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SECURITIES & EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of report (date of earliest event reported): September 23, 1997
CANDLEWOOD HOTEL COMPANY, INC.
(Exact name of Registrant as specified in charter)
DELAWARE 0-12708 48-1188025
(State or other jurisdiction of (Commission File Number) (I.R.S. Employer
incorporation) (Identification Number)
LAKEPOINT OFFICE PARK, 9342 EAST CENTRAL 67206
WICHITA, KANSAS (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (316) 631-1300
None
(Former name or former address, if changed since last report)
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ITEM 5. OTHER EVENTS
In two closings, on September 23, 1997 and October 3, 1997, Candlewood
Hotel Company, Inc., a Delaware corporation (the "Company") completed a private
placement (the "Private Placement") whereby the Company issued 65,000 shares of
its Series A Cumulative Convertible Preferred Stock, par value $0.01 per share
(the "Preferred Stock"), at a price of $1,000 per share. The Preferred Stock
was issued pursuant to a Stock Purchase Agreement dated as of August 27, 1997
(the "Stock Purchase Agreement"). On September 23, 1997 the Company issued
25,000 shares of Preferred Stock and received proceeds of $25 million, and on
October 3, 1997, the Company issued 40,000 shares of Preferred Stock and
received proceeds of $40 million. The purchasers of the Preferred Stock (the
"Purchasers") consisted of a group of institutional investors and individuals
who are "accredited investors" within the meaning of Regulation D promulgated
under the Securities Act of 1933, as amended (the "Act"). In connection with
the Private Placement, the Company paid cash in the aggregate amount of
$3,152,500 to Donaldson, Lufkin & Jenrette Securities Corporation and
Schroder & Co. Inc. as a placement fee. The Company intends to use the net
proceeds of the Private Placement to support the Company's national expansion
through the development of Company-owned Candlewood hotels and for general
working capital purposes.
The rights of the Purchasers as holders of the Preferred Stock are set
forth in the Company's Certificate of Incorporation, as amended by the
Certificate of Designations of Series A Cumulative Convertible Preferred Stock
which was filed with the Secretary of State of Delaware on September 22, 1997.
The financial terms of the financing were established on August 27, 1997, the
commitment date. The holders of the Preferred Stock are entitled to a
preferential quarterly dividend equal to 7.5% of the Stated Value (initially
$1,000.00 per share, subject to adjustment), payable quarterly beginning on
August 31, 1998. The Certificate of Designation provides for conversion of the
Preferred Stock into Common Stock of the Company, upon the election of the
holders, at a price of $9.50 per share of Common Stock, subject to certain
anti-dilution adjustments (the "Conversion Price"). The Preferred Stock will
automatically convert into Common Stock subsequent to August 31, 1999 at the
then applicable Conversion Price if the Common Stock has traded for 20
consecutive days at not less than 200% of the Conversion Price and upon the
effectiveness of a registration statement for an underwritten offering covering
up to 50% of the shares of common stock issuable upon conversion of the then
outstanding Preferred Stock. Holders of Preferred Stock have a liquidation
preference equal to $1,000.00 per share (the "Liquidation Preference Price").
With certain limited exceptions, in the event of a change of control of the
Company, the Company shall offer to purchase all of the outstanding shares of
Preferred Stock at the greater of (i) 175% of the Stated Value or (ii) the
Liquidation Preference Price. The Purchasers have agreed that they will forfeit
their preferential rights if they are a member of a group which causes a change
of control of the Company prior to August 27, 1999. The Company is required to
redeem the Preferred Stock on August 31, 2004 for the Liquidation Preference
Price and may redeem after August 31, 1999, at its election, for 200% of the
Stated Value.
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Holders of Preferred Stock have the right to vote with the Common Stock
on an as-if-converted basis. Approval of the majority of the outstanding
Preferred Stock will be required for any change in the Company's Restated
Certificate of Incorporation which would (i) adversely affect the holders of
the Preferred Stock; (ii) create any class or series of stock which is senior
to or on parity with the Preferred Stock with respect to voting rights,
dividends or liquidation preference or (iii) affect any redemption or
repurchase of any capital stock of the Company junior to the Preferred Stock.
The Certificate of Designation also provides the Holders of the Preferred Stock
with protection from certain dilutive share issuances and other events.
In connection with the Private Placement, the Company entered into a
registration rights agreement. Pursuant to the terms of this agreement the
holders of the Preferred Stock have certain rights in respect of (i) demand
registrations with net offering proceeds exceeding $20,000,000 per demand
registration, (ii) shelf registrations with net offering proceeds exceeding
$2,500,000 per shelf registration, and (iii) "piggyback" registration rights in
connection with certain public distributions.
The Preferred Stock was issued pursuant to an exemption to the NASDAQ
stockholder approval requirements. With the consent of the NASDAQ, the Company
delivered written notice of the issuance of the Preferred Stock to its
stockholders ten days prior to the second closing. In addition, holders of in
excess of 50% of the Company's voting securities had previously entered into an
agreement pursuant to which they agreed to vote in favor of the issuance of the
Preferred Stock, if such stockholder approval was required by the NASDAQ.
In accordance with the Stock Purchase Agreement, the Board of Directors
voted on September 19, 1997 to amend the Bylaws so as to increase the size of
the Board of Directors from seven to ten members. Three nominees selected by
certain of the Purchasers have been elected as new Directors. The Purchasers of
the Preferred Stock shall continue to be entitled to nominate three individuals
to serve on the Company's Board of Directors. The Purchasers of the Preferred
Stock, Doubletree Corporation and certain members of management have agreed to
vote for each other's nominees for the Board of Directors pursuant to a
Stockholders Agreement dated as of September 22, 1997.
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ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(c) Exhibits
Exhibit Number Description of Document
4 Certificate of Designations, Preferences and Relative,
Participating, Optional and Other Special Rights of
Preferred Stock and Qualifications, Limitations and
Restrictions Thereof of Series A Cumulative Convertible
Preferred Stock
10.1 Stock Purchase Agreement
10.2 Registration Rights Agreement
10.3 Stockholders Agreement
10.4a Press Release, dated July 23, 1997, announcing
commencement of the offering
10.4b Press Release, dated September 23, 1997, announcing
completion of the first closing
10.4c Press Release, dated October 6, 1997, announcing
completion of the second closing
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: October 7, 1997 CANDLEWOOD HOTEL COMPANY, INC.
By: /s/ JACK P. DEBOER
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Name: Jack P. DeBoer
Title: Chief Executive Officer