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Exhibit 10.2
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement, dated as of September 22,
1997 (this "Agreement"), is made by and among Candlewood Hotel Company, Inc., a
Delaware corporation ("Candlewood" or the "Company"), Doubletree Corporation, a
Delaware corporation ("Doubletree"), Mr. Jack P. DeBoer ("DeBoer"), on behalf of
himself and as representative of the Alexander John DeBoer Trust dated March 14,
1995 and the Christopher Scott DeBoer Trust dated March 14, 1995 (collectively,
the "Trusts"), the Warren D. Fix Family Partnership, L.P. (the "Fix
Partnership") and each of the parties set forth on Schedule A attached hereto
(collectively, the "Investors", and, together with Candlewood, Doubletree,
DeBoer, the Trusts and the Fix Partnership, the "Parties").
BACKGROUND
A. DeBoer, Doubletree and the Fix Partnership had previously
entered into that certain Incorporation and Registration Rights Agreement dated
September 1, 1996 (the "Original Agreement").
B. The Company completed an initial public offering of its Common
Stock, par value $0.01 per share (the "Common Stock"), on November 5, 1996 (the
"Initial Public Offering").
C. In connection with the issuance and sale of $65 million of its
Series A Cumulative Convertible Preferred Stock (the "Preferred Stock"), the
Company has agreed to grant certain registration rights with respect to the
shares of Common Stock issuable upon the conversion of the Preferred Stock.
D. The parties to the Original Agreement hereby terminate the
Original Agreement and enter into this Agreement on the terms and subject to the
conditions set forth below.
NOW, THEREFORE, in consideration of the foregoing and intending
to be legally bound, the Parties agree as follows:
1. Certain Definitions. As used in this Agreement, the
following terms shall have the following respective meanings:
"Commission" means the United States Securities and Exchange
Commission.
"Certificate of Designation" means the Certificate of
Designations, Preferences and Relative, participating, Optional and Other
Special Rights of Preferred Stock and Qualifications, Limitations and
Restrictions Thereof, dated September 22, 1997, relating to the Preferred Stock.
"Eligible Securities" means the shares of Common Stock (i) issued
to Doubletree, DeBoer, the Trusts and the Fix Partnership upon the
reorganization of the Company from
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Candlewood Hotel Company, LLC to a Delaware corporation, (ii) to be issued upon
the conversion of the Preferred Stock into Common Stock, stock dividends paid
with respect to such shares or issued in exchange for or in lieu of such
shares, and (iii) issued or issuable upon exercise of any Purchase Warrant
(Eligible Securities described in clauses (ii) and (iii) being referred to
collectively as "Preferred Eligible Securities").
"Holder" means a registered holder of outstanding Eligible
Securities or securities convertible into or exercisable for Eligible
Securities.
"Purchase Warrant" means any warrant for the purchase of Common
Stock issued to any holder of Series A Preferred Stock in accordance with the
terms of the Certificate of Designation establishing the preferences and rights
of and the qualifications, limitations and restrictions with respect to, the
Preferred Stock.
"Securities Act" means the Securities Act of 1933 or any similar
Federal statute, and the rules and regulations of the Commission thereunder, all
as the same shall be in effect at the time.
2. Required Registration.
(a) At any time after 180 days from the date of the
issuance and sale of the Preferred Stock, (i) Doubletree, or (ii) Investors
holding at least 50% of the shares of the Preferred Eligible Securities may
deliver to the Company a written request that the Company file and use its best
efforts to cause to become effective a registration statement under the
Securities Act with respect to such number of the Eligible Securities owned by
Doubletree or the Investors as shall be specified in such request (a
"Registration Request"); provided, however, that the Company shall not be
obligated to effect any such registration pursuant to subsection (ii) on behalf
of the Investors unless the anticipated aggregate offering price, net of
underwriting discounts and commissions, would exceed $20,000,000. Except as
otherwise provided in Section 2(b)(iv) and 2(b)(v) hereof, the Company shall
not be required to file and use its best efforts to cause to become effective,
pursuant to a Registration Request under this Section 2, (a) more than two
registration statements at the demand of Doubletree, or (b) more than two
registration statements at the demand of the Investors. The party or parties
delivering a Registration Request is hereinafter referred to as the "Requesting
Holder." The second Registratio Request made by the Investors may be identified
by the Requesting Holder as a "Priority Demand".
(b) As soon as practicable following the receipt of a
Registration Request, the Company will use its best efforts to register under
the Securities Act, for public sale in accordance with the method of disposition
specified in such Registration Request, the number of shares of Eligible
Securities specified in such Registration Request (and the number of Eligible
Securities specified in all notices received from Holders within 20 days after
their receipt of notice delivered pursuant to Section 4 hereof). The Company
will also be entitled to include in any registration statement filed pursuant to
a Registration Request, for sale in accordance with the method of disposition
specified in such Registration Request, such number of shares of Common Stock
as the Company shall desire to sell for its own account. If the
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method of sale designated is an underwritten public offering, the managing
underwriter or underwriters must be reasonably acceptable to both the Requesting
Holder, or the holders of a majority of the Eligible Securities held by all
parties comprising the Requesting Holder if more than one party is the
Requesting Holder, and the Company, which acceptance shall not be unreasonably
withheld. Notwithstanding the foregoing provisions of this paragraph (b), to the
extent that, in the opinion of the underwriter or underwriters (if the method of
disposition shall be an underwritten public offering), marketing considerations
require the reduction of the number of shares of Common Stock covered by any
such registration, the number of shares of Common Stock to be registered and
sold pursuant to such registration shall be reduced as follows:
(i) The number of shares of Eligible Securities
to be registered on behalf of the Company shall be reduced (to zero, if
necessary);
(ii) The number of shares of Eligible Securities to
be registered on behalf of DeBoer, the Trusts and the Fix Partnership
shall be reduced (to zero, if necessary) pro rata according to the
number of shares of Eligible Securities held by each; and
(iii) The number of shares of Eligible Securities
to be registered on behalf of Doubletree and the Investors shall be
reduced pro rata according to the number of shares of Eligible
Securities held by each; provided, however, that in connection with a
Priority Demand the number of shares of Eligible Securities requested
to be registered on behalf of the Investors shall only be reduced after
the number of shares requested to be registered by Doubletree has been
reduced to zero.
(iv) Notwithstanding the foregoing, if in
connection with anyRegistration Request made by Doubletree, the number
of Eligible Securities requested to be registered by Doubletree shall
have been reduced, the number of Registration Requests granted to
Doubletree pursuant to clause 2(a) above shall be increased by one.
(v) Notwithstanding the foregoing, if in
connection with any Registration Request made by the Investors, the
Investors requesting inclusion of Eligible Securities in such
registration shall experience a reduction in the number of such Eligible
Securities by 10% or more, the number of Registration Requests granted
to the Investors pursuant to clause 2(a) above shall be increased by
one.
(vi) In no event shall any registration of Common
Stock by the Company pursuant to Section (vi)(a) of the Certificate of
Designation constitute a Registration Request allocable to any Holder
pursuant to clause 2(a) above.
(c) Notwithstanding the foregoing provisions of this
Section 2, the Company shall not be obligated to file a registration statement
at the demand of any Holder pursuant to this Section 2 within 180 days
following any underwritten public offering of Common Stock or of securities of
the Company convertible into or exercisable or exchangeable for Common Stock.
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3. Shelf Registration on Form S-3.
(a) At any time after 180 days from the date of the
issuance and sale of the Preferred Stock, any Holder or Holders may deliver to
the Company a written request (a "Form S-3 Request") that the Company file and
use its best efforts to cause to become effective a "shelf" registration
statement on Form S-3 (or such equivalent successor form) under the Securities
Act for an offering to be made on a delayed or continuous basis pursuant to
Rule 415 under the Securities Act (a "Shelf Registration Statement") with
respect to such number of Eligible Securities owned by the Holder or Holders as
shall be specified in such request; (and the number of Eligible Securities
specified in all notices received from Holders within 20 days after their
receipt of notice delivered pursuant to Section 4 hereof); provided, however,
that the Company shall not be obligated to effect any such registration pursuant
to this Section 3 unless the aggregate value of the securities to be registered
thereon would exceed $2,500,000. The Company shall not be required to file and
use its best efforts to cause to become effective, pursuant to a Form S-3
Request under this Section 3, (a) more than two Shelf Registration Statements
on behalf of Doubletree, or (b) more than two Shelf Registrations on behalf
of the Investors.
(b) As soon as practicable following the receipt of a Form
S-3 Request, the Company will use its best efforts to register under the
Securities Act, for an offering to be made on a delayed or continuous basis
pursuant to Rule 415 of the Securities Act, the number of shares of Eligible
Securities specified in such Form S-3 Request (and the number of Eligible
Securities specified in all notices received from Holders within 20 days after
their receipt of notice delivered pursuant to Section 4 hereof). The Company
will also be entitled to include in any Shelf Registration Statement filed
pursuant to this Section 3 such number of shares of Common Stock as the Company
shall desire to sell for its own account.
4. Piggyback Registration.
(a) If the Company at any time proposes to register
Common Stock under the Securities Act for sale to the public (including
registrations pursuant to Section 2 or 3 hereof), whether for its own account
or for the account of other security holders or both (except registration
statements on Form S-8, S-4 or another form not available for registering the
Eligible Securities for sale to the public), each such time it will give written
notice to all Holders of its intention to do so. Upon the written request of any
Holder (a "Piggyback Request"), given within 20 days after receipt of any such
notice, to register any of its Eligible Securities, the Company will use its
best efforts to cause the Eligible Securities as to which registration shall
have been so requested to be covered by the registration statement proposed to
be filed by the Company.
(b) In the event that any registration statement described
in this Section 4 shall relate, in whole or in part, to an underwritten public
offering of shares of Common Stock, the Eligible Securities to be registered
must be sold through the same underwriters as have been selected by the Company
or agreed to pursuant to Section 2(b) hereof. Otherwise, the method of
distribution of the Eligible Securities to be sold by any Holder making
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a Piggyback Request shall be as specified therein. Except in the case of a
registration statement filed pursuant to a Registration Request under Section 2
hereof or a Form S-3 Request made under Section 3 hereof, the number of shares
of Common Stock to be included in such registration statement on account of any
person (other than the Company) may be reduced if and to the extent that the
underwriter or underwriters shall be of the opinion that such inclusion would
materially adversely affect the marketing of the total number of shares of
Common Stock proposed to be sold, and the number of shares to be registered
and sold by each person (other than the Company) shall be reduced pro rata
according to the relative number of fully-diluted shares owned by such person.
Notwithstanding the foregoing provisions of this Section 4, the Company may
withdraw any registration statement referred to in this Section 4 without
thereby incurring any liability to any requesting Holder.
5. Registration Procedures. If and whenever the Company is
required by the provisions of Section 2, 3 or 4 to effect the registration of
any Eligible Securities under the Securities Act, the Company shall:
(a) prepare and file with the Commission a registration
statement with respect to such securities which will permit the public sale
thereof in accordance with the method of distribution specified in the
applicable Registration Request, and the Company shall use its best efforts (i)
to cause such registration statement to be filed within 60 days of receipt of
the Registration Request, (ii) to cause such registration statement to be
declared effective as promptly as practicable and (iii) to maintain the
effectiveness of such registration statement for a period of not less than 90
days (or until such time as all securities sold thereunder shall have been sold,
in the case of a registration on Form S-3);
(b) promptly prepare and file with the Commission such
amendments and supplements to such registration statement and the prospectus
used in connection therewith as may be necessary to effect and maintain the
effectiveness of such registration statement for the period specified in Section
5(a) and as to comply with the provisions of the Securities Act with respect to
the disposition of all Eligible Securities covered by such registration
statement in accordance with the intended method of disposition set forth in
such registration statement for such period, including such amendments or
supplements as are necessary to cure any untrue statement or omission referred
to in Section 5(e)(vi);
(c) provide to the managing underwriter or underwriters
and not more than one counsel for all underwriters and to the Holders of
Eligible Securities to be included in such registration statement and not more
than one counsel for all such Holders (such counsel to be reasonably acceptable
to the Company) the opportunity to participate in the preparation of (i) such
registration statement, (ii) each prospectus relating thereto and included
therein or filed with the Commission and each amendment or supplement thereto;
(d) make available for inspection by the parties
referred to in Section 5(c) such financial and other information and books and
records of the Company, and cause the officers, directors and employees of the
Company, and counsel and independent certified public accountants of the
Company, to respond to such inquiries, as shall be reasonably necessary, in
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the judgment of respective counsel to such Holders and such underwriter or
underwriters, to conduct a reasonable investigation within the meaning of the
Securities Act; provided, however, that each such person shall be required to
retain in confidence and not to disclose to any other person any information or
records reasonably designated by the Company in writing as being confidential
until such time as such information becomes a matter of public record (whether
by virtue of its inclusion in such registration statement or otherwise), unless
(i) such person shall be required to disclose such information pursuant to the
subpoena or order of any court or other governmental agency or body having
jurisdiction over the matter or to the National Association of Insurance
Commissioners or (ii) such information is required to be set forth in such
registration statement or the prospectus included therein or in an amendment to
such registration statement or an amendment or supplement to such prospectus in
order that such registration statement, prospectus, amendment or supplement, as
the case may be, shall not contain an untrue statement of a material fact or
omit to state therein a material fact required to be stated therein or necessary
to make the statements therein not misleading, and such information has not been
so set forth after the request by a Holder to such effect; and provided,
further, that the Company need not make such information available, nor need it
cause any officer, director or employee to respond to such inquiry, unless each
such Holder and such counsel, upon the Company's request, execute and deliver to
the Company an undertaking to substantially the same effect contained in the
immediately preceding proviso;
(e) immediately notify the persons referred to in Section
5(c) and (if requested by any such person) confirm such advice in writing, (i)
when such registration statement or any prospectus included therein or any
amendment or supplement thereto has been filed and, with respect to such
registration statement or any such amendment, when the same has become
effective, (ii) of any material comments by the Commission with respect thereto
or any request by the Commission for amendments or supplements to such
registration statement or prospectus or for additional information, (iii) of the
issuance by the Commission of any stop order suspending the effectiveness of
such registration statement or the initiation of any proceedings for that
purpose, (iv) if at any time the representations and warranties of the Company
contemplated by Section 5(l)(i) cease to be true and correct in all material
respects, (v) of the receipt by the Company of any notification with respect to
the suspension of the qualification of any Eligible Securities for sale in any
jurisdiction or the initiation or threatening of any proceeding for such purpose
or (vi) at any time when a prospectus is required to be delivered under the
Securities Act, of the occurrence or failure to occur of any event, or any other
change in law, fact or circumstance, as a result of which such registration
statement, prospectus or any amendment or supplement thereto, or any document
incorporated by reference in any of the foregoing, contains an untrue statement
of a material fact or omits to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in light of
the circumstances then existing;
(f) take reasonable efforts to obtain the withdrawal at
the earliest practicable date of any order suspending the effectiveness of such
registration statement or any post-effective amendment thereto;
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(g) if requested by the managing underwriter or
underwriters or the Holders of at least a majority of the Eligible Securities
being sold in connection with an underwritten public offering, promptly
incorporate in a prospectus supplement or post-effective amendment such
information as such managing underwriter or underwriters or such Holders
reasonably specify should be included therein relating to the terms of the sale
of such Eligible Securities, including, without limitation, information with
respect to the number of Eligible Securities being sold to such underwriters,
the names and descriptions of such Holders, the purchase price being paid
therefor by such underwriters and any other terms of the underwritten (or best
efforts underwritten) offering of the Eligible Securities to be sold in such
offering, and make all required filings of such prospectus supplement or
post-effective amendment promptly after notification of the matters to be
incorporated in such prospectus supplement or post-effective amendment;
(h) furnish to each Holder of Eligible Securities included
in such registration and each underwriter and counsel for Holder, if any,
thereof an executed copy of such registration statement, each such amendment and
supplement thereto (in each case including all exhibits thereto, whether or not
such exhibits are incorporated by reference therein) and such number of copies
of the prospectus included in such registration statement (including each
preliminary prospectus and any summary prospectus) and each amendment or
supplement thereto, in conformity with the requirements of the Securities Act,
as such Holder and managing underwriter, if any, may reasonably request in order
to facilitate the disposition of such Eligible Securities by such Holder or by
the participating underwriters;
(i) use its best efforts to (i) register or qualify the
Eligible Securities to be included in such registration statement under such
other securities laws or blue sky laws of such jurisdictions as any Holder of
such Eligible Securities and each managing underwriter, if any, thereof shall
reasonably request, (ii) keep such registrations or qualifications in effect for
so long as is necessary to effect the disposition of such Eligible Securities in
the manner contemplated by the registration statement, the prospectus included
therein and any amendment or supplement thereto and (iii) take any and all such
actions as may be reasonably necessary or advisable to enable such Holder and
any participating underwriter or underwriters to consummate the disposition in
such jurisdictions of such Eligible Securities; provided, however, that the
Company shall not be required for any such purpose to (A) qualify generally to
do business as a foreign corporation or a broker-dealer in any jurisdiction
wherein it would not otherwise be required to qualify but for the requirements
of this Section 5(i), (B) subject itself to taxation in any such jurisdiction or
(C) consent to general service of process in any such jurisdiction;
(j) cooperate with the Holders of the Eligible Securities
included in such registration and the managing underwriters, if any, to
facilitate the timely preparation and delivery of certificates representing
Eligible Securities to be sold, which certificates shall be printed,
lithographed or engraved, or produced by any combination of such methods, on
steel engraved borders and which shall not bear any restrictive legends; and, in
the case of an underwritten public offering, enable such Eligible Securities to
be registered in such names as the
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underwriter or underwriters may request at least two business days prior to any
sale of such Eligible Securities;
(k) provide not later than the effective date of the
registration statement a CUSIP number for all Eligible Securities;
(l) enter into an underwriting agreement, engagement
letter, agency agreement, "best efforts" underwriting agreement or similar
agreement, as appropriate, and take such other actions in connection therewith
as the Holders of at least a majority of the Eligible Securities to be included
in such registration shall reasonably request in order to expedite or facilitate
the disposition of such Eligible Securities, and in connection therewith,
whether or not an underwriting agreement is entered into and whether or not the
registration is an underwritten public offering, (i) make such representations
and warranties to the Holders of such Eligible Securities included in such
registration and the underwriters, if any, in form, substance and scope as are
customarily made in an underwritten public offering, (ii) obtain an opinion of
counsel to the Company in customary form and covering such matters as are
customarily covered by such an opinion as the Holders of at least a majority of
such Eligible Securities and the underwriters, if any, may reasonably request,
addressed to each participating Holder and the underwriters, if any, and dated
the effective date of such registration statement (or, if such registration
includes an underwritten public offering, dated the date of the closing under
the underwriting agreement); (iii) obtain a "cold comfort" letter from the
independent certified public accountants of the Company addressed to the Holders
of the Eligible Securities included in such registration and the underwriters,
if any, dated the effective date of such registration statement (and, if such
registration includes an underwritten public offering, also dated the date of
the closing under the underwriting agreement), such letter to be in customary
form and covering such matters as are customarily covered by such letters; (iv)
deliver such documents and certificates as may be reasonably requested by the
Holders of at least a majority of the Eligible Securities included in such
registration and the managing underwriter or underwriters, if any, to evidence
compliance with clause (i) above and with any customary conditions contained in
the underwriting agreement or other agreement entered into by the Company, and
(v) undertake such obligations relating to expense reimbursement,
indemnification and contribution as are provided in Sections 6, 7 and 8 hereof;
and
(m) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission.
Notwithstanding the provisions of Section 5(a), the Company's
obligation to file a registration statement, or cause such registration
statement to become effective, shall be suspended, without incurring any
liability to any Holder, for a period not to exceed 90 days if there exists at
the time material non-public information relating to the Company that, in the
reasonable opinion of the Company, should not be disclosed, provided that any
such suspension shall occur no more than once in any twelve (12)-month period.
In such an event, the Company shall promptly inform all Holders of the Company's
decision to defer filing of a registration statement and shall notify all
Holders promptly (but in any event not later than upon the expiration of the
90-day period specified in the immediately preceding sentence) of the
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recommencement of the Company's efforts to file the registration statement and
to cause the registration statement to become effective.
In connection with each registration of Eligible Securities
hereunder, the Holders thereof will furnish to the Company in writing such
information with respect to themselves and the proposed distribution by them as
shall be reasonably necessary in order to assure compliance with applicable
federal and state securities laws. Each such Holder also agrees to notify the
Company as promptly as practicable of any inaccuracy or change in information
previously furnished by such Holder to the Company or of the occurrence of any
other event, in either case as a result of which any prospectus relating to such
registration contains an untrue statement of a material fact regarding such
Holder or the distribution of such Eligible Securities or omits to state any
material fact regarding such Holder or the distribution of such Eligible
Securities required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing, and promptly
to furnish to the Company any additional information required to correct and
update such previously furnished information or required so that such prospectus
shall not contain, with respect to such Holder or the distribution of such
Eligible Securities, an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading, in light of the circumstances then existing. Each such
Holder further agrees that upon giving any notice referred to in the immediately
preceding sentence, or upon receipt of any notice from the Company pursuant to
Section 5(e)(vi) hereof, such Holder shall forthwith discontinue the disposition
of Eligible Securities pursuant to the registration statement applicable to such
Eligible Securities until such Holder shall have received copies of an amended
or supplemented registration statement or prospectus, and if so directed by the
Company, such Holder shall deliver to the Company (at the Company's expense) all
copies, other than permanent file copies, then in such Holder's possession of
the prospectus covering such Eligible Securities at the time of receipt of such
notice.
6. Expenses. The Company shall pay all expenses incurred in
complying with Sections 2, 3 and 4, including without limitation all
registration and filing fees, printing expenses, fees and disbursements of
counsel and independent public accountants for the Company, fees and expenses of
one counsel for the selling Holders, fees and expenses (including counsel fees)
incurred in connection with complying with state securities or "blue sky" laws
(other than those which by law must be paid by the selling security holders),
fees of the National Association of Securities Dealers, Inc., transfer taxes,
fees of transfer agents and registrars and stock exchange listing fees, but
excluding all underwriting discounts and selling commissions applicable to the
sale of Eligible Securities. All expenses of participating sellers other than
those assumed by the Company in this Agreement shall be borne by such sellers in
proportion to the number of shares sold by each seller or as they may otherwise
agree.
7. Indemnification.
(a) In the event of a registration of Eligible Securities
under the Securities Act pursuant to Section 2, 3 or 4, the Company shall
indemnify and hold harmless each selling Holder, each underwriter of such
Eligible Securities thereunder and each other
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person, if any, who controls such selling Holder or underwriter within the
meaning of the Securities Act, against any losses, claims, damages or
liabilities, joint or several, to which such selling Holder, underwriter or
controlling person may become subject under the Securities Act or otherwise or
in any action in respect thereof, and will reimburse each such selling Holder,
underwriter and controlling person for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or action, as such expenses are incurred, insofar as
such losses, claims, ties or liabilities (or actions in respect thereof) arise
out of or are based upon any untrue statement or alleged untrue statement of
any material fact contained in any registration statement under which such
Eligible Securities were registered under the Securities Act pursuant to Section
2, 3 or 4, any preliminary prospectus or final prospectus contained therein, or
any amendment or supplement thereof, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading, provided however, that the Company shall not be liable to any such
selling Holder, underwriter or controlling person in any such case if and to the
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in conformity with information furnished by such selling Holder,
underwriter or controlling person in writing specifically for use in such
registration statement or prospectus.
(b) In the event of a registration of any of the
Eligible Securities under the Securities Act pursuant to Section 2, 3 or 4, each
selling Holder of such Eligible Securities, severally and not jointly, will
indemnify and hold harmless the Company, each underwriter and each person, if
any, who controls the Company or any underwriter within the meaning of the
Securities Act, each officer of the Company who signs the registration
statement, each director of the Company, each other seller of securities
registered by the registration statement covering such Eligible Securities and
each person, if any, who controls such seller, against all losses, claims,
damages or liabilities, joint or several, to which the Company or any such
officer, director, underwriter, other seller or controlling person may become
subject under the Securities Act or otherwise, and shall reimburse the Company
and each such officer, director, underwriter, other seller and controlling
person for any legal or other expenses reasonably incurred by them in connection
with investigating or defending any such loss, claim, damage, liability or
action, but only to the extent that any such loss, claim, damage or liability
(or action in respect thereof) arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
reliance upon and in conformity with information pertaining to such Holder
furnished in writing to the Company by such Holder specifically for use in the
registration statement or prospectus relating to such Eligible Securities.
Notwithstanding the immediately preceding sentence, the liability of each such
Holder hereunder shall, not in any event exceed the net proceeds received by
such Holder from the sale of Eligible Securities covered by such registration
statement.
(c) Promptly after receipt by an indemnified party
hereunder of notice of the commencement of any action, such indemnified party,
if a claim in respect thereof is to be made against an indemnifying party
hereunder, shall notify such indemnifying party in writing thereof, but the
omission so to notify such indemnifying party shall not relieve such
indemnifying party from any liability that it may have to any indemnified party
other than under
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this Section 7 and, unless the failure to so provide notice materially adversely
affects or prejudices such indemnifying party's defense against any action,
shall not relieve such indemnifying party from any liability that it may have to
any indemnified party under this Section 7. In case any such action shall be
brought against any indemnified party and it shall notify an indemnifying
party of the commencement thereof, such indemnifying party shall be
entitled to participate in and, to the extent it shall wish, to assume and
undertake the defense thereof with counsel reasonably satisfactory to such
indemnified party, and, after notice from such indemnifying party to such
indemnified party of its election so to assume and undertake the defense
thereof, such indemnifying party shall not be liable to such indemnified party
under this Section 7 for any legal expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation and of liaison with counsel so selected; provided,
however, that, if the defendants in any such action include both the indemnified
party and the indemnifying party and the indemnified party shall have reasonably
concluded that there may be reasonable defenses available to it that are
different from or additional to those available to the indemnifying party or
if the interests of the indemnified party reasonably may be deemed to conflict
with the interests of the indemnifying party, the indemnified party shall have
the right to select a separate counsel and to assume and undertake the defense
of such action, with the expenses and fees of such separate counsel and other
expenses related to such defense to be reimbursed by the indemnifying party as
incurred.
(d) No indemnifying party shall be liable for any amounts
paid in a settlement effected without the consent of such indemnifying party,
which consent shall not be unreasonably withheld. No indemnifying party shall
consent to entry of any judgment or enter into any settlement which does not
include as an unconditional term thereof the giving by the plaintiff to the
indemnified party of a release from all liability in respect of such claim or
litigation.
(e) The reimbursements required by this Section 7 shall be
made by periodic payments during the course of the investigation or defense, as
and when bills are received and expenses incurred.
8. Contribution. If for any reason the indemnity set forth in
Section 7 is unavailable or is insufficient to hold harmless an indemnified
party, then the indemnifying party shall contribute to the amount paid or
payable by such indemnified party as a result of the aggregate losses, claim,
damages, liabilities and expenses of the nature contemplated by said indemnity
(i) in such proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand and such indemnified party on the other
(determined by reference to, among other things, whether the untrue statement of
a material fact or omission to state a material fact relates to information
supplied by the indemnifying party or such indemnified party and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such untrue statement or omission), or (ii) if the allocation provided
by clause (i) above is not permitted by applicable law or provides a lesser sum
to such indemnified party than the amount hereinafter calculated, in such
proportion as is appropriate to reflect not only the relative fault of the
indemnifying party and such indemnified party but also the relative benefits
received
11
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by the indemnifying party on the one hand and such indemnified party on the
other, as well as any other relevant equitable considerations.
The Company and the Parties agree that it would not be just and
equitable if contribution pursuant to this Section 8 were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
The amount paid or payable by an indemnified party as a result of the losses,
claims, damages, liabilities or expenses referred to in such paragraph shall be
deemed to include, subject to the limitations set forth above, any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section, a Holder shall not be required to contribute any
amount in excess of the amount by which the net proceeds of the sale of Eligible
Securities sold by such Holder and distributed to the public exceeds the amount
of any damages which such Holder has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
which is not guilty of such fraudulent misrepresentation.
9. Underwriting Agreement. If Eligible Securities are to be sold
pursuant to a registration statement in an underwritten offering pursuant to
Section 2, 3 or 4, the Company and each selling Holder of Eligible Securities
agrees to enter into a written agreement with the managing underwriter or
underwriters selected in the manner herein provided in such form and containing
such provisions as are reasonably satisfactory to the Company and each such
selling Holder and as are customary in the securities business for such an
arrangement among such underwriter or underwriters, each such selling Holder and
companies of the Company's size and investment stature. No Holder of Eligible
Securities may participate in any underwritten sale of Eligible Securities
pursuant to Section 2, 3 or 4 hereof unless such Holder agrees to sell such
Holder's securities in accordance with any underwriting arrangements approved by
the persons entitled hereunder to specify the method of distribution of the
securities being registered and completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
reasonably required under the terms of such underwriting arrangements.
10. Limitations on Subsequent Registration Rights. If, subsequent
to the date hereof, the Company grants to any holders or prospective holders of
the Company's securities the right to require that the Company register any
securities of the Company under the Securities Act, such registration rights
shall be granted subject to the rights of the Holders to include all or part of
their Eligible Securities in any such registration on the terms and conditions
set forth in Section 4.
11. Rule 144. The Company covenants with the Holders of Eligible
Securities that, if and to the extent the Company shall be required to do so
under the Securities Exchange Act of 1934, as amended, and the rules and
regulations thereunder, as the same may be amended and in effect at the time
(the "Exchange Act"), the Company shall timely file the reports required to be
filed by it under the Exchange Act or the Securities Act (including, but not
limited to, the
12
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reports under Sections 13 and 15(d) of the Exchange Act referred to in
subparagraph (c)(1) of Rule 144 adopted by the Commission under the Securities
Act), all to the extent required from time to time to enable such Holder to sell
Eligible Securities without registration under the Securities Act within the
limitations of the exemption provided by Rule 144 under the Securities Act, as
such Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the Commission. Upon the request of any Holder of Eligible
Securities, the Company shall deliver to such Holder a written statement as to
whether it has complied with such requirements.
12. Effect of Failure to Sell and Purchase Preferred Stock.
The shares of Preferred Stock will be sold in two separate sales of shares
pursuant to the Stock Purchase Agreement. If the sale of such shares on the
Second Closing Date (as defined in the Stock Purchase Agreement) does not occur
within six months of the Initial Closing Date (as defined in the Stock Purchase
Agreement), on such six month anniversary date, pursuant to Section (vi)(r) of
the Certificate of Designation, all shares of Preferred Stock then outstanding
shall, at the option of each Holder, be converted into Common Stock at the then
applicable Conversion Price (as defined in the Certificate of Designation) or
purchased by the Company for the Liquidation Amount (as defined in the
Certificate of Designation).
(a) If all shares of Preferred Stock are purchased by
the Company pursuant to Section (vi)(r) of the Certificate of Designation, all
rights of the Holders pursuant to this Agreement shall terminate immediately
upon such purchase.
(b) In the event that any shares of Preferred Stock are
converted into Common Stock pursuant to Section (vi)(r) of the Certificate of
Designation, the rights of the Investors pursuant to this Agreement shall be
modified as follows:
(i) The number of Registration Requests to which
the Investors shall be entitled pursuant to Section 2(a) shall be
reduced to one, and in connection with such Registration Request, the
Company shall not be obligated to effect any such registration pursuant
to Section 2(a) unless the anticipated aggregate offering price, net of
underwriting discounts and commissions, would exceed $10,000,000.
(ii) The Investors shall not be entitled to any
Priority Demand pursuant to Section 2(a).
(iii) The number of Form S-3 Requests to which the
Investors shall be entitled pursuant to Section 3(a) shall be reduced
to one.
13. Miscellaneous.
(a) All covenants and agreements contained in this
Agreement by or on behalf of any of the signatories shall bind and inure to the
benefit of the respective successors and permitted assigns of the signatories,
whether so expressed or not. If any permitted transferee of any Holder of
Eligible Securities shall acquire Eligible Securities in any manner (other than
by way of a registered public offering), whether by operation of law or
otherwise, such Eligible
13
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Securities shall be held subject to all of the terms of this Agreement,
and by taking and holding such Eligible Securities such transferee shall be
entitled to receive the benefits of and be conclusively deemed to have agreed to
be bound by and to perform all of the terms and provisions of this Agreement.
The benefits to which any such permitted transferee shall be entitled shall
include, without limitation, the rights to register Eligible Securities under
Sections 2, 3 and 4 hereof; provided, however, that any such permitted
transferee shall not be entitled to deliver to the Company a Registration
Request or a Form S-3 Request pursuant to Section 2 or 3 hereof unless such
permitted transferee acquired from its transferor (i) with respect to Eligible
Securities issued upon the conversion of Preferred Stock, at least 100,000
Eligible Securities; provided, however, that the transfer of registration rights
held pursuant to this Agreement to a partner, shareholder, equity holder or
officer of any Investor shall be without restriction as to minimum shareholding;
or (ii) with respect to all other Eligible Securities, at least a majority of
the Eligible Securities owned by such transferor at the time of transfer. If the
Company shall so request, any such successor or permitted assign shall agree in
writing to acquire and hold the Eligible Securities subject to all of the terms
hereof. This Section 12(a) shall not be deemed to create any right on the part
of any Holder to transfer Eligible Securities in contravention of any
restriction thereon contained in any other agreement to which such Holder is a
party.
(b) All notices, consents and other communications under
this Agreement shall be in writing and shall be deemed to have been duly given
when (a) delivered by hand, (b) sent by telecopier (with receipt confirmed),
provided that a copy is mailed by registered mail, return receipt requested, or
(c) when received by the addressee, if sent by Express Mail, Federal Express or
other express delivery service (receipt requested), in each case to the
appropriate addresses and telecopier numbers set forth below (or to such other
addresses and telecopier numbers as a party may designate as to itself by notice
to the other parties):
(i) If to Doubletree: 410 North 44th Street,
Suite 700, Phoenix, AZ 85008, Attention: General Counsel, telecopier no.
(602) 220-6666.
(ii) If to the Company: Lakepoint Office Park,
9342 East Central, Wichita, Kansas 67206, telecopier number (316)
631-1333, Attention: President.
(iii) If to DeBoer or the Trusts: Lakepoint Office
Park, 9342 East Central, Wichita, Kansas 67206, telecopier number (316)
631-1333, Attention: Jack DeBoer.
(iv) If to the Fix Partnership: Lakepoint Office
Park, 9342 East Central, Wichita, Kansas 67206, telecopier number (316)
631-1333, Attention: Warren Fix.
(v) If to an Investor: at the address set forth
on Schedule A attached hereto.
(c) This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware.
14
15
(d) This Agreement may not be amended or modified, and
no provision hereof may be waived, except in writing, and any such writing shall
only be effective with respect to a Party who has executed such writing. The
failure of any of the Parties to insist upon strict adherence to any term of
this Agreement on any occasion shall not be considered a waiver of that term or
deprive such Party of the right thereafter to insist upon strict adherence to
that term or any other term of this Agreement.
(e) This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(f) The Parties acknowledge that there may be no adequate
remedy at law if any Party fails to perform any of its obligations hereunder and
that each Party may be irreparably harmed by any such failure, and accordingly
agree that each Party, in addition to any other remedy to which it may be
entitled in law or in equity, shall be entitled to compel specific performance
of the obligations of any other Party under this Agreement in accordance with
the terms and conditions of this Agreement in any court of the United States or
any state thereof having jurisdiction.
(g) The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(h) In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstances, is held
invalid, illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions contained herein shall not be in any way impaired
thereby, it being intended that all of the rights and privileges of the Holders
shall be enforceable to the fullest extent permitted by law.
(i) This Agreement is intended by the parties as a final
expression of their agreement and a complete and exclusive statement of the
agreement and understanding of the parties hereto in respect of the subject
matter contained herein. There are no restrictions, promises, warranties or
undertakings other than those set forth or referred to herein or therein. This
Agreement supersedes all prior agreements and understandings between the Parties
with respect to such subject matter.
15
16
CANDLEWOOD HOTEL COMPANY, INC.
By: /s/ JACK P. DEBOER
---------------------------------------
Name: Jack P. DeBoer
Title: Chief Executive Officer
DOUBLETREE CORPORATION
By: /s/ DAVID L. STIVERS
---------------------------------------
Name: David L. Stivers
Title: Senior Vice President, General
Counsel and Secretary
WARREN D. FIX FAMILY PARTNERSHIP, L.P.
By: /s/ WARREN D. FIX
---------------------------------------
Name: Warren D. Fix
Title: General Partner
/s/ WARREN D. FIX
------------------------------------------
Warren D. Fix
JACK P. DeBOER, for himself and on
behalf of the ALEXANDER DeBOER
TRUST DATED MARCH 14, 1995 and the
CHRISTOPHER SCOTT DeBOER TRUST
DATED MARCH 14, 1995
/s/ JACK P. DEBOER
-----------------------------------------
16
17
Name: Jack P. DeBoer
OLYMPUS GROWTH FUND II, L.P.
By: OGP II, L.P., its General Partner
By: Conroy, L.L.C., its General Partner
By: /s/ JAMES A. CONROY
----------------------------------
Name: James A. Conroy
Title: General Partner
OLYMPUS EXECUTIVE FUND, L.P.
By: OEF, L.P., its General Partner
By: Conroy, L.L.C., its General Partner
By: /s/ JAMES A. CONROY
---------------------------------
Name: James A. Conroy
Title: General Partner
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK, AS
TRUSTEE OF THE COMMINGLED
PENSION TRUST FUND (MULTI-
MARKET SPECIAL INVESTMENT
FUND II) OF MORGAN GUARANTY
TRUST COMPANY OF NEW YORK
By: /s/ RONALD G. HODGE, II
--------------------------------------
Name: Ronald G. Hodge, II
Title: Vice President
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK, AS
TRUSTEE OF THE MULTI-MARKET
SPECIAL INVESTMENT TRUST FUND
OF MORGAN GUARANTY TRUST
COMPANY OF NEW YORK
By: /s/ RONALD G. HODGE, II
--------------------------------------
18
Name: Ronald G. Hodge, II
Title: Vice President
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK, AS
INVESTMENT MANAGER AND AGENT
FOR THE ALFRED P. SLOAN
FOUNDATION (MULTI-MARKET
ACCOUNT)
By: /s/ RONALD G. HODGE, II
--------------------------------------
Name: Ronald G. Hodge, II
Title: Vice President
CHASE VENTURE CAPITAL ASSOCIATES, L.P.
By: Chase Capital Partners, its General Partner
By: /s/ JAMES D. KALLMAN
--------------------------------------
Name: James D. Kallman
Title:
PRIVATE EQUITY
INVESTORS III, L.P.
By: Rohit M. Desai Associates III, LLC
General Partner
By: /s/ ROHIT M. DESAI
--------------------------------------
Name: Rohit M. Desai
Title: Managing Member
19
EQUITY-LINKED INVESTORS-II
By: Rohit M. Desai Associates-II
General Partner
By: /s/ ROHIT M. DESAI
--------------------------------------
Name: Rohit M. Desai
Title: Managing General Partner
LNR CANDLEWOOD HOLDINGS, INC.
By: /s/ MARGARET A. JORDAN
--------------------------------------
Name: Margaret A. Jordan
Title: Treasurer
DELAWARE STATE EMPLOYEES' RETIREMENT FUNDS
By: Pecks Management Partners Ltd.
its Investment Advisor
By: /s/ ROBERT J. CRESCI
--------------------------------------
Name: Robert J. Cresci
Title: Managing Director
DECLARATION OF TRUST FOR THE
DEFINED BENEFIT PLAN OF ZENECA
HOLDINGS INC.
By: Pecks Management Partners Ltd.
its Investment Advisor
By: /s/ ROBERT J. CRESCI
--------------------------------------
Name: Robert J. Cresci
Title: Managing Director
20
DECLARATION OF TRUST FOR THE
DEFINED BENEFIT PLAN OF ICI
AMERICAN HOLDINGS INC.
By: Pecks Management Partners Ltd.
its Investment Advisor
By: /s/ ROBERT J. CRESCI
----------------------------------
Name: Robert J. Cresci
Title: Managing Director
J.W. McCONNELL FAMILY TRUST
By: Pecks Management Partners Ltd.
its Investment Advisor
By: /s/ ROBERT J. CRESCI
----------------------------------
Name: Robert J. Cresci
Title: Managing Director
ADVANCE CAPITAL PARTNERS, L.P.
By: Advance Capital Associates, L.P.
By: Advance Capital Management, LLC
By: /s/ ROBERT A. BERNSTEIN
------------------------------
Name: Robert A. Bernstein
Title: Principal
21
ADVANCE CAPITAL OFFSHORE PARTNERS, L.P.
By: Advance Capital Offshore Associates, LDC
By: Advance Capital Associates, L.P.
By: Advance Capital Management, LLC
By: /s/ ROBERT A. BERNSTEIN
--------------------------------
Name: Robert A. Bernstein
Title: Principal
ALLIED CAPITAL CORPORATION
By: /s/ G. CABEL WILLIAMS
--------------------------------------
Name: G. Cabel Williams
Title: Managing Director
ALLIED CAPITAL CORPORATION II
By: /s/ G. CABEL WILLIAMS
--------------------------------------
Name: G. Cabel Williams
Title: Managing Director
THE FFJ 1997 NOMINEE TRUST
By: /s/ SAMUEL T. BYRNE
--------------------------------------
Name: Samuel T. Byrne
Title: Trustee
22
THE MUTUAL LIFE INSURANCE
COMPANY OF NEW YORK
By: /s/ SUZANNE E. WALTON
------------------------------------
Name: Suzanne E. Walton
Title: Managing Director
HARBOR INVESTMENTS LTD.
By: Strong Capital Management, Inc.,
its Investment Advisor
By: /s/ STEPHEN J. SHENKENBERG
------------------------------------
Name: Stephen J. Shenkenberg
Title: Vice President
STRONG SPECIAL INVESTMENT LIMITED
PARTNERSHIP
By: Strong Capital Management, Inc.
its General Partner
By: /s/ STEPHEN J. SHENKENBERG
------------------------------------
Name: Stephen J. Shenkenberg
Title: Vice President
STRONG QUEST LIMITED
PARTNERSHIP
By: Strong Capital Management, Inc.
its General Partner
By: /s/ STEPHEN J. SHENKENBERG
------------------------------------
Name: Stephen J. Shenkenberg
Title: Vice President
23
/s/ WILLIAM J. ABRAMS
------------------------------------
William J. Abrams
/s/ JOSEPH P. ADAMS, JR.
------------------------------------
Joseph P. Adams, Jr.
/s/ ERIC ANDERSON
------------------------------------
Eric Anderson
/s/ ROBERT P. BRENNAN, JR.
------------------------------------
Robert P. Brennan, Jr.
/s/ ROBERT BRODY
------------------------------------
Robert Brody
/s/ VANESSA BURGESS
------------------------------------
Vanessa Burgess
/s/ CRAIG CALLEN
------------------------------------
Craig Callen
/s/ MICHAEL DANA
------------------------------------
Michael Dana
/s/ PETER DEEKS
------------------------------------
Peter Deeks
/s/ ROBERT E. DIEMAR, JR.
------------------------------------
Robert E. Diemar, Jr.
/s/ DAVID HURWITZ
------------------------------------
David Hurwitz
24
/s/ STEVE KANTOR
------------------------------------
Steve Kantor
/s/ LOUIS KLEVAN
------------------------------------
Louis Klevan
/s/ LARRY LAVINE
------------------------------------
Larry Lavine
/s/ DANIEL J. MACKELL
------------------------------------
Daniel J. Mackell
/s/ PATRICK MCMULLAN
------------------------------------
Patrick McMullan
/s/ ANDREW J. MCSPADDEN
------------------------------------
Andrew J. McSpadden
/s/ DAVID R. SMITH
------------------------------------
David R. Smith
/s/ PHIL TAGER
------------------------------------
Phil Tager
/s/ DOUGLAS M. WEILL
------------------------------------
Douglas M. Weill