<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 12, 1997
REGISTRATION NO. 333-16661
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
CHARTWELL LEISURE INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 22-3326054
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION
INCORPORATION OR ORGANIZATION) NUMBER)
605 THIRD AVENUE
NEW YORK, NEW YORK 10158
(212) 692-1400
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
---------------
RICHARD L. FISHER
CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER
605 THIRD AVENUE
NEW YORK, NEW YORK 10158
(212) 692-1400
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
---------------
COPIES TO:
JOHN N. TURITZIN, ESQ.
BATTLE FOWLER LLP
75 EAST 55TH STREET
NEW YORK, NEW YORK 10022
(212) 856-7000
---------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [_]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the
same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
---------------
CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MAXIMUM PROPOSED
OFFERING MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE PRICE PER AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED SECURITY OFFERING PRICE REGISTRATION FEE
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.01 par
value per share,
reserved for issuance
upon exercise of 2,602,000
rights................ shares $14.00 $36,428,000 $11,039(1)
- -----------------------------------------------------------------------------------------
2,602,000
Rights................. rights -- -- --(2)
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(1) Previously paid. On November 22, 1996, the Registrant filed its
Registration Statement on Form S-3 (File No. 333-16661) (the "Original S-
3") covering up to 5,175,000 shares of Common Stock that the Registrant
had intended to sell in an underwritten public offering. At that time the
Registrant paid a registration fee in the amount of $20,583. The
Registrant now amends the Original S-3 to reflect its intent to issue up
to approximately 2,602,000 Transferable subscription rights to its
existing stockholders and to sell up to approximately 2,602,000 shares of
Common Stock pursuant to a rights offering. The Registrant no longer
intends to sell shares of Common Stock in an underwritten public offering.
(2)Pursuant to Rule 457(g) under the Securities Act, no separate registration
fee is required with respect to the Rights.
---------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
EXPLANATORY NOTE
On November 22, 1996, the Registrant filed its Registration Statement on
Form S-3 (File No. 333-16661) (the "Original S-3") covering up to 5,175,000
shares of Common Stock that the Registrant had intended to sell in an
underwritten public offering. The Registrant now amends the Original S-3 to
reflect its intent to issue up to approximately 2,602,000 transferable
subscription rights to its existing stockholders and to sell up to
approximately 2,602,000 shares of Common Stock pursuant to a rights offering.
The Registrant no longer intends to sell shares of Common Stock in an
underwritten public offering.
<PAGE>
PROSPECTUS
CHARTWELL LEISURE INC.
TRANSFERABLE RIGHTS TO PURCHASE UP TO
2,499,233 SHARES OF COMMON STOCK
EXPIRING MARCH , 1997
Chartwell Leisure Inc., a Delaware corporation (the "Company"), is
distributing transferable subscription rights ("Rights") to holders of record
at the close of business on February , 1997 (the "Record Date") of its shares
of common stock, par value $.01 per share (the "Common Stock"), and to holders
of stock options ("HFS Option Holders") granted pursuant to HFS Incorporated's
1992 Incentive Stock Option Plan (the "HFS Option Plan") prior to the time the
Company was spun-off from HFS Incorporated. The Rights entitle stockholders
and HFS Option Holders to subscribe for and purchase an aggregate of
approximately 2,499,233 shares of Common Stock (the "Rights Offering") at a
cash price of $14.00 per share (the "Subscription Price"). Holders of Rights
("Rights Holders") will be able to exercise Rights until 5:00 p.m., New York
City time, on March , 1997, unless the period for the exercise of Rights is
extended or terminated by the Board of Directors of the Company in its sole
discretion (such time and date, the "Expiration Date"). Commencement of the
Rights Offering is subject to receipt of a waiver by the Company's bank
lenders to permit the distribution of the Rights. See "The Rights Offering."
Stockholders of the Company on the Record Date and HFS Option Holders will
receive .23 Rights to purchase shares of Common Stock for each share of Common
Stock held on the Record Date or each option held on the Record Date, as the
case may be. Rights Holders are entitled to purchase, at the Subscription
Price, one share of Common Stock for each whole Right held (the "Basic
Subscription Privilege"). An aggregate of approximately 2,499,233 Rights will
be distributed pursuant to the Rights Offering. In lieu of fractional Rights,
the aggregate number of Rights issued by the Company to a Rights Holder will
be rounded up to the next whole number. Each Right also entitles any Rights
Holder exercising the Basic Subscription Privilege in full to subscribe at the
Subscription Price for up to one additional share of Common Stock for each
share of Common Stock purchased by the Rights Holder pursuant to Basic
Subscription Privilege (the "Oversubscription Privilege"), to the extent
shares (other than the shares which a certain stockholder and certain HFS
Option Holders have agreed not to subscribe for pursuant to their Basic
Subscription Privileges) are not otherwise subscribed for pursuant to the
exercise of the Basic Subscription Privilege. If an insufficient number of
shares of Common Stock are available to satisfy fully all subscriptions
pursuant to the Oversubscription Privilege, then the available shares will be
prorated among those who subscribe pursuant to the Oversubscription Privilege.
See "The Rights Offering--Subscription Privileges--Oversubscription
Privilege." The Rights will be evidenced by transferable certificates.
Chartwell Leisure Associates L.P. II ("CL Associates") and FSNL LLC ("FSNL"),
which collectively own approximately 46.75% of the outstanding Common Stock,
have informed the Company that they intend to exercise their Basic
Subscription Privilege in full for a total investment of approximately $15.8
million by CL Associates and FSNL in the Rights Offering. See "The Rights
Offering."
The Common Stock is traded in the Nasdaq Market under the symbol "CHRT." On
January 22, 1997, the last full trading day prior to the public announcement
of the Company's intention to commence the Rights Offering, the last sale
reported for the Common Stock on the Nasdaq National Market was $14 1/8. On
February 11, 1997, the last sale reported for the Common Stock on the Nasdaq
National Market was $16. There has been no prior market for the Rights. The
Rights are expected to be approved for listing on the Nasdaq National Market
under the symbol "CHRTR"; however, no assurances can be given that a market
for the Rights will develop or, if a market develops, that such market will
remain available throughout the Rights Offering.
After the Expiration Date, the Rights will no longer be exercisable and will
have no value. Accordingly, Rights Holders are strongly urged either to
exercise or to sell their Rights.
SEE "RISK FACTORS" BEGINNING ON PAGE 12 OF THIS PROSPECTUS FOR INFORMATION
THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
--------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
--------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SUBSCRIPTION PRICE UNDERWRITING DISCOUNTS AND COMMISSIONS(1) PROCEEDS TO COMPANY(2)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share............... $ 14.00 None $ 14.00
- ------------------------------------------------------------------------------------------------------------
Total................... $34,989,262 None $29,918,084
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(1) The Shares are being offered and sold directly by the Company, and no
commissions or other remuneration is intended to be paid to any person for
soliciting purchases of the shares in this Offering. See "The Rights
Offering--Method of Offering."
(2) Before deducting expenses payable by the Company estimated at $1,170,000.
Assumes the exercise of all Rights, other than (i) approximately 299,000
Rights issuable to a stockholder of the Company which has agreed not to
exercise or transfer its Rights and (ii) approximately 63,227 Rights
issuable to certain HFS Option Holders (the "Nonexercising Option
Holders") who have agreed not to exercise or transfer their Rights. The
Company has also registered an additional 102,767 Rights and a
corresponding 102,767 shares of Common Stock to account for exercises of
options by HFS Option Holders and option holders under the Company's 1994
Stock Option Plan and to account for rounding up to the next whole number
the number of Rights issued to each Rights holder. The exercise of these
Rights has not been assumed in calculating the proceeds to the Company.
See "Prospectus Summary--Recent Developments--Sale of Common Stock to
Brahman Funds".
February , 1997
<PAGE>
NO DEALER, SALESMAN OR ANY OTHER PERSON IS AUTHORIZED IN CONNECTION WITH THE
OFFERING MADE HEREBY TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT
CONTAINED IN OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITY OTHER THAN THE
RIGHTS OR THE COMMON STOCK OFFERED HEREBY TO ANY PERSON IN ANY JURISDICTION IN
WHICH IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION TO SUCH PERSON.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREBY SHALL UNDER
ANY CIRCUMSTANCES IMPLY THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF
ANY DATE SUBSEQUENT TO THE DATE HEREOF.
No action has been or will be taken in any jurisdiction by the Company that
would permit an issuance of the Rights, an offering of Common Stock or
possession or distribution of this Prospectus in any jurisdiction where action
for that purpose is required, other than in the United States. Persons into
whose possession this Prospectus comes are required by the Company to inform
themselves about and to observe any restrictions as to the issuance of the
Rights, the offering of Common Stock and the distribution of this Prospectus.
In this Prospectus references to "dollars" and "$" are to United States
dollars unless otherwise stated, and the terms "United States" and "U.S." mean
the United States of America, its states, its territories, its possessions and
all areas subject to jurisdiction.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Additional Information..................................................... 3
Incorporation of Certain Information by Reference.......................... 4
Prospectus Summary......................................................... 5
Risk Factors............................................................... 12
The Rights Offering........................................................ 19
Use of Proceeds............................................................ 27
Price Range of Common Stock................................................ 27
Dividend Policy............................................................ 28
State and Foreign Securities Laws.......................................... 28
Capitalization............................................................. 29
Description of Capital Stock............................................... 30
Shares Eligible for Future Sale............................................ 33
Plan of Distribution....................................................... 34
Legal Matters.............................................................. 34
Experts.................................................................... 34
</TABLE>
----------------
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR"
PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for certain forward-looking statements. The factors discussed under
"Risk Factors," among others, could cause actual results to differ materially
from those contained in forward-looking statements made in this Prospectus,
filings by the Company with the Securities and Exchange Commission (the
"Commission"), in the Company's press releases and in oral statements made by
authorized officers of the Company. When used in this Prospectus, the words
"estimate," "project," "anticipate," "expect," "intend," "believe," and
similar expressions are intended to identify forward-looking statements.
2
<PAGE>
ADDITIONAL INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith, files reports, proxy statement and other information with the
Commission. Such reports, proxy statements and other information filed by the
Company can be inspected without charge at the office of the Commission at the
Public Reference Section located at 450 Fifth Street, N.W., Washington, D.C.
20549 and at the regional offices of the Commission located at Seven World
Trade Center, 13th Floor, New York, New York 10048 and 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511, and copies thereof may be
obtained from the Commission upon payment of the prescribed fees. The
Commission also maintains a site on the World Wide Web, the address of which
is http://www.sec.gov., that contains reports, proxy and information
statements and other information regarding issuers, such as the Company, that
file electronically with the Commission. Such reports, proxy statements and
other information concerning the Company can also be inspected at the office
of the National Association of Securities Dealers, 1735 K Street, N.W.,
Washington, D.C. 20006, which supervises the NASDAQ National Market on which
the Company's Common Stock is traded.
The Company has filed with the Commission in Washington, D.C., a
Registration Statement on Form S-3 (of which this Prospectus is a part) under
the Securities Act of 1933, as amended (the "Securities Act") with respect to
the Common Stock offered hereby. This Prospectus does not contain all the
information set forth in the Registration Statement and the exhibits and
schedules thereto. Statements contained in this Prospectus as to the contents
of any contract or other document referred to are not necessarily complete and
in each instance reference is made to the copy of such contract or other
document filed as an exhibit to the Registration Statement, each such
statement being qualified in all respects by such reference and the exhibits
and schedules thereto. For further information with respect to the Company and
the Common Stock offered hereby, reference is made to the Registration
Statement and such exhibits and schedules.
3
<PAGE>
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents filed with the Commission are incorporated in this
Prospectus by reference:
(i) The Company's Annual Report of Form 10-K for the fiscal year ended
December 31, 1995 (File No. 0-24794) filed with the Commission on April 1,
1996, as amended by the Company's Annual Report on Form 10-K/A filed with
the Commission on May 24, 1996, as amended by the Company's Annual Report
on Form 10-K/A filed with the Commission on July 3, 1996;
(ii) The Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended March 31, 1996 filed with the Commission on May 15, 1996;
(iii) The Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended June 30, 1996 filed with the Commission on August 8, 1996, as amended
by the Company's Quarterly Report on Form 10-Q/A filed with the Commission
on August 9, 1996;
(iv) The Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended September 30, 1996 filed with the Commission on November 12, 1996;
(v) The Company's Current Report on Form 8-K, dated January 23, 1996,
filed with the Commission on February 7, 1996, as amended by the Company's
Current Report on Form 8-K/A filed with the Commission on April 2, 1996, as
amended by the Company's Current Report on Form 8-K/A filed with the
Commission on July 3, 1996, as amended by the Company's Current Report on
Form 8-K/A filed with the Commission on July 9, 1996; and
(vi) The Company's Current Report on Form 8-K, dated October 1, 1996,
filed with the Commission on October 15, 1996, as amended by the Company's
Current Report on Form 8-K/A filed with the Commission on December 12,
1996, as amended by the Company's Current Report on Form 8-K/A filed with
the Commission on February 7, 1997.
All documents subsequently filed by the Company with the Commission pursuant
to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the
date hereof and, prior to the termination of the Offering, shall be deemed
incorporated by reference in this Prospectus and to be a part of this
Prospectus from the date of the filing of such reports. The Company hereby
undertakes to provide without charge to each person to whom a copy of this
Prospectus has been delivered, on the written oral request of any such person,
a copy of any or all of the information that has been incorporated by
reference in this Prospectus (not including exhibits to the information that
is incorporated by reference unless such exhibits are specifically
incorporated by reference into the information that this Prospectus
incorporates). Requests for such copies should be directed to Chartwell
Leisure Inc., 605 Third Avenue, New York, New York 10158 (telephone (212) 692-
1400), Attention: Douglas H. Verner, Esq.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained
herein or in any other subsequently filed document that also is or is deemed
to be incorporated by reference herein modifies or supersedes such statement.
Any statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
4
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND THE FINANCIAL STATEMENTS AND NOTES THERETO INCORPORATED BY
REFERENCE IN THIS PROSPECTUS. EACH INVESTOR IS URGED TO READ THIS PROSPECTUS IN
ITS ENTIRETY PRIOR TO MAKING AN INVESTMENT IN THE SHARES OF COMMON STOCK
OFFERED HEREBY.
THE COMPANY
Chartwell Leisure Inc. ("Chartwell" or the "Company") is an opportunistic
acquiror of diversified hotel properties that it believes provide the potential
for cash flow and earnings growth, principally through rebranding,
repositioning, reimaging and remarketing. Chartwell owns, directly or with
joint venture partners, 133 hotel properties in both the full-service and
limited-service segments, including approximately 11,520 guest rooms, located
in 26 states and six Canadian provinces. In the full-service segment, Chartwell
operates 27 hotels aggregating approximately 5,430 guest rooms that contributed
57% of Chartwell's gross room revenues (including gross room revenues of
unconsolidated joint ventures) during the nine-month period ended September 30,
1996 on a pro forma basis. Chartwell's remaining 106 hotels, consisting of
approximately 6,100 rooms, operate in the limited-service segment, principally
under the Travelodge(R) brand.
Chartwell was spun-off from HFS Incorporated ("HFS") in 1994 and until late
1995 was engaged in the business of investing in casino gaming facilities. In
December 1995, an investment group ("CL Associates") primarily consisting of
members of the Fisher Brothers family and a trust for the benefit of Gordon
Getty and members of his family acquired a 16.6% equity interest in Chartwell
by purchasing newly issued shares of Common Stock. In connection with that
purchase, Richard L. Fisher, a member of the Fisher Brothers family, was
elected to Chartwell's Board of Directors and to the chairmanship of
Chartwell's executive committee. At the same time, Chartwell's Board of
Directors decided to redirect the focus of Chartwell's business from gaming to
lodging and Chartwell agreed to acquire full and partial interests in 115
Travelodge hotels, consisting of approximately 8,000 guest rooms, from Forte
Hotels, Inc. (the "Travelodge Acquisition") for approximately $98 million (a
cost of approximately $13,000 per guest room after accounting for joint venture
interests and other assets acquired).
In connection with the closing of the Travelodge Acquisition in January 1996,
Chartwell agreed in principle to issue four million shares of Common Stock for
an aggregate purchase price of $57 million to an expanded investment group,
consisting of CL Associates and a limited liability company ("FSNL") owned
principally by a trust for the benefit of Charles de Gunzburg (the "CL
Associates/FSNL Investment"), Mr. Fisher was elected Chairman and Chief
Executive Officer of Chartwell, a new senior management team was assembled, and
Mr. Fisher and that new management team began to implement Chartwell's current
strategy. Since that time, Chartwell has (i) acquired 21 Travelodge hotels in
Canada (including a one-half interest in a joint venture) totalling
approximately 3,500 guest rooms, for approximately $77 million (a cost of
approximately $22,000 per guest room) (the "Canadian Acquisition"), (ii)
obtained the 30-year exclusive master franchise licenses for the Travelodge
brand in Canada and Mexico, (iii) formed a joint venture with Grupo Piasa, S.A.
de C.V., a diversified Mexican real estate and development company ("Grupo
Piasa"), for the purpose of developing and operating Travelodge hotels
throughout Mexico ("Chartwell de Mexico") and (iv) formed a strategic alliance
with Hilton Hotels Corporation ("Hilton") to develop Hilton Garden Inn(R)
hotels in target markets nationwide. Chartwell has curtailed future activities
in the gaming industry and, during the twelve-month period ended December 31,
1996, derived no revenues from gaming.
5
<PAGE>
RECENT DEVELOPMENTS
. Capital Investments: Chartwell has launched an extensive capital improvement
program to increase room and occupancy rates of its hotels by improving the
quality of its properties. By mid-1997, Chartwell intends to have completed
approximately $30 million in capital improvements at its current hotels in
addition to amounts budgeted for regular capital maintenance. This program
is expected to enhance the competitiveness of its Travelodge hotels and
increase profitability.
. Strategic Alliance with Hilton: On January 20, 1997, Chartwell announced
that it had formed a strategic alliance with Hilton in which Chartwell will
develop, own, manage and operate up to 20 Hilton Garden Inn hotels in target
markets nationwide under a franchise license. The initial term of the
franchise license is three years and will require a total investment of up
to $200 million by Chartwell. Construction financing and permanent mortgage
financing for the Hilton Garden Inn development program are expected to be
arranged through NationsBank Corp. ("NationsBank") and Nomura Asset Capital
Corporation ("Nomura"). Of the total construction costs, NationsBank is
committed to provide up to 80% of the financing, with Hilton guaranteeing up
to 25% of the loan. Chartwell is required to put up the remaining 20% of the
capital as equity. Upon obtaining a certificate of occupancy for each Hilton
Garden Inn, the construction loan allocated for such hotel will convert to a
15-year permanent mortgage through an arrangement with Nomura. Chartwell
expects to commence construction of its first Hilton Garden Inn shortly at
Albuquerque International Airport and this spring expects to commence
construction of its second Hilton Garden Inn site in Santa Fe, New Mexico at
its Anasazi Plaza site. Chartwell expects to break ground on other Hilton
Garden Inns as additional sites are secured. In addition to the Hilton
Garden Inn franchise license, Hilton has formally approved the conversion of
the 207 room, Chartwell-owned San Diego Travelodge to a full-service Hilton
hotel. The property, on Harbor Island Drive, will undergo a $4 million
renovation, expected to be completed by this summer.
. Sale of Common Stock to Brahman Funds: On January 31, 1997, Chartwell sold
1,000,000 shares of Common Stock to funds managed by affiliates of Brahman
Management, LLC (collectively, "Brahman") at $14 per share, for a total
investment of $14 million by Brahman (the "Brahman Private Placement").
Brahman manages investment funds, including one affiliated with George
Soros. As a result of the Brahman Private Placement, the Brahman-Soros group
owns approximately 1,300,000 shares of Common Stock, or approximately 12.4%
of the Company's outstanding Common Stock, before giving effect to the
issuance of any shares of Common Stock pursuant to the Rights Offering.
Chartwell is required to hold the proceeds of the Brahman Private Placement
in a segregated interest-bearing account until CL Associates and FSNL have
purchased at least 1,071,428 shares of Common Stock in the Rights Offering
by April 15, 1997. If that condition is not satisfied, Brahman may require
the Company to repurchase the shares sold to Brahman in the Brahman Private
Placement at a price of $14.00 per share plus the interest accrued in that
segregated account. CL Associates and FSNL have informed the Company that
they intend to exercise their Basic Subscription Privilege (for
approximately 1,128,134 shares of Common Stock) in full. Chartwell has
agreed to file a registration statement under the Securities Act to register
the resale of the shares sold to Brahman, to use its best efforts to cause
that registration statement to become effective by May 1, 1997 and to
maintain that registration in effect until Brahman has sold all of the
shares it purchased in the Brahman Private Placement or until those shares
may be sold under Rule 144 under the Securities Act without limitation.
Brahman has agreed not to sell, transfer or otherwise dispose, directly or
indirectly, of any of the shares it purchased in the Brahman Private
Placement, without the prior written consent of the Company, until August 1,
1997. Brahman has agreed not to exercise or transfer any of the
approximately 299,000 Rights that it receives through the Basic Subscription
Privilege and the Oversubscription Privilege, and to allow such Rights to
expire unexercised.
. Proposed Sale of Common Stock to Baron Funds: Chartwell has reached an
agreement in principle to sell approximately 535,000 shares of Common Stock
to Baron Funds at $14 per share, for a total investment of
6
<PAGE>
$7.5 million by Baron Funds (the "Baron Private Placement"). Baron Funds is
the parent organization for a family of funds managed by Ronald Baron. The
closing of the Baron Private Placement is expected to occur at or prior to
the time of the closing of the Rights Offering. Chartwell expects to be
obligated to file a registration statement under the Securities Act to
register the resale of the shares sold to Baron Funds, to use its best
efforts to cause that registration statement to become effective by May 1,
1997 and to maintain that registration in effect until Baron Funds has sold
all of the shares it purchased in the Baron Private Placement or until
those shares may be sold under Rule 144 under the Securities Act without
limitation. See "Prospectus Summary--Recent Developments--Sale of Common
Stock to Brahman Funds."
. Amendment to Stockholders' Agreement: CL Associates and FSNL are parties to
a stockholders' agreement (the "Stockholders' Agreement") that includes
certain voting arrangements (the "Voting Arrangements") which provide that
CL Associates and FSNL will vote their shares of Common Stock to elect as a
director of the Company one nominee selected by FSNL and any number of
nominees selected by CL Associates, and that FSNL will vote its shares of
Common Stock at all meetings of stockholders of the Company and in any
written consent in the manner directed by CL Associates. The Stockholders'
Agreement also includes certain transfer restrictions (the "Transfer
Restrictions") which provide for certain restrictions on the transfer of
their shares of Common Stock and on future acquisitions of shares of Common
Stock by CL Associates and FSNL. Additionally, under the Stockholders'
Agreement, FSNL is afforded certain "tag-along" rights (the "Tag Along
Arrangements") exercisable by it upon a sale of shares by CL Associates. CL
Associates may also require FSNL to sell its shares to a third party
offering to purchase all of CL Associates' and FSNL's shares of Common
Stock (the "Drag Along Arrangements"). CL Associates and FSNL have informed
the Company that they intend to amend the Stockholders' Agreement in
connection with the Rights Offering to provide that the shares purchased by
them in the Rights Offering will not be subject to the Transfer
Restrictions, Tag Along Arrangements or Drag Along Arrangements, but will
be subject to the Voting Arrangements.
. Results for the Fourth Quarter ended December 31, 1996: For the three month
period ended December 31, 1996, the Company reported hotel revenue of $26.2
million, and total revenue of $26.9 million, resulting in a net loss for
the three month period of $(14.5) million, or $(1.47) per share. Included
in the loss were $(2.2) million in non-cash provisions for losses on gaming
assets, a charge of $(9.5) million for cancellation of a corporate services
agreement with HFS, and an additional $(.8) million charge for the
Company's termination of its San Diego Harbor Island Travelodge franchise
agreement in connection with the planned conversion of that hotel to a
Hilton franchise.
. Consolidation of Offices: The Company intends to consolidate into its
executive offices in New York City during the first half of 1997 a
significant portion of the operations which it currently conducts at its
offices in El Cajon, California. The Company expects to incur approximately
$1 million in one-time expenses in 1997 associated with that consolidation.
BACKGROUND
The Company's original gaming business was conducted as a division of HFS
from August 1993 until September 1994, when the Company was formed as National
Gaming Corp., a Delaware corporation and a wholly owned subsidiary of HFS
created for the purpose of carrying on that business. In November 1994, the
Company became an independent public company when HFS distributed all of the
outstanding shares of the Company's Common Stock to the stockholders of HFS
(the "Distribution"). In January 1996, the Company's name was changed to
National Lodging Corp., and on August 8, 1996, the Company's name became
Chartwell Leisure Inc. The Company's principal executive offices are located
at 605 Third Avenue, New York, New York 10158, and its telephone number is
(212) 692-1400. Unless the context otherwise requires, all references in this
Prospectus to the Company include the Company, its subsidiaries and their
respective predecessors, and references to "hotels" include both hotels and
motels.
7
<PAGE>
THE RIGHTS OFFERING
Rights.................. Each record holder (a "Record Holder") of Common
Stock at the close of business on February , 1997
(the "Record Date") and each holder of stock options
(an "HFS Option Holder" and each, as well as each
Record Holder, a "Rights Holder") granted pursuant to
HFS Incorporated's 1992 Incentive Stock Option Plan
(the "HFS Option Plan") prior to the date of the
Distribution will receive .23 transferable
subscription rights ("Rights") for each share of
Common Stock held on the Record Date. The number of
Rights issued by the Company to a Rights Holder will
be rounded up to the nearest whole number. Each Right
will entitle the Rights Holder to purchase from the
Company one share of Common Stock for a cash price of
$14.00 (the "Subscription Price") on the terms and
subject to the conditions of the offering. The
distribution of Rights and sale of shares of Common
Stock upon the exercise of Rights are referred to as
the "Rights Offering." An aggregate of approximately
2,499,233 Rights will be distributed pursuant to the
Rights Offering. After March , 1997 (the "Expiration
Date"), the Rights will no longer be exercisable and
will have no value. Rights Holders are strongly urged
either to exercise or to sell their Rights prior to
the Expiration Date.
Record Date............. February , 1997.
Expiration Date......... March , 1997, 5:00 p.m., New York City time, unless
terminated or extended by the Board of Directors of
the Company, in its sole discretion.
Basic Subscription
Privilege............... Rights Holders are entitled to purchase, at the
Subscription Price, one share of Common Stock for
each whole Right held (the "Basic Subscription
Privilege"). See "The Rights Offering--Subscription
Privileges--Basic Subscription Privilege."
Oversubscription
Privilege............... Each Rights Holder who elects to exercise the Basic
Subscription Privilege in full also may subscribe at
the Subscription Price for up to one additional share
of Common Stock (the "Excess Shares") for each share
of Common Stock purchased by the Rights Holder
pursuant to the Basic Subscription Privilege (the
"Oversubscription Privilege"), to the extent shares
of Common Stock (other than the shares which a
certain stockholder and certain HFS Option Holders
have agreed not to subscribe for pursuant to their
Basic Subscription Privileges) have not been
purchased pursuant to the Basic Subscription
Privilege, subject to proration and reduction by the
Company under certain circumstances.
There can be no assurance that there will be Excess
Shares sufficient to satisfy all exercises of the
Oversubscription Privilege. If an insufficient number
of Excess Shares is available to satisfy fully all
exercises of the Oversubscription Privilege, then the
Excess Shares will be prorated among Rights Holders
who exercise their Oversubscription Privilege based
upon the respective numbers of shares of Common Stock
for which each such Rights Holder subscribes pursuant
to the Basic Subscription Privilege. See "The Rights
Offering--Subscription Privileges--Oversubscription
Privilege."
8
<PAGE>
Subscription Price...... $14.00, in cash, for each share of Common Stock.
Procedure for
Exercising Rights....... The Basic Subscription Privilege may be exercised and
the Oversubscription Privilege may be subscribed for
by properly completing the Subscription Certificate
evidencing the Rights (a "Subscription
Certificate") and forwarding such Subscription
Certificate (or following the Guaranteed Delivery
Procedures (as defined below)), with payment of the
Subscription Price for each share of Common Stock
purchased pursuant to the Basic Subscription
Privilege and subscribed for pursuant to the
Oversubscription Privilege, to the Subscription Agent
(as defined below) for receipt by the Subscription
Agent on or prior to the Expiration Date. If the mail
is used to forward Subscription Certificates, it is
recommended that insured, registered mail be used. If
time does not permit a Holder of a Right to deliver
its Subscription Certificate to the Subscription
Agent on or before the Expiration Date, such Holder
should make use of the Guaranteed Delivery Procedures
described under "The Rights Offering--Exercise of
Rights."
If paying by uncertified personal check, please note
that the funds paid thereby may take at least five
business days to clear. Accordingly, Holders who wish
to pay the Subscription Price by means of uncertified
personal check are urged to make payment sufficiently
in advance of the Expiration Date to ensure that such
payment is received and clears by such date and are
urged to consider payment by means of certified or
cashier's check or money order.
A Right may not be exercised in part and fractional
Rights will not be issued.
If the aggregate Subscription Price paid by an
exercising Rights Holder is insufficient to purchase
the number of shares of Common Stock that such holder
indicates on the Subscription Certificate are being
purchased or subscribed for, or if no number of
shares of Common Stock to be purchased or subscribed
for is specified, then the Rights Holder will be
deemed to have exercised the Basic Subscription
Privilege to purchase shares of Common Stock to the
full extent of the payment tendered. If the aggregate
Subscription Price paid by an exercising Rights
Holder exceeds the amount necessary to purchase the
number of shares of Common Stock for which the Rights
Holder has indicated on the Subscription Certificate
an intention to purchase, then the Rights Holder will
be deemed to have subscribed pursuant to the
Oversubscription Privilege to the full extent of the
excess payment tendered. If any Rights Holder is
allocated a fewer number of shares than such Rights
Holder subscribed for pursuant to the
Oversubscription Privilege, then the excess funds
paid by that holder will be returned without
interest. See "The Rights Offering--Exercise of
Rights."
No Revocation........... Once a Rights Holder has exercised the Basic
Subscription Privilege or subscribed for the
Oversubscription Privilege, such exercise or
subscription may not be revoked by such Rights
Holder. See "The Rights Offering--No Revocation."
9
<PAGE>
Shares of Common Stock
Outstanding After the
Rights Offering.........
Assuming the Rights Offering is fully subscribed for,
the Company will have approximately 12,629,856 shares
outstanding after the Rights Offering, based on
10,492,850 shares outstanding immediately prior to
the consummation of the Rights Offering, and assuming
no exercise or transfer by Brahman of the Rights it
receives in respect of its shares of Common Stock or
by certain HFS Option Holders of the Rights they
receive in respect of their stock options granted
pursuant to the HFS Option Plan, and assuming the
unavailability of such Rights to be exercised by
other Rights Holders pursuant to the Oversubscription
Privilege.
Transferability of The Rights are freely transferable and will be quoted
Rights.................. on the Nasdaq National Market under the trading
symbol "CHRTR" until the close of business on the
last trading day prior to the Expiration Date. Any
transfer of Rights will be deemed a transfer of both
the Basic Subscription Privilege and the
Oversubscription Privilege. The Subscription Agent
will endeavor to sell Rights for Rights Holders who
have so requested and have delivered one or more
Subscription Certificate(s) evidencing such Rights,
with the instruction for sale included thereon
properly executed, to the Subscription Agent by 5:00
p.m., New York City time, on or before March , 1997
(three business days prior to the Expiration Date).
There can be no assurance, however, that any market
for Rights will develop, or that the Subscription
Agent will be able to sell any Rights for Holders. If
less than all sales orders received by the
Subscription Agent can be filled, sales proceeds will
be prorated among the Holders based upon the number
of Rights each has instructed the Subscription Agent
to sell during the term of the Rights Offering,
irrespective of when during such period the
instructions are received by the Subscription Agent.
See "The Rights Offering--Method of Transferring
Rights."
Amendments and
Termination............. The Rights Offering may be extended, and its terms
and conditions amended by the Company, at the
Company's option. If the Company amends the terms of
the Rights Offering, a new definitive Prospectus will
be distributed to all Rights Holders who had
previously exercised Rights and to all Rights Holders
of record on the date of such amendment, together
with a form on which each exercising Rights Holder
can consent to the amended terms. Any Rights Holder
who has previously exercised any Rights, or who
exercises Rights within four (4) business days after
the mailing of the new definitive Prospectus, and who
does not so consent within ten (10) business days
after the mailing of the definitive Prospectus and
form of consent, will be deemed to have canceled such
exercise and the Company will refund as soon as
practicable the full amount of the Subscription Price
paid by such Rights Holder, without interest. Any
completed Subscription Certificate received by the
Subscription Agent five (5) or more business days
after the date of the amendment will be deemed to
constitute the consent of the Rights Holder who
completed such Subscription Certificate to the
amended terms.
10
<PAGE>
The Company may terminate the Rights Offering at any
time prior to delivery of the shares of Common Stock.
See "The Rights Offering--Amendments and
Termination."
Persons Holding Shares,
or Wishing to Exercise
Rights, Through
Others..................
Persons holding shares of Common Stock, and receiving
the Rights distributable with respect to such shares,
through a broker, dealer, commercial bank, trust
company or other nominee, as well as persons holding
certificates of Common Stock personally who would
prefer to have such institutions effect transactions
relating to the Rights on their behalf, should
contact the appropriate institution or nominee and
request it to effect the transactions for them. See
"The Rights Offering--Exercise of Rights."
Issuance of Common Certificates representing shares of Common Stock
Stock................... purchased pursuant to the Basic Subscription
Privilege or the Oversubscription Privilege will be
delivered to subscribers as soon as practicable after
the Expiration Date and after all prorations have
been effected. See "The Rights Offering--Subscription
Privileges."
Use of Proceeds.........
The net proceeds available to the Company from the
Rights Offering will be approximately $28.7 million.
The Company currently plans to use such net proceeds
from the Rights Offering, together with available
cash, for general corporate purposes. In addition,
all or a portion of the proceeds may be used to fund
the construction of Hilton Garden Inns under the
Company's alliance with Hilton, to fund the Company's
Mexican joint venture and to fund the redevelopment
of the Company's existing hotels. The Company may
also use a portion of the net proceeds to acquire
additional hotels, although the Company has no
present understanding or agreement with respect to
any acquisitions. At the present time, the Company
has not determined a specific use for the proceeds.
See "Use of Proceeds."
Subscription Agent...... ChaseMellon Shareholder Services, L.L.C.
Information Agent....... Any questions regarding the Rights Offering,
including the procedure for exercising Rights, and
requests for additional copies of this Prospectus,
the Subscription Certificate or the notice of
guaranteed delivery should be directed to ChaseMellon
Shareholder Services, L.L.C. (the "Information
Agent") at (800) 414-2879.
Nasdaq National Market
Symbol for Common
Stock...................
CHRT
Nasdaq National Market
Symbol for Rights.......
CHRTR
11
<PAGE>
RISK FACTORS
Prospective investors should consider carefully the following factors, in
addition to the other information contained in this Prospectus, before
purchasing the shares of Common Stock offered hereby.
EXPANSION RISKS
The Company's strategy includes increasing the number of its hotels through
the acquisition and the redevelopment of existing hotels and development of
new hotels. The Company's ability to expand depends on a number of factors,
including the selection and availability of suitable locations at acceptable
prices, the hiring and training of sufficiently skilled management and
personnel and the availability of financing. There can be no assurance that
financing, or desirable locations for acquisitions or new development, will be
available or, if available, will be on terms acceptable to the Company.
Acquisition Risks: Expansion by acquisition of hotels entails risks that
investments will fail to perform in accordance with expectations and that the
anticipated costs of renovation or conversion will prove inaccurate, as well
as general investment risks associated with any new real estate investment. In
connection with acquired properties, the Company will incur additional costs
relating to renovation and, if applicable, rebranding activities and operating
expenses, which could adversely affect the Company's financial performance.
Development Risks: Expansion by development of new hotels is subject to a
number of risks, including site acquisition cost and availability, risks of
construction delay, inclement weather and labor or material shortages or cost
overruns, risks that properties will not achieve anticipated occupancy levels
or sustain expected room rate levels and commencement risks such as receipt of
zoning, occupancy and other required governmental permits and authorizations,
which in each case could adversely affect the Company's financial performance.
Newly opened hotels generally begin with lower occupancy and room rates and
improve those rates over time.
Redevelopment Risks: The redevelopment of hotels involves risks associated
with construction and renovation of real property, including the possibility
of construction cost overruns and delays due to various factors (including
receipt of regulatory approvals, inclement weather and labor or material
shortages) and market or site determination after acquisition or renovation.
The operations at the hotels under redevelopment can be substantially
curtailed during portions of the redevelopment activity.
There can be no assurance that the Company's expansion strategy will be
implemented successfully. The Company's inability to successfully implement
its expansion plans would limit the Company's ability to increase its revenue
base. Furthermore, there can be no assurance that suitable hotel acquisition
candidates or development sites will be located, that hotel acquisitions can
be consummated successfully or that acquired or developed hotels can be
operated profitably or integrated successfully into the Company's operations.
LODGING INDUSTRY RISKS
The lodging industry in general may be adversely affected by such factors as
changes in national and regional economic conditions (particularly in
geographic areas in which the Company has a high concentration of hotels),
changes in local market conditions, oversupply of hotel space or a reduction
in local demand for rooms and related services, competition in the hotel
industry, changes in interest rates, the availability of financing and other
factors relating to the operation of hotels.
Operating Risks: Operating factors affecting the Company and the lodging
industry generally include (i) competition from other hotels, motels and
recreational properties, (ii) demographic changes, (iii) the recurring need
for renovations, refurbishment and improvements of hotels and increased
expenses related to hotel security, (iv) restrictive changes in zoning and
similar land use laws and regulations, or in health, safety, disability and
environmental laws, rules and regulations, (v) changes in government
regulations that influence or determine wages, prices or construction costs,
(vi) changes in the characteristics of hotel locations, (vii) the inability to
12
<PAGE>
secure property and liability insurance to fully protect against all losses or
to obtain such insurance at reasonable costs, (viii) changes in real estate
tax rates and other operating costs, (ix) changes or cancellations in local
tourist, athletic or cultural events, (x) changes in travel patterns that may
be affected by increases in transportation costs or gasoline prices, changes
in airline schedules and fares, strikes, weather patterns or relocation or
construction of highways, (xi) increases in operating expenses and litigation
as a result of injuries to guests, and (xii) changes in brand identity and
reputation. Unexpected or adverse changes in any of the foregoing factors
could have a material adverse effect on the Company's business, assets,
financial condition or results of operations.
Cyclicality: The hotel industry is subject to periods of cyclical growth and
downturn. In the past, the hotel industry has experienced cyclical downturns
resulting from, among other things, overbuilding in the industry and sluggish
general economic conditions in the United States. There can be no assurance
that downturns or prolonged adverse conditions in the hotel industry, in real
estate or capital markets or in national or local economics will not have a
material adverse impact on the Company. In addition, the Company's hotels are
located throughout the United States and Canada, but the Company has a
geographic concentration of hotels in the State of California. As a result,
the Company's cash flow may be affected by economic conditions and demand for
hotel rooms within the State of California.
Seasonality: The hotel industry is seasonal in nature. Room occupancy rates
at the Company's hotels are affected by normally recurring seasonal patterns
and, in most locations in the United States and Canada, are higher in the late
spring through early fall months (May through October) than during the balance
of the year, with the lowest occupancy rates occurring in the first quarter of
the year. As a result, the Company expects to experience seasonal lodging
revenue patterns similar to the hotel industry with the summer months, due to
the increase in leisure travel, producing a higher revenue than in other
periods during the year.
IMPORTANCE OF FRANCHISOR RELATIONSHIPS
Substantially all of the Company's hotels are operated under the Travelodge
brand name pursuant to franchise agreements with affiliates of HFS. The
Company expects that substantially all of the hotels that it acquires or
develops in the future will be operated under hotel brands franchised by major
hotel franchisors. While the Company believes that franchise arrangements
offer the Company competitive advantages over nonfranchised lodging
properties, the value of a brand name under which the Company's hotels operate
and, as a result, the Company's business as a whole, could be adversely
affected by a number of factors relating to the franchisor of that brand over
which the Company has no control. These risks include the general reputation
of the brand and the success of the franchisor's marketing efforts. In
addition, pursuant to the terms of an applicable franchise agreement, a
franchisor can terminate the agreement if, among other things, its quality
standards are not maintained or if payments due are not made in a timely
fashion. If any of the franchise agreements were terminated by the franchisor,
the Company could explore entering into a franchise agreement with another
franchisor. There can be no assurance, however, that a desirable replacement
relationship would be available.
RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS
The Company has begun to expand its hotel operations in Mexico and Canada.
As a result, the Company's operations may be affected adversely as a result of
political changes or instability, general economic conditions, the imposition
of regulations relating to the ownership of hotel properties or real estate or
the franchising of hotel properties, the imposition of taxes, and other
charges on international business activities, in Mexico or Canada, and the
fluctuations in the value of the U.S. dollar against the Canadian dollar or
the Mexican peso, as the case may be, or restrictions on international
currency transactions.
RISKS OF NEW MANAGEMENT TEAM
The Company's senior management team, including the Chief Executive Officer,
the President, the Chief Operating Officer and the Chief Financial Officer,
have been appointed only recently and have had only a limited opportunity to
work as a management team. As a result, there can be no assurance that the
Company's
13
<PAGE>
management team will be successful in managing the operations of the Company
or be able to effectively implement the Company's business and expansion
strategy.
RELIANCE ON CURRENT MANAGEMENT
Although the Company's management team includes individuals with substantial
experience in operating, managing, developing and acquiring hotels and real
estate properties, the Company relies upon the services and expertise of
Richard L. Fisher, the Company's Chairman and Chief Executive Officer, and
Martin L. Edelman, a Director and the Company's President. The occurrence of
any event which would cause the Company to lose the services of either of
Messrs. Fisher or Edelman could have a material adverse effect on the Company.
The Company has purchased $5 million key-man life insurance policies covering
each of Messrs. Fisher and Edelman. There is no assurance, however, that the
Company will continue to maintain such insurance policies in effect or that
any proceeds thereof would be sufficient to compensate the Company for the
loss of services of either of Messrs. Fisher or Edelman. In addition to the
substantial amounts of time that Messrs. Fisher and Edelman devote to the
Company's business activities, both Messrs. Fisher and Edelman engage in other
business activities. Neither Mr. Fisher nor Mr. Edelman has an employment
agreement with the Company.
RELATIONSHIP WITH HFS
In addition to the Company's relationship with HFS as the franchisor of the
Travelodge brand name under which substantially all of the Company's hotels
operate, $75 million of the Company's borrowings under its Credit Facility
among the Company, Chartwell Canada Corp., which is a subsidiary of the
Company, the Chase Manhattan Bank, as Administrative Agent, The Bank of Nova
Scotia, as Syndication Agent, and the Banks (as defined therein) from time to
time parties thereto (the "Credit Facility") are currently guaranteed by HFS.
The amount and availability of the Credit Facility could be adversely affected
by adverse changes in the financial condition of HFS.
CONFLICTS OF INTEREST
Three members of the Company's Board of Directors also serve as directors of
HFS. This commonality of directors could result in various conflicts of
interest with respect to the administration of the ongoing relationships
between HFS and the Company. In particular, conflicts may arise with respect
to various agreements, such as franchise agreements, entered into between the
Company and HFS. No assurance can be given that all conflicts will be resolved
in favor of the Company and its stockholders.
RISKS ASSOCIATED WITH OWNING REAL ESTATE
The Company's investments will be subject to varying degrees of risk
generally incident to the ownership of real estate. These risks include, among
others, changes in national, regional and local economic conditions, local
real estate market conditions, changes in interest rates and in the
availability, cost and terms of financing, the potential for uninsured
casualty and other losses, the impact of present or future environmental
legislation and compliance with environmental laws, the ongoing need for
capital improvements, particularly in older structures, civil unrest, acts of
God, including earthquakes, flooding and other natural disasters (which may
result in uninsured losses), acts of war and adverse changes in zoning laws
and other regulations, many of which are beyond the control of the Company. In
addition, real estate investments are relatively illiquid, which means that
the ability of the Company to vary its portfolio of hotels in response to
changes in economic and other conditions may be limited. If the Company must
sell an investment, there can be no assurance that the Company will be able to
dispose of it in the time period it desires or that the sale price of any
investment will recoup or exceed the amount of the Company's investment.
14
<PAGE>
RISK OF EXPIRATION OF GROUND LEASES
Approximately 67% of the Company's hotels are located on property covered by
ground leases with unaffiliated third parties. Although the Company intends to
attempt to obtain renewals of the ground leases or the purchase of the real
property from the lessor when it considers renewal or purchase to be
advantageous, there can be no assurance that the Company will be able to do
so. The Company's failure to renew these ground leases or purchase the real
property from the lessor could adversely affect the Company's financial
performance.
COMPETITION
The hotel industry is highly competitive. The success of a hotel in its
market, in large part, is dependent upon its ability to compete in such areas
as reasonableness of room rates, quality of accommodations, service level and
convenience of location. The Company's hotels compete with existing hotel
facilities in their geographic markets, as well as future hotel facilities
that may be developed in proximity to the existing hotels. The Company's
hotels generally operate in areas that contain numerous competitors. The
Company's hotels compete with numerous other hotels, motels and other lodging
establishments in their market areas. Chains such as Days Inn and Howard
Johnson, both of which are franchised by HFS, Comfort Inns, Fairfield Inns,
Hampton Inns, La Quinta, Motel 6 and Red Roof Inns are direct competitors of
the Company's limited-service Travelodge brand hotels and Ramada, Holiday Inn
and Quality Inns are direct competitors, of the Company's full-service hotels.
Demographic, geographic or other changes in one or more of the Company's
markets could impact the convenience or desirability of the sites of certain
hotels, which would adversely affect the operations of those hotels. There can
be no assurance that new or existing competitors will not significantly lower
rates or offer greater convenience, services or amenities or significantly
expand or improve facilities in a market in which the Company's hotels
compete, thereby adversely affecting the Company's operations. In addition,
some of the Company's competitors have a larger network of locations and
greater resources than the Company. These competitors may generally be able to
accept more risk than the Company can prudently manage, including risks with
respect to the geographic proximity of its investments. Competition may
generally reduce the number of suitable hotel acquisition opportunities
offered to the Company and increase the bargaining power of property owners
seeking to sell, which could adversely affect the Company's financial
performance.
CONTROL BY PRINCIPAL STOCKHOLDERS
CL Associates and FSNL have informed the Company that they intend to
exercise their Basic Subscription Privilege in full. After consummation of the
Rights Offering and the exercise by CL Associates and FSNL of their Basic
Subscription Privilege, CL Associates and FSNL will beneficially own
approximately 6,033,064 shares of the Company's Common Stock, representing
approximately 47.77% of the outstanding shares of Common Stock, and will have
voting and investment power with respect to such stock. Accordingly, CL
Associates and FSNL will retain effective control, subject to the terms of the
Amended and Restated Stock Purchase Agreement, dated as of March 14, 1996, by
and among CL Associates, FSNL and the Company (the "CL Associates/FSNL Stock
Purchase Agreement"), over the election of Directors of the Company and most
corporate actions, as well as the outcome of most issues submitted to the
Company's stockholders. Certain conflicts of interest may arise between CL
Associates, FSNL and their affiliates and the Company. Such conflicts could
arise with respect to business dealings between CL Associates, FSNL and their
affiliates and the Company and other corporate matters. However, pursuant to
the CL Associates/FSNL Stock Purchase Agreement, CL Associates and FSNL have
agreed to certain limitations on their activities and certain limits on the
exercise of their control over the Company.
SHARES ELIGIBLE FOR FUTURE SALE
Upon consummation of the Rights Offering, if the Rights Offering is fully
subscribed (other than by Brahman which has agreed not to exercise or transfer
any of the approximately 299,000 Rights it will receive pursuant to the Rights
Offering and certain HFS Option Holders (the "Nonexercising Option Holders")
who have agreed not to exercise or transfer any of the approximately 63,227
Rights they will receive pursuant to the Rights Offering), the Company will
have outstanding an aggregate of approximately 12,629,856 shares of
15
<PAGE>
Common Stock (based on the number of shares outstanding as of February 10,
1997), assuming no exercise of outstanding options. Of the total outstanding
shares of Common Stock, the 2,137,006 shares of Common Stock sold in the
Rights Offering, if it is fully subscribed (other than by Brahman which has
agreed not to exercise or transfer any of the approximately 299,000 Rights it
will receive pursuant to the Rights Offering and the Nonexercising Option
Holders who have agreed not to exercise or transfer any of the approximately
63,227 Rights they will receive pursuant to the Rights Offering), will be
freely tradable without restriction or further registration under the
Securities Act, unless purchased by "affiliates" of the Company, as that term
is defined in Rule 144 under the Securities Act (which sales would be subject
to certain volume limitations and other restrictions described below). In
addition, of the 6,033,064 shares of Common Stock held by CL Associates and
FSNL after the full exercise by CL Associates and FSNL of their Basic
Subscription Privilege in the Rights Offering, the approximately 1,128,134
shares purchased by CL Associates and FSNL in the Rights Offering will be
immediately eligible for resale in the public market, subject to certain
volume and other restrictions under Rule 144, 904,930 of the shares of Common
Stock held by CL Associates will be eligible for resale in the public market,
subject to certain volume and other restrictions under Rule 144, in December
1997, and the remaining 4,000,000 shares of Common Stock held by them will be
eligible for resale in the public market, subject to certain volume and other
restrictions under Rule 144, in August 1998, but the sale of those 4,000,000
shares in the public market will be not be permitted until August 1999 by the
terms of the CL Associates/FSNL Stock Purchase Agreement. The 1,000,000 shares
of Common Stock purchased by Brahman in the Brahman Private Placement are
subject to a "lock up" agreement with the Company under which those shares
will not be permitted to be sold, transferred or otherwise disposed of by them
until August 1, 1997. The Company is obligated to register all of the shares
of Common Stock purchased by Brahman in the Brahman Private Placement and
expects to be obligated to register all the shares of Common Stock purchased
by Baron in the Baron Private Placement by May 1, 1997. As a result, at the
conclusion of the Brahman lock-up period and shortly after the close of the
Baron Private Placement, the shares purchased in the Brahman Private Placement
and the Baron Private Placement may be sold in the public market. See "Shares
Eligible for Future Sale." No prediction can be made as to the effect, if any,
that future sales of shares, or the availability of shares for future sales,
will have on the market price of the shares of Common Stock from time to time.
The sale of substantial amounts of shares of Common Stock, or the perception
that such sales could occur, could adversely affect prevailing market prices
for the Common Stock. See "Shares Eligible for Future Sale."
REGULATORY RISKS
The lodging industry is subject to numerous federal, state and local
government regulations, including building and zoning requirements. Also, the
Company is subject to laws governing its relationship with employees,
including minimum wage requirements, overtime, working conditions and work
permit requirements. An increase in the minimum wage rate, employee benefit
costs or other costs associated with employees, could adversely affect the
Company. Under the Americans with Disabilities Act of 1990 (the "ADA"), all
public accommodations are required to meet certain federal requirements
related to access and use by disabled persons. Although the Company has taken
actions to comply with the ADA, no assurance can be given that a material ADA
claim will not be asserted against the Company. These and other initiatives
could adversely affect the Company, as well as the lodging industry in
general. The Company is also subject to dramshop statutes or equivalent common
law in some jurisdictions that give an injured person the right to recover
damages from any establishment that wrongfully served alcoholic beverages to
an intoxicated person who causes the injury. The Company believes that its
insurance coverage with respect to any such liquor liability is adequate. The
Company has hotels that are subject to alcohol sales regulations and/or
dramshop statutes in Canada and the following states: California, Florida,
Georgia, New Jersey, New York, Oregon, Pennsylvania and Texas.
DIVIDEND POLICY
The Company has never paid any dividends on the Common Stock and does not
anticipate paying dividends on the Common Stock in the foreseeable future. In
addition, the Company's Credit Facility prohibits the payment of dividends on
the Common Stock. See "Dividend Policy."
16
<PAGE>
ENVIRONMENTAL MATTERS
Various United States Federal, state and local, Canadian and Mexican laws
and regulations impose liability on present and former real property owners
and operators for the cost of cleaning up or removing contamination caused by
hazardous or toxic materials. Under certain of these laws and regulations,
liability may be imposed without regard to fault or legality of the original
actions, and may be joint and several with other responsible parties.
Consequently, the Company could be responsible for payment of the full amount
of the liability, whether or not any other responsible party is also liable.
The presence of contamination at, adjacent to or near, a property also can
affect the valuation of that property or the ability of the owner to sell,
lease or obtain financing for the property and may in certain circumstances
form the basis for liability to third persons for personal injury or other
damages. Some of the Company's hotels are located on or near properties, such
as gasoline stations, on which activities have been conducted which have or
may have released petroleum products or other hazardous substances into the
soil or groundwater. The Company is aware of soil contamination, which the
Company believes was caused by unrelated third parties, at several of its
hotel sites in the United States and Canada. The Company has not received any
notices of liability in connection with such contamination. Based on its
present knowledge, the Company does not believe that environmental matters are
likely to have a material adverse effect on the Company's business, assets,
financial condition or results of operations. However, due to the absence of
complete information, possible future changes in laws and regulations,
possible future changes in the condition of the Company's properties, and
other factors, no assurance can be given that environmental matters will not
have a material adverse effect on the Company's business, assets, financial
condition or results of operations.
DIVESTITURE AND LOSS OF VOTING RIGHTS
Because the Company was formerly engaged in investing in casino gaming
activities, the Company's certificate of incorporation includes provisions
that may have the effect of permitting the Company to redeem or require a
stockholder of the Company to divest its shares of Common Stock or forfeit its
voting rights in certain circumstances where such stockholder's ownership of
Common Stock would adversely affect the Company's ability to secure requisite
gaming-related approvals or comply with certain other governmental
requirements. These provisions may be waived with the consent of the Company's
Board of Directors. See "Description of Capital Stock."
UNCERTAIN MARKET FOR RIGHTS; MARKET CONDITIONS; MARKET CONSIDERATIONS
Because the Rights are new securities, the trading market for the Rights may
be volatile. Moreover, there can be no assurance that a market for the Rights
will develop or as to the price at which the Rights will trade.
The Subscription Price of the Rights has been determined by the Board of
Directors of the Company and represents a discount to the market price of the
Common Stock at the date of this Prospectus. However, there can be no
assurance that the market price for the Common Stock will not decline during
the subscription period or that, following the Expiration Date, a subscribing
Rights Holder will be able to sell shares of Common Stock purchased in the
Rights Offering at a price equal to or greater than the Subscription Price.
When made, the election of a Rights Holder to exercise Rights in the Rights
Offering is irrevocable. Moreover, until certificates are delivered,
subscribing Rights Holders may not be able to sell the Common Stock that they
have purchased in the Rights Offering. Certificates representing shares of
Common Stock purchased pursuant to the Basic Subscription Privilege or the
Oversubscription Privilege will be delivered to subscribers as soon as
practicable after the Expiration Date and after all prorations have been
effected. No interest will be paid to Rights Holders on funds delivered to the
Subscription Agent pursuant to the exercise of Rights pending delivery of
shares of Common Stock acquired upon exercise of Rights.
IMPACT OF RIGHTS OFFERING ON HOLDERS OF COMMON STOCK; DILUTION
The Rights entitle the holders of shares of Common Stock to purchase shares
of Common Stock at a price below the prevailing market price of the Common
Stock immediately prior to the commencement of the Rights
17
<PAGE>
Offering. Holders of shares of Common Stock who exercise their Rights will
preserve their proportionate interest in their equity ownership and voting
power of the Company. Rights Holders who do not exercise their Basic
Subscription Privilege will experience a decrease in their proportionate
interest in the equity ownership and voting power of the Company. The sale of
the Rights may not compensate a holder for all or any part of the reduction in
the market value of such stockholder's shares of Common Stock, if any,
resulting from the Rights Offering. Stockholders who do not exercise or sell
their Rights will relinquish any value inherent in the Rights.
Assuming all of the Rights are exercised (other than by Brahman which has
agreed not to exercise or transfer any of the approximately 299,000 Rights it
will receive pursuant to the Rights Offering and certain Nonexercising Option
Holders who have agreed not to exercise or transfer any of the approximately
63,227 Rights they will receive pursuant to the Rights Offering) and based on
10,492,850 shares of Common Stock outstanding on February 10, 1997 the
consummation of the Rights Offering would result (on a pro forma basis as of
such date) in an increase of approximately 2,137,006 shares of Common Stock.
CL Associates and FSNL own approximately 46.75% of the Common Stock as of such
date and have informed the Company that they intend to exercise the Rights
they receive through the Basic Subscription Privilege in full. Assuming that
all of the holders of the Rights exercise such Rights and that CL Associates
and FSNL exercise the approximately 1,128,134 Rights they receive through the
Basic Subscription Privilege in full and do not exercise the Rights they
receive through the Oversubscription Privilege, CL Associates and FSNL would
own 47.77% of the Common Stock of the Company after the Rights Offering.
Assuming that no Rights are exercised by the holders thereof but that CL
Associates and FSNL exercise their Basic Subscription Privilege but do not
exercise their Oversubscription Privilege, CL Associates and FSNL would own
51.92% of the Common Stock after the Rights Offering.
18
<PAGE>
THE RIGHTS OFFERING
THE RIGHTS
The Company is distributing transferable subscription rights ("Rights") to
the record holders ("Record Holders") of its outstanding Common Stock as of
the close of business on February , 1997 (the "Record Date") and to holders
of stock options ("HFS Option Holders" and together with the Record Holders,
the "Rights Holders") granted pursuant to HFS Incorporated's 1992 Incentive
Stock Option Plan (the "HFS Option Plan"). The Company will distribute, at no
cost to the record holders, .23 Rights for each share of Common Stock held on
the Record Date. An aggregate of approximately 2,499,233 Rights will be
distributed pursuant to the "Rights Offering." Rights will be evidenced by
transferable subscription certificates ("Subscription Certificates"), which
are being distributed to each Rights Holder contemporaneously with the
delivery of this Prospectus. Commencement of the Rights Offering is subject to
receipt of a waiver by the Company's bank lenders under its Credit Facility to
permit the distribution of the Rights.
No fractional Rights or cash in lieu thereof will be issued or paid. The
number of Rights distributed to each holder of Common Stock will be rounded up
to the nearest whole number. No Subscription Certificate may be divided in
such a way as to permit the holders of Common stock to receive a greater
number of rights than the number to which such Subscription Certificate
entitles its holder, except that a depository, bank, trust company, and
securities broker or dealer holding shares of Common Stock on the Record Date
for more than one beneficial owner may, upon proper showing to the
Subscription Agent (defined below), exchange its Subscription Certificate to
obtain a Subscription Certificate for the number of Rights to which all such
beneficial owners in the aggregate would have been entitled had each been a
holder on the Record Date. The Company reserves the right to refuse to issue
any such Subscription Certificate if such issuance would be inconsistent with
the principle that each beneficial owner's holdings will be rounded up to the
nearest whole Right.
Because the number of Rights distributed to each stockholder will be rounded
up to the nearest whole number, beneficial owners of Common Stock who are also
the record holders of such shares might receive more Rights under certain
circumstances than beneficial owners of Common Stock who are not the record
holders of their shares and who do not obtain (or cause the record owner of
their shares of Common Stock to obtain) a separate Subscription Certificate
with respect to the shares beneficially owned by them, including shares held
in an investment advisory or similar account. To the extent that record
holders of Common Stock or beneficial owners of Common Stock who obtain a
separate Subscription Certificate receive more Rights, they will be able to
subscribe for more shares pursuant to the Basic Subscription Privilege and
Oversubscription Privilege described below.
CL Associates and FSNL, which beneficially own approximately 46.75% of the
Common Stock (based on 10,492,850 shares of outstanding Common Stock as of
February 10, 1997), have informed the Company that they intend to exercise the
Rights they receive through the Basic Subscription Privilege. If no holder of
Rights other than CL Associates and FSNL exercises its Rights, and if CL
Associates and FSNL fully exercise the Basic Subscription Privilege, then
approximately 45.14% of the Rights distributed by the Company will be
exercised, and CL Associates and FSNL's beneficial ownership in the Company
would increase to 51.92%, assuming CL Associates and FSNL do not exercise the
Rights they receive through the Oversubscription Privilege.
Brahman, which may be deemed to own beneficially on behalf of its investment
advisory client accounts 12.39% of the Common Stock, has agreed not to
exercise or transfer any of the approximately 299,000 Rights that it receives
through the Basic Subscription Privilege or the Oversubscription Privilege,
and to allow such Rights to expire unexercised. The Nonexercising Option
Holders have also agreed not to exercise or transfer any of the approximately
63,227 Rights they receive through the Basic Subscription Privilege or the
Oversubscription Privilege, and to allow such Rights to expire unexercised.
These 362,227 Rights will not be made available to other Rights Holders who
exercise their Oversubscription Privileges.
19
<PAGE>
The Rights will expire at 5:00 p.m., New York City time, on March , 1997
("Expiration Date"). After the Expiration Date, unexercised Rights will be
null and void. The Company will not be obligated to honor any purported
exercise of Rights received by the Subscription Agent after the Expiration
Date, regardless of when the documents relating to such exercise were sent,
except pursuant to the "Guaranteed Delivery Procedures" described below.
METHOD OF OFFERING
The Rights Offering is being made directly by the Company. The Company will
pay no underwriting discounts or commissions, finders fees or other
remuneration in connection with any distribution of the Rights or sales of the
shares of Common Stock offered hereby, other than the fees paid to ChaseMellon
Shareholders Services, L.L.C., as Subscription Agent and Information Agent.
SUBSCRIPTION PRIVILEGES
Basic Subscription Privilege
Stockholders of the Company will receive .23 Rights to purchase shares of
Common Stock at the Subscription Price for each share of Common Stock held on
the Record Date (the "Basic Subscription Privilege"). Each Right entitles the
holder to purchase at the Subscription Price one share of Common Stock. Each
Rights Holder is entitled to subscribe for all, or any portion of, the shares
of Common Stock subject to Rights.
Oversubscription Privilege
Each Right also entitles any Rights Holder exercising the Basic Subscription
Privilege in full to subscribe for up to one additional share of Common Stock
for each share of Common Stock purchased pursuant to the Basic Subscription
Privilege (the "Oversubscription Privilege"), to the extent all shares have
not been purchased pursuant to the Basic Subscription Privilege (excluding the
shares which Brahman and the Nonexercising Option Holders have agreed not to
subscribe for pursuant to their Basic Subscription Privileges). Only Rights
Holders who exercise all of the Rights pursuant to the Basic Subscription
Privilege will be entitled to exercise the Oversubscription Privilege.
Shares of Common Stock will be available for purchase pursuant to the
Oversubscription Privilege only to the extent that any shares of Common Stock
are not subscribed for through the Basic Subscription Privilege, other than
(i) approximately 299,000 shares of Common Stock issuable upon the exercise of
Rights granted to Brahman which Brahman has agreed not to exercise or transfer
and (ii) approximately 63,227 shares of Common Stock issuable upon the
exercise of Rights granted to the Nonexercising Option Holders who have agreed
not to exercise or transfer those Rights. If the shares of Common Stock (other
than the shares issuable upon the exercise of the Rights granted to Brahman
and the Nonexercising Option Holders) not subscribed for through the Basic
Subscription Privilege (the "Excess Shares") are not sufficient to satisfy all
subscriptions pursuant to the Oversubscription Privilege, the Excess Shares
will be allocated pro rata (subject to the elimination of fractional shares)
among the Rights Holders exercising the Oversubscription Privilege in
proportion to the number of shares of Common Stock a Rights Holder exercising
the Oversubscription Privilege has subscribed for pursuant to the Basic
Subscription Privilege.
Banks, brokers and other nominee Rights Holders who exercise the Basic
Subscription Privilege and subscribe pursuant to the Oversubscription
Privilege on behalf of beneficial owners of Rights will be required to certify
to the Subscription Agent and the Company, in connection with the subscription
pursuant to the Oversubscription Privilege, as to the aggregate number of
Rights that have been exercised and the number of shares of Common Stock that
are being subscribed for pursuant to the Oversubscription Privilege by each
beneficial owner of Rights on whose behalf such nominee holder is acting.
20
<PAGE>
SUBSCRIPTION PRICE
The Subscription Price is $14.00 per share of Common Stock.
EXERCISE OF RIGHTS
Rights may be exercised by delivering to ChaseMellon Shareholder Services,
L.L.C. (the "Subscription Agent") at the addresses specified below, on or
prior to the Expiration Date, the properly completed and executed Subscription
Certificate evidencing such Rights with any signatures guaranteed as required,
together with payment in full of the Subscription Price for each share of
Common Stock purchased pursuant to the Basic Subscription Privilege and
subscribed for pursuant to the Oversubscription Privilege. Payment may be made
only by check or bank draft drawn upon a U.S. bank or postal, telegraphic or
express money order payable to ChaseMellon Shareholder Services, L.L.C., as
Subscription Agent. The Subscription Price will be deemed to have been
received by the Subscription Agent only upon (i) clearance of any uncertified
check or (ii) receipt by the Subscription Agent of any certified check or bank
draft drawn upon a U.S. bank or of any postal, telegraphic or express money
order. If paying by uncertified personal check, please note that the funds
paid thereby may take at least five business days to clear. Accordingly,
Rights Holders who wish to pay the Subscription Price by means of uncertified
personal check are urged to make payment sufficiently in advance of the
Expiration date to ensure that such payment is received and clears by such
date and are urged to consider payment by means of certified or cashier's
check or money order. All funds received in payment of the Subscription Price
will be held by the Subscription Agent and invested at the direction of the
Company in short-term certificates of deposit, short-term obligations of the
United States or any state or any agency of the United States or money market
mutual funds investing in such instruments.
Subscription Certificates and payment of the Subscription Price or, if
applicable, Notices of Guaranteed Delivery or DTC Participant Oversubscription
Subscription Forms (each, as defined below) should be delivered to the
Subscription Agent at the addresses for the Subscription Agent set forth
below.
If a Rights Holder wishes to exercise Rights, but time will not permit such
holder to cause the Subscription Certificate or Subscription Certificates
evidencing such Rights to reach the Subscription Agent on or prior to the
Expiration Date, such Rights may nevertheless be exercised if all of the
following conditions (the "Guaranteed Delivery Procedures") are met:
(i) such holder has caused payment in full of the Subscription Price for
each share of Common Stock being purchased pursuant to the Basic
Subscription Privilege and subscribed for pursuant to the Oversubscription
Privilege to be received (in the manner set forth above) by the
Subscription Agent on or prior to the Expiration Date;
(ii) the Subscription Agent receives, on or prior to the Expiration Date,
a guarantee notice (a "Notice of Guaranteed Delivery"), which has been
distributed with the Subscription Certificates, from a member firm of a
registered national securities exchange or a member of the National
Association of Securities Dealers, Inc., from a commercial bank or trust
company having an office or correspondent in the United States, or from a
financial institution acceptable to the Subscription Agent (each an
"Acceptable Institution"), stating the name of the exercising Rights
Holder, the number of Rights represented by the Subscription Certificate or
Subscription Certificates held by such exercising Rights Holder, the number
of shares of Common Stock being purchased pursuant to the Basic
Subscription Privilege and the number of shares of Common Stock, if any,
being subscribed for pursuant to the Oversubscription Privilege, and
guaranteeing the delivery to the Subscription Agent of any Subscription
Certificate evidencing such Rights within five trading days on the Nasdaq
National Market following the Expiration Date; and
(iii) the properly completed Subscription Certificate(s), with any
required signatures guaranteed, evidencing the Rights being exercised, with
any required guaranties, is received by the Subscription Agent within five
trading days on the Nasdaq National Market following the date of the Notice
of Guaranteed Delivery relating thereto. The Notice of Guaranteed Delivery
may be delivered to the Subscription Agent in the same manner as
Subscription Certificates at the addresses set forth above, or may be
transmitted to the
21
<PAGE>
Subscription Agent by facsimile transmission at the facsimile number set
forth below. Additional copies of the form of Notice of Guaranteed Delivery
are available upon request from the Subscription Agent or the Information
Agent, whose address and telephone number is set forth below.
If an exercising Rights Holder does not indicate the number of Rights being
exercised, or does not forward full payment of the aggregate Subscription
Price for the number of Rights that the Rights Holder indicates are being
exercised, then the Rights Holder will be deemed to have exercised the Basic
Subscription Privilege with respect to the maximum number of Rights that may
be exercised for the aggregate Subscription Price payment delivered by the
Rights Holder, and to the extent that the aggregate Subscription Price payment
delivered by the Rights Holder exceeds the product of (a) the Subscription
Price and (b) the number of Rights evidenced by the Subscription Certificates
delivered by the Rights Holder (such excess being the "Subscription Excess"),
the Rights Holder will be deemed to have subscribed pursuant to the
Oversubscription Privilege to purchase, to the extent available, that number
of whole Excess Shares equal to the quotient of (i) the Subscription Excess
and (ii) the Subscription Price, for up to one additional share of Common
Stock for each share of Common Stock such Rights Holder would be entitled to
purchase pursuant to the Basic Subscription Privilege.
Funds received in payment of the Subscription Price for Excess Shares
subscribed for pursuant to the Oversubscription Privilege will be held in a
segregated account pending issuance of such remaining Shares. If a Rights
Holder subscribing pursuant to the Oversubscription Privilege is allocated
less than all of the shares of Common Stock which such holder wished to
subscribe for pursuant to the Oversubscription Privilege, the excess funds
paid by such holder in respect of the Subscription Price for shares not issued
will be returned promptly after the Expiration Date by mail, without any
interest earned on such funds.
Unless a Subscription Certificate (i) provides that the shares of Common
Stock to be issued pursuant to the exercise of Rights represented thereby are
to be delivered to the holder of such Rights or (ii) is submitted for the
account of an Acceptable Institution, signatures on such Subscription
Certificate must be guaranteed by a participant in the Securities Transfer
Agents Medallion Program, the Stock Exchange Medallion Program or the New York
Stock Exchange Inc. Medallion Signature Program.
Persons who hold shares of Common Stock for the account of others, such as
brokers, trustees or depositories for securities, should notify the respective
beneficial owners of such shares as soon as possible to ascertain such
beneficial owners' intentions and to obtain instructions with respect to the
Rights. If the beneficial owner so instructs, the record holder of such Right
should complete Subscription Certificates and submit them to the Subscription
Agent with the proper payment. In addition, beneficial owners of Common Stock
or Rights held through such a holder should contact the holder and request the
holder to effect transactions in accordance with the beneficial owners'
instructions.
The instructions accompanying the Subscription Certificates should be read
carefully and followed in detail. DO NOT SEND SUBSCRIPTION CERTIFICATES TO THE
COMPANY.
THE METHOD OF DELIVERY OF SUBSCRIPTION CERTIFICATES AND PAYMENT OF THE
SUBSCRIPTION PRICE TO THE SUBSCRIPTION AGENT WILL BE AT THE ELECTION AND RISK
OF THE RIGHTS HOLDERS, BUT IF SENT BY MAIL, IT IS RECOMMENDED THAT SUCH
CERTIFICATES AND PAYMENTS BE SENT BY REGISTERED MAIL, PROPERLY INSURED, WITH
RETURN RECEIPT REQUESTED, AND THAT A SUFFICIENT NUMBER OF DAYS BE ALLOWED TO
ENSURE DELIVERY TO THE SUBSCRIPTION AGENT AND CLEARANCE OF PAYMENT PRIOR TO
5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE. BECAUSE UNCERTIFIED
PERSONAL CHECKS MAY TAKE AT LEAST FIVE BUSINESS DAYS TO CLEAR, YOU ARE
STRONGLY URGED TO PAY, OR ARRANGE FOR PAYMENT, BY MEANS OF CERTIFIED OR
CASHIER'S CHECK OR MONEY ORDER.
All questions concerning the timeliness, validity, form and eligibility of
any exercise of Rights or subscriptions pursuant to the Oversubscription
Privilege will be determined by the Company, whose determinations will be
final and binding. The Company in its sole discretion may waive any defect or
irregularity,
22
<PAGE>
or permit a defect or irregularity to be corrected within such time as it may
determine, or reject the purported exercise of any Right or subscription
pursuant to the Oversubscription Privilege. Subscriptions will not be deemed
to have been received or accepted until all irregularities have been waived or
cured within such time as the Company determines in its sole discretion.
Neither the Company nor the Subscription Agent will be under any duty to give
notification of any defect or irregularity in connection with the submission
of Subscription Certificates or incur nay liability for failure to give such
notification.
Any questions or requests for assistance concerning the method of exercising
Rights or subscribing pursuant to the Oversubscription Privilege or requests
for additional copies of this Prospectus or the Notice of Guaranteed Delivery
should be directed to the Information Agent, ChaseMellon Shareholder Services,
L.L.C., Inc., at its addresses set forth under "Information Agent."
NO REVOCATION
ONCE A RIGHTS HOLDER HAS EXERCISED THE BASIC SUBSCRIPTION PRIVILEGE AND/OR
SUBSCRIBED PURSUANT TO THE OVERSUBSCRIPTION PRIVILEGE, SUCH EXERCISE OR
SUBSCRIPTION MAY NOT BE REVOKED BY SUCH RIGHTS HOLDER.
METHOD OF TRANSFERRING RIGHTS
The Rights will be quoted on the Nasdaq National Market under the trading
symbol CHRTR and may be purchased or sold through usual investment channels,
including banks and brokers. Trading in Rights will cease on the close of
business of the Nasdaq National Market trading day preceding the Expiration
Date.
The Rights evidenced by a single Subscription Certificate may be transferred
in whole by endorsing the Subscription certificate for transfer in accordance
with the accompanying instructions. A portion of the Rights evidenced by a
single Subscription Certificate (but not fractional Rights) may be transferred
by delivering to the Subscription Agent a Subscription Certificate properly
endorsed for transfer, with instructions to register such portion of the
Rights evidenced thereby in the name of the transferee (and to issue a new
Subscription Certificate to the transferee evidencing such transferred
Rights). In such event, a new Subscription Certificate evidencing the balance
of the Rights will be issued to the Rights Holder or, if the Rights Holder so
instructs, to an additional transferee.
The Rights evidenced by a Subscription Certificate also may be sold, in
whole or in part, through the Subscription Agent by delivering to the
Subscription Agent such Subscription Certificate properly executed for sale by
the Subscription Agent. If only a portion of the Rights (but not fractional
Rights) evidenced by a single Subscription Certificate is to be sold by the
Subscription Agent, such Subscription Certificate must be accompanied by
instructions setting forth the action to be taken with respect to the Rights
that are not to be sold.
Promptly following the Expiration Date, the Subscription Agent will send the
Rights Holder a check for the net proceeds from the sale of such Rights. If
the Rights can be sold, sales of such Rights will be deemed to have been
effected at the weighted average price received by the Subscription Agent for
all Rights sold by it at the request of Rights Holders, less any applicable
brokerage commissions, taxes and other direct expenses of sale. The Company
will pay the fees charged by the Subscription Agent for effecting such sales.
Orders to sell Rights must be received by the Subscription Agent prior to 5:00
p.m., New York City time, on the third business day preceding the Expiration
Date. If less than all sales orders received by the Subscription Agent can be
filled, sales proceeds will be prorated among the Rights Holders based upon
the number of Rights each has instructed the Subscription Agent to sell during
such period, irrespective of when during such period the instructions are
received by the Subscription Agent. The Subscription Agent's obligation to
execute orders for the sale of Rights is subject to its ability to find
buyers.
Rights Holders of Common Stock wishing to transfer all or a portion of their
Rights (but not fractional Rights) should allow a sufficient amount of time
prior to the Expiration Date for (i) the transfer instructions to be received
and processed by the Subscription Agent, (ii) a new Subscription Certificate
to be issued and transmitted to the transferee or transferees with respect to
transferred Rights, and to the transferor with respect to
23
<PAGE>
retained Rights, if any, and (iii) the Rights evidenced by such new
Subscription Certificates to be exercised or sold by the recipients thereof.
If time does not permit a transferee of a Right who wishes to exercise its
Right to deliver its Subscription Certificate to the Subscription Agent on or
before the Expiration Date, such transferee should make use of the Guaranteed
Delivery Procedure described under "The Rights Offering--Exercise of Rights."
Neither the Company nor the Subscription Agent shall have any liability to a
transferee or transferor of Rights if Subscription Certificates are not
received in time for exercise or sale prior to the Expiration Date.
Except for the fees charged by the Subscription Agent, all commissions, fees
and other expenses (including brokerage commissions and transfer taxes)
incurred in connection with the purchase, sale or exercise of Rights will be
for the account of the transferor of the Rights, and none of such commissions,
fees or expenses will be paid by the Company or the Subscription Agent.
AMENDMENTS AND TERMINATION
The Company reserves the right to extend the Expiration Date and to amend
the terms and conditions of the Rights Offering. If the Company amends the
terms of the Rights Offering, the Registration Statement of which this
Prospectus forms a part will be amended, and a new definitive Prospectus will
be distributed to all Rights Holders who have previously exercised Rights and
to holders of record of unexercised Rights on the date the Company amends such
terms. In addition, all Rights Holders who have previously exercised Rights,
or who exercise Rights within four (4) business days after the mailing of the
new definitive Prospectus, will be provided with a form of Consent to Amended
Rights Offering Terms, on which such Rights Holders can confirm their exercise
of Rights and their subscriptions under the terms of the Rights Offering as
amended by the Company; any Rights Holder who has previously exercised any
Rights, or who exercises Rights within four (4) business days after the
mailing of the new definitive Prospectus, and who does not return such Consent
within ten (10) business days after the mailing of such Consent by the Company
will be deemed to have canceled such Rights Holder's exercise of Rights, and
the full amount of the Subscription Price theretofore paid by such Rights
Holder will be returned promptly after the Expiration Date by mail, without
any interest earned on such funds. Any completed Subscription Certificate
received by the Subscription Agent five (5) or more business days after the
date of the amendment will be deemed to constitute the consent of the Rights
Holder who completed such Subscription Certificate to the amended terms.
The Company reserves the right at any time prior to delivery of the shares
of Common Stock purchased in the Rights Offering to terminate the Rights
Offering. Such termination would be effected by the Company by giving oral or
written notice of such termination to the Subscription Agent and making a
public announcement thereof. If the Rights Offering is so terminated, the
Subscription Price will be returned promptly after the Expiration Date by
mail, without any interest earned on such funds. Neither the Company nor any
selling Rights Holder will have any obligation to a purchaser of Rights,
whether such purchase was made through the Subscription Agent or otherwise, in
the event the Rights Offering is terminated.
SHARES NOT PURCHASED IN RIGHTS OFFERING
Any shares of Common Stock remaining after exercise of the Basic
Subscription Privilege and the Oversubscription Privilege will be retained by
the Company and will not be offered to the public.
SUBSCRIPTION AGENT
The Company has appointed ChaseMellon Shareholder Services, L.L.C. as
Subscription Agent for the Rights Offering. The Subscription Agent's
addresses, which are the addresses to which the Subscription Certificates and
payment of the Subscription Price should be delivered, as well as the address
to which a Notice of Guaranteed Delivery must be delivered, and numbers are:
Address if by mail:
ChaseMellon Shareholder Services, L.L.C.
Reorganization Department
P.O. Box 798
Midtown Station
New York, N.Y. 10018
24
<PAGE>
Address if by hand or overnight courier:
ChaseMellon Shareholder Services, L.L.C.
Reorganization Department
120 Broadway
13th Floor
New York, N.Y. 10271
Facsimile Number:
Facsimile (For Eligible Institutions Only)
(201) 329-8936
For Confirming Fax Only: (201) 296-4209 or (201) 296-4381
The Company will pay the fees and expenses of the Subscription Agent and has
agreed to indemnify the Subscription Agent from certain liability which it may
incur in connection with the Rights Offering.
INFORMATION AGENT
The Company has appointed ChaseMellon Shareholder Services, L.L.C. as
Information Agent for the Rights Offering. Any questions or requests for
additional copies of this Prospectus or the Notice of Guaranteed Delivery may
be directed to the Information Agent at the address and numbers below:
Address:
ChaseMellon Shareholder Services, L.L.C.
Information Agent
450 West 33rd Street, 15th Floor
New York, N.Y. 10001
Telephone Number:
(800) 414-2879
The Company will pay the fees and expenses of the Information Agent and has
agreed to indemnify the Information Agent from certain liabilities which it
may incur in connection with the Rights Offering.
NO BOARD RECOMMENDATION
An investment in the Common Stock must be made pursuant to each Rights
Holder's or prospective investor's evaluation of the investor's best
interests. Accordingly, the Board of Directors of the Company makes no
recommendation to any Rights Holder or prospective investor regarding the
exercise of Rights.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following summary describes certain U.S. federal income tax
considerations relevant to beneficial owners of Common Stock upon the issuance
of Rights, and to Rights Holders upon the exercise, disposition or lapse of
Rights. This summary is based upon laws, regulations, rulings and decisions
currently in effect, all of which are subject to change, possibly with
retroactive effect. This summary is addressed only to Rights Holders that hold
Rights and any Common Stock as capital assets and does not discuss state,
local or foreign tax consequences of the Rights Offering. This summary does
not discuss all aspects of federal income taxation that may be relevant to a
particular investor or to certain types of investors subject to special
treatment under the federal income tax laws, including banks, dealers in
securities, life insurance companies, tax-exempt
25
<PAGE>
organizations, foreign taxpayers, and investors that hold their Common Stock
or Rights as part of a "straddle" for federal income tax purposes or as part
of an integrated investment.
BENEFICIAL OWNERS OF COMMON STOCK AND RIGHTS HOLDERS ARE URGED TO CONSULT
THEIR TAX ADVISORS AS TO THE U.S. FEDERAL, STATE, LOCAL AND FOREIGN TAX
CONSEQUENCES OF THE RIGHTS OFFERING.
ISSUANCE OF RIGHTS
Beneficial owners of Common Stock are not expected to recognize taxable
income, for federal income tax purposes, in connection with the distribution
of Rights. Pursuant to Section 305(a) of the Internal Revenue Code of 1986, as
amended (the "Code"), the Company intends to treat the distribution of Rights
as a nontaxable distribution. If the Internal Revenue Service were to take a
contrary position with respect to this matter, by deeming the distribution of
Rights to constitute a taxable distribution, a person receiving a Right would
recognize a dividend, taxable as ordinary income, in an amount equal to the
fair market value of the Right received, but only to the extent of the current
and accumulated earnings and profits of the Company. To the extent the deemed
distribution exceeds the current and accumulated earnings and profits of the
Company, such excess would be treated first as a nontaxable recovery of
adjusted tax basis in the Common Stock with respect to which the Right was
distributed and then as gain from the sale or exchange of such Common Stock. A
person's tax basis in a Right received in a taxable distribution would equal
the fair market value of the Right as of the date of distribution of the
Right.
BASIS AND HOLDING PERIOD OF RIGHTS
Except as provided below, the basis of Rights received by a beneficial owner
of Common Stock will be zero. If, however, either (i) the fair market value of
the Rights on the date the Rights are issued is 15% or more of the fair market
value (on the date of issuance) of the Common Stock with respect to which the
Rights are received, or (ii) the beneficial owner elects, in its federal
income tax return for the taxable year in which the Rights are received, to
allocate part of the basis of such Common Stock to the Rights, then upon
exercise or sale of the Rights, the Rights Holder's basis in such Common Stock
will be allocated between such Common Stock and the Rights in proportion to
the fair market values of each on the date the Rights are issued, except that,
in either case, no allocation of basis will be made to the Rights if the
Rights are not exercised or sold (e.g., the Rights expire unexercised). The
holding period of a Rights Holder with respect to Rights received as a
distribution on such Rights Holder's Common Stock will include the Rights
Holder's holding period for the Common Stock with respect to which the Rights
were distributed. In the case of a purchaser of Rights, the tax basis of the
purchased Rights will be equal to the purchase price paid therefor, and the
holding period for such Rights will begin on the day following the date of the
purchase.
SALE OF RIGHTS
Upon a sale or other taxable disposition of Rights, Rights Holders will
recognize gain or loss equal to the difference between the amount realized on
the sale or other disposition and the Rights Holder's basis in such Rights.
Such gain or loss will be capital gain or loss if gain or loss from a sale of
Common Stock by the beneficial holder would be characterized as capital gain
or loss at the time of such sale. Any such gain or loss will be long-term
capital gain or loss if Rights are treated as held (under the holding period
rules described above in "Basis and Holding Period of Rights") for more than
one year at the time of such sale or other disposition. Any gain or loss
recognized on a sale of Rights acquired by purchase will be short term capital
gain or loss if Common Stock acquired through the exercise of such Rights
would be a capital asset in the hands of the seller.
LAPSE OF RIGHTS
Upon the lapse of any Rights received by Rights Holders, such Rights Holders
will not recognize any gain or loss and, as indicated above, no allocation of
basis in such Rights Holders' Common Stock will be made to
26
<PAGE>
the Rights. A purchaser of Rights will be entitled to a short term capital
loss equal to its tax basis in the Rights upon a lapse of the Rights if Common
Stock acquired through the exercise of such Rights would be a capital asset in
the hands of the purchaser.
EXERCISE OF RIGHTS; BASIS AND HOLDING PERIOD OF THE COMMON STOCK ACQUIRED
THROUGH EXERCISE
Rights Holders will not recognize any gain or loss upon the exercise of
Rights. The basis of the Common Stock acquired upon exercise of Rights will be
equal to the sum of the Subscription Price therefor and the Rights Holder's
basis in the Rights exercised. The holding period for the Common Stock
acquired through exercise of Rights will begin on the day following the date
the Rights are exercised.
USE OF PROCEEDS
The net proceeds to be received by the Company from the Rights Offering
depends on the number of Rights exercised. If all Rights are exercised, the
Company expects the net proceeds available to it from the Rights Offering to
be approximately $28.7 million after payment of related fees and expenses
estimated to be $1.17 million. However, no assurance can be given that any or
all of the Rights will be exercised. Therefore, the actual proceeds from the
Rights Offering could be substantially lower.
The Company currently plans to use the net proceeds from the Rights
Offering, together with available cash, for general corporate purposes. In
addition, all or a portion of the proceeds may be used to fund the
construction of Hilton Garden Inns under the Company's alliance with Hilton,
to fund the Company's Mexican joint venture and to fund the redevelopment of
the Company's existing hotels. The Company may also use a portion of the net
proceeds to acquire additional hotels, although the Company has no present
understanding or agreement with respect to any acquisitions. At the present
time, however, the Company has not determined the specific use for the
proceeds of the Rights Offering.
Pending use, the net proceeds will be invested in short-term, interest
bearing securities.
PRICE RANGE OF COMMON STOCK
The Common Stock commenced trading on the NASDAQ National Market on November
14, 1994 under the symbol "NAGC." From January 1996 until August 8, 1996, the
Common Stock traded under the symbol "NALC" and, since August 8, 1996, has
traded under the symbol "CHRT." The following table sets forth for the periods
indicated the high and low sale prices of the Common Stock as reported on the
NASDAQ National Market.
<TABLE>
<CAPTION>
HIGH LOW
------- -------
<S> <C> <C>
1994
Fourth Quarter (commencing November 14, 1994)................ $19 1/8 $ 9 1/2
1995
First Quarter................................................ $14 1/4 $ 8 1/4
Second Quarter............................................... $11 $ 8
Third Quarter................................................ $10 1/2 $ 7 1/8
Fourth Quarter............................................... $12 1/2 $ 8 1/2
1996
First Quarter................................................ $14 3/4 $10 1/2
Second Quarter............................................... $17 1/2 $13
Third Quarter................................................ $18 1/2 $12 7/8
Fourth Quarter............................................... $17 3/4 $11 1/2
1997
First Quarter (through February 11, 1997).................... $17 1/4 $11 7/8
</TABLE>
27
<PAGE>
As of February 11, 1997, there were 142 holders of record of Common Stock. A
recent reported last sale price of the Common Stock on the NASDAQ National
Market is set forth on the cover of this Prospectus.
DIVIDEND POLICY
The Company has never paid any dividends on the Common Stock, other than the
dividend of the Rights in the Rights Offering. The Company expects to retain
its earnings for the development and expansion of its business and the
repayment of indebtedness and does not anticipate paying dividends on the
Common Stock in the foreseeable future. Any future dividend policy will be
determined by the Company's Board of Directors, and the payment of any
dividend in the future will be based upon conditions then existing, including
the Company's earnings, financial condition and capital requirements, as well
as such economic and other factors as the Board of Directors may deem relevant
at the time. In addition, the Company's Credit Facility prohibits the payment
of dividends on the Common Stock.
STATE AND FOREIGN SECURITIES LAWS
The Rights may not be exercised by any person, and neither this Prospectus
nor any Subscription Certificate shall constitute an offer to sell or a
solicitation of an offer to purchase any shares of Common Stock in any
jurisdiction in which such transactions would be unlawful. No action has been
taken in any jurisdiction outside the United States to permit offers and sales
of the Rights or the Common Stock. Consequently, the Company may reject
subscriptions pursuant to the exercise of Rights by any holder of Rights
outside the United States, and the Company may also reject subscriptions from
holders in jurisdictions within the United States if it should determine that
it may not lawfully issue shares to such holders, even if it could do so by
qualifying the shares for sale or by taking other actions in such
jurisdictions.
28
<PAGE>
CAPITALIZATION
The following table sets forth the pro forma capitalization of the Company
as of September 30, 1996 as adjusted to give effect to the Canadian
Acquisition and related borrowings which occurred on October 1, 1996, and as
adjusted to give effect to the sale of 2,137,006 shares of Common Stock (which
reflects Brahman's agreement not to exercise or transfer any of the
approximately 299,000 Rights it will receive pursuant to the Rights Offering
and the agreement of the Nonexercising Option Holders not to exercise or
transfer any of the approximately 63,227 Rights they will receive pursuant to
the Rights Offering, as well as the unavailability of those approximately
362,227 Rights to be exercised by other Rights Holders pursuant to the
Oversubscription Privilege) pursuant to the Rights Offering at the
Subscription Price and the application of the estimated net proceeds therefrom
(after deduction of the estimated expenses of the Rights Offering). See "Use
of Proceeds." For additional information, see other financial and statistical
information included elsewhere as incorporated by reference in this
Prospectus.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
-------------------------------
PRO FORMA AS ADJUSTED(1)(2)(3)
--------- --------------------
(IN THOUSANDS)
<S> <C> <C> <C>
Long-term debt.............................. $ 84,655 $ 84,655
Stockholders' equity:
Preferred stock, $1.00 par value--
10,000,000 authorized, none issued and
outstanding.............................. -- --
Common Stock, $.01 par value--100,000,000
authorized; 9,467,750 issued and
outstanding, 11,604,756 issued and
outstanding, as adjusted(4).............. 95 116
Additional paid-in capital................ 161,521 190,248
Accumulated deficit....................... (35,874) (35,874)
Foreign currency translation adjustment... 86 86
-------- --------
Total stockholders' equity.............. 125,828 154,576
-------- --------
Total capitalization........................ $210,483 $239,231
======== ========
</TABLE>
- --------
(1) Assumes the issuance of 2,137,006 shares of Common Stock (which reflects
Brahman's agreement not to exercise or transfer any of the approximately
299,000 Rights it will receive pursuant to the Rights Offering and the
agreement of the Nonexercising Option Holders not to exercise or transfer
any of the approximately 63,227 Rights they will receive pursuant to the
Rights Offering, as well as the unavailability of those approximately
362,227 Rights to be exercised by other Rights Holders pursuant to the
Oversubscription Privilege) pursuant to the Rights Offering. Also assumes
the payment of expenses attributable to the Rights Offering estimated to
equal approximately $1,170,000. The number of shares reserved for issuance
upon exercise of the Rights will be dependent on the number of shares
outstanding as of the commencement of the Rights Offering, which is
anticipated to be approximately 10,492,850 shares.
(2) Excludes 1,000,000 shares of Common Stock sold on January 31, 1997 in the
Brahman Private Placement for total proceeds of $14 million before
expenses.
(3) Excludes the results of the fourth quarter ended December 31, 1996 which
resulted in a reported loss of $(14.5) million.
(4) Excludes an aggregate of 2,000,000 shares of Common Stock reserved for
issuance under the Company's Stock Option Plan as of September 30, 1996,
including 1,623,000 shares as to which options were then outstanding, of
which 45,000 were exercisable on such date. Also excludes 398,480 shares
reserved for issuance under HFS' 1992 Incentive Stock Option Plan as of
September 30, 1996, including 398,480 shares as to which options were then
outstanding, of which 308,720 were exercisable on such date. In November
1996, the number of shares reserved for issuance under the Company's Stock
Option Plan was increased to 3,000,000 shares and options to purchase
514,000 shares of Common Stock were granted.
29
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The following description summarizes certain information regarding the
capital stock of the Company. This information does not purport to be complete
and is subject in all respects to the applicable provisions of the Delaware
General Corporation Law, as amended (the "DGCL"), the Company's Restated
Certificate of Incorporation (the "Certificate of Incorporation") and the
Company's Amended and Restated Bylaws (the "Bylaws").
The authorized capital stock of the Company consists of 100,000,000 shares
of Common Stock, $0.01 par value per share, and 10,000,000 shares of Preferred
Stock, $1.00 par value per share. Upon consummation of the Rights Offering,
approximately 12,629,856 shares of Common Stock will be issued and outstanding
if the Rights Offering is fully subscribed (other than by Brahman which has
agreed not to exercise or transfer any of the approximately 299,000 Rights it
will receive pursuant to the Rights Offering and the Nonexercising Option
Holders who have agreed not to exercise or transfer any of the approximately
63,227 Rights they will receive pursuant to the Rights Offering). The Company
has no shares of Preferred Stock issued and outstanding, nor will any shares
of Preferred Stock be issued and outstanding upon consummation of the Rights
Offering.
COMMON STOCK
Each share of Common Stock entitles the holder thereof to one vote on all
matters submitted to a vote of stockholders, including the election of
directors. There is no cumulative voting in the election of directors;
consequently, the holders of a majority of the outstanding shares of Common
Stock can elect all of the directors then standing for election.
Holders of Common Stock are entitled to receive such dividends, if any, as
may be declared from time to time by the Board of Directors out of funds
legally available therefor. See "Dividend Policy." Holders of Common Stock
have no conversion, redemption or preemptive rights to subscribe to any
securities of the Company. All outstanding shares of Common Stock are, and the
shares to be sold in the Rights Offering when issued and paid for will be,
validly issued, fully paid and nonassessable. In the event of any liquidation,
dissolution or winding up of the affairs of the Company, holders of Common
Stock will be entitled to share ratably in the assets of the Company remaining
after provision for payment of liabilities to creditors. The rights,
preferences and privileges of holders of Common Stock are subject to the
rights of the holders of any shares of preferred stock that the Company may
issue in the future.
PREFERRED STOCK
The Certificate of Incorporation authorizes the Board of Directors to create
and issue one or more series of Preferred Stock and determine the rights and
preferences of each series, to the extent permitted by the Certificate of
Incorporation and applicable law. Among other rights, the Board of Directors
may determine with respect to any such series of preferred stock (i) the
designation of such series; (ii) the rate and time of, and conditions and
preferences with respect to, dividends, and whether such dividends are
cumulative; (iii) the voting rights, if any, of shares of such series; (iv)
the price, timing and conditions regarding the redemption of shares of such
series and whether a sinking fund should be established for such series; (v)
the rights and preferences of shares of such series in the event of voluntary
or involuntary dissolution, liquidation or winding up of the affairs of the
Company; and (vi) the right, if any, to convert or exchange shares of such
series into or for stock or securities of any other series or class. Except
for any difference so provided by the Board of Directors, the shares of all
series of Preferred Stock will rank on a parity with respect to the payment of
dividends and to the distribution of assets of liquidation.
The provisions of any such series of preferred stock could have an adverse
effect on the earnings of the Company available for dividends on the Common
Stock and for other corporate purposes and on amounts distributable to the
holders of Common Stock if the Company were liquidated. Such provisions may
also include restrictions on the ability of the Company to pay dividends on,
repurchase or redeem shares of Common Stock or other series of preferred
stock.
30
<PAGE>
DIVESTITURE AND LOSS OF VOTING RIGHTS
The Certificate of Incorporation contains a provision (the "Gaming
Provision") that provides that except as otherwise approved by the Company's
Board of Directors, no stockholder who is a "Disqualified Stockholder" would
be entitled to vote, directly or indirectly, any shares of the Company's
capital stock beneficially owned by such stockholder on any matter. A
"Disqualified Stockholder" is defined as any stockholder who (i) owns
beneficially five percent or more of the outstanding capital stock of the
Company and has not fully cooperated with the Company and/or any regulatory
gaming authority with respect to providing information or complying with other
similar requests, (ii) is required by any gaming authority to be qualified
with respect to any of the Company's or its subsidiaries' gaming licenses or
authorizations (collectively, the "Gaming Licenses") and who has neither been
qualified by nor obtained a waiver of qualification from each gaming authority
requiring such qualification (a "Waiver") in a timely manner, (iii) has been
found unsuitable or disqualified by any gaming authority with respect to any
Gaming Licenses, if such finding has not been reversed, vacated or superseded
or (iv) is not a United States citizen (as defined under the Shipping Act or
the Merchant Marine Act) and who acquires beneficial ownership of shares of
the Company's capital stock, which when aggregated with all other shares of
the Company's capital stock that are owned by non-U.S. citizens, represents
more than 25% of the Company's outstanding capital stock (such shares of
capital stock in excess of 25% of the Company's outstanding capital stock
being the "Disqualifying Excess Shares"). Shares of the Company's capital
stock held by a Disqualified Stockholder would not be considered as
outstanding stock entitled to vote for any purpose.
In addition, under the Gaming Provision, the Company has the right, upon
written notice, to require that a Disqualified Stockholder that holds
"Publicly-traded Securities" dispose of any and all (or the Disqualifying
Excess Shares in the case of a Disqualified Stockholder described in (iv)
above) of the Company's Publicly-traded Securities held by such Disqualified
Stockholder. "Publicly-traded Securities" are defined as any securities that
are listed or admitted to trading on any national securities exchange or are
quoted on the NASDAQ.
The Company also has the right, at its option, to call for redemption any or
all of the shares (or the Disqualifying Excess Shares in the case of a
Disqualified Stockholder described in (iv) above) of the Company's capital
stock beneficially owned by a Disqualified Stockholder. Generally, the
"Redemption Price" paid to the Disqualified Stockholder for each share of
capital stock, in the case of exchange-listed or NASDAQ-quoted stock, would be
equal to the average closing price of such shares for the 20-day period
preceding the date of the notice of redemption, and if the stock were not
listed or quoted, then the Redemption Price would be the fair market value as
determined by the Company's Board of Directors. The Company has the right to
pay the Redemption Price to the Disqualified Stockholder in cash, property or
rights, including securities of the Company, as the Board of Directors might
determine. If, on the date set for redemption, a holder failed to deliver the
certificates for the shares to be redeemed properly endorsed for transfer, the
payment to be delivered by the Company would be set aside to be delivered to
the holder, without interest, upon surrender of the certificates.
Unsurrendered certificates would no longer represent outstanding shares, the
right to receive further dividends with respect to those shares would cease,
and all rights of the person holding those shares would cease, except for the
right to receive the payment that had been set aside with respect to those
shares.
CLASSIFIED DIRECTORS
The Certificate of Incorporation provides that the number of directors shall
not be less than three nor more than 15 and, within such limits and subject to
the rights of holders of any class or series of preferred stock, the number
may be fixed from time to time by the Board of Directors of the Company. The
Certificate of Incorporation provides that directors shall be divided into
three classes, designated Class I, Class II and Class III, each class
consisting, as nearly as may be possible, of one-third of the total number of
directors constituting the entire Board of Directors. Each director serves for
a term ending on the date of the third annual meeting of stockholders next
following the annual meeting at which such director was elected, provided that
directors originally designated as Class I, Class II and Class III directors,
respectively, serve for a term ending on the date of the first, second and
third annual meeting, respectively, following the effective date of the
Certificate of Incorporation.
31
<PAGE>
With a classified Board of Directors, at least two annual meetings of
stockholders, instead of one, are generally required to effect a change in a
majority of the Board of Directors. As a result, a classified Board of
Directors may discourage proxy contests for the election of directors or
purchases of a substantial block of the Common Stock because it limits the
ability to obtain control of the Board of Directors of the Company in a
relatively short period of time. The classification provisions could also have
the effect of discouraging a third party from making a tender offer or
otherwise attempting to obtain control of the Company. In addition, because
under Delaware law a director serving on a classified Board of Directors may
be removed only for cause, a classified Board of Directors would delay
stockholders who do not agree with the policies of the Board of Directors from
replacing a majority of the Board of Directors for two years, unless it could
be demonstrated that the directors should be removed for cause and the
requisite vote of stockholders were obtained. Such a delay may help ensure
that the Board of Directors of the Company, if confronted by a person
conducting a proxy contest or pursuing an extraordinary corporate transaction,
will have sufficient time to review the proposal and appropriate alternatives
to the proposal and to act in what it believes is the best interests of the
Company and its stockholders. Approval of the Board of Directors as well as an
80% stockholder vote is required to amend the director classification
provisions of the Certificate of Incorporation.
SPECIAL MEETINGS OF STOCKHOLDERS; ACTION BY WRITTEN CONSENT; ADVANCE NOTICE
PROVISIONS
The Certificate of Incorporation and Bylaws provide that special meetings of
stockholders of the Company may only be called by the Board of Directors or
the Chairman of the Board of the Company. The Certificate of Incorporation
also requires that stockholder action be taken at a meeting of stockholders
and prohibits stockholder action by written consent. The Bylaws provide that
stockholder nominations of directors and stockholder proposals to conduct
business at a stockholders' meeting must be given in advance of the meeting
within the time period and in the manner provided for in the Bylaws. Approval
of the Board of Directors as well as an 80% stockholder vote would be required
to amend any of the foregoing provisions.
LIABILITY OF DIRECTORS; INDEMNIFICATION
The Company's Certificate of Incorporation contains a provision that
eliminates the personal liability of a director to the Company and its
stockholders for breaches of fiduciary duty as a director to the fullest
extent permitted by the DGCL. Under Delaware law, however, this provision does
not eliminate or limit the personal liability of a directors (i) for any
breach of such director's duty of loyalty to the Company or its stockholders,
(ii) for acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law, (iii) under the DGCL statutory
provision making directors personally liable, under a negligence standard, for
unlawful payment of dividends or unlawful stock repurchase or redemptions, of
(iv) for any transaction from which the director derived an improper personal
benefit. This provision offers persons who serve on the Board of Directors of
the Company protection against awards of monetary damages resulting from
breaches of their duty of care (except as indicated above), including grossly
negligent business decisions made in connection with takeover proposals for
the Company. As a result of this provision, the ability of the Company or a
stockholder thereof to successfully prosecute an action against a director for
a breach of his duty of care has been limited. However, the provision does not
affect the availability of equitable remedies such as an injunction or
rescission based upon a director's breach of his duty of care. Insofar as
indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers and controlling persons of the Company, in
the opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable.
The Certificate of Incorporation also provides that each person (and the
heirs, executors or administrators of such person) who was or is a party or is
threatened to be made a party to, or is involved in any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative
or investigative, by reason of the fact that such persons is or was a director
or officer of the Company or is or was serving at the request of the Company
as a director or officer of another corporation, partnership, joint venture,
trust or other enterprise, shall be indemnified and held harmless by the
Company to the fullest extent permitted by the DGCL.
32
<PAGE>
Under the DGCL and the Bylaws, the right to indemnification includes the right
to be paid by the Company the expenses incurred in defending in any such
proceeding in advance of its final disposition to the fullest extent permitted
by the DGCL. The Certificate of Incorporation provides further that, by action
of the Board of Directors, the Company may provide indemnification to such
officers, employees and agents of the Company to the extent that, in the
determination of the Board of Directors, indemnification is appropriate and
authorized under the DGCL.
SHARES ELIGIBLE FOR FUTURE SALE
Upon consummation of the Rights Offering, if the Rights Offering is fully
subscribed (other than by Brahman which has agreed not to exercise or transfer
any of the approximately 299,000 Rights it will receive pursuant to the Rights
Offering and the Nonexercising Option Holders who have agreed not to exercise
or transfer any of the approximately 63,227 Rights they will receive pursuant
to the Rights Offering), the Company will have outstanding an aggregate of
approximately 12,629,856 shares of Common Stock (based on the number of shares
outstanding as of February 10, 1997), assuming no exercise of outstanding
options. Of the total outstanding shares of Common Stock, the 2,137,006 shares
of Common Stock sold in the Rights Offering, if it is fully subscribed (other
than by Brahman which has agreed not to exercise or transfer any of the
approximately 299,000 Rights it will receive pursuant to the Rights Offering
and the Nonexercising Option Holders who have agreed not to exercise or
transfer any of the approximately 63,227 Rights they will receive pursuant to
the Rights Offering), will be freely tradable without restriction or further
registration under the Securities Act, unless purchased by "affiliates" of the
Company, as that term is defined in Rule 144 under the Securities Act (which
sales would be subject to certain volume limitations and other restrictions
described below). In addition, of the approximately 6,033,064 shares of Common
Stock held by CL Associates and FSNL after the full exercise by CL Associates
and FSNL of their Basic Subscription Privilege in the Rights Offering, the
approximately 1,128,134 shares purchased by CL Associates and FSNL in the
Rights Offering will be immediately eligible for resale in the public market,
subject to certain volume and other restrictions under Rule 144, 904,930 of
the shares of Common Stock held by CL Associates will be eligible for resale
in the public market, subject to certain volume and other restrictions under
Rule 144, in December 1997, and the remaining 4,000,000 shares of Common Stock
held by them will be eligible for resale in the public market, subject to
certain volume and other restrictions under Rule 144, in August 1998, but the
sale of those 4,000,000 shares in the public market will be not be permitted
until August 1999 by the terms of the CL Associates/FSNL Stock Purchase
Agreement. The 1,000,000 shares of Common Stock purchased by Brahman in the
Brahman Private Placement are subject to a "lock up" agreement with the
Company under which those shares will not be permitted to be sold, transferred
or otherwise disposed of by them until August 1, 1997. The Company is
obligated to register all of the shares of Common Stock purchased by Brahman
in the Brahman Private Placement and expects to be obligated to register all
the shares of Common Stock expected to be purchased by Baron in the Baron
Private Placement by May 1, 1997. As a result, at the conclusion of the
Brahman lock-up period and shortly after the close of the Baron Private
Placement, the shares purchased in the Brahman Private Placement and the Baron
Private Placement may be sold in the public market.
In general, under Rule 144 as currently in effect, a person, including a
person who may be deemed an "affiliate" of the Company, who has held
restricted shares for two years may sell such shares, subject to certain
volume limitations and other restrictions, without registering them under the
Securities Act. Rule 144 generally also permits sales of restricted shares,
without any volume limitations, by a person who has not been an "affiliate" of
the Company for at least three months preceding the sale of such shares and
who has held those restricted shares for at least three years. Pursuant to the
terms of a registration rights agreement, each of CL Associates or FSNL (or
its assignee) will be entitled to certain demand registration rights with
respect to shares of Common Stock held by them. In addition to these demand
registration rights, each of CL Associates and FSNL (or its assignees) will
be, subject to certain limitations, entitled to register shares of Common
Stock in connection with future registration statements prepared by the
Company to register its equity securities.
33
<PAGE>
PLAN OF DISTRIBUTION
The Common Stock offered pursuant to the Rights Offering is being offered by
the Company directly to its holders of Common Stock.
The Company will pay the fees and expenses of ChaseMellon Shareholder
Services, L.L.C., as Subscription Agent, and has also agreed to indemnify the
Subscription Agent from any liability which it may incur in connection with
the Rights Offering, including liabilities under the Securities Act. The
Company will pay the fees and expenses of ChaseMellon Stockholder Services,
L.L.C., as Information Agent, and has agreed to indemnify the Information
Agent from certain liabilities which it may incur in connection with the
Rights offering, including liabilities under the Securities Act.
Rights Holders who desire to purchase shares of Common Stock in the Rights
Offering are urged to complete, date and sign the Subscription Certificate
accompanying this Prospectus and return it to the Subscription Agent on or
before the Expiration Date, with payment in full of the aggregate Subscription
Price. See "The Rights Offering--Exercise of Rights." Rights may be
transferred. See "The Rights Offering--Method of Transferring Rights." Any
questions concerning the procedure for subscribing for the purchase of shares
should be directed to the Subscription Agent or the Information Agent.
LEGAL MATTERS
The validity of the Common Stock has been passed upon for the Company by
Battle Fowler LLP, New York, New York. Martin L. Edelman, who is the President
and a Director of the Company, is also of counsel to Battle Fowler LLP.
EXPERTS
The consolidated financial statement of the Company for the years ended
December 31, 1995 and 1994 and the period August 1, 1993 (date of inception)
to December 31, 1993 incorporated by reference in this Prospectus have been
audited by Deloitte & Touche LLP, independent auditors, as stated in their
reports appearing therein, and have been so included in reliance upon the
reports of such firm given upon their authority as experts in accounting and
auditing. The consolidated financial statements of Travelodge/Thriftlodge as
of January 23, 1996 and for the period February 1, 1995 to January 23, 1996
incorporated by reference in this Prospectus and the registration statement
have been audited by Deloitte & Touche LLP independent auditors, as stated in
their report appearing therein, and have been so included in reliance upon the
report of such firm given upon their authority as experts in auditing and
accounting. The consolidated financial statements of Travelodge/Thriftlodge as
of January 31, 1995 and for each of the two years in the period ended January
31, 1995 incorporated by reference in this Prospectus have been so included in
reliance on the report of Price Waterhouse LLP, independent accountants, given
on the authority of said firm as experts in accounting and auditing. The
consolidated financial statements of Capital Properties Limited Partnership as
of September 30, 1996 and 1995 and each of the three years in the period ended
September 30, 1996 incorporated by reference in this Prospectus and the
related financial statement schedules included therein have been audited by
Deloitte & Touche, independent auditors as stated in their reports appearing
therein, and have been so included in reliance upon the reports of such firm
given upon their authority as experts in accounting and auditing.
34
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table shows all expenses of the issuance and distribution of
the securities offered hereby, other than underwriting discounts and
commissions:
<TABLE>
<S> <C>
Securities and Exchange Commission ("SEC") filing fee............ $ 20,583
Nasdaq National Market ("Nasdaq") listing fee.................... 18,500
Printing and engraving expenses.................................. 150,000
Subscription agent's fees and expenses........................... 12,500
Information agent's fees and expenses............................ 7,500
Legal fees and expenses.......................................... 500,000
Accounting fees and expenses..................................... 300,000
Blue Sky filing fees and expenses (including counsel fees)....... 5,000
Miscellaneous expenses........................................... 155,917
----------
Total........................................................ $1,170,000
==========
</TABLE>
All expenses other than the SEC filing fee, NASD filing fee and Nasdaq
listing fee have been estimated for purposes of this filing. All expenses will
be paid by the Company.
15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law ("DGCL") empowers a
corporation to indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (other
than an action by or in the right of the corporation), by reason of the fact
that such person is or was a director, officer or agent of the corporation or
another enterprise if serving at the request of the corporation. Depending on
the character of the proceeding, a corporation may indemnify against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred in connection with such action, suit or
proceeding if the person indemnified acted in good faith and in a manner such
person reasonably believed to be in or not opposed to the best interests of
the corporation, and, with respect to any criminal action or proceeding, had
no reasonable cause to believe such persons's conduct was unlawful. In the
case of an action by or in the right of the corporation, no indemnification
may be made with respect to any claim, issue or matter as to which such person
shall have been adjudged to be liable to the corporation unless and only to
the extent that the Court of Chancery or the court in which such an action or
suit was brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstance of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which the Court of Chancery or such other court shall deem proper. Section 145
further provides that to the extent a director or officer of a corporation has
been successful in the defense of any action, suit or proceeding referred to
above or in the defense of any claim, issue or matter therein, such person
shall be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by such person in connection therewith. The
indemnification provided is not deemed to be exclusive of any other rights to
which a director or officer may be entitled under any corporation's by-law,
agreement, vote or otherwise.
In accordance with Section 145 of the DGCL, Article 10 of the Company's
Restated Certificate of Incorporation (the "Restated Certificate") and Article
VIII of the Company's Amended and Restated Bylaws (the "Bylaws") provide that
the Company shall indemnify to the fullest extent permitted under the DGCL any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative by reason of the fact that he is or
was a director or officer of the Company, or is or was a director or officer
of the Company serving at the request of the Company as director or officer,
employee or agent of another corporation, partnership, joint venture, trust,
II-1
<PAGE>
employee benefit plan or other enterprise, against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or proceeding
if he acted in good faith and in a manner he reasonably believed to be in, or
not opposed to, the best interests of the Company, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful. The indemnification provided by the Restated Certificate and the
Bylaws shall not be deemed exclusive of any other rights to which any of those
seeking indemnification or advancement of expenses may be entitled under any
other agreement, vote or otherwise. Expenses incurred in defending a civil or
criminal action, suit or proceeding shall (in the case of any action, suit or
proceeding against a director or officer of the Company) or may (in the case
of any action, suit or proceeding against an employee or agent) be paid by the
Company in advance of the final disposition of such action, suit or proceeding
as authorized by the Board of Directors of the Company upon receipt of an
undertaking by or on behalf of the indemnified person to repay such amount if
it shall ultimately be determined that he is not entitled to be indemnified by
the Company. Article 10 of the Restated Certificate provides that neither the
amendment or repeal of the above-referenced provisions of the Restated
Certificate shall eliminate or reduce the effect of such provisions in respect
of any matter occurring before such amendment or repeal.
16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
2.1 Transfer and Distribution Agreement, dated as of November 22,
1994, between the Company and HFS. (Incorporated by reference to
the Company's Current Report on Form 8-K, dated December 2, 1994,
Exhibit 2.1).
2.2 Agreement and Plan of Merger and Reorganization, dated as of
January 17, 1995, by and among Boomtown, Tweety Sub, Inc. and the
Company. (Incorporated by reference to the Company's Current
Report on Form 8-K, dated February 1, 1995, Exhibit 2.1).
2.3 Agreement and Plan of Merger by and among National Gaming Corp.,
NGC Acquisition Corp. and Par-A-Dice Gaming Corporation, dated
December 28, 1994. (Incorporated by reference to the Company's
annual Report on Form 10-K, dated December 31, 1994, Exhibit 2.3).
2.4 Stock Purchase Agreement, dated as of December 19, 1995, between
Forte USA, Inc. and the Company. (Incorporated by reference to the
Company's Current Report on Form 8-K, dated January 23, 1996,
Exhibit 2.1).
2.5 Amendment No. 1 to Stock Purchase Agreement, dated as of January
1996, between Forte USA, Inc. and the Company. (Incorporated by
reference to the Company's Current Report on Form 8-K, dated
January 23, 1996, Exhibit 2.2).
2.6 Stock Purchase Agreement, dated as of December 20, 1995, by and
between Chartwell Leisure Associates L.P. II and the Company.
(Incorporated by reference to the Company's Annual Report on Form
10-K, dated December 31, 1995, Exhibit 2.6).
2.7 Stock Purchase Agreement, dated as of February 14, 1996, by and
between Chartwell Leisure Associates L.P. II, FSNL LLC and the
Company. (Incorporated by reference to the Company's Annual Report
on Form 10-K, dated December 31, 1995, Exhibit 2.7).
2.8 Form of Amended and Restated Stock Purchase Agreement, dated as of
March 14, 1996, by and among Chartwell Leisure Associates L.P. II,
FSNL LLC and the Company. (Incorporated by reference to the
Company's Annual Report on Form 10-K, dated December 31, 1995,
Exhibit 2.8).
2.9 Securities Purchase Agreement, dated as of January 31, 1997, among
the Company and the Investors listed therein.+
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
4.1 Form of Common Stock Certificate. (Incorporated by reference to
Amendment No. 2 to the Company's Registration Statement on Form
10/A (File No. 0-024794), dated November 2, 1994, Exhibit 4.1).
4.2 Form of Subscription Certificate.+
5.1 Opinion of Battle Fowler LLP regarding the legality of the
securities being registered.+
23.1(a) Consent of Deloitte & Touche LLP.*
23.1(b) Consent of Deloitte & Touche LLP.*
23.1(c) Consent of Deloitte & Touche.*
23.2 Consent of Battle Fowler LLP (included in its opinion filed as
Exhibit 5.1 hereto).+
23.3 Consent of Price Waterhouse LLP.*
24.1 Powers of Attorney (included on the signature pages hereto).+
99.1 Form of Instructions to Record Holder.+
99.2 Form of Notice of Guaranteed Delivery for Subscription
Certificates.+
99.3 Form of Certification and Request for Additional Rights.+
99.4 Nominee Holder Subscription Certification.+
99.5 Special Notice to Foreign Holders.+
99.6 Form of Letter to Common Stockholders who are record holders.+
99.7 Form of Letter to Common Stockholders who are beneficial holders.+
99.8 Form of Letter to Common Stockholders.+
99.9 Form of DTC Participant Oversubscription Exercise Form.+
99.10 Form of Subscription Agent Agreement between the Company and
ChaseMellon Shareholder Services, L.L.C.+
99.11 Form of Information Agent Agreement between the Company and
ChaseMellon Shareholder Services, L.L.C.+
</TABLE>
- --------
*Filed herewith.
+Filed previously.
(b) Financial Statement Schedules:
All other schedules have been omitted because they are not applicable, or
are not required, or the information is shown in the Financial Statements or
the Notes thereto.
17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than payment by the Registrant
of expenses incurred or paid by a director, officer or controlling person of
the Registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with
the securities being registered, the Registrant will, unless in the opinion of
its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of Prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and
II-3
<PAGE>
contained in a form of Prospectus filed by the Registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be
part of this Registration Statement as of the time it was declared
effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of Prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(3) For purposes of determining any liability under the Securities Act of
1933, each filing of the Registrant's annual report pursuant to section
13(a) or section 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report
pursuant to section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the registration statement shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
The undersigned Registrant hereby undertakes to deliver or cause to be
delivered with the Prospectus, to each person to whom the Prospectus is sent
or given, the latest annual report to security holders that is incorporated by
reference in the Prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X is not set forth in the Prospectus, to deliver, or
cause to be delivered to each person to whom the Prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference in
the Prospectus to provide such interim financial information.
II-4
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS AMENDMENT NO. 2
TO THE REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED,
THEREUNTO DULY AUTHORIZED, IN THE CITY OF NEW YORK, STATE OF NEW YORK, ON
FEBRUARY 12, 1997.
Chartwell Leisure Inc.
(Registrant)
/s/ Martin L. Edelman
By: _________________________________
MARTIN L. EDELMAN
PRESIDENT
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 2 TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS
IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
* Chairman of the
- ------------------------------------- Board of Directors February 12,
RICHARD L. FISHER and Chief Executive 1997
Officer (principal
executive officer)
/s/ Martin L. Edelman Director and
- ------------------------------------- President February 12,
MARTIN L. EDELMAN 1997
* Chief Financial
- ------------------------------------- Officer (principal February 12,
KENNETH J. WEBER financial and 1997
accounting officer)
* Director
- ------------------------------------- February 12,
HENRY R. SILVERMAN 1997
* Director
- ------------------------------------- February 12,
STEPHEN P. HOLMES 1997
II-5
<PAGE>
SIGNATURE TITLE DATE
* Director
- ------------------------------------- February 12,
MARC E. LELAND 1997
* Director
- ------------------------------------- February 12,
MICHAEL J. KENNEDY 1997
* Director
- ------------------------------------- February 12,
DR. GUIDO GOLDMAN 1997
* Director
- ------------------------------------- February 12,
RACHEL ROBINSON 1997
/s/ Martin L. Edelman
*By: ________________________________ February 12,
MARTIN L. EDELMAN ATTORNEY-IN-FACT 1997
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
2.1 Transfer and Distribution Agreement, dated as of November 22, 1994,
between the Company and HFS. (Incorporated by reference to the
Company's Current Report on Form 8-K, dated December 2, 1994, Exhibit
2.1).
2.2 Agreement and Plan of Merger and Reorganization, dated as of January
17, 1995, by and among Boomtown, Tweety Sub, Inc. and the Company.
(Incorporated by reference to the Company's Current Report on Form 8-
K, dated February 1, 1995, Exhibit 2.1).
2.3 Agreement and Plan of Merger by and among National Gaming Corp., NGC
Acquisition Corp. and Par-A-Dice Gaming Corporation, dated December
28, 1994. (Incorporated by reference to the Company's annual Report
on Form 10-K, dated December 31, 1994, Exhibit 2.3).
2.4 Stock Purchase Agreement, dated as of December 19, 1995, between Forte
USA, Inc. and the Company. (Incorporated by reference to the
Company's Current Report on Form 8-K, dated January 23, 1996, Exhibit
2.1).
2.5 Amendment No. 1 to Stock Purchase Agreement, dated as of January 1996,
between Forte USA, Inc. and the Company. (Incorporated by reference
to the Company's Current Report on Form 8-K, dated January 23, 1996,
Exhibit 2.2).
2.6 Stock Purchase Agreement, dated as of December 20, 1995, by and
between Chartwell Leisure Associates L.P. II and the Company.
(Incorporated by reference to the Company's Annual Report on Form 10-
K, dated December 31, 1995, Exhibit 2.6).
2.7 Stock Purchase Agreement, dated as of February 14, 1996, by and
between Chartwell Leisure Associates L.P. II, FSNL LLC and the
Company. (Incorporated by reference to the Company's Annual Report on
Form 10-K, dated December 31, 1995, Exhibit 2.7).
2.8 Form of Amended and Restated Stock Purchase Agreement, dated as of
March 14, 1996, by and among Chartwell Leisure Associates L.P. II,
FSNL LLC and the Company. (Incorporated by reference to the Company's
Annual Report on Form 10-K, dated December 31, 1995, Exhibit 2.8).
2.9 Securities Purchase Agreement, dated as of January 31, 1997, among the
Company and the Investors listed therein.+
4.1 Form of Common Stock Certificate. (Incorporated by reference to
Amendment No. 2 to the Company's Registration Statement on Form 10/A
(File No. 0-024794), dated November 2, 1994, Exhibit 4.1).
4.2 Form of Subscription Certificate.+
5.1 Opinion of Battle Fowler LLP regarding the legality of the securities
being registered.+
23.1(a) Consent of Deloitte & Touche LLP.*
23.1(b) Consent of Deloitte & Touche LLP.*
23.1(c) Consent of Deloitte & Touche.*
23.2 Consent of Battle Fowler LLP (included in its opinion filed as Exhibit
5.1 hereto).+
23.3 Consent of Price Waterhouse LLP.*
24.1 Powers of Attorney (included on the signature pages hereto).+
99.1 Form of Instructions to Record Holder.+
99.2 Form of Notice of Guaranteed Delivery for Subscription Certificates.+
99.3 Form of Certification and Request for Additional Rights.+
99.4 Nominee Holder Subscription Certification.+
99.5 Special Notice to Foreign Holders.+
99.6 Form of Letter to Common Stockholders who are record holders.+
99.7 Form of Letter to Common Stockholders who are beneficial holders.+
99.8 Form of Letter to Common Stockholders.+
99.9 Form of DTC Participant Oversubscription Exercise Form.+
99.10 Form of Subscription Agent Agreement between the Company and Chase
Mellon Shareholder Services, L.L.C.+
99.11 Form of Information Agent Agreement between the Company and Chase
Mellon Shareholder Services, L.L.C.+
</TABLE>
- --------
*Filed herewith.
+Filed previously.
<PAGE>
EXHIBIT 23.1(a)
INDEPENDENT AUDITORS' CONSENT
To the Board of Directors and
Shareholders of Chartwell Leisure Inc.
We consent to the incorporation by reference in this Amendment No. 2 to the
Registration Statement of Chartwell Leisure Inc. (formerly National Lodging
Corp.) on Form S-3 of our report dated March 11, 1996 appearing in and
incorporated by reference in the Annual Report on Form 10-K of Chartwell
Leisure Inc. for the year ended December 31, 1995, and to the reference to us
under the heading "Experts" in the Prospectus which is part of this
registration statement.
Deloitte & Touche LLP
Parsippany, New Jersey
February 12, 1997
<PAGE>
EXHIBIT 23.1(b)
INDEPENDENT AUDITORS' CONSENT
To the Board of Directors and
Shareholders of Chartwell Leisure Inc.
We consent to the incorporation by reference in this Amendment No. 2 to the
Registration Statement of Chartwell Leisure Inc. (formerly National Lodging
Corp.) on Form S-3 of our report dated April 19, 1996 appearing in the Report
on Form 8-K/A of Chartwell Leisure Inc. on the financial statements of
Travelodge/Thriftlodge for the period from February 1, 1995 to January 23,
1996 and to the reference to us under the heading "Experts" in the Prospectus
which is part of this registration statement.
Deloitte & Touche LLP
Parsippany, New Jersey
February 12, 1997
<PAGE>
EXHIBIT 23.1(c)
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in the Registration Statement
of Chartwell Leisure Inc. (formerly National Lodging Corp.) on Amendment No. 2
to Form S-3 of our report dated October 30, 1996 appearing in the report on
Form 8-KA of Chartwell Leisure Inc. on the financial statements of Capital
Properties Limited Partnership for the year ended September 30, 1996 and to
the reference to us under the heading "Experts" in the Prospectus which is
part of this Registration Statement.
Deloitte & Touche LLP
Chartered Accountants
Calgary, Alberta, Canada
February 5, 1997
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-3 of Chartwell
Leisure Inc. (formerly National Lodging Corp.) of our report dated
February 20, 1996 relating to the financial statements of the Acquired
Business as of and for each of the two years in the period ended January 31,
1995, which appears on page 8 of the Current Report on Form 8-K/A of Chartwell
Leisure Inc. (formerly National Lodging Corp.) dated January 23, 1996, as
amended, filed with the Securities and Exchange Commission on July 9, 1996. We
also consent to the reference to us under the heading "Experts" in such
Prospectus.
Price Waterhouse LLP
San Diego, California
February 12, 1997
