Abrams
/s/ JOSEPH P. ADAMS, JR.
------------------------------------
Joseph P. Adams, Jr.
/s/ ERIC ANDERSON
------------------------------------
Eric Anderson
/s/ ROBERT P. BRENNAN, JR.
------------------------------------
Robert P. Brennan, Jr.
/s/ ROBERT BRODY
------------------------------------
Robert Brody
/s/ VANESSA BURGESS
------------------------------------
Vanessa Burgess
/s/ CRAIG CALLEN
------------------------------------
Craig Callen
/s/ MICHAEL DANA
------------------------------------
Michael Dana
/s/ PETER DEEKS
------------------------------------
Peter Deeks
/s/ ROBERT E. DIEMAR, JR.
------------------------------------
Robert E. Diemar, Jr.
/s/ DAVID HURWITZ
------------------------------------
David Hurwitz
<PAGE> 1
Exhibit 3
CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND RELATIVE, PARTICIPATING, OPTIONAL AND
OTHER SPECIAL RIGHTS OF PREFERRED STOCK
AND QUALIFICATIONS, LIMITATIONS
AND RESTRICTIONS THEREOF
OF
SERIES A CUMULATIVE CONVERTIBLE
PREFERRED STOCK
OF
CANDLEWOOD HOTEL COMPANY, INC.,
-------------------------
PURSUANT TO SECTION 151 OF THE
GENERAL CORPORATION LAW OF THE STATE OF DELAWARE
-------------------------
Candlewood Hotel Company, Inc., a Delaware corporation (the
"Corporation") certifies that pursuant to the authority contained in Article
Fourth of its Restated Certificate of Incorporation (the "Certificate of
Incorporation") and in accordance with the provisions of Section 151 of the
General Corporation Law of the State of Delaware, the Board of Directors of the
Corporation at a telephonic meeting called and held on September 19, 1997
adopted the following resolution, which resolution remains in full force and
effect on the date hereof:
RESOLVED, that there is hereby established a series of authorized
preferred stock having a par value of $.01 per share, which series shall be
designated as "Series A Cumulative Convertible Preferred Stock" (the "Series A
Preferred Stock"), shall consist of 65,000 shares and shall have the following
voting powers, preferences and relative, participating, optional and other
special rights, and qualifications, limitations and restrictions thereof as
follows:
(i) Designation and Amount. The designation of the series of
the Preferred Stock shall be "Series A Cumulative Convertible Preferred Stock",
par value $.01 per share (the "Series A Preferred Stock"). The number of shares
of Series A Preferred Stock shall be 65,000. The Series A Preferred Stock shall
be assigned a stated value of $1,000 per share (the "Stated Value").
(ii) Dividends. Rate, etc. The holders of shares of Series A
Preferred
<PAGE> 2
Stock as of the related Dividend Record Date (as defined below) shall be
entitled to receive, when and if declared by the Board of Directors out of
funds legally available therefor, dividends from the date of issue thereof at
the rate of 7.5% per annum (calculated by reference to the Stated Value),
accruing on a daily basis, payable quarterly, in arrears, on the last day in
August, November, February and May of each year (each a "Dividend Payment
Date"), commencing on August 31, 1998 until such time as the Series A Preferred
Stock is redeemed or retired in full. Upon conversion of any shares of Series A
Preferred Stock, dividends shall be paid as provided in clause (vi). If any
Dividend Payment Date occurs on a day that is not a Business Day, any accrued
dividends otherwise payable on such Dividend Payment Date shall be paid on the
next succeeding Business Day with the same effect as though made on such
Dividend Payment Date. The term "Business Day" shall mean a day other than a
Saturday or Sunday, any federal holiday or any day on which banks in the City of
New York are closed. Such dividends shall be payable in cash. Such dividends
shall accrue and be cumulative with respect to each share from the date of
original issuance and shall compound on each Dividend Payment Date, beginning
November 30, 1998, with respect to any accrued dividends not paid on any such
Dividend Payment Date, whether or not earned or declared. Except as otherwise
required by law, the "Dividend Record Date" with respect to the next succeeding
Dividend Payment Date shall be the date 10 Business Days prior to such Dividend
Payment Date.
(a) Rank, etc. Unless full dividends, if applicable, on
all outstanding shares of Series A Preferred Stock which have previously become
due and payable, have been paid or are contemporaneously declared and paid (or
declared and a sum sufficient for the payment thereof is set apart for such
payment), the Corporation shall not (1) declare or pay any dividend on (A) the
common stock, $.01 par value per share (the "Common Stock"), of the Corporation
or (B) on any other class or series of stock ranking junior to the Series A
Preferred Stock as to dividends or upon liquidation (the Common Stock and any
such junior class or series being the "Junior Stock") or make any payment on
account of, or set apart money for, a sinking or other analogous fund for the
purchase, redemption or other retirement of, any Junior Stock or make any
distribution in respect thereof, either directly or indirectly and whether in
cash or property or in obligations or shares of the Corporation (other than in
shares of Junior Stock) or (2) purchase any shares of Series A Preferred Stock
(except for consideration payable in Junior Stock) or redeem fewer than all of
the shares of Series A Preferred Stock then outstanding.
(iii) Liquidation. Preference Upon Liquidation, Dissolution or
Winding Up. In the event of any liquidation, dissolution or winding up of the
affairs of the Corporation (any or all of such events, a "liquidation"), whether
voluntary or involuntary, subject to the prior preferences and other rights of
any Senior Stock (as defined below), if any, as to liquidation preferences, the
holders of shares of Series A Preferred Stock then outstanding shall be entitled
pari passu as if members of a single class of securities with the holders of any
Parity Stock (as defined below), if any, to be paid out of the assets of the
Corporation before any payment shall be made to the
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holders of the Junior Stock, an amount equal to the Stated Value plus any
accrued but unpaid dividends (the "Liquidation Amount"). Except as provided
in this paragraph, holders of Series A Preferred Stock shall not be entitled to
any distribution in the event of liquidation, dissolution or winding up of the
affairs of the Corporation. The term "Senior Stock" shall mean any class or
series of stock of the Corporation authorized after the date of issuance of the
Series A Preferred Stock in accordance with clause (v)(b) hereof ranking senior
to the Series A Preferred Stock in respect of the right to receive dividends or
the right to participate in any distribution upon liquidation and the term
"Parity Stock" shall mean any class or series of stock of the Corporation
authorized after the date of issuance of the Series A Preferred Stock in
accordance with clause (v)(b) hereof ranking on a parity with the Series A
Preferred Stock in respect of the right to receive dividends or the right to
participate in any distribution upon liquidation.
(b) Preference on Merger, Consolidation or Sale of Assets.
Alternatively, in the event of a liquidation pursuant to clause (iii)(e) of this
Certificate of Designation, a holder of shares of Series A Preferred Stock may
elect to convert any or all of such holder's shares of Series A Preferred Stock
into shares of Common Stock in accordance with clause (vi) of this Certificate
of Designation, in which event the holders electing to convert shall be entitled
to receive, together with the other holders of shares of Common Stock, pro rata
based on the number of shares of Common Stock then outstanding and the number of
shares of Common Stock into which the Series A Preferred Stock shall have been
converted pursuant to such election, the remaining cash and/or other property
distributable to holders of Common Stock if, as and when such remaining cash
and/or other properties is distributed by the Corporation.
(c) Insufficient Assets. If, upon any liquidation of the
Corporation, the assets of the Corporation are insufficient to pay the holders
of shares of the Series A Preferred Stock and any Parity Stock, if any, then
outstanding the full amount to which they shall be entitled, such assets shall
be distributed to each holder of the Series A Preferred Stock and Parity Stock,
if any, pro rata based on the number of shares of Series A Preferred Stock and
Parity Stock, if any, held by each.
(d) Rights of Other Holders. In the event of any
liquidation, after payment shall have been made to the holders of the Series A
Preferred Stock and Parity Stock, if any, of all preferential amounts to which
they shall be entitled, the holders of shares of Junior Stock and other capital
stock of the Corporation shall receive such amounts as to which they are
entitled by the terms thereof.
(e) Consolidation, Merger or Sale of Assets. A
consolidation or merger of the Corporation with or into any other corporation
(excluding a merger in which the Corporation is the surviving entity or a merger
into a wholly-owned subsidiary), or a sale or transfer of all or substantially
all of the Corporation's assets for cash or securities shall be considered a
liquidation within the meaning of this clause (iii).
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(iv) Redemption. (i) Optional Redemption. The Series A
Preferred Stock shall be subject to redemption, at the option of the
Corporation, in whole or from time to time in part, at any time subsequent to
September 30, 1999 at a per share redemption price equal to 200% of the Stated
Value plus accrued but unpaid dividends to the date of such redemption, payable
in cash out of funds legally available therefor (an "Optional Redemption"). (ii)
Mandatory Redemption. All outstanding shares of Series A Preferred Stock shall
be redeemed by the Corporation on September 30, 2004 (the "Mandatory Redemption
Date"), at a per share redemption price equal to the Liquidation Amount, payable
in cash out of funds legally available therefor (the "Mandatory Redemption").
(a) Change of Control. Upon the occurrence of a Change of
Control Event (as hereafter defined), the Corporation shall offer to redeem all
outstanding shares of Series A Preferred Stock for a price per share equal to
the greater of (i) 175% of the Stated Value or (ii) the Liquidation Amount,
payable in cash. A "Change of Control Event" shall mean (x) the acquisition by
any Person or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the
Exchange Act) (other than a group comprised entirely of the Purchasers), of
beneficial ownership, direct or indirect, of securities of the Corporation
representing fifty percent (50%) or more of the combined voting power of the
Corporation's then outstanding equity securities or (y) the acquisition of the
Corporation, or all or substantially all of its assets, by, or the combination
of the Corporation or all or substantially all of its assets, with, another
Person, unless the acquiring or surviving Person shall be a corporation, limited
liability company, partnership or other entity more than 50% of the combined
voting power of which corporation's then outstanding equity securities, after
such acquisition or combination, are owned, immediately after such acquisition
or combination, by the owners of more than 50% of the voting securities of the
Corporation immediately prior to such acquisition or combination; provided,
however, that the Corporation shall not be required to redeem any shares of
Series A Preferred Stock held by a member of a group described in clause (x)
above (but including a group comprised entirely of the Purchasers) in connection
with a Change in Control occurring prior to August 27, 1999. When used herein
the term "Person" shall mean and include an individual, a corporation, a limited
liability company, an association, a partnership, a trust or estate, a
government or any department or agency thereof.
(b) Notice of Redemption. The Corporation shall give each
holder of Series A Preferred Stock written notice of any Optional Redemption not
less than thirty (30) days nor more than forty-five (45) days prior to the
proposed redemption date, specifying such redemption date (each, an "Optional
Redemption Date"), the per share redemption price and the number of such
holder's shares to be redeemed on such date. The Corporation shall give each
holder of Series A Preferred Stock written notice (a "Notice of Change of
Control Event") within five (5) days after the Corporation or any of its
executive officers or directors obtains knowledge of the occurrence of a Change
of Control Event, specifying that a Change of Control Event has occurred, the
material facts and circumstances of such Change of Control Event,
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<PAGE> 5
the redemption date, the per share redemption price and instructions that a
holder of Series A Preferred Stock must follow in order to have his shares
redeemed. The redemption date for any Change of Control Event (each a "Change of
Control Redemption Date") shall be the twenty-fifth date following such Change
of Control Event, provided that, if such redemption date is not a Business Day,
the redemption date shall be the first Business Day thereafter. Upon receipt of
a Notice of Change of Control Event, a holder of shares of Series A Preferred
Stock may, at his option, elect to have the Corporation redeem all of such
shares of Series A Preferred Stock by providing written notice to the
Corporation of such election not less than five (5) days prior to the specified
Change of Control Redemption Date. In the event some or all of such shares of
Preferred Stock are not tendered for redemption, the holder of such shares not
so tendered shall be deemed to have consented to he redemption by the
Corporation of any Junior Stock being prepaid, redeemed, retired or exchanged
pursuant to a Change of Control Event, notwithstanding any approval rights of
holders of Series A Preferred Stock pursuant to clause (v) hereof. If the
applicable redemption date is on or after a Dividend Record Date and on or
before the related Dividend Payment Date, the dividend payable shall be paid to
the holder in whose name the Series A Preferred Stock is registered at the close
of business on such record date. In the case of an Optional Redemption of less
than all shares of Series A Preferred Stock at the time outstanding, the shares
to be redeemed shall be selected pro rata, consistent with Delaware law.
(c) Failure to Redeem. (A) If, upon the Mandatory
Redemption Date, the Corporation does not redeem all outstanding shares of
Series A Preferred Stock at the per share price specified in clause (iv)(a)(ii),
the Corporation shall issue to each holder of Series A Preferred Stock on such
Redemption Date and on each three month anniversary thereof (each a "Warrant
Payment Date"), warrants to purchase twenty-five percent (25%) of the number of
shares of Common Stock (rounded to the nearest whole share) into which such
holder's outstanding shares of Series A Preferred Stock would be convertible on
such Warrant Payment Date at the then current Conversion Price. Such warrants
shall be immediately exercisable with respect to each share of Common Stock for
$.01. (B) If, upon the Change of Control Redemption Date, the Corporation does
not redeem all shares of Series A Preferred Stock tendered for redemption
pursuant to clause (iv)(c) hereof, the Conversion Price (as defined below) shall
be reduced to the lower of (1) the then applicable Conversion Price or (2) the
Market Price (as defined below) per share of Common Stock on the Redemption Date
divided by 1.75; provided, however, that under no circumstances shall the
Conversion Price be reduced to a level that is less than the par value of the
Common Stock.
(d) Effect of Redemption. On the date established for
redemption pursuant to clause (iv) hereof, all rights in respect of the shares
of Series A Preferred Stock to be redeemed, except the right to receive the
applicable redemption price, plus accrued dividends, if any, to the date of
redemption, shall cease and terminate (unless default shall be made by the
Corporation in the payment of the
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<PAGE> 6
applicable redemption price, plus accrued dividends, if any, in which event such
rights shall be exercisable until such default is cured), and such shares shall
no longer be deemed to be outstanding, notwithstanding that any certificates
representing such shares shall not have been surrendered to the Corporation.
All shares of Series A Preferred Stock redeemed pursuant to this clause (iv)
shall be retired and shall be restored to the status of authorized and unissued
shares of preferred stock, without designation as to series or class and may
thereafter be reissued, subject to compliance with the terms hereof, as shares
of any series of preferred stock other than shares of Series A Preferred Stock.
(e) Insolvency of Corporation. If, upon the Mandatory
Redemption Date or any Change of Control Redemption Date, the payment of the
full amount of the redemption payments due on such date would render the
Corporation insolvent (as determined in accordance with either the then
applicable definition in the United States Bankruptcy Code or the then
applicable definition of any state fraudulent conveyance or fraudulent transfer
statute), any liquidation of the Corporation in connection with such redemption
shall require the consent of the holders of 66-2/3% of the Series A Preferred
Stock and no other consent of any holder of any other equity securities of the
Corporation, except as otherwise required by Delaware law, and in the event of
such consent the Corporation shall be liquidated and the assets of the
Corporation distributed in accordance with the provisions of clause (iii)
of this Certificate of Designation.
(f) Conversion Prior to Redemption. Anything to the
contrary in this clause (iv) of this Certificate of Designation notwithstanding,
the holders of Series A Preferred Stock shall have the right, exercisable at any
time prior to the date set for redemption thereof, to convert all or any part of
such Series A Preferred Stock into shares of Common Stock pursuant to clause
(vi) hereof.
(g) Funds for Redemption. No share of Series A Preferred
Stock may be redeemed except with funds legally available therefor.
(v) Voting Rights. Voting as a Class with the Common Stock. The
holders of the Series A Preferred Stock shall be entitled to vote together with
the holders of shares of Common Stock and any other class or series of capital
stock entitled to vote with the Common Stock as a single class on all matters to
be voted upon by the Common Stock, and shall not have any additional voting
rights other than the rights specified below in this clause (v) or otherwise
required by law. Each holder of Series A Preferred Stock shall be entitled to
such number (rounded to the nearest whole number) of votes as such holder would
be entitled if such holder had converted the shares of Series A Preferred Stock
held by such holder into shares of Common Stock pursuant to clause (vi) hereof
immediately prior to such vote.
(a) Additional Capital Stock, etc. The Corporation shall
not, without the affirmative consent or approval of the holders of shares
representing
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<PAGE> 7
66 2/3% of the shares of Series A Preferred Stock then outstanding, voting as a
single class (such consent or approval to be given by written consent in lieu of
a meeting if allowable under the Corporation's Certificate of Incorporation or
by vote at a meeting called for such purpose for which notice shall have been
given to the holders of the Series A Preferred Stock): (i) authorize the
issuance of or issue any new, or increase the authorized number of shares of any
existing, class or series of capital stock of the Corporation which would be
senior or superior as to dividends or upon liquidation to the Series A Preferred
Stock, (ii) issue any shares of preferred stock authorized in the Certificate of
Incorporation or create any other class or series of stock ranking on a parity
with the Series A Preferred Stock as to dividends or upon liquidation, (iii)
authorize or issue shares of stock of any class or series or any bonds,
debentures, notes or other obligations convertible into or exchangeable for, or
having rights to purchase, any shares of stock of the Corporation which would be
senior or superior to, or rank on a parity with, the Series A Preferred Stock as
to dividends or upon liquidation, (iv) reissue any shares of Series A Preferred
Stock that have been redeemed or purchased by the Corporation, (v) take any
action, including, causing any amendment, alteration or repeal of any of the
provisions of the Corporation's Certificate of Incorporation that may alter or
change the powers, preferences or special rights of the shares of Series A
Preferred Stock so as to affect the holders thereof adversely, (vi) effect any
redemption or repurchase of any Junior Stock other than in connection with the
cashless exercise of options, or upon the exercise by the Corporation of its
repurchase rights (up to a maximum of $250,000 in the aggregate) as to Common
Stock issued to employees of the Corporation upon a termination of such
employment, (vii) increase the number of members on the Board of Directors
(except by one, in connection with the election of the President to the Board of
Directors as the eleventh member) or (viii) file a voluntary petition seeking
liquidation, reorganization, arrangement or readjustment of its debts, make an
assignment for the benefit of creditors, permit an involuntary petition seeking
liquidation, reorganization, arrangement or readjustment of its debts or seeking
appointment of a receiver to remain unchallenged or otherwise seek or permit
remedies for insolvency. Notwithstanding any other provision in this Certificate
of Designation, (1) upon the consent or approval of holders of shares
representing 66 2/3% of the shares of Series A Preferred Stock then outstanding,
voting as a single class and (2) with such other votes or consents as may be
required by Delaware law, the rules and regulations of the Securities and
Exchange Commission, the regulations of the NASDAQ or other securities exchange
applicable to the Corporation or pursuant to the Company's Certificate of
Incorporation, the Corporation may take any such action referenced in the
preceding clauses (i) - (viii).
(vi) Conversion Rights. Optional Conversion of Series A
Preferred Stock. The holder of any shares of Series A Preferred Stock shall have
the right, at such holder's option, at any time or from time to time to convert
any or all of such holder's shares of Series A Preferred Stock into such number
of fully paid and nonassessable shares of Common Stock (the "Conversion Shares")
as determined for each share of Series A Preferred Stock by dividing the Stated
Value by the "Conversion Price" in effect at the time of such conversion. The
"Conversion Price" shall be $9.50
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per share of Series A Preferred Stock, subject to the adjustments set forth
herein; provided, however, that if the Corporation fails to pay, in cash, any
and all dividends accrued, for any two Dividend Payment Dates, whether
consecutive or not (a "Dividend Default"), the Conversion Price shall be
reduced by $.50 for each such Dividend Default; and provided, further, that if
the Corporation fails to pay any and all accrued dividends on August 31, 1998,
the Conversion Price shall be reduced by $1.00; in each case subject to
adjustment as otherwise provided herein; provided, however, that a default in
the payment of any dividends accrued and unpaid as of August 31, 1998
shall not be combined with any other default to constitute a Dividend Default.
The Conversion Shares and the Conversion Price are subject to certain
adjustments as set forth herein, and the terms Conversion Shares and Conversion
Price as used herein shall as of any time be deemed to include all such
adjustments to be given effect as of such time in accordance with the terms
hereof; provided, further, that under no circumstances shall the Conversion
Price be reduced to a level that is less than the par value of the Common Stock.
Upon the exercise of the option of the holder of any shares of
Series A Preferred Stock to convert Series A Preferred Stock into Common Stock,
the holder of such shares of Series A Preferred Stock to be converted shall
surrender the certificates representing the shares of Series A Preferred Stock
so to be converted in the manner provided in clause (vi)(c) below. Immediately
following such conversion, the rights of the holders of converted Series A
Preferred Stock (other than the right to receive dividends accrued to the date
of such conversion) shall cease and the persons entitled to receive the Common
Stock upon the conversion of Series A Preferred Stock shall be treated for all
purposes (other than the right to receive dividends accrued to the date of such
conversion) as having become the owners of such Common Stock.
(a) Automatic Conversion. Subsequent to August 31, 1999,
each share of Series A Preferred Stock shall automatically be converted into
shares of Common Stock at the then applicable Conversion Price if (i) the Common
Stock has traded for a period of not less than twenty (20) consecutive days at
not less than 200% of the then applicable Conversion Price and (ii) the
Corporation at its sole expense shall have caused to become effective within 90
days of such twenty (20) consecutive day period a registration statement under
the Securities Act with respect to at least the number of shares equal to 50% of
the shares of Common Stock into which the Series A Preferred Stock then
outstanding is convertible at the then applicable Conversion Price (or such
lesser number as shall have been requested to be registered by the holders of
the Series A Preferred Stock, following notice from the Company) and shall have
caused all such shares to be sold (allocated pro rata among holders of such
Series A Preferred Stock in relation to the number of shares requested to be
registered following notice from the Company) pursuant to an underwritten public
offering in accordance with the provisions of Section 5 of the Registration
Rights Agreement (the "Registration Rights Agreement") dated September 22, 1997
among the Corporation and the parties thereto (or a registered but not
underwritten sale to one or more nationally recognized registered broker/dealers
for resale through a public distribution)
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at a per share price to each selling holder of not less than 200% of the
Conversion Price, less 1% of the then applicable Market Price.
(b) Delivery of Stock Certificates; No Fractional Shares.
The holder of any shares of Series A Preferred Stock may exercise the optional
conversion right pursuant to clause (vi)(a) above by delivering to the
Corporation or its duly authorized transfer agent during regular business hours
at the office of the Corporation the certificate or certificates for the shares
to be converted, duly endorsed or assigned either in blank or to the Corporation
(if required by it), accompanied by written notice stating that such holder
elects to convert such shares and shall provide a certificate to the Corporation
or its duly authorized transfer agent as to the date of such conversion. Upon
the occurrence of an automatic conversion pursuant to clause (vi)(b) above, the
Corporation shall deliver notice to each holder of Series A Preferred Stock and
the holder of any shares of Series A Preferred Stock shall deliver to the
Corporation at the office of the Corporation the certificate or certificates for
all shares of Series A Preferred Stock then held by such holder, duly endorsed
or assigned either in blank or to the Corporation (if requested by it).
Conversion shall be deemed to have been effected (1) in the case of an optional
conversion, on the date when the aforesaid delivery of stock certificates is
made if such day is a Business Day and otherwise on the Business Day following
the date of the aforesaid delivery, and (2) in the case of an automatic
conversion pursuant to clause (vi)(b), upon the effective date of the
registration statement (provided that if the shares registered thereunder are
not sold no Conversion Date shall be deemed to have occurred) and in each case
such date is referred to herein as the "Conversion Date." As promptly as
practicable thereafter, the Corporation, through its transfer agent, shall issue
and deliver to or upon the written order of such holder, to the place designated
by such holder, a certificate or certificates for the number of full shares of
Common Stock to which such holder is entitled and a check or cash in respect of
any fractional interest in a share of Common Stock, as provided below; provided,
however, that in the case of a conversion in connection with liquidation, no
such certificates need be issued. The person in whose name the certificate or
certificates for Common Stock are to be issued shall be deemed to have become
the stockholder of record in respect of such Common Stock on the applicable
Conversion Date unless the transfer books of the Corporation are closed on that
date, in which event such holder shall be deemed to have become the stockholder
of record in respect of such Common Stock on the next succeeding date on which
the transfer books are open, but the Conversion Price shall be that in effect
on the Conversion Date. Upon conversion of only a portion of the number of
shares covered by a stock certificate representing shares of Series A Preferred
Stock surrendered for conversion, the Corporation shall issue and deliver to or
upon the written order of the holder of the stock certificate so surrendered for
conversion, at the expense of the Corporation, a new stock certificate covering
the number of shares of Series A Preferred Stock representing the unconverted
portion of the certificate so surrendered. Any transfer taxes applicable to the
above described transactions shall be paid by such transferee. The Corporation
shall not be required to pay any tax which may be payable in respect of any
transfer involved in the issuance and delivery of Common Stock or the
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reissuance of the Preferred Stock in a name other than that in which the shares
of Series A Preferred Stock so converted were registered, and no such issuance
or delivery shall be made unless and until the person requesting such issuance
has paid to the Corporation the amount of any such tax or has established to the
satisfaction of the Corporation that such tax has been paid.
(c) No Fractional Shares of Common Stock. (1) No
fractional shares of Common Stock shall be issued upon conversion of shares of
Series A Preferred Stock and in lieu thereof, the Corporation shall pay a cash
adjustment in respect of such fractional interest in an amount equal to the then
current Market Price (as defined in clause (vi)(e)(8) below) of a share of
Common Stock multiplied by such fractional interest. The holders of fractional
interests shall not be entitled to any rights as stockholders of the Corporation
in respect of such fractional interests. In determining the number of shares of
Common Stock and the payment, if any, in lieu of fractional shares that a holder
of Series A Preferred Stock shall receive, the total number of shares of Series
A Preferred Stock surrendered for conversion by such holder shall be aggregated.
(2) On the first Dividend Payment Date on which accrued dividends
are paid in full to all holders of Series A Preferred Stock following the
optional conversion pursuant to clause (vi) (a) of all or any portion of the
Series A Preferred Stock, the Corporation shall pay (i) any dividends accrued on
such converted Series A Preferred Stock to the date of such conversion plus (ii)
any dividends accrued on any accrued and unpaid dividends (on which dividends
shall accrue at a rate of 7.5% per annum, compounded quarterly) other than
dividends accruing as of the last Dividend Payment Date. Accrued dividends with
respect to all shares converted pursuant to clause (vi) (b) hereof shall be paid
in full on the Conversion Date out of funds legally available therefor.
(d) Adjustment of Conversion Price Upon Issuance of Common
Stock. If and whenever after the date hereof the Corporation shall issue or sell
any shares of its Common Stock (except upon conversion of the Series A Preferred
Stock) for a consideration per share less than, under certain circumstances
including those in paragraphs (1) through (9) below, the Conversion Price in
effect immediately prior to the time of such issue or sale, then, forthwith upon
such issue or sale, the Conversion Price shall be reduced (but not increased,
except as otherwise specifically provided in paragraph (3) below) to the price
(calculated to the nearest cent) determined by dividing (i) an amount equal to
the sum of (A) the aggregate number of shares of Common Stock outstanding
immediately prior to such issue or sale multiplied by the then existing
Conversion Price and (B) the consideration, if any, received by the Corporation
upon such issue or sale, by (ii) the aggregate number of shares of Common Stock
of all classes outstanding immediately after such issue or sale.
No adjustment of the Conversion Price, however, shall be made in
an amount less than $.05 per share, but any such lesser adjustment shall be
carried
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forward and shall be made upon the time of and together with the next
subsequent adjustment, if any.
For the purposes of this clause (vi)(e), the following paragraphs
(1) through (9) shall also be applicable:
(1) Issuance of Rights or Options - In case at any time after the
date hereof the Corporation shall in any manner grant (whether directly
or by assumption in a merger or otherwise, except in the circumstances
described in clause (vi)(f) below) any rights to subscribe for or to
purchase, or any options or warrants for the purchase of, Common Stock
or any stock, notes or securities convertible into or exchangeable for
Common Stock (such convertible or exchangeable stock, notes or
securities being herein called "Convertible Securities"), whether or not
such rights, options or warrants or the right to convert or exchange any
such Convertible Securities are immediately exercisable, and the price
per share for which Common Stock is issuable upon the exercise of such
rights, options or warrants or upon conversion or exchange of such
Convertible Securities (determined by dividing (i) the total amount, if
any, received or receivable by the Corporation as consideration for the
granting of such rights, options or warrants, plus the minimum aggregate
amount of additional consideration, if any, payable to the Corporation
upon the exercise of such rights, options or warrants, plus, in the case
of such rights, options or warrants which relate to Convertible
Securities, the minimum aggregate amount of additional consideration, if
any, payable upon the issue or sale of such Convertible Securities and
upon the conversion or exchange thereof, by (ii) the total maximum
number of shares of Common Stock issuable upon the exercise of such
rights, options or warrants or upon the conversion or exchange of all
such Convertible Securities issuable upon the exercise of such rights,
options or warrants) shall be less than the Conversion Price in effect
immediately prior to the time of the granting of such rights, options or
warrants, then the total maximum number of shares of Common Stock
issuable upon the exercise of such rights, options or warrants or upon
conversion or exchange of all such Convertible Securities issuable upon
the exercise of such rights, options or warrants shall (as of the date
of granting of such rights or options) be deemed to be outstanding and
to have been issued for such price per share. Except as provided in
paragraph (3), no further adjustment of the Conversion Price shall be
made upon the actual issue of such Common Stock or of such Convertible
Securities upon exercise of such rights, options or warrants or upon the
actual issue of such Common Stock upon conversion or exchange of such
Convertible Securities.
(2) Issuance of Convertible Securities - In case at any time
after the date hereof the Corporation shall in any manner issue (whether
directly or by assumption in a merger or otherwise) or sell any
Convertible Securities, whether or not the rights to exchange or convert
thereunder are immediately
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exercisable, and the price per share for which Common Stock is issuable
upon such conversion or exchange (determined by dividing (i) the total
amount received or receivable by the Corporation as consideration for
the issue or sale of such Convertible Securities, plus the minimum
aggregate amount of additional consideration, if any, payable to the
Corporation upon the conversion or exchange thereof, by (ii) the total
maximum number of shares of Common Stock issuable upon the conversion
or exchange of all such Convertible Securities) shall be less than the
Conversion Price in effect immediately prior to the time of such issue
or sale, then the total maximum number of shares of Common Stock
issuable upon conversion or exchange of all such Convertible Securities
shall (as of the date of the issue or sale of such Convertible
Securities) be deemed to be outstanding and to have been issued for such
price per share; provided, however, that (a) except as otherwise
provided in paragraph (3), no further adjustment of the Conversion Price
shall be made upon the actual issue of such Common Stock upon conversion
or exchange of such Convertible Securities, and (b) if any such issue or
sale of such Convertible Securities is made upon exercise of any rights
to subscribe for or to purchase or any option to purchase any such
Convertible Securities for which adjustments of the Conversion Price
have been or are to be made pursuant to other provisions of this clause
(vi)(e), no further adjustment of the Conversion Price shall be made by
reason of such issue or sale.
(3)Change in Option Price or Conversion Rate - If the purchase
price provided for in any right or option referred to in paragraph (1),
the additional consideration, if any, payable upon the conversion or
exchange of any Convertible Securities referred to in paragraph (1) or
(2), or the rate at which any Convertible Securities referred to in
paragraph (1) or (2) are convertible into or exchangeable for Common
Stock shall change (other than under or by reason of provisions designed
to protect against dilution), the Conversion Price then in effect
hereunder shall forthwith be readjusted (increased or decreased, as the
case may be) to the Conversion Price which would have been in effect at
such time had such rights, options or Convertible Securities still
outstanding provided for such changed purchase price, additional
consideration or conversion rate, as the case may be, at the time
initially granted, issued or sold. On the expiration of any such option
or right referred to in paragraph (1) or the termination of any such
right to convert or exchange any such Convertible Securities referred to
in paragraph (1) or (2), the Conversion Price then in effect hereunder
shall forthwith be readjusted (increased or decreased, as the case may
be) to the Conversion Price which would have been in effect at the time
of such expiration or termination had such right, option or Convertible
Securities, to the extent outstanding immediately prior to such
expiration or termination, never been granted, issued or sold, and the
Common Stock issuable thereunder shall no longer be deemed to be
outstanding. If the purchase price provided for in any such right or
option referred to in paragraph (1) or the rate at which any Convertible
Securities referred to in paragraph (1) or (2) are convertible into or
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exchangeable for Common Stock shall be reduced at any time under or by
reason of provisions with respect thereto designed to protect against
dilution, then in case of the delivery of shares of Common Stock upon
the exercise of any such right or option or upon conversion or exchange
of any such Convertible Securities, the Conversion Price then in effect
hereunder shall, if not already adjusted, forthwith be adjusted to such
amount as would have obtained had such right, option or Convertible
Securities never been issued as to such shares of Common Stock and had
adjustments been made upon the issuance of the shares of Common Stock
delivered as aforesaid, but only if as a result of such adjustment the
Conversion Price then in effect hereunder is thereby reduced.
(4) Stock Dividends - In case at any time (other than with respect
to the Series A Preferred Stock and, to the extent the holders of shares
of Series A Preferred Stock participate on an as-converted basis, the
Common Stock) the Corporation shall declare a dividend or make any other
distribution upon any class or series of stock of the Corporation
payable in shares of Common Stock or Convertible Securities, any shares
of Common Stock or Convertible Securities, as the case may be, issuable
in payment of such dividend or distribution shall be deemed to have been
issued or sold without consideration.
(5) Consideration for Stock - Anything herein to the contrary
notwithstanding, in case at any time any shares of Common Stock or
Convertible Securities or any rights, options or warrants to purchase
any such Common Stock or Convertible Securities shall be issued or sold
for cash, the consideration received therefor shall be deemed to be the
amount received by the Corporation therefor, without deduction therefrom
of any expenses incurred or any underwriting commissions or concessions
paid or allowed by the Corporation in connection therewith.
In case at any time any shares of Common Stock or any class or
Convertible Securities or any rights or options to purchase any such shares of
Common Stock or Convertible Securities shall be issued or sold for a
consideration other than cash, in whole or in part, the amount of the
consideration other than cash received by the Corporation shall be deemed to be
the fair value of such consideration as determined reasonably and in good faith
by the Board of Directors of the Corporation, without deduction of any expenses
incurred or any underwriting commissions or concessions paid or allowed by the
Corporation in connection therewith. In case at any time any shares of Common
Stock or any class or Convertible Securities or any rights or options to
purchase such shares of Common Stock or Convertible Securities shall be issued
in connection with any merger or consolidation in which the Corporation is the
surviving corporation, the amount of consideration received therefor shall be
deemed to be the fair value as determined reasonably and in good faith by the
Board of Directors of the Corporation of such portion of the assets and business
of the nonsurviving corporation as such Board may determine to be attributable
to such shares of Common
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<PAGE> 14
Stock, Convertible Securities, rights or options, as the case may be. In case at
any time any rights or options to purchase any shares of Common Stock or
Convertible Securities shall be issued in connection with the issue and sale of
other securities of the Corporation, together comprising one integral
transaction in which no consideration is allocated to such rights or options by
the parties thereto, such rights or options shall be deemed to have been issued
for an amount of consideration equal to the fair value thereof as determined
reasonably and in good faith by the Board of Directors of the Corporation.
(6) Record Date - In case the Corporation shall take a record of
the holders of its Common Stock for the purpose of entitling them (A) to
receive a dividend or other distribution payable in shares of Common
Stock or in Convertible Securities, or (B) to subscribe for or purchase
shares of Common Stock or Convertible Securities, then such record date
shall be deemed to be the date of the issue or sale of the shares of
Common Stock deemed to have been issued or sold as a result of the
declaration of such dividend or the making of such other distribution or
the date of the granting of such right of subscription or purchase, as
the case may be.
(7) Treasury Shares - The number of shares of Common Stock
outstanding at any given time shall not include shares owned or held by
or for the account of the Corporation, and the disposition of any such
shares shall be considered an issue or sale of Common Stock for the
purposes of this clause (vi)(e).
(8) Definition of Market Price - Unless otherwise set forth in
this Certificate of Designation, "Market Price" shall mean the last
reported sale price of the applicable security as reported by the
National Association of Securities Dealers, Inc. Automatic Quotations
System, National Market System, or, if the applicable security is listed
or admitted for trading on a securities exchange, the last reported
sales price of the applicable security on the principal exchange on
which the applicable security is listed or admitted for trading (which
shall be for consolidated trading if applicable to such exchange), or if
neither so reported or listed or admitted for trading, the last reported
bid price of the applicable security in the over-the-counter market. In
the event that the Market Price cannot be determined as aforesaid, the
Board of Directors of the Corporation shall determine the Market Price
on the basis of such quotations as it in good faith considers
appropriate, in consultation with a nationally recognized investment
bank. The Market Price shall be such price averaged over a period of 20
consecutive business days ending 2 days prior to the day as of which
"Market Price" is being determined.
(9) Adjustment to Determination of Market Price - When making the
calculations and determinations described in clause (vi)(e) hereof,
there shall not be taken into account (i) the issuance of Common Stock
upon the exercise of
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<PAGE> 15
options outstanding on the date this Certificate of Designation was
filed with the State of Delaware for the purchase of up to 554,350
shares of Common Stock, and (ii) the issuance of any rights to subscribe
for or to purchase, or any options for the purchase of, up to 3.5% of
the fully diluted shares of Common Stock of the Corporation as of the
date of issuance of all shares of Series A Preferred Stock (subject to
adjustment as set forth herein) or any stock or securities convertible
into or exchangeable for Common Stock to officers, employees or
directors ("Company Securities"); provided, that all Common Stock
issuable with respect to any such Company Securities be issuable at or
above the Market Price as of the date of the grant.
(e) Liquidating Dividends; Purchase Rights. (1) In case at
any time after the date hereof the Corporation shall declare a dividend upon the
shares of Common Stock of any class payable otherwise than in shares of Common
Stock or Convertible Securities, otherwise than out of funds legally available
therefor (determined in accordance with generally accepted accounting
principles, including the making of appropriate deductions for minority
interests, if any, in subsidiaries), and otherwise than in the securities to
which the provisions of clause (2) below apply, the Corporation shall pay over
to each holder of Series A Preferred Stock, upon conversion thereof on or after
the dividend payment date, the securities and other property (including cash)
which such holder would have received (together with all distributions thereon)
if such holder had converted the Series A Preferred Stock held by it on the
record date fixed in connection with such dividend, and the Corporation shall
take whatever steps are necessary or appropriate to keep in reserve at all times
such securities and other property as shall be required to fulfill its
obligations hereunder in respect of the shares issuable upon the exercise or
conversion of all the Series A Preferred Stock. For the purposes of the
foregoing, a dividend other than in cash shall be considered payable out of
funds legally available therefor, only to the extent that such earnings or
retained earnings are charged an amount equal to the fair value of such dividend
as determined by the Board of Directors of the Corporation.
(2) If at any time or from time to time on or after the date
hereof, the Corporation shall grant, issue or sell any options or rights (other
than Convertible Securities) to purchase stock, warrants, securities or other
property pro rata to the holders of Common Stock of all classes ("Purchase
Rights"), and if the holder shall be entitled to an adjustment pursuant to
clause (vi)(e) above, then in lieu of such adjustment, each holder of Series A
Preferred Stock shall be entitled, at such holder's option, to acquire (whether
or not such holder's Series A Preferred Stock shall have been converted), upon
the terms applicable to such Purchase Rights, the aggregate Purchase Rights
which such holder could have acquired if such holder had held the number of
shares of Common Stock issuable upon conversion of such Series A Preferred Stock
immediately prior to the time or times at which the Corporation granted, issued
or sold such Purchase Rights.
(f) Subdivision or Combination of Stock. In case the
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<PAGE> 16
Corporation shall at any time subdivide its outstanding shares of Common Stock
into a greater number of shares, the Conversion Price in effect immediately
prior to such subdivision shall be proportionately reduced and, conversely, in
case the outstanding shares of Common Stock of the Corporation shall be combined
into a smaller number of shares, the Conversion Price in effect immediately
prior to such combination shall be proportionately increased.
(g) Changes in Common Stock. If any capital reorganization
or reclassification of the capital stock of the Corporation, or consolidation or
merger of the Corporation with another corporation, or the sale, transfer or
other disposition of all or substantially all of its assets to another
corporation for cash or stock of such other corporation, shall be effected,
then, as a condition of such reorganization, reclassification, consolidation,
merger, sale, transfer or other disposition, lawful and adequate provision shall
be made whereby each holder of Series A Preferred Stock shall thereafter have
the right to purchase and receive upon the basis and upon the terms and
conditions herein specified and in lieu of the shares of the Common Stock of the
Corporation immediately theretofore issuable upon conversion of the Series A
Preferred Stock, such shares of stock, securities or properties as may be
issuable or payable with respect to or in exchange for a number of outstanding
shares of such Common Stock equal to the number of shares of such Common Stock
immediately theretofore issuable upon conversion of the Series A Preferred Stock
had such reorganization, reclassification, consolidation, merger, sale, transfer
or other disposition not taken place, and in any such case appropriate
provisions shall be made with respect to the rights and interests of each holder
of Series A Preferred Stock to the end that the provisions hereof (including
without limitation provisions for adjustment of the Conversion Price) shall
thereafter be applicable, as nearly equivalent as may be practicable in relation
to any shares of stock, securities or properties thereafter deliverable upon the
exercise thereof. The Corporation shall not effect any such consolidation,
merger, sale, transfer or other disposition, unless prior to or simultaneously
with the consummation thereof the successor corporation (if other than the
Corporation) resulting from such consolidation or merger or the corporation
purchasing or otherwise acquiring such properties shall assume, by written
instrument executed and mailed or delivered to the holders of Series A Preferred
Stock at the last address of such holders appearing on the books of the
Corporation, the obligation to deliver to such holders such shares of stock,
securities or properties as, in accordance with the foregoing provisions, such
holders may be entitled to acquire. The above provisions of this subparagraph
shall similarly apply to successive reorganizations, reclassifications,
consolidations, mergers, sales, transfers, or other dispositions.
(h) Certain Events. If any event occurs as to which in the
opinion of the Board of Directors of the Corporation the other provisions of
this clause (vi) are not strictly applicable or if strictly applicable would not
fairly protect the conversion rights of the holders of the Series A Preferred
Stock in accordance with the essential intent and principles of such provisions,
then such Board of Directors, acting by a vote of at least 75% of the members
thereof, shall provide for the benefit of
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<PAGE> 17
holders of shares of Series A Preferred Stock an adjustment, if any, on a basis
consistent with such essential intent and principles, necessary to preserve,
without dilution, the rights of the holders of the Series A Preferred Stock.
Upon such vote by the Board of Directors, the Corporation shall forthwith make
the adjustments described therein; provided, however, that no such adjustment
shall have the effect of increasing the Conversion Price as otherwise determined
pursuant to this clause (vi) except in the event of a combination of shares of
the type contemplated in clause (vi)(g) and then in no event to an amount larger
than the conversion price as adjusted pursuant to clause (vi)(g).
(i) Prohibition of Certain Actions. The Corporation shall
not, without the affirmative consent or approval of the holders of shares
representing 66 2/3% of the shares of Series A Preferred Stock then outstanding,
voting as a single class (such consent or approval to be given by written
consent in lieu of a meeting (if allowable under the Corporation's Certificate
of Incorporation) or by vote at a meeting called for such purpose for which
notice shall have been given to the holders of the Series A Preferred Stock)
(1) authorize or issue, or agree to authorize or issue, any shares of its
capital stock of any class or series of preferred as to dividends or
liquidation, unless the rights of the holders thereof shall be limited to a
fixed sum or percentage of par value in respect of participation in dividends
and in the distribution of such assets or (2) authorize, issue or permit to
remain outstanding any class or series of its capital stock (including, without
limitation, the Common Stock but not including he Series A Preferred Stock)
having the right to vote for the election of directors or in respect of any
other matter, which class or series is entitled to more than one vote per share.
The Corporation will not take any action which would result in any adjustment
of the Conversion Price if the total number of shares of Common Stock issuable
after such action upon conversion of all of the Series A Preferred Stock would
exceed the total number of shares of Common Stock then authorized by the
Corporation's Certificate of Incorporation.
(j) Stock to be Reserved. The Corporation will at all
times reserve and keep available out of its authorized Common Stock, solely for
the purpose of issue upon the conversion of Series A Preferred Stock as herein
provided, such number of shares of Common Stock as shall then be issuable upon
the conversion of all outstanding Series A Preferred Stock. The Corporation
covenants that all shares of Common Stock which shall be so issuable shall, upon
issuance, be duly authorized, validly issued, fully paid and nonassessable,
free from preemptive or similar rights on the part of the holders of any shares
of capital stock or securities of the Corporation, and free from all liens and
charges with respect to the issue thereof; and without limiting the generality
of the foregoing, the Corporation covenants that it will from time to time take
all such action as may be requisite to assure that the par value, if any, per
share of the Common Stock is at all times equal to or less than the then
effective Conversion Price. The Corporation will take all such action as may be
necessary to assure that such shares of Common Stock may be so issued without
violation by the Corporation of any applicable law or regulation or agreement,
or of any requirements
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<PAGE> 18
of any domestic securities exchange upon which the Common Stock may be listed.
Without limiting the foregoing, the Corporation will take all such action as may
be necessary to assure that, upon conversion of any of the Series A Preferred
Stock, an amount equal to the lesser of (1) the par value of each share of
Common Stock outstanding immediately prior to such conversion, or (2) the
Conversion Price shall be credited to the Corporation's stated capital account
for each share of Common Stock issued upon such conversion, and that, if clause
(1) above is applicable, the balance of the Conversion Price of Series A
Preferred Stock converted shall be credited to the Corporation's capital surplus
account.
(k) Registration and Listing of Common Stock. If any
shares of Common Stock required to be reserved for purposes of conversion of
Series A Preferred Stock hereunder require registration with or approval of any
governmental authority under any Federal or state law (other than the Securities
Act) before such shares may be issued upon conversion, the Corporation will, at
its expense and as expeditiously as possible, use its best efforts to cause such
shares to be duly registered or approved, as the case may be. Shares of Common
Stock issuable upon conversion of the Series A Preferred Stock shall be
registered by the Corporation under the Securities Act or similar statute then
in force if required before such shares may be issued upon conversion. If and
so long as the Common Stock is listed on any national securities exchange, the
Corporation will, at its expense, obtain promptly and maintain the approval for
listing on each such exchange upon official notice of issuance, of shares of
Common Stock issuable upon conversion of the then outstanding Series A Preferred
Stock and maintain the listing of such shares after their issuance; and the
Corporation will also list on such national securities exchange, will register
under the Exchange Act and will maintain such listing of, any other securities
that at any time are issuable upon conversion of the Series A Preferred Stock,
if and at the time that any securities of the same class shall be listed on
such national securities exchange by the Corporation.
(l) Closing of Books. The Corporation will at no time
close its transfer books against the transfer of any Series A Preferred Stock or
of any shares of Common Stock issued or issuable upon the conversion of any
Series A Preferred Stock in any manner which interferes with the timely
conversion ofsuch Series A Preferred Stock.
(m) Statement of Adjustment of Conversion Price. Whenever
the Conversion Price shall be adjusted as provided in clause (vi)(e) above, the
Corporation shall forthwith file at its office a statement, signed by its
independent certified public accountants, showing in detail the facts requiring
such adjustment and the Conversion Price that shall be in effect after such
adjustment. The Corporation shall also cause a copy of such statement to be sent
by certified mail, return receipt requested, to each holder of shares of Series
A Preferred Stock to such holder's address appearing on the Corporation's
records. Where appropriate, such copy may be given in advance and may be
included as part of a notice required to be mailed under the
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<PAGE> 19
provisions of clause (vi)(o) below.
(n) Notice. In the event the Corporation shall propose to
take any action of the types described in clause (vi)(e) above, the Corporation
shall give notice to each holder of shares of Series A Preferred Stock which
notice shall specify the record date, if any, with respect to any such action
and the date on which such action is to take place. Such notice shall also set
forth such facts with respect thereto as shall be reasonably necessary to
indicate the effect of such action (to the extent such effect may be known at
the date of such notice) on the Conversion Price and the number, kind or class
of shares or other securities or property which shall be deliverable or
purchasable upon the occurrence of such action or deliverable upon conversion
of shares of Series A Preferred Stock. In the case of any action which would
require the fixing of a record date, such notice shall be given at least 20
days prior to the date so fixed, and in case of all other action, such notice
shall be given at least 30 days prior to the taking of such proposed action.
(o) Taxes. The Corporation shall pay all documentary,
stamp or other transactional taxes attributable to the issuance or delivery of
shares of capital stock of the Corporation upon conversion of any shares of
Series A Preferred Stock. The Corporation shall not, however, be required to pay
any tax which may be payable in respect of any transfer involved in the issuance
and delivery of Common Stock or the reissuance of the Preferred Stock in a name
other than that in which the shares of Series A Preferred Stock so converted
were registered, and no such issuance or delivery shall be made unless and until
the person requesting such issuance has paid to the Corporation the amount of
any such tax or has established to the satisfaction of the Corporation that such
tax has been paid.
(p) Exclusion of Other Rights. Except as may otherwise be
required by law, the shares of Series A Preferred Stock shall not have any
voting powers, preferences and relative, participating, optional or other
special rights, other than those specifically set forth in this resolution and
in the Certificate of Incorporation. The shares of Series A Preferred Stock
shall have no preemptive or subscription rights.
(q) Failure to Sell and Purchase Series A Preferred Stock.
The shares of Series A Preferred Stock will be sold to certain purchasers in two
separate sales of shares pursuant to a Stock Purchase Agreement among the
Corporation and such purchasers (the "Stock Purchase Agreement"). If the sale of
such shares on the Second Closing Date (as defined in the Stock Purchase
Agreement) does not occur within six months of the Initial Closing Date (as
defined in the Stock Purchase Agreement) on such six month anniversary date,
all shares of Series A Preferred Stock then outstanding shall, at the option of
each holder, be converted into Common Stock at the then applicable Conversion
Price or purchased by the Corporation for the Liquidation Amount.
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<PAGE> 20
IN WITNESS WHEREOF, Candlewood Hotel Company, Inc. has caused
these presents to be signed in its name and on its behalf by its Chief
Executive Officer on September 21, 1997.
CANDLEWOOD HOTEL COMPANY, INC.
By /s/ Jack P. DeBoer
------------------------------
Name: Jack P. DeBoer
Title: Chief Executive Officer
<PAGE> 1
EXHIBIT 4
FORM OF WARRANT
THE SECURITIES REPRESENTED BY THESE CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"). THIS SECURITIES HAVE BEEN ISSUED OR SOLD IN
RELIANCE ON AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT AND NEITHER THE SECURITIES NOR ANY INTEREST
THEREIN MAY BE SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED
OF EXCEPT PURSUANT TO A REGISTRATION STATEMENT EFFECTIVE UNDER
SUCH ACT OR IN A TRANSACTION WHICH IS EXEMPT FROM THE
REGISTRATION REQUIREMENTS OF SUCH ACT AND THE RULES AND
REGULATIONS THEREUNDER.
_________ Warrants to Purchase Date of Issuance: ______, ___
Common Stock
WARRANT CERTIFICATE REPRESENTING
WARRANTS TO PURCHASE COMMON STOCK OF
CANDLEWOOD HOTEL COMPANY, INC.
FOR VALUE RECEIVED, Candlewood Hotel Company, Inc., a Delaware
corporation (the "Company"), hereby certifies that ____________________ (the
"Holder"), is the owner of the number of Warrants set forth above, each of which
represents the right to purchase, at any time, from the Company, one share of
Common Stock, par value $.01 per share (the "Common Stock"), of the Company
(subject to adjustment as provided herein) at the purchase price (the "Exercise
Price") of $.01 per share of Common Stock, upon surrender hereof to the Company
or its duly authorized transfer agent of the purchase price for the shares as to
which the Warrant(s) represented by this Warrant Certificate are exercised, all
subject to the terms and conditions hereof.
These Warrants shall be subject to the following terms and conditions:
SECTION 1. Adjustments. The number of shares of Common Stock issuable
upon exercise of each Warrant shall be subject to adjustment from time to time
as follows:
(a) Stock Dividends; Stock Splits; Reserve Stock Splits;
<PAGE> 2
Reclassifications. In case the Company shall (i) pay a dividend or make any
other distribution with respect to its Common Stock in shares of any class or
series of its capital stock, (ii) subdivide its outstanding Common Stock, (iii)
combine its outstanding Common Stock into a smaller number of shares or (iv)
issue any shares of its capital stock in a reclassification of the Common Stock
(other than a reclassification in connection with a merger, consolidation or
other business combination which will be governed by Section 1(g)), the number
of shares of Common Stock purchasable upon exercise of each Warrant immediately
prior to the record date for such dividend or distribution or the effective date
of such subdivision, combination or reclassification shall be adjusted so that
the Holder of each Warrant shall be entitled to receive the kind and number of
shares of Common Stock or other securities of the Company which such Holder
would have been entitled to receive after the happening of any of the events
described above had such Warrant been exercised immediately prior to the
happening of such event or any record date with respect thereto (with any record
date requirement being deemed to have been satisfied). An adjustment made
pursuant to this Section 1(a) shall become effective immediately after the
effective date of such event retroactive to the record date, if any, for such
event.
(b) Rights; Options; Warrants. In case the Company shall issue
rights, options, warrants or convertible or exchangeable securities (other than
a convertible or exchangeable security subject to Section 1(a)) to all holders
of its Common Stock, entitling them to subscribe for or purchase Common Stock (a
"Right") at a price per share of Common Stock (determined in the case of such
rights, options, warrants or convertible or exchangeable securities, by dividing
(x) the total amount receivable by the Company in consideration of the issuance
of such rights, options, warrants or convertible or exchangeable securities, if
any, plus the total consideration payable to the Company upon exercise,
conversion or exchange thereof, by (y) the total number of shares of Common
Stock covered by such rights, options, warrants or convertible or exchangeable
securities) which is lower (at the record date for such issuance) than the then
Market Value (as defined herein) per share of Common Stock, the number of shares
of Common Stock thereafter purchasable upon exercise of each Warrant shall be
determined by multiplying the number of shares of Common Stock theretofore
purchasable upon exercise of each Warrant by a fraction, the numerator of which
shall be the number of shares of Common Stock outstanding immediately prior to
the issuance of such rights, options, warrants or convertible or exchangeable
securities plus the number of additional shares of Common Stock offered for
subscription or purchase or issuable upon conversion or exchange, and the
denominator of which shall be the number of shares of Common Stock outstanding
immediately prior to the issuance of such rights, options, warrants or
convertible or exchangeable securities plus the number of shares which the
aggregate offering price of the total number of shares of Common Stock so
offered would purchase at the then Market Value per share of Common Stock. Such
adjustment shall be made whenever such rights, options, warrants or convertible
or exchangeable securities are issued, and shall become effective retroactively
immediately after the record date for the determination of shareholders entitled
to receive such rights, options, warrants or convertible or exchangeable
securities.
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<PAGE> 3
(c) Issuance of Common Stock at Lower Values. In case the Company
shall sell or issue any shares of Common Stock or Right (excluding (i) any Right
issued in any of the transactions described in Section 1(a) or (b) above and
(ii) any Company Securities (as defined in the Company's Certificate of
Designation filed with the State of Delaware), then the number of shares of
Common Stock thereafter purchasable upon the exercise of each Warrant shall be
determined by multiplying the number of shares of Common Stock theretofore
purchasable upon exercise of such Warrant by a fraction, the numerator of which
shall be the number of shares of Common Stock outstanding immediately after such
sale or issuance and the denominator of which shall be the number of shares of
Common Stock outstanding immediately prior to such sale or issuance plus the
number of shares of Common Stock which the aggregate consideration received
(determined as provided below) for such sale or issuance would purchase at such
Market Value per share of Common Stock. For purposes of this Section 1(c), the
shares of Common Stock which the holder of any such Right shall be entitled to
subscribe for or purchase shall be deemed to be issued and outstanding as of the
date of such sale and issuance and the consideration received by the Company
therefor shall be deemed to be the consideration received by the Company for
such Right, plus the consideration or premiums stated in such Right to be paid
for the shares of Common Stock covered thereby.
(d) Distributions of Debt, Assets, Subscription Rights or
Convertible Securities. In case the Company shall fix a record date for the
making of a distribution to all holders of its Common Stock of evidences of its
indebtedness, assets, cash dividends or distributions (excluding dividends or
distributions referred to in Section 1(a) above and excluding distributions in
connection with the dissolution, liquidation or winding up of the Company which
will be governed by Section 1(g)(B) below) or securities (excluding those
referred to in Section 1(a), Section 1(b) or Section 1(c) above), then in each
case the number of shares of Common Stock purchasable after such record date
upon the exercise of each Warrant shall be determined by multiplying the number
of shares of Common Stock purchasable upon the exercise of such Warrant
immediately prior to such record date by a fraction, the numerator of which
shall be the Market Value per share of Common Stock immediately prior to the
record date for such distribution and the denominator of which shall be the
Market Value per share of Common Stock immediately prior to the record date for
such distribution less the then fair value (as determined in good faith by the
Board of Directors of the Company) of the portion of the assets, evidence of
indebtedness, cash dividends or distributions or securities so distributed
applicable to one share of Common Stock. Such adjustment shall be made whenever
any such distribution is made, and shall become effective on the date of
distribution retroactive to the record date for the determination of
shareholders entitled to receive such distribution.
(e) Expiration of Rights, Options and Conversion Privileges. Upon
the expiration of any rights, options, warrants or conversion or exchange
privileges that have previously resulted in an adjustment hereunder, if any
thereof shall not have been exercised, the number of shares of Common Stock
issuable upon the exercise of
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<PAGE> 4
each Warrant shall, upon such expiration, be readjusted and shall thereafter,
upon any future exercise, be such as they would have been had they been
originally adjusted (or had the original adjustment not been required, as the
case may be) as if (i) the only shares of Common Stock so issued were the shares
of Common Stock, if any, actually issued or sold upon the exercise of such
rights, options, warrants or conversion or exchange rights and (ii) such shares
of Common Stock, if any, were issued or sold for the consideration actually
received by the Company upon such exercise plus the consideration, if any,
actually received by the Company for issuance, sale or grant of all such rights,
options, warrants or conversion or exchange rights whether or not exercised;
provided, that no such readjustment shall have the effect of decreasing the
number of shares issuable upon exercise of each Warrant by a number, in excess
of the amount or number of the adjustment initially made in respect to the
issuance, sale or grant of such rights, options, warrants or conversion or
exchange rights.
(f) De Minimis Adjustments. No adjustment in the number of shares
of Common Stock purchasable hereunder shall be required unless such adjustment
would require an increase or decrease of at least one percent (1%) in the number
of shares of Common Stock purchasable upon the exercise of each Warrant;
provided, however, that any adjustments which by reason of this Section 4.1(f)
are not required to be made shall be carried forward and taken into account in
any subsequent adjustment. All calculations shall be made to the nearest
one-thousandth of a share.
(g) Consolidation, Merger, Etc. (A) Subject to the provisions of
Subsection (B) below of this Section 1(g), in case of the consolidation of the
Company with, or merger of the Company with or into, or of the sale of all or
substantially all of the properties and assets of the Company to, any Person and
in connection therewith consideration is payable to holders of Common Stock (or
other securities or property purchasable upon exercise of Warrants) in exchange
therefor, the Warrants shall remain subject to the terms and conditions set
forth in this Warrant Certificate and each Warrant shall, after such
consolidation, merger or sale, entitle the Holder to receive upon exercise the
number of shares of capital stock or other securities or property (including
cash) of the Company, or of such Person resulting from such consolidation or
surviving such merger or to which such sale shall be made, as the case may be,
that would have been distributable or payable on account of the shares of Common
Stock (or other securities or properties purchasable upon exercise of Warrants)
if such Holder's Warrants had been exercised immediately prior to such merger,
consolidation or sale (or, if applicable, the record date therefor); and in any
such case the provisions of this Agreement with respect to the rights and
interests thereafter of the Holders of Warrants shall be appropriately adjusted
by the Board of Directors of the Company in good faith so as to be applicable,
as nearly as may reasonably be, to any shares of stock or other securities or
any property thereafter deliverable on the exercise of the Warrants.
(B) Notwithstanding the foregoing, (x) if the Company merges or
consolidates with, or sells all or substantially all of its property and assets
to, another Person and consideration is payable to holders of Common Stock in
exchange for their
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<PAGE> 5
Common Stock in connection with such merger, consolidation or sale which
consists solely of cash, or (y) in the event of the dissolution, liquidation or
winding up of the Company, then the Holders of Warrants shall be entitled to
receive distributions on the date of such event on an equal basis with holders
of Common Stock (or other securities issuable upon exercise of the Warrants) as
if the Warrants had been exercised immediately prior to such event, less the
Exercise Price. Upon receipt of such payment, if any, the right of a Holder
shall terminate and cease and such Holder's Warrants shall expire.
(h) In addition to the foregoing adjustments, the Board of
Directors of the Company may make any other adjustment to increase the number of
shares of Common Stock or other securities or property issuable upon exercise of
Warrants as it may, in good faith, deem desirable to protect the rights and
benefits of Holders. In addition, the Company may from time to time increase the
number of shares of Common Stock or other securities or property issuable upon
exercise of Warrants, provided that any such increase must be effective for at
least 30 calendar days, and must be preceded by written notice of such increase
to the Holders, which notice must be mailed at least 30 calendar days prior to
the effective date of such increase. Any such increase shall not alter or adjust
the Exercise Price.
SECTION 2. Definition of Market Value. Unless otherwise set forth in
this Warrant Certificate, "Market Value" shall mean the last reported sale price
of the applicable security as reported by National Association of Securities
Dealers, Inc. Automatic Quotation System, National Market System, or, if the
applicable security is listed or admitted for trading on a securities exchange,
the last reported sales price of the applicable security on the principal
exchange on which the applicable security is listed or admitted for trading
(which shall be for consolidated trading if applicable to such exchange), or if
neither so reported or listed or admitted for trading, the last reported bid
price of the applicable security in the over-the-counter market. In the event
that the Market Price cannot be determined as aforesaid, the Board of Directors
of the Corporation shall determine the Market Price on the basis of such
quotations as it in good faith considers appropriate. The Market Value shall be
such price averaged over a period of 20 consecutive business days ending 2 days
prior to the day as of which "Market Value" is being determined.
SECTION 3. Stock to be Reserved. The Company will at all times reserve
and keep available out of its authorized Common Stock, solely for the purpose of
issue upon the exercise of Warrants as herein provided, such number of shares of
Common Stock as shall then be issuable upon the exercise of all outstanding
Warrants. The Company covenants that all shares of Common Stock which shall be
so issuable shall, upon issuance, be duly authorized, validly issued, fully paid
and nonassessable, free from preemptive or similar rights on the part of the
holders of any shares of capital stock or securities of the Company, and free
from all liens and charges with respect to the issue thereof. The Company will
take all such action as may be necessary to assure that such shares of Common
Stock may be so issued without violation by the Company of any
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applicable law or regulation or agreement, or of any requirements of any
domestic securities exchange upon which the Common Stock may be listed.
SECTION 4. Closing of Books. The Company will at no time close its
transfer books against the transfer of any Warrants or of any shares of Common
Stock issued or issuable upon the exercise of any Warrants in any manner which
interferes with the timely exercise of such Warrants.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed, as of the day and year first above written.
CANDLEWOOD HOTEL COMPANY, INC.
By
-------------------------------------
Name:
Title:
6
<PAGE> 7
FORM OF SUBSCRIPTION
DATE: _______________, 19___
TO: CANDLEWOOD HOTEL COMPANY, INC.
The Undersigned, the holder of the within Warrants, hereby irrevocably
elects to exercise all or part of the purchase right represented by such
Warrants for, and to purchase thereunder, __________ shares of Common Stock of
CANDLEWOOD HOTEL COMPANY, INC. (the "Company") and herewith makes payment of
$_______________ to the Company, and requests that the certificate of such
shares be issued in the name of, and be delivered to _____________________,
whose address is _________________________________________.
(Name of Holder)
(Authorized Signatory)
(Address)
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<PAGE> 1
Exhibit 5
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement, dated as of September 22,
1997 (this "Agreement"), is made by and among Candlewood Hotel Company, Inc., a
Delaware corporation ("Candlewood" or the "Company"), Doubletree Corporation, a
Delaware corporation ("Doubletree"), Mr. Jack P. DeBoer ("DeBoer"), on behalf of
himself and as representative of the Alexander John DeBoer Trust dated March 14,
1995 and the Christopher Scott DeBoer Trust dated March 14, 1995 (collectively,
the "Trusts"), the Warren D. Fix Family Partnership, L.P. (the "Fix
Partnership") and each of the parties set forth on Schedule A attached hereto
(collectively, the "Investors", and, together with Candlewood, Doubletree,
DeBoer, the Trusts and the Fix Partnership, the "Parties").
BACKGROUND
A. DeBoer, Doubletree and the Fix Partnership had previously
entered into that certain Incorporation and Registration Rights Agreement dated
September 1, 1996 (the "Original Agreement").
B. The Company completed an initial public offering of its Common
Stock, par value $0.01 per share (the "Common Stock"), on November 5, 1996 (the
"Initial Public Offering").
C. In connection with the issuance and sale of $65 million of its
Series A Cumulative Convertible Preferred Stock (the "Preferred Stock"), the
Company has agreed to grant certain registration rights with respect to the
shares of Common Stock issuable upon the conversion of the Preferred Stock.
D. The parties to the Original Agreement hereby terminate the
Original Agreement and enter into this Agreement on the terms and subject to the
conditions set forth below.
NOW, THEREFORE, in consideration of the foregoing and intending
to be legally bound, the Parties agree as follows:
1. Certain Definitions. As used in this Agreement, the
following terms shall have the following respective meanings:
"Commission" means the United States Securities and Exchange
Commission.
"Certificate of Designation" means the Certificate of
Designations, Preferences and Relative, participating, Optional and Other
Special Rights of Preferred Stock and Qualifications, Limitations and
Restrictions Thereof, dated September 22, 1997, relating to the Preferred Stock.
"Eligible Securities" means the shares of Common Stock (i) issued
to Doubletree, DeBoer, the Trusts and the Fix Partnership upon the
reorganization of the Company from
<PAGE> 2
Candlewood Hotel Company, LLC to a Delaware corporation, (ii) to be issued upon
the conversion of the Preferred Stock into Common Stock, stock dividends paid
with respect to such shares or issued in exchange for or in lieu of such
shares, and (iii) issued or issuable upon exercise of any Purchase Warrant
(Eligible Securities described in clauses (ii) and (iii) being referred to
collectively as "Preferred Eligible Securities").
"Holder" means a registered holder of outstanding Eligible
Securities or securities convertible into or exercisable for Eligible
Securities.
"Purchase Warrant" means any warrant for the purchase of Common
Stock issued to any holder of Series A Preferred Stock in accordance with the
terms of the Certificate of Designation establishing the preferences and rights
of and the qualifications, limitations and restrictions with respect to, the
Preferred Stock.
"Securities Act" means the Securities Act of 1933 or any similar
Federal statute, and the rules and regulations of the Commission thereunder, all
as the same shall be in effect at the time.
2. Required Registration.
(a) At any time after 180 days from the date of the
issuance and sale of the Preferred Stock, (i) Doubletree, or (ii) Investors
holding at least 50% of the shares of the Preferred Eligible Securities may
deliver to the Company a written request that the Company file and use its best
efforts to cause to become effective a registration statement under the
Securities Act with respect to such number of the Eligible Securities owned by
Doubletree or the Investors as shall be specified in such request (a
"Registration Request"); provided, however, that the Company shall not be
obligated to effect any such registration pursuant to subsection (ii) on behalf
of the Investors unless the anticipated aggregate offering price, net of
underwriting discounts and commissions, would exceed $20,000,000. Except as
otherwise provided in Section 2(b)(iv) and 2(b)(v) hereof, the Company shall
not be required to file and use its best efforts to cause to become effective,
pursuant to a Registration Request under this Section 2, (a) more than two
registration statements at the demand of Doubletree, or (b) more than two
registration statements at the demand of the Investors. The party or parties
delivering a Registration Request is hereinafter referred to as the "Requesting
Holder." The second Registratio Request made by the Investors may be identified
by the Requesting Holder as a "Priority Demand".
(b) As soon as practicable following the receipt of a
Registration Request, the Company will use its best efforts to register under
the Securities Act, for public sale in accordance with the method of disposition
specified in such Registration Request, the number of shares of Eligible
Securities specified in such Registration Request (and the number of Eligible
Securities specified in all notices received from Holders within 20 days after
their receipt of notice delivered pursuant to Section 4 hereof). The Company
will also be entitled to include in any registration statement filed pursuant to
a Registration Request, for sale in accordance with the method of disposition
specified in such Registration Request, such number of shares of Common Stock
as the Company shall desire to sell for its own account. If the
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<PAGE> 3
method of sale designated is an underwritten public offering, the managing
underwriter or underwriters must be reasonably acceptable to both the Requesting
Holder, or the holders of a majority of the Eligible Securities held by all
parties comprising the Requesting Holder if more than one party is the
Requesting Holder, and the Company, which acceptance shall not be unreasonably
withheld. Notwithstanding the foregoing provisions of this paragraph (b), to the
extent that, in the opinion of the underwriter or underwriters (if the method of
disposition shall be an underwritten public offering), marketing considerations
require the reduction of the number of shares of Common Stock covered by any
such registration, the number of shares of Common Stock to be registered and
sold pursuant to such registration shall be reduced as follows:
(i) The number of shares of Eligible Securities
to be registered on behalf of the Company shall be reduced (to zero, if
necessary);
(ii) The number of shares of Eligible Securities to
be registered on behalf of DeBoer, the Trusts and the Fix Partnership
shall be reduced (to zero, if necessary) pro rata according to the
number of shares of Eligible Securities held by each; and
(iii) The number of shares of Eligible Securities
to be registered on behalf of Doubletree and the Investors shall be
reduced pro rata according to the number of shares of Eligible
Securities held by each; provided, however, that in connection with a
Priority Demand the number of shares of Eligible Securities requested
to be registered on behalf of the Investors shall only be reduced after
the number of shares requested to be registered by Doubletree has been
reduced to zero.
(iv) Notwithstanding the foregoing, if in
connection with anyRegistration Request made by Doubletree, the number
of Eligible Securities requested to be registered by Doubletree shall
have been reduced, the number of Registration Requests granted to
Doubletree pursuant to clause 2(a) above shall be increased by one.
(v) Notwithstanding the foregoing, if in
connection with any Registration Request made by the Investors, the
Investors requesting inclusion of Eligible Securities in such
registration shall experience a reduction in the number of such Eligible
Securities by 10% or more, the number of Registration Requests granted
to the Investors pursuant to clause 2(a) above shall be increased by
one.
(vi) In no event shall any registration of Common
Stock by the Company pursuant to Section (vi)(a) of the Certificate of
Designation constitute a Registration Request allocable to any Holder
pursuant to clause 2(a) above.
(c) Notwithstanding the foregoing provisions of this
Section 2, the Company shall not be obligated to file a registration statement
at the demand of any Holder pursuant to this Section 2 within 180 days
following any underwritten public offering of Common Stock or of securities of
the Company convertible into or exercisable or exchangeable for Common Stock.
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<PAGE> 4
3. Shelf Registration on Form S-3.
(a) At any time after 180 days from the date of the
issuance and sale of the Preferred Stock, any Holder or Holders may deliver to
the Company a written request (a "Form S-3 Request") that the Company file and
use its best efforts to cause to become effective a "shelf" registration
statement on Form S-3 (or such equivalent successor form) under the Securities
Act for an offering to be made on a delayed or continuous basis pursuant to
Rule 415 under the Securities Act (a "Shelf Registration Statement") with
respect to such number of Eligible Securities owned by the Holder or Holders as
shall be specified in such request; (and the number of Eligible Securities
specified in all notices received from Holders within 20 days after their
receipt of notice delivered pursuant to Section 4 hereof); provided, however,
that the Company shall not be obligated to effect any such registration pursuant
to this Section 3 unless the aggregate value of the securities to be registered
thereon would exceed $2,500,000. The Company shall not be required to file and
use its best efforts to cause to become effective, pursuant to a Form S-3
Request under this Section 3, (a) more than two Shelf Registration Statements
on behalf of Doubletree, or (b) more than two Shelf Registrations on behalf
of the Investors.
(b) As soon as practicable following the receipt of a Form
S-3 Request, the Company will use its best efforts to register under the
Securities Act, for an offering to be made on a delayed or continuous basis
pursuant to Rule 415 of the Securities Act, the number of shares of Eligible
Securities specified in such Form S-3 Request (and the number of Eligible
Securities specified in all notices received from Holders within 20 days after
their receipt of notice delivered pursuant to Section 4 hereof). The Company
will also be entitled to include in any Shelf Registration Statement filed
pursuant to this Section 3 such number of shares of Common Stock as the Company
shall desire to sell for its own account.
4. Piggyback Registration.
(a) If the Company at any time proposes to register
Common Stock under the Securities Act for sale to the public (including
registrations pursuant to Section 2 or 3 hereof), whether for its own account
or for the account of other security holders or both (except registration
statements on Form S-8, S-4 or another form not available for registering the
Eligible Securities for sale to the public), each such time it will give written
notice to all Holders of its intention to do so. Upon the written request of any
Holder (a "Piggyback Request"), given within 20 days after receipt of any such
notice, to register any of its Eligible Securities, the Company will use its
best efforts to cause the Eligible Securities as to which registration shall
have been so requested to be covered by the registration statement proposed to
be filed by the Company.
(b) In the event that any registration statement described
in this Section 4 shall relate, in whole or in part, to an underwritten public
offering of shares of Common Stock, the Eligible Securities to be registered
must be sold through the same underwriters as have been selected by the Company
or agreed to pursuant to Section 2(b) hereof. Otherwise, the method of
distribution of the Eligible Securities to be sold by any Holder making
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<PAGE> 5
a Piggyback Request shall be as specified therein. Except in the case of a
registration statement filed pursuant to a Registration Request under Section 2
hereof or a Form S-3 Request made under Section 3 hereof, the number of shares
of Common Stock to be included in such registration statement on account of any
person (other than the Company) may be reduced if and to the extent that the
underwriter or underwriters shall be of the opinion that such inclusion would
materially adversely affect the marketing of the total number of shares of
Common Stock proposed to be sold, and the number of shares to be registered
and sold by each person (other than the Company) shall be reduced pro rata
according to the relative number of fully-diluted shares owned by such person.
Notwithstanding the foregoing provisions of this Section 4, the Company may
withdraw any registration statement referred to in this Section 4 without
thereby incurring any liability to any requesting Holder.
5. Registration Procedures. If and whenever the Company is
required by the provisions of Section 2, 3 or 4 to effect the registration of
any Eligible Securities under the Securities Act, the Company shall:
(a) prepare and file with the Commission a registration
statement with respect to such securities which will permit the public sale
thereof in accordance with the method of distribution specified in the
applicable Registration Request, and the Company shall use its best efforts (i)
to cause such registration statement to be filed within 60 days of receipt of
the Registration Request, (ii) to cause such registration statement to be
declared effective as promptly as practicable and (iii) to maintain the
effectiveness of such registration statement for a period of not less than 90
days (or until such time as all securities sold thereunder shall have been sold,
in the case of a registration on Form S-3);
(b) promptly prepare and file with the Commission such
amendments and supplements to such registration statement and the prospectus
used in connection therewith as may be necessary to effect and maintain the
effectiveness of such registration statement for the period specified in Section
5(a) and as to comply with the provisions of the Securities Act with respect to
the disposition of all Eligible Securities covered by such registration
statement in accordance with the intended method of disposition set forth in
such registration statement for such period, including such amendments or
supplements as are necessary to cure any untrue statement or omission referred
to in Section 5(e)(vi);
(c) provide to the managing underwriter or underwriters
and not more than one counsel for all underwriters and to the Holders of
Eligible Securities to be included in such registration statement and not more
than one counsel for all such Holders (such counsel to be reasonably acceptable
to the Company) the opportunity to participate in the preparation of (i) such
registration statement, (ii) each prospectus relating thereto and included
therein or filed with the Commission and each amendment or supplement thereto;
(d) make available for inspection by the parties
referred to in Section 5(c) such financial and other information and books and
records of the Company, and cause the officers, directors and employees of the
Company, and counsel and independent certified public accountants of the
Company, to respond to such inquiries, as shall be reasonably necessary, in
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<PAGE> 6
the judgment of respective counsel to such Holders and such underwriter or
underwriters, to conduct a reasonable investigation within the meaning of the
Securities Act; provided, however, that each such person shall be required to
retain in confidence and not to disclose to any other person any information or
records reasonably designated by the Company in writing as being confidential
until such time as such information becomes a matter of public record (whether
by virtue of its inclusion in such registration statement or otherwise), unless
(i) such person shall be required to disclose such information pursuant to the
subpoena or order of any court or other governmental agency or body having
jurisdiction over the matter or to the National Association of Insurance
Commissioners or (ii) such information is required to be set forth in such
registration statement or the prospectus included therein or in an amendment to
such registration statement or an amendment or supplement to such prospectus in
order that such registration statement, prospectus, amendment or supplement, as
the case may be, shall not contain an untrue statement of a material fact or
omit to state therein a material fact required to be stated therein or necessary
to make the statements therein not misleading, and such information has not been
so set forth after the request by a Holder to such effect; and provided,
further, that the Company need not make such information available, nor need it
cause any officer, director or employee to respond to such inquiry, unless each
such Holder and such counsel, upon the Company's request, execute and deliver to
the Company an undertaking to substantially the same effect contained in the
immediately preceding proviso;
(e) immediately notify the persons referred to in Section
5(c) and (if requested by any such person) confirm such advice in writing, (i)
when such registration statement or any prospectus included therein or any
amendment or supplement thereto has been filed and, with respect to such
registration statement or any such amendment, when the same has become
effective, (ii) of any material comments by the Commission with respect thereto
or any request by the Commission for amendments or supplements to such
registration statement or prospectus or for additional information, (iii) of the
issuance by the Commission of any stop order suspending the effectiveness of
such registration statement or the initiation of any proceedings for that
purpose, (iv) if at any time the representations and warranties of the Company
contemplated by Section 5(l)(i) cease to be true and correct in all material
respects, (v) of the receipt by the Company of any notification with respect to
the suspension of the qualification of any Eligible Securities for sale in any
jurisdiction or the initiation or threatening of any proceeding for such purpose
or (vi) at any time when a prospectus is required to be delivered under the
Securities Act, of the occurrence or failure to occur of any event, or any other
change in law, fact or circumstance, as a result of which such registration
statement, prospectus or any amendment or supplement thereto, or any document
incorporated by reference in any of the foregoing, contains an untrue statement
of a material fact or omits to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in light of
the circumstances then existing;
(f) take reasonable efforts to obtain the withdrawal at
the earliest practicable date of any order suspending the effectiveness of such
registration statement or any post-effective amendment thereto;
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<PAGE> 7
(g) if requested by the managing underwriter or
underwriters or the Holders of at least a majority of the Eligible Securities
being sold in connection with an underwritten public offering, promptly
incorporate in a prospectus supplement or post-effective amendment such
information as such managing underwriter or underwriters or such Holders
reasonably specify should be included therein relating to the terms of the sale
of such Eligible Securities, including, without limitation, information with
respect to the number of Eligible Securities being sold to such underwriters,
the names and descriptions of such Holders, the purchase price being paid
therefor by such underwriters and any other terms of the underwritten (or best
efforts underwritten) offering of the Eligible Securities to be sold in such
offering, and make all required filings of such prospectus supplement or
post-effective amendment promptly after notification of the matters to be
incorporated in such prospectus supplement or post-effective amendment;
(h) furnish to each Holder of Eligible Securities included
in such registration and each underwriter and counsel for Holder, if any,
thereof an executed copy of such registration statement, each such amendment and
supplement thereto (in each case including all exhibits thereto, whether or not
such exhibits are incorporated by reference therein) and such number of copies
of the prospectus included in such registration statement (including each
preliminary prospectus and any summary prospectus) and each amendment or
supplement thereto, in conformity with the requirements of the Securities Act,
as such Holder and managing underwriter, if any, may reasonably request in order
to facilitate the disposition of such Eligible Securities by such Holder or by
the participating underwriters;
(i) use its best efforts to (i) register or qualify the
Eligible Securities to be included in such registration statement under such
other securities laws or blue sky laws of such jurisdictions as any Holder of
such Eligible Securities and each managing underwriter, if any, thereof shall
reasonably request, (ii) keep such registrations or qualifications in effect for
so long as is necessary to effect the disposition of such Eligible Securities in
the manner contemplated by the registration statement, the prospectus included
therein and any amendment or supplement thereto and (iii) take any and all such
actions as may be reasonably necessary or advisable to enable such Holder and
any participating underwriter or underwriters to consummate the disposition in
such jurisdictions of such Eligible Securities; provided, however, that the
Company shall not be required for any such purpose to (A) qualify generally to
do business as a foreign corporation or a broker-dealer in any jurisdiction
wherein it would not otherwise be required to qualify but for the requirements
of this Section 5(i), (B) subject itself to taxation in any such jurisdiction or
(C) consent to general service of process in any such jurisdiction;
(j) cooperate with the Holders of the Eligible Securities
included in such registration and the managing underwriters, if any, to
facilitate the timely preparation and delivery of certificates representing
Eligible Securities to be sold, which certificates shall be printed,
lithographed or engraved, or produced by any combination of such methods, on
steel engraved borders and which shall not bear any restrictive legends; and, in
the case of an underwritten public offering, enable such Eligible Securities to
be registered in such names as the
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<PAGE> 8
underwriter or underwriters may request at least two business days prior to any
sale of such Eligible Securities;
(k) provide not later than the effective date of the
registration statement a CUSIP number for all Eligible Securities;
(l) enter into an underwriting agreement, engagement
letter, agency agreement, "best efforts" underwriting agreement or similar
agreement, as appropriate, and take such other actions in connection therewith
as the Holders of at least a majority of the Eligible Securities to be included
in such registration shall reasonably request in order to expedite or facilitate
the disposition of such Eligible Securities, and in connection therewith,
whether or not an underwriting agreement is entered into and whether or not the
registration is an underwritten public offering, (i) make such representations
and warranties to the Holders of such Eligible Securities included in such
registration and the underwriters, if any, in form, substance and scope as are
customarily made in an underwritten public offering, (ii) obtain an opinion of
counsel to the Company in customary form and covering such matters as are
customarily covered by such an opinion as the Holders of at least a majority of
such Eligible Securities and the underwriters, if any, may reasonably request,
addressed to each participating Holder and the underwriters, if any, and dated
the effective date of such registration statement (or, if such registration
includes an underwritten public offering, dated the date of the closing under
the underwriting agreement); (iii) obtain a "cold comfort" letter from the
independent certified public accountants of the Company addressed to the Holders
of the Eligible Securities included in such registration and the underwriters,
if any, dated the effective date of such registration statement (and, if such
registration includes an underwritten public offering, also dated the date of
the closing under the underwriting agreement), such letter to be in customary
form and covering such matters as are customarily covered by such letters; (iv)
deliver such documents and certificates as may be reasonably requested by the
Holders of at least a majority of the Eligible Securities included in such
registration and the managing underwriter or underwriters, if any, to evidence
compliance with clause (i) above and with any customary conditions contained in
the underwriting agreement or other agreement entered into by the Company, and
(v) undertake such obligations relating to expense reimbursement,
indemnification and contribution as are provided in Sections 6, 7 and 8 hereof;
and
(m) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission.
Notwithstanding the provisions of Section 5(a), the Company's
obligation to file a registration statement, or cause such registration
statement to become effective, shall be suspended, without incurring any
liability to any Holder, for a period not to exceed 90 days if there exists at
the time material non-public information relating to the Company that, in the
reasonable opinion of the Company, should not be disclosed, provided that any
such suspension shall occur no more than once in any twelve (12)-month period.
In such an event, the Company shall promptly inform all Holders of the Company's
decision to defer filing of a registration statement and shall notify all
Holders promptly (but in any event not later than upon the expiration of the
90-day period specified in the immediately preceding sentence) of the
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<PAGE> 9
recommencement of the Company's efforts to file the registration statement and
to cause the registration statement to become effective.
In connection with each registration of Eligible Securities
hereunder, the Holders thereof will furnish to the Company in writing such
information with respect to themselves and the proposed distribution by them as
shall be reasonably necessary in order to assure compliance with applicable
federal and state securities laws. Each such Holder also agrees to notify the
Company as promptly as practicable of any inaccuracy or change in information
previously furnished by such Holder to the Company or of the occurrence of any
other event, in either case as a result of which any prospectus relating to such
registration contains an untrue statement of a material fact regarding such
Holder or the distribution of such Eligible Securities or omits to state any
material fact regarding such Holder or the distribution of such Eligible
Securities required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing, and promptly
to furnish to the Company any additional information required to correct and
update such previously furnished information or required so that such prospectus
shall not contain, with respect to such Holder or the distribution of such
Eligible Securities, an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading, in light of the circumstances then existing. Each such
Holder further agrees that upon giving any notice referred to in the immediately
preceding sentence, or upon receipt of any notice from the Company pursuant to
Section 5(e)(vi) hereof, such Holder shall forthwith discontinue the disposition
of Eligible Securities pursuant to the registration statement applicable to such
Eligible Securities until such Holder shall have received copies of an amended
or supplemented registration statement or prospectus, and if so directed by the
Company, such Holder shall deliver to the Company (at the Company's expense) all
copies, other than permanent file copies, then in such Holder's possession of
the prospectus covering such Eligible Securities at the time of receipt of such
notice.
6. Expenses. The Company shall pay all expenses incurred in
complying with Sections 2, 3 and 4, including without limitation all
registration and filing fees, printing expenses, fees and disbursements of
counsel and independent public accountants for the Company, fees and expenses of
one counsel for the selling Holders, fees and expenses (including counsel fees)
incurred in connection with complying with state securities or "blue sky" laws
(other than those which by law must be paid by the selling security holders),
fees of the National Association of Securities Dealers, Inc., transfer taxes,
fees of transfer agents and registrars and stock exchange listing fees, but
excluding all underwriting discounts and selling commissions applicable to the
sale of Eligible Securities. All expenses of participating sellers other than
those assumed by the Company in this Agreement shall be borne by such sellers in
proportion to the number of shares sold by each seller or as they may otherwise
agree.
7. Indemnification.
(a) In the event of a registration of Eligible Securities
under the Securities Act pursuant to Section 2, 3 or 4, the Company shall
indemnify and hold harmless each selling Holder, each underwriter of such
Eligible Securities thereunder and each other
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<PAGE> 10
person, if any, who controls such selling Holder or underwriter within the
meaning of the Securities Act, against any losses, claims, damages or
liabilities, joint or several, to which such selling Holder, underwriter or
controlling person may become subject under the Securities Act or otherwise or
in any action in respect thereof, and will reimburse each such selling Holder,
underwriter and controlling person for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or action, as such expenses are incurred, insofar as
such losses, claims, ties or liabilities (or actions in respect thereof) arise
out of or are based upon any untrue statement or alleged untrue statement of
any material fact contained in any registration statement under which such
Eligible Securities were registered under the Securities Act pursuant to Section
2, 3 or 4, any preliminary prospectus or final prospectus contained therein, or
any amendment or supplement thereof, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading, provided however, that the Company shall not be liable to any such
selling Holder, underwriter or controlling person in any such case if and to the
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in conformity with information furnished by such selling Holder,
underwriter or controlling person in writing specifically for use in such
registration statement or prospectus.
(b) In the event of a registration of any of the
Eligible Securities under the Securities Act pursuant to Section 2, 3 or 4, each
selling Holder of such Eligible Securities, severally and not jointly, will
indemnify and hold harmless the Company, each underwriter and each person, if
any, who controls the Company or any underwriter within the meaning of the
Securities Act, each officer of the Company who signs the registration
statement, each director of the Company, each other seller of securities
registered by the registration statement covering such Eligible Securities and
each person, if any, who controls such seller, against all losses, claims,
damages or liabilities, joint or several, to which the Company or any such
officer, director, underwriter, other seller or controlling person may become
subject under the Securities Act or otherwise, and shall reimburse the Company
and each such officer, director, underwriter, other seller and controlling
person for any legal or other expenses reasonably incurred by them in connection
with investigating or defending any such loss, claim, damage, liability or
action, but only to the extent that any such loss, claim, damage or liability
(or action in respect thereof) arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
reliance upon and in conformity with information pertaining to such Holder
furnished in writing to the Company by such Holder specifically for use in the
registration statement or prospectus relating to such Eligible Securities.
Notwithstanding the immediately preceding sentence, the liability of each such
Holder hereunder shall, not in any event exceed the net proceeds received by
such Holder from the sale of Eligible Securities covered by such registration
statement.
(c) Promptly after receipt by an indemnified party
hereunder of notice of the commencement of any action, such indemnified party,
if a claim in respect thereof is to be made against an indemnifying party
hereunder, shall notify such indemnifying party in writing thereof, but the
omission so to notify such indemnifying party shall not relieve such
indemnifying party from any liability that it may have to any indemnified party
other than under
10
<PAGE> 11
this Section 7 and, unless the failure to so provide notice materially adversely
affects or prejudices such indemnifying party's defense against any action,
shall not relieve such indemnifying party from any liability that it may have to
any indemnified party under this Section 7. In case any such action shall be
brought against any indemnified party and it shall notify an indemnifying
party of the commencement thereof, such indemnifying party shall be
entitled to participate in and, to the extent it shall wish, to assume and
undertake the defense thereof with counsel reasonably satisfactory to such
indemnified party, and, after notice from such indemnifying party to such
indemnified party of its election so to assume and undertake the defense
thereof, such indemnifying party shall not be liable to such indemnified party
under this Section 7 for any legal expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation and of liaison with counsel so selected; provided,
however, that, if the defendants in any such action include both the indemnified
party and the indemnifying party and the indemnified party shall have reasonably
concluded that there may be reasonable defenses available to it that are
different from or additional to those available to the indemnifying party or
if the interests of the indemnified party reasonably may be deemed to conflict
with the interests of the indemnifying party, the indemnified party shall have
the right to select a separate counsel and to assume and undertake the defense
of such action, with the expenses and fees of such separate counsel and other
expenses related to such defense to be reimbursed by the indemnifying party as
incurred.
(d) No indemnifying party shall be liable for any amounts
paid in a settlement effected without the consent of such indemnifying party,
which consent shall not be unreasonably withheld. No indemnifying party shall
consent to entry of any judgment or enter into any settlement which does not
include as an unconditional term thereof the giving by the plaintiff to the
indemnified party of a release from all liability in respect of such claim or
litigation.
(e) The reimbursements required by this Section 7 shall be
made by periodic payments during the course of the investigation or defense, as
and when bills are received and expenses incurred.
8. Contribution. If for any reason the indemnity set forth in
Section 7 is unavailable or is insufficient to hold harmless an indemnified
party, then the indemnifying party shall contribute to the amount paid or
payable by such indemnified party as a result of the aggregate losses, claim,
damages, liabilities and expenses of the nature contemplated by said indemnity
(i) in such proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand and such indemnified party on the other
(determined by reference to, among other things, whether the untrue statement of
a material fact or omission to state a material fact relates to information
supplied by the indemnifying party or such indemnified party and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such untrue statement or omission), or (ii) if the allocation provided
by clause (i) above is not permitted by applicable law or provides a lesser sum
to such indemnified party than the amount hereinafter calculated, in such
proportion as is appropriate to reflect not only the relative fault of the
indemnifying party and such indemnified party but also the relative benefits
received
11
<PAGE> 12
by the indemnifying party on the one hand and such indemnified party on the
other, as well as any other relevant equitable considerations.
The Company and the Parties agree that it would not be just and
equitable if contribution pursuant to this Section 8 were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
The amount paid or payable by an indemnified party as a result of the losses,
claims, damages, liabilities or expenses referred to in such paragraph shall be
deemed to include, subject to the limitations set forth above, any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section, a Holder shall not be required to contribute any
amount in excess of the amount by which the net proceeds of the sale of Eligible
Securities sold by such Holder and distributed to the public exceeds the amount
of any damages which such Holder has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
which is not guilty of such fraudulent misrepresentation.
9. Underwriting Agreement. If Eligible Securities are to be sold
pursuant to a registration statement in an underwritten offering pursuant to
Section 2, 3 or 4, the Company and each selling Holder of Eligible Securities
agrees to enter into a written agreement with the managing underwriter or
underwriters selected in the manner herein provided in such form and containing
such provisions as are reasonably satisfactory to the Company and each such
selling Holder and as are customary in the securities business for such an
arrangement among such underwriter or underwriters, each such selling Holder and
companies of the Company's size and investment stature. No Holder of Eligible
Securities may participate in any underwritten sale of Eligible Securities
pursuant to Section 2, 3 or 4 hereof unless such Holder agrees to sell such
Holder's securities in accordance with any underwriting arrangements approved by
the persons entitled hereunder to specify the method of distribution of the
securities being registered and completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
reasonably required under the terms of such underwriting arrangements.
10. Limitations on Subsequent Registration Rights. If, subsequent
to the date hereof, the Company grants to any holders or prospective holders of
the Company's securities the right to require that the Company register any
securities of the Company under the Securities Act, such registration rights
shall be granted subject to the rights of the Holders to include all or part of
their Eligible Securities in any such registration on the terms and conditions
set forth in Section 4.
11. Rule 144. The Company covenants with the Holders of Eligible
Securities that, if and to the extent the Company shall be required to do so
under the Securities Exchange Act of 1934, as amended, and the rules and
regulations thereunder, as the same may be amended and in effect at the time
(the "Exchange Act"), the Company shall timely file the reports required to be
filed by it under the Exchange Act or the Securities Act (including, but not
limited to, the
12
<PAGE> 13
reports under Sections 13 and 15(d) of the Exchange Act referred to in
subparagraph (c)(1) of Rule 144 adopted by the Commission under the Securities
Act), all to the extent required from time to time to enable such Holder to sell
Eligible Securities without registration under the Securities Act within the
limitations of the exemption provided by Rule 144 under the Securities Act, as
such Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the Commission. Upon the request of any Holder of Eligible
Securities, the Company shall deliver to such Holder a written statement as to
whether it has complied with such requirements.
12. Effect of Failure to Sell and Purchase Preferred Stock.
The shares of Preferred Stock will be sold in two separate sales of shares
pursuant to the Stock Purchase Agreement. If the sale of such shares on the
Second Closing Date (as defined in the Stock Purchase Agreement) does not occur
within six months of the Initial Closing Date (as defined in the Stock Purchase
Agreement), on such six month anniversary date, pursuant to Section (vi)(r) of
the Certificate of Designation, all shares of Preferred Stock then outstanding
shall, at the option of each Holder, be converted into Common Stock at the then
applicable Conversion Price (as defined in the Certificate of Designation) or
purchased by the Company for the Liquidation Amount (as defined in the
Certificate of Designation).
(a) If all shares of Preferred Stock are purchased by
the Company pursuant to Section (vi)(r) of the Certificate of Designation, all
rights of the Holders pursuant to this Agreement shall terminate immediately
upon such purchase.
(b) In the event that any shares of Preferred Stock are
converted into Common Stock pursuant to Section (vi)(r) of the Certificate of
Designation, the rights of the Investors pursuant to this Agreement shall be
modified as follows:
(i) The number of Registration Requests to which
the Investors shall be entitled pursuant to Section 2(a) shall be
reduced to one, and in connection with such Registration Request, the
Company shall not be obligated to effect any such registration pursuant
to Section 2(a) unless the anticipated aggregate offering price, net of
underwriting discounts and commissions, would exceed $10,000,000.
(ii) The Investors shall not be entitled to any
Priority Demand pursuant to Section 2(a).
(iii) The number of Form S-3 Requests to which the
Investors shall be entitled pursuant to Section 3(a) shall be reduced
to one.
13. Miscellaneous.
(a) All covenants and agreements contained in this
Agreement by or on behalf of any of the signatories shall bind and inure to the
benefit of the respective successors and permitted assigns of the signatories,
whether so expressed or not. If any permitted transferee of any Holder of
Eligible Securities shall acquire Eligible Securities in any manner (other than
by way of a registered public offering), whether by operation of law or
otherwise, such Eligible
13
<PAGE> 14
Securities shall be held subject to all of the terms of this Agreement,
and by taking and holding such Eligible Securities such transferee shall be
entitled to receive the benefits of and be conclusively deemed to have agreed to
be bound by and to perform all of the terms and provisions of this Agreement.
The benefits to which any such permitted transferee shall be entitled shall
include, without limitation, the rights to register Eligible Securities under
Sections 2, 3 and 4 hereof; provided, however, that any such permitted
transferee shall not be entitled to deliver to the Company a Registration
Request or a Form S-3 Request pursuant to Section 2 or 3 hereof unless such
permitted transferee acquired from its transferor (i) with respect to Eligible
Securities issued upon the conversion of Preferred Stock, at least 100,000
Eligible Securities; provided, however, that the transfer of registration rights
held pursuant to this Agreement to a partner, shareholder, equity holder or
officer of any Investor shall be without restriction as to minimum shareholding;
or (ii) with respect to all other Eligible Securities, at least a majority of
the Eligible Securities owned by such transferor at the time of transfer. If the
Company shall so request, any such successor or permitted assign shall agree in
writing to acquire and hold the Eligible Securities subject to all of the terms
hereof. This Section 12(a) shall not be deemed to create any right on the part
of any Holder to transfer Eligible Securities in contravention of any
restriction thereon contained in any other agreement to which such Holder is a
party.
(b) All notices, consents and other communications under
this Agreement shall be in writing and shall be deemed to have been duly given
when (a) delivered by hand, (b) sent by telecopier (with receipt confirmed),
provided that a copy is mailed by registered mail, return receipt requested, or
(c) when received by the addressee, if sent by Express Mail, Federal Express or
other express delivery service (receipt requested), in each case to the
appropriate addresses and telecopier numbers set forth below (or to such other
addresses and telecopier numbers as a party may designate as to itself by notice
to the other parties):
(i) If to Doubletree: 410 North 44th Street,
Suite 700, Phoenix, AZ 85008, Attention: General Counsel, telecopier no.
(602) 220-6666.
(ii) If to the Company: Lakepoint Office Park,
9342 East Central, Wichita, Kansas 67206, telecopier number (316)
631-1333, Attention: President.
(iii) If to DeBoer or the Trusts: Lakepoint Office
Park, 9342 East Central, Wichita, Kansas 67206, telecopier number (316)
631-1333, Attention: Jack DeBoer.
(iv) If to the Fix Partnership: Lakepoint Office
Park, 9342 East Central, Wichita, Kansas 67206, telecopier number (316)
631-1333, Attention: Warren Fix.
(v) If to an Investor: at the address set forth
on Schedule A attached hereto.
(c) This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware.
14
<PAGE> 15
(d) This Agreement may not be amended or modified, and
no provision hereof may be waived, except in writing, and any such writing shall
only be effective with respect to a Party who has executed such writing. The
failure of any of the Parties to insist upon strict adherence to any term of
this Agreement on any occasion shall not be considered a waiver of that term or
deprive such Party of the right thereafter to insist upon strict adherence to
that term or any other term of this Agreement.
(e) This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(f) The Parties acknowledge that there may be no adequate
remedy at law if any Party fails to perform any of its obligations hereunder and
that each Party may be irreparably harmed by any such failure, and accordingly
agree that each Party, in addition to any other remedy to which it may be
entitled in law or in equity, shall be entitled to compel specific performance
of the obligations of any other Party under this Agreement in accordance with
the terms and conditions of this Agreement in any court of the United States or
any state thereof having jurisdiction.
(g) The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(h) In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstances, is held
invalid, illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions contained herein shall not be in any way impaired
thereby, it being intended that all of the rights and privileges of the Holders
shall be enforceable to the fullest extent permitted by law.
(i) This Agreement is intended by the parties as a final
expression of their agreement and a complete and exclusive statement of the
agreement and understanding of the parties hereto in respect of the subject
matter contained herein. There are no restrictions, promises, warranties or
undertakings other than those set forth or referred to herein or therein. This
Agreement supersedes all prior agreements and understandings between the Parties
with respect to such subject matter.
15
<PAGE> 16
CANDLEWOOD HOTEL COMPANY, INC.
By: /s/ JACK P. DEBOER
---------------------------------------
Name: Jack P. DeBoer
Title: Chief Executive Officer
DOUBLETREE CORPORATION
By: /s/ DAVID L. STIVERS
---------------------------------------
Name: David L. Stivers
Title: Senior Vice President, General
Counsel and Secretary
WARREN D. FIX FAMILY PARTNERSHIP, L.P.
By: /s/ WARREN D. FIX
---------------------------------------
Name: Warren D. Fix
Title: General Partner
/s/ WARREN D. FIX
------------------------------------------
Warren D. Fix
JACK P. DeBOER, for himself and on
behalf of the ALEXANDER DeBOER
TRUST DATED MARCH 14, 1995 and the
CHRISTOPHER SCOTT DeBOER TRUST
DATED MARCH 14, 1995
/s/ JACK P. DEBOER
-----------------------------------------
16
<PAGE> 17
Name: Jack P. DeBoer
OLYMPUS GROWTH FUND II, L.P.
By: OGP II, L.P., its General Partner
By: Conroy, L.L.C., its General Partner
By: /s/ JAMES A. CONROY
----------------------------------
Name: James A. Conroy
Title: General Partner
OLYMPUS EXECUTIVE FUND, L.P.
By: OEF, L.P., its General Partner
By: Conroy, L.L.C., its General Partner
By: /s/ JAMES A. CONROY
---------------------------------
Name: James A. Conroy
Title: General Partner
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK, AS
TRUSTEE OF THE COMMINGLED
PENSION TRUST FUND (MULTI-
MARKET SPECIAL INVESTMENT
FUND II) OF MORGAN GUARANTY
TRUST COMPANY OF NEW YORK
By: /s/ RONALD G. HODGE, II
--------------------------------------
Name: Ronald G. Hodge, II
Title: Vice President
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK, AS
TRUSTEE OF THE MULTI-MARKET
SPECIAL INVESTMENT TRUST FUND
OF MORGAN GUARANTY TRUST
COMPANY OF NEW YORK
By: /s/ RONALD G. HODGE, II
--------------------------------------
<PAGE> 18
Name: Ronald G. Hodge, II
Title: Vice President
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK, AS
INVESTMENT MANAGER AND AGENT
FOR THE ALFRED P. SLOAN
FOUNDATION (MULTI-MARKET
ACCOUNT)
By: /s/ RONALD G. HODGE, II
--------------------------------------
Name: Ronald G. Hodge, II
Title: Vice President
CHASE VENTURE CAPITAL ASSOCIATES, L.P.
By: Chase Capital Partners, its General Partner
By: /s/ JAMES D. KALLMAN
--------------------------------------
Name: James D. Kallman
Title:
PRIVATE EQUITY
INVESTORS III, L.P.
By: Rohit M. Desai Associates III, LLC
General Partner
By: /s/ ROHIT M. DESAI
--------------------------------------
Name: Rohit M. Desai
Title: Managing Member
<PAGE> 19
EQUITY-LINKED INVESTORS-II
By: Rohit M. Desai Associates-II
General Partner
By: /s/ ROHIT M. DESAI
--------------------------------------
Name: Rohit M. Desai
Title: Managing General Partner
LNR CANDLEWOOD HOLDINGS, INC.
By: /s/ MARGARET A. JORDAN
--------------------------------------
Name: Margaret A. Jordan
Title: Treasurer
DELAWARE STATE EMPLOYEES' RETIREMENT FUNDS
By: Pecks Management Partners Ltd.
its Investment Advisor
By: /s/ ROBERT J. CRESCI
--------------------------------------
Name: Robert J. Cresci
Title: Managing Director
DECLARATION OF TRUST FOR THE
DEFINED BENEFIT PLAN OF ZENECA
HOLDINGS INC.
By: Pecks Management Partners Ltd.
its Investment Advisor
By: /s/ ROBERT J. CRESCI
--------------------------------------
Name: Robert J. Cresci
Title: Managing Director
<PAGE> 20
DECLARATION OF TRUST FOR THE
DEFINED BENEFIT PLAN OF ICI
AMERICAN HOLDINGS INC.
By: Pecks Management Partners Ltd.
its Investment Advisor
By: /s/ ROBERT J. CRESCI
----------------------------------
Name: Robert J. Cresci
Title: Managing Director
J.W. McCONNELL FAMILY TRUST
By: Pecks Management Partners Ltd.
its Investment Advisor
By: /s/ ROBERT J. CRESCI
----------------------------------
Name: Robert J. Cresci
Title: Managing Director
ADVANCE CAPITAL PARTNERS, L.P.
By: Advance Capital Associates, L.P.
By: Advance Capital Management, LLC
By: /s/ ROBERT A. BERNSTEIN
------------------------------
Name: Robert A. Bernstein
Title: Principal
<PAGE> 21
ADVANCE CAPITAL OFFSHORE PARTNERS, L.P.
By: Advance Capital Offshore Associates, LDC
By: Advance Capital Associates, L.P.
By: Advance Capital Management, LLC
By: /s/ ROBERT A. BERNSTEIN
--------------------------------
Name: Robert A. Bernstein
Title: Principal
ALLIED CAPITAL CORPORATION
By: /s/ G. CABEL WILLIAMS
--------------------------------------
Name: G. Cabel Williams
Title: Managing Director
ALLIED CAPITAL CORPORATION II
By: /s/ G. CABEL WILLIAMS
--------------------------------------
Name: G. Cabel Williams
Title: Managing Director
THE FFJ 1997 NOMINEE TRUST
By: /s/ SAMUEL T. BYRNE
--------------------------------------
Name: Samuel T. Byrne
Title: Trustee
<PAGE> 22
THE MUTUAL LIFE INSURANCE
COMPANY OF NEW YORK
By: /s/ SUZANNE E. WALTON
------------------------------------
Name: Suzanne E. Walton
Title: Managing Director
HARBOR INVESTMENTS LTD.
By: Strong Capital Management, Inc.,
its Investment Advisor
By: /s/ STEPHEN J. SHENKENBERG
------------------------------------
Name: Stephen J. Shenkenberg
Title: Vice President
STRONG SPECIAL INVESTMENT LIMITED
PARTNERSHIP
By: Strong Capital Management, Inc.
its General Partner
By: /s/ STEPHEN J. SHENKENBERG
------------------------------------
Name: Stephen J. Shenkenberg
Title: Vice President
STRONG QUEST LIMITED
PARTNERSHIP
By: Strong Capital Management, Inc.
its General Partner
By: /s/ STEPHEN J. SHENKENBERG
------------------------------------
Name: Stephen J. Shenkenberg
Title: Vice President
<PAGE> 23
/s/ WILLIAM J. ABRAMS
------------------------------------
William J. Abrams
/s/ JOSEPH P. ADAMS, JR.
------------------------------------
Joseph P. Adams, Jr.
/s/ ERIC ANDERSON
------------------------------------
Eric Anderson
/s/ ROBERT P. BRENNAN, JR.
------------------------------------
Robert P. Brennan, Jr.
/s/ ROBERT BRODY
------------------------------------
Robert Brody
/s/ VANESSA BURGESS
------------------------------------
Vanessa Burgess
/s/ CRAIG CALLEN
------------------------------------
Craig Callen
/s/ MICHAEL DANA
------------------------------------
Michael Dana
/s/ PETER DEEKS
------------------------------------
Peter Deeks
/s/ ROBERT E. DIEMAR, JR.
------------------------------------
Robert E. Diemar, Jr.
/s/ DAVID HURWITZ
------------------------------------
David Hurwitz
<PAGE> 24
/s/ STEVE KANTOR
------------------------------------
Steve Kantor
/s/ LOUIS KLEVAN
------------------------------------
Louis Klevan
/s/ LARRY LAVINE
------------------------------------
Larry Lavine
/s/ DANIEL J. MACKELL
------------------------------------
Daniel J. Mackell
/s/ PATRICK MCMULLAN
------------------------------------
Patrick McMullan
/s/ ANDREW J. MCSPADDEN
------------------------------------
Andrew J. McSpadden
/s/ DAVID R. SMITH
------------------------------------
David R. Smith
/s/ PHIL TAGER
------------------------------------
Phil Tager
/s/ DOUGLAS M. WEILL
------------------------------------
Douglas M. Weill
