-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, Atq9Hfi6LKd163k8ouOBVWyaSWC3kfAWuzpUfIxan+o/JoHcxCYGgPaOkkYP5pnm BSc0ZFgo3A53HZ5L52iWkg== 0000950150-94-000201.txt : 19940209 0000950150-94-000201.hdr.sgml : 19940209 ACCESSION NUMBER: 0000950150-94-000201 CONFORMED SUBMISSION TYPE: DEFS14A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19940225 FILED AS OF DATE: 19940208 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CARTER HAWLEY HALE STORES INC /DE/ CENTRAL INDEX KEY: 0000750217 STANDARD INDUSTRIAL CLASSIFICATION: 5311 IRS NUMBER: 940457907 STATE OF INCORPORATION: DE FISCAL YEAR END: 0202 FILING VALUES: FORM TYPE: DEFS14A SEC ACT: 34 SEC FILE NUMBER: 001-08765 FILM NUMBER: 94504885 BUSINESS ADDRESS: STREET 1: 3880 N MISSION RD CITY: LOS ANGELES STATE: CA ZIP: 90031 BUSINESS PHONE: 2132272000 FORMER COMPANY: FORMER CONFORMED NAME: EMPORIUM CAPEWELL CO DATE OF NAME CHANGE: 19910827 FORMER COMPANY: FORMER CONFORMED NAME: BROADWAY HALE STORES INC DATE OF NAME CHANGE: 19910827 DEFS14A 1 NOTICE OF SPECIAL MEETING 1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ SCHEDULE 14A PROXY STATEMENT (PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934) ------------------------ CARTER HAWLEY HALE STORES, INC. FILED BY THE REGISTRANT [X] FILED BY A PARTY OTHER THAN THE REGISTRANT [ ] CHECK THE APPROPRIATE BOX: [ ] PRELIMINARY PROXY STATEMENT [X] DEFINITIVE PROXY STATEMENT [ ] DEFINITIVE ADDITIONAL MATERIALS [ ] SOLICITING MATERIAL PURSUANT TO SECTION SEC. 249.14A-11(C) OR SEC. 140.14A-12 CARTER HAWLEY HALE STORES, INC. (NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) MARC E. BERCOON, ESQ. GENERAL COUNSEL AND CORPORATE SECRETARY CARTER HAWLEY HALE STORES, INC. 3880 NORTH MISSION ROAD LOS ANGELES, CALIFORNIA 90031 WITH COPIES TO: ERIC H. SCHUNK, ESQ. MILBANK, TWEED, HADLEY & MCCLOY 601 SOUTH FIGUEROA STREET LOS ANGELES, CALIFORNIA 90017 (NAME OF PERSON(S) FILING PROXY STATEMENT) PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX): [X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2). [ ] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-6(i)(3). [ ] Fee computed per Exchange Act Rules 14a-6(i)(4) and 0-11. 1. Title of each class of securities to which transaction applies: 2. Aggregate number of securities to which transaction applies: 3. Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11: 4. Proposed maximum aggregate value of transaction: [ ] Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. 1. Amount Previously Paid: 2. Form, Schedule or Registration No.: 3. Filing Party: 4. Date Filed: - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 CARTER HAWLEY HALE STORES, INC. 3880 NORTH MISSION ROAD LOS ANGELES, CALIFORNIA 90031 ------------------------ NOTICE OF SPECIAL MEETING OF STOCKHOLDERS TO BE HELD AT THE OFFICES OF CARTER HAWLEY HALE STORES, INC. 3880 NORTH MISSION ROAD LOS ANGELES, CALIFORNIA 90031 To the Stockholders: NOTICE is hereby given that a Special Meeting of Stockholders (the "Special Meeting") of Carter Hawley Hale Stores, Inc. (the "Company") will be held at the offices of Carter Hawley Hale Stores, Inc., 3880 North Mission Road, Los Angeles, California 90031 on Friday, February 25, 1994 at 10:00 a.m. local time, for the following purposes: 1. To approve the issuance of up to 11,792,453 shares of the Company's common stock, par value $.01 per share ("Common Stock"), issuable upon conversion of $143,750,000 of the Company's 6 1/4% Convertible Senior Subordinated Notes due 2000, for purposes of listing such shares on the New York Stock Exchange. 2. To consider and transact such other business as may properly come before the Special Meeting or any adjournment thereof. Holders of the Company's Common Stock, par value $.01 per share, and Series A Exchangeable Preferred Stock, par value $.01 per share, at the close of business on February 3, 1994, the record date fixed by the Board of Directors, are entitled to notice of and to vote at the Special Meeting. The Company's Board of Directors urges that all stockholders of record exercise their right to vote at the meeting personally or by proxy. Accordingly, we are sending you the following Proxy Statement and the enclosed proxy card. WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE SPECIFY YOUR VOTE ON THE ACCOMPANYING PROXY AND SIGN, DATE AND RETURN IT AS PROMPTLY AS POSSIBLE IN THE ENCLOSED SELF-ADDRESSED, POSTAGE-PAID ENVELOPE. Your prompt response will be appreciated. By Order of the Board of Directors Marc E. Bercoon Secretary Los Angeles, California February 4, 1994 (LOGO) Printed on Recycled Paper 3 CARTER HAWLEY HALE STORES, INC. 3880 NORTH MISSION ROAD LOS ANGELES, CALIFORNIA 90031 PROXY STATEMENT The accompanying proxy is solicited by the Board of Directors of Carter Hawley Hale Stores, Inc. (the "Company") to be used at the Special Meeting of Stockholders on Friday, February 25, 1994 (the "Special Meeting"). This Proxy Statement and the enclosed form of proxy are being sent to stockholders on or about February 5, 1994. At the Special Meeting, stockholders will be asked to consider and vote upon a proposal to approve the issuance of up to 11,792,453 shares (the "Conversion Shares") of the Company's common stock, par value $.01 per share ("Common Stock"), issuable upon conversion of $143,750,000 of the Company's 6 1/4% Convertible Senior Subordinated Notes due 2000 (the "Notes"), for purposes of listing such shares on the New York Stock Exchange (the "Proposal"). Any stockholder giving a proxy may revoke it at any time prior to its exercise at the Special Meeting by giving notice of such revocation either personally or in writing to the Secretary of the Company at the Company's executive offices, by subsequently executing and delivering another proxy or by voting in person at the Special Meeting. The Board of Directors of the Company believes that the approval of the Proposal is in the best interests of the Company and its stockholders and recommends that the stockholders approve the Proposal. VOTING Shares represented by duly executed and unrevoked proxies in the enclosed form received by the Board of Directors will be voted at the Special Meeting in accordance with the specifications made therein by the stockholders, unless authority to do so is withheld. If no specification is made, shares represented by duly executed and unrevoked proxies in the enclosed form will be voted FOR the approval of the Proposal. The cost of preparing, assembling and mailing the proxy materials will be borne by the Company. The Company has not retained any firm to solicit proxies. Only holders of record at the close of business on February 3, 1994 (the "Record Date") of the Common Stock, which is listed on the New York Stock Exchange, and the Company's Series A Exchangeable Preferred Stock, $.01 par value (the "Preferred Stock"), which has not been admitted or listed for trading on any national securities exchange or on any national automated dealer quotation system, will be entitled to vote at the Special Meeting. As of the Record Date, there were 45,582,865 shares of Common Stock and 870,861 shares of Preferred Stock outstanding. As provided in the Company's Amended and Restated Certificate of Incorporation (the "Certificate of Incorporation"), and the Certificate of Designation, Preferences and Rights of Series A Exchangeable Preferred Stock, the shares of Common Stock and Preferred Stock will vote together as a single class. Each share of Common Stock and each share of Preferred Stock is entitled to one vote on all matters presented at the Special Meeting. VOTE REQUIRED The approval of the Proposal requires a majority of the votes cast in person or by proxy at the Special Meeting, provided that the total vote cast on the Proposal represents over 50% in interest of all outstanding Common Stock and Preferred Stock, voting as a single class. Under Delaware law, the Company's Certificate of Incorporation and the Company's By-laws, shares as to which a stockholder abstains or withholds from voting and shares as to which a broker indicates that it does not have discretionary authority to vote ("broker non-votes") will not be counted as voting thereon. The stockholders of the Company have no dissenters' or appraisal rights in connection with the Proposal. 4 The Company has been informed that Zell/Chilmark Fund, L.P., a Delaware limited partnership ("Zell/Chilmark"), a holder of approximately 54.4% of the shares entitled to vote, and First Plaza Group Trust ("First Plaza") a holder of approximately 5.5% of the shares entitled to vote, each intend to vote FOR the approval of the Proposal. If Zell/Chilmark and First Plaza do in fact so vote their shares, the approval of the Proposal is assured, irrespective of the votes of other stockholders. See "Principal Stockholders and Management Ownership -- Principal Stockholders." PRINCIPAL STOCKHOLDERS AND MANAGEMENT OWNERSHIP PRINCIPAL STOCKHOLDERS The table below sets forth certain information as to those persons known to the Company to be beneficial owners (as determined in accordance with Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) of more than 5% of the outstanding Common Stock as of the Record Date. The percentage ownership figures set forth in the table are calculated on the basis of the number of shares of Common Stock outstanding as of the Record Date. As to Preferred Stock, as of the Record Date, Bankers Trust held 573,285 shares of Preferred Stock, or 65.8% of the outstanding Preferred Stock, on behalf of the participants in the Company's 401(k) Savings and Investment Plan (the "401(k) Plan") in its capacity as trustee of the 401(k) Plan.
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS --------------------- ---------------------- ---------- Zell/Chilmark Fund, L.P........................................ 24,800,866(1) 54.4% Two North Riverside Plaza, Suite 1500 Chicago, IL 60606 Mellon Bank, N.A., as Trustee for.............................. 2,500,000(2) 5.5% First Plaza Group Trust One Mellon Center Pittsburgh, PA 15258
- --------------- (1) The sole general partner of Zell/Chilmark is ZC Limited Partnership, an Illinois limited partnership ("ZC Limited"). The sole general partner of ZC Limited is ZC Partnership, a Delaware general partnership ("ZC"). The general partners of ZC are ZC, Inc., an Illinois corporation ("ZCI"), and CZ, Inc., a Delaware corporation ("CZI"). The Samuel Zell Revocable Trust dated January 17, 1990 (the "SZ Trust") is the sole stockholder of ZCI. Mr. Samuel Zell is trustee and the beneficiary of the SZ Trust. Mr. David M. Schulte is the sole stockholder of CZI. One of the limited partners of ZC Limited is COP General Partnership, an Illinois general partnership ("COP"). One of the general partners of COP is COP Seniors General Partnership, an Illinois general partnership ("COP Seniors"). One of the general partners of COP Seniors is Sanford Shkolnik. Messrs. Zell, Schulte and Shkolnik, each of whom are directors of the Company, may each be deemed to share beneficial ownership of the shares referenced, but each disclaims beneficial ownership of such shares. (2) Mellon Bank, N.A., acts as the trustee (the "Trustee") of First Plaza Group Trust ("First Plaza"), a trust under and for the benefit of certain employee benefit plans of General Motors Corporation ("GM") and its subsidiaries. First Plaza may be deemed to beneficially own the shares referenced. Additionally, General Motors Investment Management Corporation, a Delaware corporation and a wholly-owned subsidiary of GM, may be deemed to beneficially own these shares because it serves as investment manager for First Plaza with respect to such shares and has the power to direct the Trustee as to voting and disposition of such shares. The Pension Investment Committee of GM may also be deemed to beneficially own such shares by virtue of its authority to select the investment manager of such shares. MANAGEMENT OWNERSHIP The table on the following page indicates the total number of equity securities of the Company beneficially owned by each of the Company's directors, by the named executive officers and by all directors 2 5 and executive officers as a group as of the Record Date. Beneficial ownership has been calculated in accordance with Rule 13d-3 promulgated under the Exchange Act. Unless otherwise indicated in the footnotes, the numbers listed below reflect holdings of Common Stock. Additionally, unless otherwise indicated, all shares are owned directly and the owner has sole voting and investment power with respect thereto.
AMOUNT AND NATURE OF PERCENT OF CLASS NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP BENEFICIALLY OWNED -------------------------- ---------------------- -------------------- Directors: Leobardo F. Estrada.............................. 10,000(1) * Sidney R. Petersen............................... 10,825(1)(2) * Terry Savage..................................... 11,000(1)(3) * David M. Schulte................................. 24,800,866(4) 54.4%(4) Sanford Shkolnik................................. 24,920,866(5) 54.7%(5) Robert M. Solow.................................. 10,000(1) * Dennis C. Stanfill............................... 12,710(1)(6) * James D. Woods................................... 13,000(1) * Samuel Zell...................................... 24,800,866(7) 54.4%(7) Named Executive Officers: David L. Dworkin................................. 666,666(8) * Philip M. Hawley................................. 480,000(9) 1.1% William Podany................................... 36,666(10) * Patricia A. Warren............................... 0 * Janet Grove...................................... 13,333(11) * James Rosenthal.................................. 13,333(11) * Edwin J. Holman.................................. 5,293(12) * Larry G. Peterson................................ 3,722(13) * All Directors and Executive Officers as a Group (20 persons)..................................... 25,758,548(4)(5)(7)(14) 56.5%
- --------------- * Less than 1 percent. (1) Includes currently exercisable options to purchase 10,000 shares of Common Stock. (2) Includes 405 shares of Common Stock and warrants to purchase 420 shares of Common Stock, all of which are held by Mr. Petersen and his wife as trustees for the Petersen Family Trust. (3) Includes 1,000 shares of Common Stock held by Ms. Savage as trustee for Terry Savage Productions Limited, Retirement Plan and Trust dated June 1, 1982. (4) The shares listed for Mr. Schulte are held of record by Zell/Chilmark. Mr. Schulte may be deemed to share, with others, voting and dispositive power with respect to the shares owned by Zell/Chilmark. Mr. Schulte disclaims beneficial ownership of all of such shares. See footnote 1 to the table under the heading "Principal Stockholders and Management Ownership -- Principal Stockholders." (5) Includes currently exercisable options to purchase 110,000 shares of Common Stock. 24,800,866 of the shares listed for Mr. Shkolnik are held of record by Zell/Chilmark. The sole general partner of Zell/ Chilmark is ZC Limited. One of the limited partners of ZC Limited is COP General Partnership, an Illinois general partnership ("COP"). One of the general partners of COP is COP Seniors General Partnership, an Illinois general partnership ("COP Seniors"). One of the general partners of COP Seniors is Mr. Shkolnik. Mr. Shkolnik may be deemed to share, with others, voting and dispositive power with respect to the shares owned by Zell/Chilmark. Mr. Shkolnik disclaims beneficial ownership of all shares held by Zell/Chilmark. See footnote 1 to the table under the heading "Principal Stockholders and Management Ownership -- Principal Stockholders." (6) Includes warrants to purchase 210 shares of Common Stock. 3 6 (7) The shares listed for Mr. Zell are held of record by Zell/Chilmark. Mr. Zell may be deemed to share, with others, voting and dispositive power with respect to the shares owned by Zell/Chilmark. Mr. Zell disclaims beneficial ownership of all of such shares. See footnote 1 to the table under the heading "Principal Stockholders and Management Ownership -- Principal Stockholders." (8) Includes currently exercisable options to purchase 666,666 shares of Common Stock. Mr. Dworkin was named the President and Chief Executive Officer of the Company on March 24, 1993. (9) Includes currently exercisable options to purchase 480,000 shares of Common Stock. Mr. Hawley resigned as Chief Executive Officer effective February 1993 and resigned as a director in June 1993. (10) Includes currently exercisable options to purchase 36,666 shares of Common Stock. (11) Includes currently exercisable options to purchase 13,333 shares of Common Stock. (12) Includes warrants to purchase 840 shares of Common Stock and 1,855 shares of Preferred Stock which are currently exchangeable for warrants to purchase 1,855 shares of Common Stock. Mr. Holman left the employ of the Company in October 1993. (13) Includes warrants to purchase 840 shares of Common Stock and 1,055 shares of Preferred Stock which are currently exchangeable for warrants to purchase 1,055 shares of Common Stock. Mr. Petersen left the employ of the Company in October 1993. (14) Includes currently exercisable options to purchase 934,663 shares of Common Stock, warrants to purchase 2,310 shares of Common Stock and 859 shares of Preferred Stock that are currently exchangeable for warrants to purchase 859 shares of Common Stock. RECAPITALIZATION On February 11, 1991, the Company filed a voluntary petition for relief under chapter 11 of the United State Bankruptcy Code (the "Bankruptcy Code") in the United States Bankruptcy Court for the Central District of California (the "Bankruptcy Court"). During the bankruptcy proceedings, the Company managed its affairs and operated its business as debtor in possession under the supervision of the Bankruptcy Court while it developed a reorganization plan to restructure the Company. On October 8, 1992 (the "Emergence Date"), the Company emerged from bankruptcy pursuant to a plan of reorganization (the "POR"). Since the Emergence Date, the Company has operated independently, although the Bankruptcy Court has retained jurisdiction over certain claims and other matters relating to the POR. Pursuant to the POR, as of the Emergence Date, the Company's largest secured creditors and certain other secured creditors agreed to extend the maturities and adjust the prospective interest and payment terms for loans totaling $451.8 million and capitalize $66.1 million of interest accrued thereon during the chapter 11 proceedings. In addition, the Company negotiated significant reductions in lease payments and common area charges under its equipment and real property leases. While the bankruptcy proceedings were pending, Zell/ Chilmark acquired via tender offer approximately $461.0 of the $600.0 million in unsecured claims against the Company, making Zell/Chilmark the Company's largest unsecured creditor. Pursuant to the POR, these unsecured claims were converted into equity. In addition Zell/Chilmark and First Plaza were each issued 2,500,000 shares of Common Stock in exchange for a cash equity infusion totaling $50.0 million. As a result, Zell/Chilmark held approximately 70% of the shares of Common Stock outstanding as of the Emergence Date. Pursuant to the POR, holders of the Company's common stock, $.01 par value, outstanding prior to the Emergence Date ("Old Common Stock") received .081 shares of Common Stock and .084 Warrants (or, in the case of participants in the profit sharing plan in effect prior to the Emergence Date with respect to shares 4 7 of Old Common Stock held by such plan and other holders of Old Common Stock who so elected, .081 shares of Common Stock and .084 shares of Preferred Stock). THE PROPOSAL BACKGROUND The Company entered into a Purchase Agreement, dated as of December 14, 1993 (the "Agreement"), with Salomon Brothers Inc (the "Initial Purchaser") under which the Company issued the Notes on December 21, 1993 in a private placement. The Notes were sold by the Initial Purchaser to qualified institutional buyers and other institutional accredited investors. The Notes are convertible at the option of the holders thereof at any time after 90 days following the date of initial issuance thereof and prior to maturity, at an initial conversion price of $12.19 per share, subject to adjustment from time to time upon the occurrence of certain events. The closing market price of the Common Stock on December 21, 1993 was $9.375 per share. The net proceeds from the private placement of the Notes ($137.9 million), will be used to make capital available to fund the Company's business strategy, including the modernization of the Company's stores, and, until such capital expenditures are made, to repay certain amounts outstanding under the Company's credit facilities. The Company's ability to fund its capital expenditures program and to implement its business strategy will depend on cash flow from operations and the continued availability of borrowings under its credit facilities. Operating cash flow will be affected by, among other things, the timing of results from the Company's business strategy and general competitive and economic conditions. The management of the Company believes that operating cash flow and amounts available under the Company's credit facilities, together with the proceeds from the private placement of the Notes, will be sufficient to fund the major elements of the Company's business strategy. However, the Company continuously evaluates increasing or decreasing the number of stores, the terms of the Company's credit facilities, receivables facilities and other operating and financing alternatives. THE NEW YORK STOCK EXCHANGE The Notes were issued in accordance with Delaware law and pursuant to the authority conferred upon the Board of Directors of the Company (the "Board") by the Company's stockholders in Article Sixth of the Company's Certificate of Incorporation. The Board approved the issuance of the Notes because the Board believed such issuance would provide the Company with needed additional capital to fund the Company's business strategy at a reasonable cost while minimizing the dilutive effect of the issuance of the Notes on the Company's existing stockholders (as reflected in the premium represented by the conversion price ($12.19 per share) over the closing market price ($9.375 per share) on December 21, 1994, the date the Notes were issued). It is the policy of The New York Stock Exchange, Inc. (the "Exchange"), which lists the Company's outstanding Common Stock, to require stockholder approval of the issuance, other than in a public offering, of common stock or securities convertible into common stock if such common stock has or would have upon issuance voting power equal to or in excess of 20% of the voting power outstanding before such issuance. If all of the shares issuable upon conversion of the Notes were outstanding on December 20, 1993 such shares would represent approximately 25.4% of the voting power outstanding immediately prior to such issuance. The stockholders are being asked to approve the Proposal in response to the policy of the Exchange. Approval by a majority of the votes cast will be required to approve the Proposal, provided that the total vote cast on the Proposal represents over 50% in interest of all outstanding Common Stock and Preferred Stock, voting as a single class. If the required affirmative vote by the shareholders is not obtained, the Notes will remain outstanding in accordance with their terms. Those terms provide that the Notes will be convertible into Common Stock beginning on March 21, 1994. Because of the importance of maintaining a market for the trading of the Company's Common Stock or the Exchange, the Board recommends that the stockholders vote FOR the Proposal. Although Zell/Chilmark, which owned approximately 54.4% of the shares entitled to vote as of the Record Date and First Plaza, which owned approximately 5.5% of the shares entitled to vote as of the Record 5 8 Date, have informed the Company that they intend to vote their shares for the Proposal, if the required stockholder approval were not obtained, the Exchange could commence delisting proceedings. In such an event, the Company intends to seek another exchange or market for the trading of its Common Stock. DESCRIPTION OF THE NOTES The statements under this caption relating to the Notes, the indenture dated as of December 21, 1993, between the Company and Continental Bank, National Association, as trustee (the "Trustee") under which the Notes were issued (the "Indenture") and the Registration Agreement dated as of December 21, 1993 between the Company and the Initial Purchaser for the benefit of holders of the Notes (the "Registration Agreement"), are summaries and do not purport to be complete. Such summaries make use of certain terms defined in the Indenture or the Registration Agreement, as applicable, and are qualified in their entirety by express reference to the Indenture or Registration Agreement, which are available from the Company upon request. As used under this caption, the term "Company" refers only to Carter Hawley Hale Stores, Inc. and not to its subsidiaries or affiliates. General. The Notes were issued under the Indenture, and the terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as in effect on the date of the Indenture (the "Trust Indenture Act"). The Notes will bear interest from the date of original issuance at the rate of 6 1/4% (unless such rate has been temporarily or permanently increased under the circumstances described in "Registration Rights" below), payable semiannually on December 31 and June 30 of each year, commencing June 30, 1994, to holders of record at the close of business on the 15th day of the month of such interest payment date (whether or not a business day). The Notes are due on December 31, 2000 and are issuable only in registered form, without coupons, in denominations of $1,000 and integral multiples thereof. The Notes are unsecured obligations of the Company. The Indenture does not contain any financial covenants or restrictions. Registration Rights. Pursuant to the Registration Agreement the Company agreed for the benefit of the holders of the Notes, that (i) it would, at its cost, within 45 days after the closing of the sale of the Notes (the "Closing"), file a shelf registration statement (the "Shelf Registration Statement") with the Securities and Exchange Commission (the "Commission") with respect to resales of the Notes and the Common Stock issuable upon conversion thereof, (ii) within 90 days after the closing of the sale of the Notes, such Shelf Registration Statement would be declared effective by the Commission and (iii) the Company would maintain such Shelf Registration Statement continuously effective under the Securities Act until the third anniversary of the date of the closing of the sale of the Notes or such earlier date as of which all the Notes or the Conversion Shares have been sold pursuant to such Shelf Registration Statement. If the Company fails to comply with clause (i) above then, at such time, the per annum interest rate on the Notes will increase by 25 basis points. Such increase will remain in effect until the date on which such Shelf Registration Statement is filed, on which date the interest rate on the Notes will revert to the interest rate originally borne by the Notes plus an increase in such interest rate pursuant to the following sentence. If the Shelf Registration Statement is not declared effective as provided in clause (ii) above, then, at such time and on each date that would have been the successive 30th day following such time, the per annum interest rate on the Notes (which interest rate will be the original interest rate on the Notes plus any increase or increases in such interest rate pursuant to the preceding sentence and this sentence) will increase by an additional 25 basis points; provided that the interest rate will not increase by more than 50 basis points pursuant to this sentence. Such increase or increases will remain in effect until the date on which such Shelf Registration Statement is declared effective, on which date the interest rate on the Notes will revert to the interest rate originally borne by the Notes. Pursuant to clause (iii) above, however, if the Company fails to keep the Shelf Registration Statement continuously effective for the period specified above, then at such time as the Shelf Registration Statement is no longer effective and on each date thereafter that is the successive 30th day subsequent to such time and until the earlier of (i) the date that the Shelf Registration Statement is again deemed effective or (ii) the date that is the third anniversary of the Closing or (iii) the date as of which all of the Notes and/or the Common Stock issuable upon conversion thereof are sold pursuant to the Shelf Registration Statement, the per annum 6 9 interest rate on the Notes will increase by an additional 25 basis points; provided, however, that the interest rate will not increase by more than 50 basis points pursuant to this sentence. The Company will provide to each holder of the Notes, or the Common Stock issuable upon conversion of the Notes, copies of the prospectus, which will be a part of such Shelf Registration Statement, notify each such holder when such Shelf Registration Statement for the Notes or the Common Stock issuable upon conversion of the Notes has become effective and take certain other actions as are required to permit unrestricted resales of the Notes or the Common Stock issuable upon conversion of the Notes. Conversion. The holder of any Note has the right, exercisable at any time after 90 days following the date of original issuance thereof and prior to maturity, to convert the principal amount thereof (or any portion thereof that is an integral multiple of $1,000) into shares of Common Stock at $12.19, subject to adjustment as described below (the "Conversion Price"), except that if a Note is called for redemption, the conversion right will terminate at the close of business on the tenth business day immediately preceding the date fixed for redemption. Upon conversion, no adjustment or payment will be made for interest or dividends, but if any holder surrenders a Note for conversion after the close of business on the record date for the payment of an installment of interest and prior to the opening of business on the next interest payment date, then, notwithstanding such conversion, the interest payable on such interest payment date will be paid to the registered holder of such Note on such record date. In such event, such Note, when surrendered for conversion, must be accompanied by payment of an amount equal to the interest payable on such interest payment date on the portion so converted. No fractional shares will be issued upon conversion, but a cash adjustment will be made for any fractional interest. The Conversion Price is subject to adjustment upon the occurrence of certain events, including (i) the issuance of shares of Common Stock as a dividend or distribution on the Common Stock; (ii) the subdivision or combination of the outstanding Common Stock; (iii) the issuance to substantially all holders of Common Stock of rights or warrants to subscribe for or purchase Common Stock (or securities convertible into Common Stock) at a price per share less than the then current market price per share, as defined; (iv) the distribution of shares of capital stock of the Company (other than Common Stock) to all holders of Common Stock, evidences of indebtedness or other assets (excluding dividends in cash); and (v) the distribution to substantially all holders of Common Stock of rights or warrants to subscribe for securities (other than those referred to in clause (iii) above). In the event of a distribution to substantially all holders of Common Stock of rights to subscribe for additional shares of the Company's capital stock (other than those referred to in clause (iii) above), the Company may, instead of making any adjustment in the Conversion Price, make proper provision so that each holder of a Note who converts such Note after the record date for such distribution and prior to the expiration or redemption of such rights shall be entitled to receive upon such conversion, in addition to shares of Common Stock, an appropriate number of such rights. No adjustment of the Conversion Price will be made until cumulative adjustments amount to one percent or more of the Conversion Price as last adjusted. No adjustment of the Conversion Price will be made for cash dividends. If the Company reclassifies or changes its outstanding Common Stock, or consolidates with or merges into or transfers or leases all or substantially all its assets to any person, or is a party to a merger that reclassifies or changes its outstanding Common Stock, the Notes will become convertible into the kind and amount of securities, cash or other assets which the holders of the Notes would have owned immediately after the transaction if the holders have converted the Notes immediately before the effective date of the transaction. Optional Redemption. The Notes may be redeemed at the option of the Company, in whole or from time to time in part, on and after December 31, 1998, on not less than 15 nor more than 60 days' notice by first class mail, at a redemption price of 100% of the principal amount thereof together with accrued and unpaid interest. If less than all the Notes are to be redeemed, the Trustee will select Notes for redemption pro rata or by lot. If any Note is to be redeemed in part only, a new Note or Notes in principal amount equal to the unredeemed principal portion thereof will be issued. Change in Control. In the event of a Change in Control (as defined below), each holder of Notes will have the right, at the holder's option, subject to the terms and conditions of the Indenture, to require the 7 10 Company to purchase all or any part (provided that the principal amount must be $1,000 or an integral multiple thereof) of the holder's Notes on the date that is the later of (i) 20 business days after the date of mailing of the Notice referred to below, and (ii) 40 business days after the occurrence of such Change in Control (the "Purchase Date") for a purchase price equal to the principal amount thereof, plus accrued and unpaid interest to the Purchase Date. Within 20 business days after the occurrence of the Change in Control, the Company shall mail to the Trustee and to each holder (and to beneficial owners as required by law) a notice of the occurrence of the Change in Control, setting forth, among other things, the terms and conditions of, and the procedures required for exercise of the holder's right to require the purchase of such holder's Notes. The Company shall cause a copy of such notice to be published in a daily newspaper of national circulation, which shall be The Wall Street Journal unless it is not then so circulated. To exercise the purchase right, a holder must deliver written notice of such exercise to the Paying Agent prior to the close of business on the Purchase Date, specifying the Notes with respect to which the right of purchase is being exercised. Such notice of exercise may be withdrawn by the holder by a written notice of withdrawal delivered to the Paying Agent at any time prior to the close of business on the Purchase Date. Under the Indenture, a "Change in Control" means any event by which (i) an Acquiring Person has become such or (ii) Continuing Directors cease to comprise a majority of the Board of Directors, provided that a Change in Control shall not be deemed to have occurred if either (i) the last sale price of the Common Stock for any five trading days during the ten trading days immediately preceding the Change in Control is at least equal to 105% of the Conversion Price in effect on such day or (ii) the consideration, in the transaction giving rise to such Change in Control, to the holders of Common Stock consists of cash, securities that are, or immediately upon issuance will be, listed on a national securities exchange or quoted on the NASDAQ National Market System, or a combination of cash and such securities, and the aggregate fair market value of such consideration (which, in the case of such securities, shall be equal to the average of the last sale prices of such securities during the ten consecutive trading days commencing with the sixth trading day following consummation of such transaction) is at least 105% of the Conversion Price in effect on the date immediately preceding the closing date of such transaction. "Acquiring Person," as defined in the Indenture, means any Person or group (as defined in Section 13(d)(3) of the Exchange Act) who or which, together with all affiliates and associates (as defined in Rule 12b-2 under the Exchange Act), becomes the beneficial owner of shares of Common Stock of the Company having more than 50% of the total number of votes that may be cast for the election of directors of the Company; provided, however, that an Acquiring Person shall not include (i) the Company, (ii) any Subsidiary of the Company, (iii) any employee benefit plan of the Company or any Subsidiary of the Company or any entity holding Common Stock of the Company for or pursuant to the terms of any such plan; (iv) Zell/Chilmark Fund, L.P., or (v) any limited partner or Affiliate of Zell/Chilmark Fund, L.P. Notwithstanding the foregoing, no Person shall become an "Acquiring Person" as the result of an acquisition of Common Stock by the Company which, by reducing the number of shares outstanding, increases the proportionate number of shares beneficially owned by such Person to 50% or more of the Common Stock of the Company then outstanding; provided, however, that if a Person shall become the beneficial owner of 50% or more of the Common Stock of the Company then outstanding by reason of share purchases by the Company and shall, after such share purchases by the Company, become the beneficial owner of any additional shares of Common Stock of the Company, then such Person shall be deemed to be an "Acquiring Person." "Affiliate of Zell/Chilmark Fund, L.P.," as defined in the Indenture, means (i) any person which, directly or indirectly, is in control of, is controlled by or is under common control with Zell/Chilmark Fund, L.P. or (ii) any other person who is a director or officer (A) of Zell/Chilmark Fund, L.P., (B) of any subsidiary of Zell/Chilmark Fund, L.P., or (C) of any person described in clause (i) above. For purposes of this definition, control of a person means the power, direct or indirect, to direct or cause the direction of the management and policies of such person whether by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. 8 11 "Continuing Director," as defined in the Indenture, means any member of the Board of Directors, while such person is a member of such Board of Directors, who is not an Acquiring Person, or an affiliate or associate of an Acquiring Person or a representative of an Acquiring Person or of any such affiliate or associate and who (a) was a member of the Board of Directors prior to the date of the Indenture, or (b) subsequently becomes a member of such Board of Directors and whose nomination for re-election or election to such Board of Directors is recommended or approved by resolution of a majority of the Continuing Directors or who is included as a nominee in a proxy statement of the Company distributed when a majority of such Board of Directors consists of Continuing Directors. The Company will comply with the provisions of Rule 13e-4, Rule 14e-1 and any other tender offer rules under the Exchange Act which may then be applicable, and will file Schedule 13E-4 or any other schedule required thereunder in connection with any offer by the Company to purchase Notes at the option of the holders upon a Change in Control. Subordination of Notes. The Notes are (i) subordinate in right of payment to all existing and future Senior Debt, including the indebtedness under the Company's credit facilities and real-property-secured financings, and (ii) pari passu in right of payment to all existing and future Senior Subordinated Indebtedness. The Indenture does not restrict the amount of Senior Debt or other indebtedness of the Company or any subsidiary of the Company. On January 1, 1994, the Company had approximately $901.7 million of Senior Debt outstanding. The Indenture prohibits the Company from incurring any debt subsequent to the date of the Indenture which is subordinate in right of payment to Senior Indebtedness of the Company and which is not expressly made by the terms of the instrument creating such indebtedness pari passu with, or subordinate and junior in right of payment to, the Notes. The payment of the principal of, interest on or any other amounts due on the Notes is subordinated in right of payment to the prior payment in full of all Senior Debt of the Company. No payment on account of principal of, redemption of, interest on or any other amounts due on the Notes and no redemption, purchase or other acquisition of the Notes may be made unless (i) full payment of amounts then due on all Senior Debt have been made or duly provided for pursuant to the terms of the instrument governing such Senior Debt, and (ii) at the time for, or immediately after giving effect to, any such payment, redemption, purchase or other acquisition, there shall not exist under any Senior Debt or any agreement pursuant to which any Senior Debt has been issued, any default which shall not have been cured or waived and which shall have resulted in the full amount of such Senior Debt being declared due and payable. In addition, the Indenture provides that if the holders of any Senior Debt notify the Company and the Trustee that a default has occurred giving the holders of such Senior Debt the right to accelerate the maturity thereof, no payment on account of principal, redemption, interest or any other amounts due on the Notes and no purchase, redemption or other acquisition of the Notes will be made for the period (the "Payment Blockage Period") commencing on the date notice is received and ending on the earlier of (A) the date on which such event of default shall have been cured or waived or (B) 180 days from the date notice is received. Notwithstanding the foregoing, only one payment blockage notice with respect to the same event of default or any other events of default existing and known to the person giving such notice at the time of such notice on the same issue of Senior Debt may be given during any period of 360 consecutive days. No new Payment Blockage Period may be commenced by the holders of Senior Debt during any period of 360 consecutive days unless all events of default which triggered the preceding Payment Blockage Period have been cured or waived. Upon any distribution of its assets in connection with any dissolution, winding-up, liquidation or reorganization of the Company or acceleration of the principal amount due on the Notes because of an Event of Default, all Senior Debt must be paid in full before the holders of the Notes are entitled to any payments whatsoever. The payment of the principal of, interest on or any other amounts due on Junior Subordinated Indebtedness are subordinated in right of payment to the prior payment in full of the Notes. "Senior Debt," as defined in the Indenture, means the principal of, interest on and other amounts due on (i) indebtedness of the Company, whether outstanding on the date of the indenture or thereafter created, incurred, assumed or guaranteed by the Company in compliance with the Indenture, for money borrowed from banks or other financial institutions, including, without limitation, money borrowed under the Credit Facility 9 12 and any refinancings or refundings thereof; (ii) indebtedness of the Company, whether outstanding on the date of the Indenture or thereafter created, incurred, assumed or guaranteed by the Company in compliance with the Indenture, which is not Senior Subordinated Indebtedness or Junior Subordinated Indebtedness; and (iii) indebtedness of the Company under interest rate swaps, caps or similar hedging agreements and foreign exchange contracts, currency swaps or similar agreements. Notwithstanding anything to the contrary in the foregoing, Senior Debt shall not include: (a) Indebtedness of or amounts owed by the Company for compensation to employees, or for goods or materials purchased in the ordinary course of business, or for services; or (b) Indebtedness of the Company to a subsidiary of the Company. "Indebtedness," as defined in the Indenture, means, with respect to any person, (i) any obligation of such person to pay the principal of, premium of, if any, interest on (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to the Company, whether or not a claim for such post-petition interest is allowed in such proceeding), penalties, reimbursement or indemnification amounts, fees, expenses or other amounts relating to any indebtedness and any other liability, contingent or otherwise, of such person (A) for borrowed money (including instances where the recourse of the lender is to the whole of the assets of such person or to a portion thereof), (B) evidenced by a note, debenture or similar instrument (including a purchase money obligation), including securities, (C) for any letter of credit or performance bond in favor of such person, or (D) for the payment of money relating to a Capitalized Lease Obligation; (ii) any liability of others of the kind described in the preceding clause (i), which the person has guaranteed or which is otherwise its legal liability; (iii) any obligation secured by a Lien to which the property or assets of such person are subject, whether or not the obligations secured thereby shall have been assumed by or shall otherwise be such person's legal liability; and (iv) any and all deferrals, renewals, extensions and refunding of, or amendments, modifications or supplements to, any liability of the kind described in any of the preceding clauses (i), (ii) or (iii). The amount of indebtedness of any person at any date shall be the outstanding balance at such date of all unconditional obligations as described above, plus the maximum amount of any contingent obligations as described above, in each case at such date. "Senior Subordinated Indebtedness," as defined in the Indenture, means Indebtedness of the Company (whether outstanding on the date of the Indenture or thereafter created, incurred, assumed or guaranteed by the Company) which, pursuant to the terms of the instrument creating or evidencing the same, is subordinate to the Senior Debt and senior in right of payment to the Junior Subordinated Indebtedness in right of payment or in rights upon liquidation. "Junior Subordinated Indebtedness," as defined in the Indenture, means Indebtedness of the Company (whether outstanding on the date of the Indenture or thereafter created, incurred, assumed or guaranteed by the Company), which, pursuant to the terms of the instrument creating or evidencing the same, is subordinate to the Senior Debt and the Senior Subordinated Indebtedness in right of payment or in rights upon liquidation. Events of Default and Notice Thereof. The term "Event of Default" when used in the Indenture means any one of the following: (i) failure of the Company to pay interest for 30 days or principal when due; (ii) failure of the Company to perform any other covenant in the Indenture for 60 days after notice; (iii) default by the Company with respect to its obligation to pay within any applicable grace period principal of or interest on certain other Indebtedness aggregating more than $10,000,000, or the acceleration of such Indebtedness under the terms of the instruments evidencing such Indebtedness; (iv) one or more judgements or decrees are entered against the Company invoking, individually or in the aggregate, a liability of $10,000,000 or more and such judgements or decrees are not vacated, discharged, satisfied or stayed pending appeal within 60 days so as to bring the aggregate liability in respect thereof below the $10,000,000 threshold; and (v) certain events of bankruptcy or reorganization of the Company or any subsidiary. The Indenture provides that the Trustee shall, within 90 days after the occurrence of any default (the term "default" to include the events specified above without grace or notice) known to it, give to the holders of Notes notice of such default; provided that, except in the case of a default in the payment of principal of or interest on any of the Notes, the Trustee shall be protected in withholding such notice if it in good faith determines that the withholding of such notice is in the interest of the holders of Notes. The Indenture will require the Company to certify to the Trustee annually as to whether any default occurred during such year. 10 13 In case an Event of Default (other than an Event of Default resulting from bankruptcy, insolvency or reorganization) shall occur and be continuing, the Trustee or the holders of at least 25% in aggregate principal amount of the Notes then outstanding, by notice in writing to the Company (and to the Trustee if given by the holders of the Notes), may, and the Trustee shall, upon the request of such holders, declare all unpaid principal and accrued interest on the Notes then outstanding to be due and payable immediately. In case an Event of Default resulting from certain events of bankruptcy, insolvency or reorganization shall occur, all unpaid principal of and accrued interest on the Notes then outstanding shall be due and payable immediately without declaration or other act on the part of the Trustee or the holders of the Notes. Such acceleration may be annulled and past defaults (except, unless theretofore cured, a default in payment of principal of or interest on the Notes) may be waived by the holders of a majority in principal amount of the Notes then outstanding, upon the conditions provided in the Indenture. The Indenture provides that no holder of Notes may pursue any remedy under the Indenture unless the Trustee shall have failed to act after notice of an Event of Default and request by holders of at least 25% in principal amount of the Notes and the offer to the Trustee of indemnity satisfactory to it, provided, however, that such provision does not affect the right to sue for enforcement of any overdue payment on the Notes. Modification and Waiver. The Indenture (including the terms and conditions of the Notes) may be modified or amended by the Company and the Trustee, without the consent of the holder of any Notes, for the purposes of (i) adding to the covenants of the Company for the benefit of the holders of Notes; (ii) surrendering any right or power conferred upon the Company; (iii) providing for conversion rights of holders of Notes in the event of consolidation, merger or sale of all or substantially all of the assets of the Company; (iv) evidencing the succession of another corporation to the Company and the assumption by such successor of the covenants and obligations of the Company thereunder and in the Notes as permitted by the Indenture; (v) reducing the Conversion Price, provided that such reduction will not adversely affect the interests of holders of Notes in any material respect; or (vi) curing any ambiguity or correcting or supplementing any defective provision contained in the Indenture, or making any other provisions which the Company and the Trustee may deem necessary or desirable and which will not adversely affect the interests of the holders of Notes in any material respect. Modification and amendment of the Indenture may be made by the Company and the Trustee with the consent of the holders of not less than a majority in principal amount of the outstanding Notes, provided that no such modification or amendment may, without the consent of the holder of each Note affected thereby, (i) change the stated maturity of the principal of or any installment of interest on, or alter the redemption provisions with respect to, any Note, (ii) reduce the principal of, or rate of interest on, any Note, (iii) impair the right to institute suit for the enforcement of any payment on or with respect to any Note, (iv) modify the conversion or subordination provisions of the Indenture in a manner adverse to the holders of the Notes, (v) reduce the above-stated percentage of holders of Notes necessary to modify or amend the Indenture or (vi) modify any of the foregoing provisions or reduce the percentage of outstanding Notes necessary to waive any covenant or past default. Holders of not less than a majority in principal amount of the outstanding Notes may waive certain past defaults. See "Events of Default and Notice Thereof." An amendment to the Indenture may not adversely affect the rights under the subordination provisions of the holders of any issue of Senior Debt without the consent of such holders. Satisfaction and Discharge. The Indenture will be discharged and cancelled upon payment of all the Notes. The Company may terminate all of its obligations under the Indenture, other than its obligation to pay the principal of and interest on the Notes and certain other obligations (including its obligation to deliver shares of Common Stock upon conversion of Notes), at any time, by depositing with the Trustee or a paying agent other than the Company, money or noncallable U.S. Government Obligations (as defined in the Indenture) sufficient to pay all remaining indebtedness on the Notes. Merger and Consolidation. The Company may consolidate or merge with any other corporation and the Company may transfer its property and assets substantially as an entirety to any person; provided that (i) the Company is the resulting or surviving corporation, or the successor corporation is a domestic corporation and it assumes, by supplemental indenture, payment of the principal of and interest on the Notes and performance 11 14 and observance of every covenant of the Indenture, and (ii) immediately before and immediately after giving effect to such transaction, no default or Event of Default shall have occurred and be continuing. Thereafter, all obligations of the Company under the Indenture and the Notes will terminate. DESCRIPTION OF CAPITAL STOCK The authorized capital stock of the Company consists of 100 million shares of Common Stock, par value $0.01 per share and 25 million shares of preferred stock, par value $.01 per share. As of February 3, 1994, there were 45,582,865 shares of Common Stock and 870,861 shares of Preferred Stock outstanding. Common Stock. The holders of the Common Stock are entitled to one vote for each share held of record, voting together with holders of Preferred Stock as one class, on all matters submitted to a vote of stockholders. The Common Stock does not have cumulative voting rights. Holders of Common Stock are entitled to receive ratably such dividends as may be declared by the Board out of funds legally available therefor. In the event of a liquidation, dissolution or winding up of the Company, holders of Common Stock will be entitled to share ratably in any assets remaining after satisfaction in full of the prior rights of creditors of the Company and the aggregate liquidation preference of any preferred stock of the Company. Holders of Common Stock have no preemptive rights and have no rights to convert their Common Stock into any other securities and there are no redemption provisions with respect to such shares. There generally exist no restrictions on alienability of shares of Common Stock other than those imposed by law on certain holders. The Common Stock is listed on the New York Stock Exchange and the Pacific Stock Exchange under the trading symbol "CHH." Preferred Stock. The Company's Board of Directors has the authority to issue various classes or series of preferred stock having such voting powers, and such preferences and relative, participating, optional or other special rights and such qualifications, limitations or restrictions thereof, as shall be determined by the Board of Directors, all in accordance with the laws of the State of Delaware. Each presently outstanding share of Preferred Stock entitles each holder thereof to one vote per share, voting together with holders of Common Stock as one class, and a liquidation preference (together with shares of preferred stock which are entitled to a preference in liquidation but subsequent to the satisfaction of liquidation preferences ranking senior thereto, if any) of $0.25 per share in any assets remaining after the satisfaction in full of the prior rights of creditors of the Company. Holders of presently outstanding Preferred Stock will be entitled to a dividend of $0.05 per share per year on a non-cumulative basis when, as and if declared by the Company Board of Directors out of assets legally available therefor. The Company does not ever expect to pay dividends with respect to the Preferred Stock. In addition, restrictions on the Company's ability to pay dividends are imposed pursuant to the terms of the Credit Facility and the Group Two Loan documents and additional restrictions may be imposed by the terms of any preferred stock which may be issued in the future by the Company. The Preferred Stock will be redeemable by the Company at the Company's option at $0.25 per share after the expiration of the Warrants as described below. Until October 8, 1999 (subject to earlier termination under certain circumstances), each share of Preferred Stock is exchangeable at the option of the holder for one Warrant. See "Description of Capital Stock -- Warrants." The Preferred Stock is not listed for trading on any national securities exchange or other national automated quotation system. Warrants. Each Warrant entitles the holder to purchase one share of Common Stock at any time during the period through and including 5:00 p.m. New York City time on October 8, 1999 (the "Exercise Period") at a purchase price (the "Warrant Price") equal to $17 per share, subject to adjustment from time to time. In the event the market price of the Common Stock equals or exceeds $25.50 for thirty consecutive trading days, the Board of Directors, after April 8, 1995, may, upon 75 days' notice, shorten the Exercise Period to end on a date earlier than October 8, 1999. The Warrant Price is subject to adjustment upon the occurrence of certain events, including, among other things, the payment of a stock dividend with respect to Common Stock, the subdivision, combination or reclassification of Common Stock, the merger or consolidation of the Company and the issuance of rights, options, or warrants (other than rights to purchase Common Stock issued to stockholders generally) to acquire Common Stock. No adjustment need be made unless such adjustment would require an increase or 12 15 decrease of at least 1% in the Warrant Price, provided that any such adjustment which is not made shall be carried forward and taken into account in computing the next Warrant Price adjustment. No holder of Warrants, as such, is entitled to any rights as a stockholder of the Company, including the right to vote or to receive dividends or other distributions with respect to the shares of Common Stock, until such holder has properly exercised the Warrants. The Warrants are listed for trading on the New York Stock Exchange and the Pacific Stock Exchange. POSSIBLE DILUTIVE EFFECT Conversion of the Notes into shares of Common Stock would result in an increase in the number of shares of Common Stock outstanding. An issuance of Common Stock at a price below the book value per share (for example, if the conversion price of the Notes were below the book value per share at the time of conversion) would have a dilutive effect on the book value of outstanding shares of Common Stock; such issuances may also have a dilutive effect on earnings per share and the relative voting power of present stockholders. The initial conversion price of the Notes is $12.19 per share. The book value of the Common Stock as of January 1, 1994 was $10.28 per share and the closing market price of the Common Stock at February 3, 1994 was $9.625 per share. The Board of Directors unanimously recommends that the stockholders vote "FOR" the Proposal. OTHER MATTERS The Board of Directors is not aware of any other matters to be presented at the meeting. If any other matters should properly come before the meeting, the persons named in the proxy will vote the proxies according to their best judgment. STOCKHOLDER PROPOSALS As stated in the Company's Proxy Statement for the 1993 Annual Meeting, the date by which stockholder proposals must have been received by the Company to be considered for inclusion in the Company's proxy materials for the 1994 Annual Meeting was December 30, 1993. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The following documents filed by the Company with the Commission are incorporated into this Proxy Statement by reference: (a) The Company's Annual Report on Form 10-K for the fifty-two week period ended January 30, 1993, as amended by the Company's Annual Report on Form 10-K/A No. 1 dated May 14, 1993; and (b) The Company's Quarterly Reports on Form 10-Q for the thirteen-week period ended May 1, 1993, the thirteen-week period ended July 31, 1993, and the thirteen-week period ended October 30, 1993. Any statement contained in a document incorporated by reference in this Proxy Statement shall be deemed to be modified or superseded for purposes of this Proxy Statement to the extent that a statement contained in this Proxy Statement 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 Proxy Statement. 13 16 [COMPANY LETTERHEAD] PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR THE SPECIAL MEETING -- FEBRUARY 25, 1994 CARTER HAWLEY HALE STORES, INC. 3880 NORTH MISSION ROAD LOS ANGELES, CALIFORNIA 90031 The undersigned hereby appoints DAVID L. DWORKIN, BRIAN L. FLEMING and MARC E. BERCOON, and each of them, proxies, each with full power of substitution, to vote all stock of the undersigned at the special meeting of stockholders of Carter Hawley Hale Stores, Inc. (the "Company") to be held February 25, 1994 at 10 a.m. at the offices of Carter Hawley Hale Stores, Inc., 3880 North Mission Road, Los Angeles, California, and/or at any adjournment of the special meeting in the manner indicated below, all in accordance with and as more fully described in the Notice of Special Meeting and accompanying Proxy Statement for the meeting, receipt of which is hereby acknowledged. (Continued on reverse side) - ------------------------------------------------------------------------------- FOLD AND DETACH HERE 17 - ----------- --------- COMMON PREFERRED Please mark /X/ your vote like this - ----------- --------- -----------------------------------
THE SHARES REPRESENTED BY THIS PROXY SHALL BE VOTED AS INDICATED BELOW: 1. To approve the issuance of up to 2. To vote in their discretion on 11,792,453 shares of the Company's such other business as may properly common stock, par value $.01 per share, come before the special meeting or issuable upon conversion of $143,750,000 any adjournment thereof. of the Company's 6-1/4% Convertible Senior Subordinated Notes due 2000, for purposes IF ANY OTHER BUSINESS IS of listing such shares on the New York PRESENTED, Stock Exchange as more fully described in THIS PROXY SHALL BE VOTED the Proxy Statement. IN ACCORDANCE WITH THE / / FOR / / AGAINST / / ABSTAIN RECOMMENDATIONS OF MANAGEMENT. Please mark, date and sign as your name appears to the left and return in the enclosed envlope. If acting as executor, administrator, trustee or guardian, state your full title and authority when signing. If the signer is a corporation, please sign the full corporate name, by duly authorized officer. If shares are held jointly, each stockholder named should sign. Dated ------------------------------- Signature(s) ------------------------ PLEASE SIGN, DATE AND RETURN THIS PROXY IN THE ENCLOSED SELF-ADDRESSED ENVELOPE. - ------------------------------------------------------------------------------- FOLD AND DETACH HERE [LOGO] CARTER HAWLEY HALE THE BROADWAY-EMPORIUM-WEINSTOCK'S YOUR VOTE IS IMPORTANT TO THE COMPANY PLEASE SIGN AND RETURN YOUR PROXY BY TEARING OFF THE TOP PORTION OF THIS SHEET AND RETURNING IT IN THE ENCLOSED POSTAGE-PAID ENVELOPE. -----END PRIVACY-ENHANCED MESSAGE-----