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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
________________________________
SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO
SECTION 14(D)(4) OF THE SECURITIES EXCHANGE ACT OF 1934
________________________________
UNITED INNS, INC.
(Name of Subject Company)
UNITED INNS, INC.
(Name of Person(s) Filing Statement)
COMMON STOCK, PAR VALUE $1.00 PER SHARE
(Title of Class of Securities)
910688 10 0
(CUSIP Number of Class of Securities)
________________________________
AUGUSTUS B. RANDLE, III
SECRETARY AND GENERAL COUNSEL
UNITED INNS, INC.
5100 POPLAR AVENUE
SUITE 2300, CLARK TOWER
MEMPHIS, TENNESSEE 38137
(901) 767-2880
(Name, address and telephone number of person authorized
to receive notices and communications on behalf of the person(s) filing
statement)
________________________________
WITH COPY TO:
WAYNE SHORTRIDGE, ESQ. SIOBHAN MCBREEN BURKE, ESQ.
PAUL, HASTINGS, JANOFSKY & WALKER PAUL, HASTINGS, JANOFSKY & WALKER
GEORGIA PACIFIC CENTER TWENTY-THIRD FLOOR
FORTY-SECOND FLOOR 555 SOUTH FLOWER STREET
133 PEACHTREE STREET, N.E. LOS ANGELES, CALIFORNIA 90071
ATLANTA, GEORGIA 30303-1840 (213) 683-6000
(404) 588-9900
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ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is United Inns, Inc., a Delaware
corporation (the "Company"). The address of the principal executive offices of
the Company is 5100 Poplar Avenue, Suite 2300, Clark Tower, Memphis, Tennessee
38137. The class of equity securities to which this Solicitation/Recommendation
Statement on Schedule 14D-9 (the "Schedule 14D-9") relates is the common stock,
par value $1.00 per share (the "Common Stock"), of the Company.
ITEM 2. TENDER OFFER OF THE BIDDER.
This Schedule 14D-9 relates to the tender offer being made by United/Harvey
Holdings, L.P., a Delaware limited partnership ("Purchaser"), to acquire all
shares of issued and outstanding Common Stock (the "Shares") at a price of
$25.00 per Share (such amount, or such other amount in cash as Purchaser may pay
pursuant to the Offer, being hereinafter referred to as the "Per Share Amount"),
net to the seller thereof in cash, upon the terms and subject to the conditions
set forth in the Offer to Purchase, dated November 21, 1994 (the "Offer to
Purchase") and the related Letter of Transmittal (which together constitute the
"Offer"). The Offer is disclosed in the Tender Offer Statement on Schedule
14D-1, dated November 21, 1994 and filed with the Securities and Exchange
Commission (the "SEC") on November 21, 1994 (the "Schedule 14D-1"). The address
of the principal executive offices of Purchaser, as set forth in the Schedule
14D-1, is 2200 Ross Avenue, 4200 Texas Commerce Tower West, Dallas, Texas 75201.
The Offer is being made pursuant to the terms of the Agreement and Plan of
Merger, dated as of November 14, 1994 (the "Merger Agreement"), among the
Company, Purchaser, United/Harvey Hotels, Inc., a Delaware corporation
("United/Harvey"), and United/Harvey Sub, Inc., a Delaware corporation ("Merger
Sub").
The Merger Agreement provides that after completion of the Offer, subject
to the terms and conditions of the Merger Agreement, Merger Sub will be merged
with and into the Company (the "Merger") and the Company will survive as the
surviving corporation and a wholly-owned subsidiary of United/Harvey. Each
outstanding Share, other than those held by United/Harvey or any subsidiary of
the Company or in the treasury of the Company (all of which will be cancelled)
and those Shares held by stockholders of the Company who properly demand and
perfect appraisal rights under the General Corporation Law of the State of
Delaware (the "Delaware Law"), will be converted at the effective time of the
Merger (the "Effective Time") into the right to receive the Per Share Amount, in
cash, without interest thereon.
The Merger Agreement provides for the conversion of nontendered Shares into
the right to receive the Per Share Amount in a cash merger as described above.
As described in the Offer to Purchase, Purchaser expressly has reserved the
right, following the consummation of the Offer, to cause the Merger Agreement to
be amended to provide nontendering stockholders the option (the "Cash/Stock
Option") to elect to receive in exchange for each Share converted in the Merger
either (i) cash in an amount at least equal to the Per Share Amount or (ii)
shares of common stock of United/Harvey. The Offer to Purchase provides that a
number of factors will influence whether or not Purchaser makes the Cash/Stock
Option available to nontendering stockholders, including the number of the
Shares owned by persons other than Purchaser following the consummation of the
Offer and compliance with applicable legal requirements, including the
Securities Act of 1933, as amended (the "Securities Act") and that, as a result,
there can be no assurance as to whether the Cash/Stock Option will be made
available to nontendering stockholders or, if so, as to the timing thereof. The
Offer to Purchase further states that, regardless of whether the Cash/Stock
Option is made available, Purchaser will, either pursuant to the Merger
Agreement as presently in effect or otherwise, subject to conditions no more
favorable to Purchaser than those contained in the Merger Agreement as presently
in effect, provide nontendering stockholders an opportunity following the
consummation of the Offer to receive cash in an amount at least equal to the Per
Share Amount in exchange for each Share not tendered pursuant to the Offer.
It is contemplated that, upon the purchase of Shares by Purchaser pursuant
to the Offer, the Company's Board of Directors will be reconstituted in its
entirety to consist solely of Purchaser's designees. Any action of the
Company's Board of Directors following the consummation of the Offer with
respect to any amendment to the Merger Agreement to provide for the Cash/Stock
Option will constitute an action of the Company's Board of Directors as then
reconstituted.
This Schedule 14D-9 relates only to the Merger Agreement as presently in
effect and to the transactions contemplated thereby, including without
limitation the cash Merger, and all references herein to the Merger Agreement
and such transactions are to the Merger Agreement as presently in effect and to
such transactions as contemplated by the Merger Agreement as presently in
effect, respectively, and not as it may be subsequently amended by the Company's
Board of Directors as reconstituted upon the purchase of Shares by Purchaser
pursuant to the Offer.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and address of the Company, which is the person filing this
Schedule 14D-9, are set forth in Item 1 above.
(b) Certain contracts, agreements, arrangements and understandings between
the Company and certain of its executive officers, directors and affiliates are
described under "Board of Directors" and "Employee Benefit Plans" of the
Company's Information Statement, a copy of which is attached hereto as Annex A
and which is incorporated herein by reference.
Certain other contracts, agreements and understandings between the
Company and its directors, executive officers and affiliates and between the
Company and Purchaser are set forth below:
(i) INDEMNIFICATION. The Company's Certificate of Incorporation, as
amended, provides that no director shall be personally liable to the Company or
any stockholder for monetary damages for breach of fiduciary duty as a director,
except for any matter in respect of which such director shall be liable under
Section 174 of the Delaware Law or shall be liable by reason that such director
(a) shall have breached his duty of loyalty to the Company or its stockholders,
(b) shall not have acted in good faith, (c) shall have acted in a manner
involving intentional misconduct or a knowing violation of law, or (d) shall
have derived an improper personal benefit.
In addition, the Company's By-laws provide that the Company shall
indemnify all of its officers and directors against any liability on their part
which may at any time be claimed to have resulted to any third person or to the
Company by reason of any acts or omissions by them, in connection with the
business or on behalf of the Company, not resulting from or arising out of fraud
or bad faith.
The Company also has entered into indemnification agreements with
each of its officers and directors, which agreements provide that, in addition
to certain rights of indemnification, the Company will purchase and maintain in
effect one or more policies of director and officer insurance covering the
Company's officers and directors, as can be obtained for the present premium
payments of $177,840 per year.
(ii) MERGER AGREEMENT. On November 14, 1994, the Company, Purchaser,
United/Harvey and Merger Sub entered into the Merger Agreement. The following
discussion of the Merger Agreement and the transactions contemplated thereby,
including the Offer and the Merger, does not purport to be complete and is
qualified in its entirety by reference to the complete text of the Merger
Agreement, a copy of which has been filed as an exhibit hereto and is
incorporated herein by reference.
THE OFFER. The Merger Agreement provides that Purchaser will
make the Offer and, subject to the terms and conditions of the Offer, Purchaser
shall accept for payment and pay for
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Shares which have been validly tendered and not withdrawn pursuant to the Offer
at the Per Share Amount net to the seller thereof in cash at the earliest time
following expiration of the Offer that all conditions to the Offer have been
satisfied or waived by Purchaser. Purchaser may waive any of the conditions to
the Offer or make any other changes in the terms and conditions of the Offer,
except that no change may be made (a) that decreases the price per Share payable
in the Offer, except for decreases, if any, to reflect the difference, if any,
between 2,704,899 shares and the number of shares of Common Stock outstanding as
of the expiration of the Offer, calculated on a fully diluted basis, (b) that
reduces the maximum number of Shares to be purchased in the Offer, (c) that
changes the form of consideration to be paid in the Offer, or (d) that imposes
conditions to the Offer in addition to those described below. In addition,
Purchaser has agreed not to extend the expiration date of the Offer, except (a)
in the event that any condition to the Offer is not satisfied on the initial
expiration date of the Offer, (b) as may be required by law, or (c) with the
Company's written permission.
CONDITIONS TO THE OFFER. The Merger Agreement provides that
Purchaser will not be required to accept for payment, or to purchase or pay for,
any tendered Shares and Purchaser may terminate or amend the Offer and may
postpone the purchase of, and payment for, Shares if (a) there shall not have
been validly tendered to Purchaser pursuant to the Offer and not withdrawn
immediately prior to the expiration of the Offer at least that number of Shares
that, when taken as a whole with all other Shares owned or acquired by Purchaser
(whether pursuant to the Offer or otherwise), constitutes at least a majority of
the Shares on a fully diluted basis (the "Minimum Condition"), (b) prior to the
time of payment for any such Shares, any waiting period (and any extension
thereof) applicable to the Offer under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the rules and regulations thereunder
(the "HSR Act") shall not have expired or otherwise been terminated or (c) at
any time on or after the date of the Merger Agreement and prior to the time of
payment for any such Shares: (1) there shall have been threatened, instituted
or pending any action, proceeding, application or counterclaim by or before any
governmental, regulatory or administrative agency or authority, domestic,
foreign or transnational, which (A) seeks to restrain or prohibit the making or
consummation of the Offer or the Merger or seeks damages in connection therewith
or resulting therefrom, (B) seeks to prohibit or restrict the ownership or
operation by Purchaser (or any of its affiliates or subsidiaries) of any portion
of its or the Company's business or assets which is material to the business of
all such entities taken as a whole, or to compel Purchaser (or any of its
affiliates or subsidiaries) to dispose of or hold separate any portion of the
Company's business or assets which is material to the business of all such
entities taken as a whole, (C) seeks to impose material limitations on the
ability of Purchaser effectively to acquire or to hold or to exercise full
rights of ownership of the Shares, including without limitation the right to
vote the Shares purchased by Purchaser on all matters properly presented to the
stockholders of the Company, (D) seeks to impose any limitations on the ability
of Purchaser or any of its affiliates or subsidiaries effectively to control in
any material respect the business and operations of the Company, or (E) would
otherwise be reasonably likely to have a material adverse effect on the
business, operations, property or condition (financial or otherwise) of the
Company and its subsidiaries, taken as a whole; or (2) the representations and
warranties of the Company set forth in the Merger Agreement shall have been
breached in any material respect (or, with respect to those representations and
warranties qualified by material adverse effect, in any respect) or the Company
shall have failed to perform any obligation or covenant required by the Merger
Agreement to be performed or complied with by it in any material respect; or (3)
there shall have occurred (A) any general suspension of, or limitation on prices
for, or trading in, securities on the New York Stock Exchange, (B) a declaration
of a banking moratorium or any suspension of payments in respect of banks in the
United States, (C) a commencement of a war, armed hostilities or other
international or national calamity directly or indirectly involving the United
States, (D) any material limitation (whether or not mandatory) by a governmental
authority, or any other event that is reasonably likely to materially adversely
affect the extension of credit by banks or other financial institutions, or
(E) in the case of any of the foregoing existing at the time of the commencement
of the Offer, a material acceleration or worsening thereof; or (4) a tender or
exchange offer for some portion of or all the Shares shall have been publicly
proposed to be made or shall have been commenced at an all cash price per share
in excess of the Per Share Amount (or at any other price if the Board of
Directors of the Company does not promptly announce publicly that it is
recommending that the
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Company's stockholders not tender into such offer) by another person or entity
or Purchaser shall have otherwise learned that any person, entity or "group"
(within the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")) shall have acquired beneficial ownership of
more than 25% of the Shares, through the acquisition of stock, the formation of
a group or otherwise, or shall have been granted any right, option or warrant,
conditional or otherwise, to acquire beneficial ownership of more than 25% of
the Shares other than acquisitions for bona fide arbitrage purposes only and
other than by persons, entities or groups that have publicly disclosed such
ownership in a Schedule 13D or 13G on file with the SEC on the date of the
Merger Agreement; or (5) any other person or entity shall have commenced a proxy
or consent solicitation of the Company's stockholders to approve a transaction
other than transactions contemplated by the Merger Agreement; or (6) the Merger
Agreement shall have been terminated in accordance with its terms; or (7) the
Board of Directors of the Company shall not have taken all necessary actions to
fulfill the Company's obligations to reconstitute the Company's Board of
Directors as described under the heading "The Board" below; or (8) Purchaser and
the Company shall have agreed that Purchaser shall amend or terminate the Offer
or postpone the payment for Shares pursuant thereto.
The Merger Agreement provides that the foregoing conditions are
for the sole benefit of Purchaser. Such conditions may be waived by Purchaser
with the approval of the Board of Directors of the Company. Any determination
by Purchaser will be final and binding upon all parties including tendering
stockholders. The failure by Purchaser at any time to exercise any of the
foregoing rights will not be deemed a waiver of any such right and each such
right will be deemed an ongoing right which may be asserted at any time and from
time to time.
THE BOARD. The Merger Agreement provides that, promptly upon the
purchase by Purchaser of a majority of the outstanding Shares pursuant to the
Offer, Purchaser shall be entitled, subject to compliance with applicable law,
to designate up to that number of members, rounded up to the nearest whole
number, of the Company's Board of Directors as will make the percentage of the
members designated by Purchaser equal to the percentage of outstanding Shares
held by Purchaser and its affiliates (other than the Company and its
subsidiaries). Pursuant to Merger Agreement, the Company has agreed to increase
the size of its Board and/or use its reasonable efforts to secure the
resignation of such number of directors as is necessary to enable Purchaser's
designees to be elected to the Company's Board of Directors and to cause
Purchaser's designees to be so elected effective immediately upon Purchaser's
acquisition of a majority of the outstanding Shares pursuant to the Offer or
otherwise. In this regard, on November 14, 1994, the Company's Board of
Directors took written action to (a) increase the number of directors of the
Company from six to nine, such increase to be effective immediately prior to
Purchaser's acquisition of a majority of the Shares, (b) elect Messrs. J. Peter
Kline, Donald J. McNamara and Robert A. Whitman (collectively, the "Purchaser
Designees"), as designees of Purchaser to fill the vacancies created by such
increase, with such elections to be effective immediately upon Purchaser's
acquisition of a majority of the Shares, and (c) accept the written resignation
as a director of the Company of each of the existing members of the Board of
Directors of the Company, such resignations being effective immediately upon
Purchaser's acquisition of a majority of the Shares; the Company has represented
to Purchaser that such action will be in effect immediately prior to Purchaser's
acquisition of a majority of the Shares. If any Purchaser Designee becomes
unable or unwilling to serve as a member of the Company's Board of Directors, it
is contemplated that an appropriate substitute will be elected to such Board in
place of such Purchaser Designee. In addition, the Company will cause the
Purchaser Designees to constitute the same percentage (rounded up to the nearest
whole number) on each of the following: (a) each committee of such Board
designated by Purchaser, (b) each board of directors of each subsidiary of the
Company designated by Purchaser, and (c) each committee of each such board
designated by Purchaser. The Company's obligations to appoint designees to the
Company's Board of Directors will be subject to Section 14(f) of the Exchange
Act and Rule 14f-1 thereunder. In this regard, the Company has prepared and
filed with the SEC an Information Statement, a copy of which is attached as
Annex A to this Schedule 14D-9 and which is incorporated herein by reference.
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The Merger Agreement provides that, from the date of the Merger
Agreement to the date on which the Purchaser Designees first become directors of
the Company as described above, the Company will notify Purchaser in advance of
every meeting of the Company's Board of Directors (or any committee thereof) and
will permit a representative of Purchaser to attend, as an observer, each such
meeting.
THE MERGER. The Merger Agreement provides that Merger Sub will
be merged with and into the Company in accordance with the relevant provisions
of the Delaware Law as soon as practicable following the satisfaction or waiver
of the conditions to the Merger described below under the heading "Conditions to
the Merger". Following the Merger, the Company shall continue as the surviving
corporation (the "Surviving Corporation") and the separate corporate existence
of Merger Sub will cease. The Certificate of Incorporation and By-laws of the
Company to be in effect from and after the Effective Time, until amended in
accordance with their respective terms and the Delaware Law will be the
Certificate of Incorporation and By-laws, respectively, of the Company, as
amended and restated in the form attached to the Merger Agreement. The
directors and officers of Merger Sub immediately prior to the Effective Time
shall be the initial directors and officers of the Surviving Corporation until
their respective successors are duly elected or appointed and qualified.
As provided in the Merger Agreement, each Share issued and
outstanding immediately prior to the Effective Time (other than Shares owned by
United/Harvey or any subsidiary of the Company or held in the treasury of the
Company, all of which shall be cancelled without consideration, and other than
Dissenting Shares, as defined below) shall, by virtue of the Merger and without
any action on the part of Merger Sub, the Company or United/Harvey, be converted
into and become the right to receive the Per Share Amount, in cash, without
interest thereon and each share of common stock, par value $0.01 per share, of
Merger Sub ("Merger Sub Common Shares") issued and outstanding immediately prior
to the Effective Time will, by virtue of the Merger and without any action on
the part of the holder thereof, be converted into and become one share of common
stock, par value $0.01 per share, of the Surviving Corporation. Each Merger Sub
Common Share held in Merger Sub's treasury or by any subsidiary of Merger Sub
immediately prior to the Effective Time will be cancelled without the payment of
any consideration therefor. The Merger Agreement provides that the Merger will
be consummated as promptly as practicable after the satisfaction or waiver of
the conditions set forth in the Merger Agreement. The Merger will become
effective at the time of filing of a certificate of merger as required by the
Delaware Law.
Any Shares held by a holder who has demanded and perfected the
right for appraisal of such Shares in accordance with the Delaware Law and who,
as of the Effective Time, has not effectively withdrawn or lost such right to
such appraisal ("Dissenting Shares") will be entitled only to such rights as are
granted by the Delaware Law. If any holder of Shares who demands appraisal of
such Shares under the Delaware Law shall effectively withdraw or lose (through
failure to perfect or otherwise) the right to such appraisal, then, as of the
later of the Effective Time or the occurrence of such event, such holder's
Shares will automatically be converted into and represent only the right to
receive the Per Share Amount in cash, without interest thereon.
The Merger Agreement provides that if required following the
completion of the Offer, the Company shall promptly take all action necessary in
accordance with the Delaware Law and its Certificate of Incorporation and By-
laws to duly call, give notice of, convene and hold a special meeting of its
stockholders (the "United Stockholders' Meeting") to consider and vote upon the
approval and adoption of the Merger. Purchaser has agreed to cause all Shares
purchased pursuant to the Offer and all other Shares owned by the Purchaser or
any affiliate thereof to be voted in favor of the approval the Merger. If the
Minimum Condition is satisfied and Purchaser purchases the Shares pursuant to
the Offer, Purchaser will be able to effect the adoption of the Merger Agreement
(whether in its present form or as it may be amended to implement the Cash/Stock
Option or otherwise) either at a meeting of the Company's
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stockholders or pursuant to written consent in lieu of such a meeting, without
the affirmative vote or consent of any other stockholder of the Company.
CONDITIONS TO THE MERGER. Under the Merger Agreement, the
respective obligations of each party to effect the Merger are subject to the
satisfaction or waiver at or prior to the Effective Time of the following
conditions: (a) the Offer shall have been consummated; (b) the Merger Agreement
shall have been adopted by the requisite vote of the stockholders of the Company
if required by applicable law; (c) any waiting period (and extension thereof)
applicable to the consummation of the Merger under the HSR Act shall have
expired or been terminated; and (d) no United States or state governmental
authority or other agency or commission or United States or state court of
jurisdiction shall have enacted, issued, promulgated, enforced or entered any
law, rule, regulation, writ, injunction or other order which is in effect and
has the effect of making the Merger or the Offer illegal or otherwise
prohibiting the consummation of the transactions contemplated by the Merger
Agreement.
REPRESENTATION AND WARRANTIES. The Merger Agreement contains
various customary representations and warranties of the parties.
Representations and warranties of Purchaser include certain matters relating to
its organization, its authority to enter into the Merger Agreement and to
consummate the transactions contemplated thereby, its filings with the SEC in
connection with the Offer, the consents and approvals required for the execution
and delivery of the Merger Agreement and the consummation of the transactions
contemplated thereby and the availability of funds sufficient to consummate the
Offer and the Merger on the terms contemplated thereby.
Representations and warranties of United/Harvey and Merger Sub
include certain matters relating to their organization, their authority to enter
into the Merger Agreement and to consummate the transactions contemplated
thereby and the consents and approvals required for the execution and delivery
of the Merger Agreement and the consummation of the transactions contemplated
thereby.
Representations and warranties of the Company include certain
matters relating to its organization and qualification to do business, its
capitalization, its authority to enter into the Merger Agreement and to
consummate the transactions contemplated thereby, the consents and approvals
required for the execution and delivery of the Merger Agreement and the
consummation of the transactions contemplated thereby, its filings with the SEC,
the absence of certain changes suffered by the Company since August 31, 1994,
its litigation, employees and employee benefit plans, taxes and environmental
matters.
CONDUCT OF BUSINESS PENDING THE MERGER. Pursuant to the Merger
Agreement, the Company has agreed that, during the period from the date of the
Merger Agreement to the Effective Time, except as otherwise provided in the
Merger Agreement or unless Purchaser otherwise agrees in writing, the businesses
of the Company and its subsidiaries will be conducted only in, and the Company
and its subsidiaries will not take any action except in, the ordinary course of
business consistent with past practices. The Company has further agreed that it
will (a) use its reasonable best efforts to (i) preserve substantially intact
the business organization of the Company and its subsidiaries, (ii) keep
available the services of the present officers, employees and consultants of the
Company and its subsidiaries, and (iii) preserve the present relationships of
the Company and its subsidiaries with customers, suppliers and other persons
with whom the Company or any of its subsidiaries has significant business
relations, (b) continue in full force and effect without material modification
all existing policies or binders of insurance currently maintained in respect of
the Company and each of its subsidiaries and their respective assets, and (c)
pay, and cause each of its subsidiaries to pay, its indebtedness and otherwise
discharge its liabilities punctually when and as the same become due and payable
and perform and observe, and cause each of its subsidiaries to perform and
observe, its duties and obligations under its material contracts.
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By way of amplification of the foregoing, the Company has agreed
that, except as expressly contemplated by the Merger Agreement, neither the
Company nor any of its subsidiaries will, between the date of the Merger
Agreement and the Effective Time, directly or indirectly do, or propose to do,
any of the following without the prior written consent of Purchaser: (a) amend
or otherwise change its Certificate of Incorporation or By-laws; (b) issue,
sell, pledge, dispose of encumber, or authorize the issuance, sale, pledge,
disposition or encumbrance of, (i) any shares of capital stock of any class, or
any options, warrants, convertible securities or other rights of any kind to
acquire any shares of capital stock, or any other ownership interests, of the
Company or any of its subsidiaries (except for the issuance of shares pursuant
to certain options and other arrangements previously disclosed to Purchaser), or
(ii) any assets of the Company or any of its subsidiaries (except for the sale
of non-material assets in the ordinary course of business consistent with past
practices); (c) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with respect to any
of its capital stock; (d) reclassify, combine, split, subdivide or redeem,
purchase or otherwise acquire, directly or indirectly, any of its capital stock;
(e)(i) acquire (by merger, consolidation or acquisition of stock or assets) any
corporation, partnership or other business organization or division thereof,
(ii) incur any indebtedness or issue any debt securities or assume, guarantee or
endorse or otherwise as an accommodation or become responsible for, the
obligations of any person, or make any loans or advances, (iii) enter into any
contract or agreement (except for certain specified contracts and agreements and
except for those non-material contracts and agreements entered into in the
ordinary course of business consistent with past practices), (iv) authorize new
capital expenditures (other than expenditures incurred in the ordinary course of
business consistent with past practices or as required by the direction or acts
of a franchisor and expenditures required by governmental direction), or (v)
amend any contract, agreement, commitment or arrangement (other than certain
specified contracts and agreements) with respect to any of the foregoing
matters; (f) increase the compensation payable or to become payable to, or grant
or pay any severance or termination pay to, the officers or employees of the
Company or its subsidiaries (except as may be necessary to comply with
applicable law, except for increases in salary or wages of employees of the
Company or its subsidiaries in accordance with existing policies or past
practices, and except pursuant to terms of contracts, policies or benefit
arrangements in effect on the date of the Merger Agreement), enter into any
employment or severance agreement with, any director, officer or other employee
of the Company or any of its subsidiaries, or establish, adopt, enter into or
amend any bonus, profit sharing, thrift, compensation, stock option, restricted
stock, pension, retirement, deferred compensation, termination, severance or
other plan, agreement, trust, fund, policy or arrangement for the benefit of any
of the directors, officers or employees of the Company or its subsidiaries
(except as may be necessary to comply with applicable law); (g) take any action
other than in the ordinary course of business consistent with past practices
(none of which actions shall be unreasonable or unusual) with respect to
accounting policies or procedures (including without limitation procedures with
respect to the payment of accounts payable and collection of accounts
receivable); (h) make any tax election or settle or compromise any tax
liability; or (i) pay, discharge or satisfy any claim, liability or obligation
(absolute, accrued, asserted or unasserted, contingent or otherwise), other than
the payment, discharge or satisfaction of the same in the ordinary course of
business consistent with past practices (including payment of the Company's
liabilities in accordance with their terms).
ACCESS. Pursuant to the Merger Agreement, the Company has
agreed that, from the date of the Merger Agreement to the Effective Time, it
will, and will cause its subsidiaries, officers, directors, employees, auditors
and agents to, afford the officers, employees and agents of Purchaser reasonable
access to its officers, employees, agents, properties, offices, plants and other
facilities and to all books and records, and will furnish Purchaser with all
financial, operating and other data and information as Purchaser, through its
officers, employees, or agents, may reasonably request.
EMPLOYEE BENEFIT PLANS. The Merger Agreement provides that the
Surviving Corporation will pay, in accordance with their terms, all amounts
which are or become due and payable under the terms of all written employment,
severance and termination contracts, agreements, plans, policies and commitments
of the Company and its subsidiaries with or with respect to its current or
former employees, officers and directors. The Surviving Corporation will
maintain, for at least a one year period
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after the Effective Time, employee plans of the Company in effect on the date of
the Merger Agreement or provide benefits to employees of the Surviving
Corporation who were employees of the Company and its subsidiaries immediately
prior to the Effective Time ("United Employees") that are at least substantially
comparable to the benefits provided to similarly situated employees of the
Surviving Corporation who are not United Employees. In addition, from the date
of the Merger Agreement and until the Effective Time, the Company will use its
reasonable efforts to enter into employment contracts, effective not later than
the Effective Time, with those persons identified by United/Harvey to the
Company on or before December 1, 1994, provided that the Company's obligations
under each such contract will be conditioned upon the agreement of the employee
party thereto to cancel any severance or termination agreement between the
Company and such employee in effect on the date of the Merger Agreement.
EXCLUSIVE NEGOTIATIONS. In the Merger Agreement, the Company
represents and warrants that, on November 4, 1994, it ceased and caused to be
terminated any existing negotiations, or prior negotiations with any party
previously conducted, with respect to a business combination with the Company or
a change in control of the Company (a "Change in Control Transaction"). The
Company also agrees that, from and after the execution and delivery of the
Merger Agreement, the Company will not and will cause its affiliates and its or
their representatives not to, solicit any offers from any person or entity in
respect of, or, except as described in the following paragraph, engage in any
negotiations relating to or provide any information in respect of, any Change in
Control Transaction.
The Merger Agreement provides that if any person (other than a
person who participated in the process to which the Company selected Purchaser
to the make the Offer and effect the Merger (a "Prior Person")) publicly
announces or notifies the Company in writing that it intends to commence a
tender or exchange offer to purchase Shares on financial and legal terms which
the Company's Board of Directors determines, based upon advice from the
Company's independent financial and legal advisors, are more favorable to the
Company than those contemplated by the Merger Agreement (an "Unsolicited
Proposal"), the Company will notify Purchaser in writing of such Unsolicited
Proposal by 5:00 p.m., Eastern Time, on the business day next following the
business day on which the Company receives notice of the Unsolicited Proposal.
Any such notice given by the Company (a "Proposal Notice") is required to state
the terms and conditions of such Unsolicited Proposal and the identity of the
person making it (and to include a copy of such Unsolicited Proposal). The
Merger Agreement further provides that, if the Company's Board of Directors
determines, based upon advice from the Company's independent legal advisors,
that its fiduciary duties under applicable law require that the Company commence
negotiations with respect to such Unsolicited Proposal or furnish information in
respect thereof, Purchaser will have the option to terminate the Merger
Agreement, whereupon Purchaser will be entitled to its expenses and a
termination fee as described under the heading "Fees and Expenses" below. The
Merger Agreement also provides that, in the event that a Prior Person makes an
Unsolicited Proposal, the Company will deliver to Purchaser a Proposal Notice
with respect thereto, but will not recommend any such Unsolicited Proposal to
its stockholders.
CERTAIN OTHER AGREEMENTS. Pursuant to the Merger Agreement, each
of the Company, Purchaser, United/Harvey and Merger Sub has agreed to use its
reasonable best efforts to take, or cause to be taken, all actions and to do, or
cause to be done, all other things necessary, proper or advisable to consummate
or make effective as promptly as practicable the transactions contemplated by
the Merger Agreement and to obtain in a timely manner all necessary waivers,
consents and approvals and to effect all necessary registrations and filings.
INDEMNIFICATION AND INSURANCE. The Merger Agreement provides
that the limitations of liability of directors and the indemnification
provisions of the Certificate of Incorporation and the By-laws of the Surviving
Corporation will not be amended, repealed, contradicted by any other provision
of such Certificate of Incorporation or By-laws or otherwise modified for a
period of seven years from the Effective Time in any manner that would adversely
affect the rights thereunder of individuals who at the time of execution and
delivery of the Merger Agreement were directors, officers, employees or
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agents of the Company, unless such modification is required by a change in
applicable law. The Merger Agreement further provides that the Company will to
the fullest extent permitted under applicable law or under the Company's
Certificate of Incorporation or By-laws or pursuant to the Directors/Officers
Indemnification Agreements previously entered into and in effect on the date of
the Merger Agreement and regardless of whether the Merger becomes effective,
indemnify and hold harmless, and after the Effective Time, the Surviving
Corporation will, to the fullest extent permitted under applicable law or under
the Surviving Corporation's Certificate of Incorporation or By-laws, indemnify
and hold harmless, each present and former director, officer, employee,
fiduciary and agent of the Company or any of its subsidiaries against any cost
or expenses (including attorneys' fees), judgments, fines, losses, claims,
damages, liabilities and amounts paid in settlement in connection with any
claim, action, suit, proceeding or investigation, whether civil, criminal,
administrative or investigative, arising out of or pertaining to any action or
omissions occurring prior to the Effective Time (including, without limitation
any claim, action suit, proceeding or investigation arising out of or pertaining
to the transactions contemplated by the Merger Agreement) for a period of seven
years after the date of the Merger Agreement. Under the Merger Agreement, the
Surviving Corporation is obligated for five years after the Effective Time to
maintain in effect, if available, directors' and officers' liability insurance
substantially comparable in scope and coverage to the Company's current
directors' and officers' liability insurance policy covering those persons who
are presently covered by such policy, except that the Surviving Corporation
shall only be obligated to maintain such coverage at a cost not to exceed
$177,840 per year.
INDEMNIFICATION OF PURCHASER AND AFFILIATES. Under the Merger
Agreement, the Company has agreed to indemnify and hold harmless each of
Purchaser and its affiliates (including United/Harvey and Merger Sub), and their
respective partners, officers, directors, employees, agents, and controlling
persons from and against any loss, damage, or expense, including without
limitation reasonable attorneys' and accountants' fees suffered by any
indemnified party, (a) as a result of any action, suit, proceeding or
investigation which is based upon, relates to or results from the Merger
Agreement or any of the transactions contemplated thereby, except to the extent
that it is finally judicially determined by a court of competent jurisdiction
that the loss in question resulted from a breach by Purchaser of any of the
representations and warranties set forth in the Merger Agreement, or (b) from
and after the Effective Time, or, if applicable, the termination of the Merger
Agreement as a result of any inaccuracy in or breach of any of the
representations, warranties or covenants of the Company set forth in the Merger
Agreement.
INDEMNIFICATION OF THE COMPANY. From and after the Effective
Time, or, if applicable, the termination of the Merger Agreement, Purchaser,
United/Harvey and Merger Sub have agreed to indemnify and hold harmless the
Company and its current and future officers, directors, employees and agents
from and against damage or expense (including without limitation reasonable
attorneys' and accountants' fees) suffered by any of them as a result of any
inaccuracy in or breach of any of the representations, warranties or covenants
made by Purchaser, United/Harvey or Merger Sub under the Merger Agreement.
TERMINATION, AMENDMENT AND WAIVER. The Merger Agreement provides
that it may be terminated at any time prior to the Effective Time: (a) by mutual
consent of Purchaser, United/Harvey and the Boards of Directors of Merger Sub
and the Company; (b) by either Purchaser or the Company if (i) the Merger shall
not have been consummated by March 31, 1995; provided, however, that such right
of termination shall not be available to any party whose failure to fulfill any
obligation under the Merger Agreement has been the cause of, or resulted in, the
failure of the Merger to occur on or before such date, or (ii) a court of
competent jurisdiction or governmental, regulatory or administrative agency or
commission shall have issued an order, decree or ruling or taken any other
action which permanently restrains, enjoins or otherwise prohibits the
transactions contemplated by the Merger Agreement; (c) by Purchaser if (i) due
to an occurrence that would result in a failure to satisfy any of the conditions
to the Offer, Purchaser shall have terminated the Offer or failed to pay for
Shares pursuant to the Offer within 180 days after the commencement of the
Offer, or (ii) prior to the purchase of Shares pursuant to the Offer, the
Company's Board of Directors shall have withdrawn or modified in a manner
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adverse to Purchaser its approval or recommendation of the Offer or the Merger
or shall have recommended another offer or transaction; (d) by the Company if
(i) due to an occurrence that would result in a failure to satisfy any of the
conditions to the Offer, Purchaser shall have terminated the Offer or failed to
pay for Shares pursuant to the Offer within 180 days after the commencement of
the Offer, or (ii) prior to the purchase of Shares pursuant to the Offer, the
Company's Board of Directors shall have withdrawn its recommendation to the
Company's stockholders to accept the Offer and shall have recommended another
offer or transaction, provided that, the Company shall not recommend another
Offer or transaction if such Offer is made by or such transaction is to be with
a Prior Person, and accordingly, may not terminate the Merger Agreement pursuant
to this provision under such circumstances; or (e) by Purchaser as described
under the heading "Exclusive Negotiations" above.
The Merger Agreement provides that it may be amended only by
action taken by Purchaser, United/Harvey and the Boards of Directors of the
Company and Merger Sub at any time before or after approval of the Merger
Agreement and by the stockholders of the Company, if required by applicable law.
The Merger Agreement provides that any party may (a) extend the
time for performance of any of the obligations or other acts of the other
parties to the Merger Agreement, (b) waive any inaccuracies in the
representations and warranties contained in the Merger Agreement, and (c) waive
compliance with any of the agreements or conditions of the other parties
contained in the Merger Agreement.
FEES AND EXPENSES. The Merger Agreement provides that all
reasonable out-of-pocket fees, costs and expenses incurred in connection with
the Offer, the Merger Agreement and the transactions contemplated thereby will
be paid or reimbursed by the Company, except that each party will pay its own
fees, costs and expenses in the event that the Offer is not consummated.
Notwithstanding the foregoing, the Merger Agreement provides that the Company
will pay or reimburse to Purchaser an amount equal to the sum of all reasonable
documented fees, costs and expenses in an amount not to exceed $1.0 million
incurred by Purchaser and its affiliates in connection with the Merger Agreement
and the transactions contemplated thereby subsequent to October 26, 1994,
immediately upon the first to occur of: (a) prior to the acceptance for payment
of Shares pursuant to the Offer, the Company's Board of Directors having
withdrawn or modified in a manner adverse to Purchaser its approval or
recommendation of the Offer or having recommended another offer or transaction;
(b) the Company having failed to perform or comply in any material respect with
any obligation or covenant required by the Merger Agreement to be performed or
complied with by it or breached any representation or warranty of the Company
set forth in the Merger Agreement in any material respect (or with respect to
those representations and warranties qualified by material adverse effect, in
any respect); or (c) if the Merger Agreement is terminated as described under
the heading "Exclusive Negotiations" above as a result of an Unsolicited
Proposal; provided that no such payment shall be made to Purchaser if Purchaser,
United/Harvey or Merger Sub, as the case may be, shall have failed to perform or
comply in any material respect with any obligation or covenant required by the
Merger Agreement to be performed or complied with by it or breached any
representation or warranty of it set forth in the Merger Agreement in any
material respect (or with respect to those representations and warranties
qualified by material adverse effect, in any respect). In addition, the Company
will pay to Purchaser immediately upon termination of the Merger Agreement
pursuant to clause (c)(ii), (d)(ii) or (e) under the first paragraph of the
heading "Termination, Amendment and Waiver" above, an amount equal to $1.0
million if such termination occurs on or before November 30, 1994, and an amount
equal to $1.5 million if such termination occurs after November 30, 1994. The
parties have agreed that any amount to be paid as described in this paragraph
will be the exclusive remedy of Purchaser in connection with any such
termination.
GUARANTY OF PERFORMANCE. In the Merger Agreement, United/Harvey,
Merger Sub and The Hampstead Group, Inc. have, jointly and severally, (a)
represented and warranted to the Company that the representations and warranties
of Purchaser set forth in the Merger Agreement are true
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and correct in all material respects, and (b) agreed to cause Purchaser to
perform and comply in all material respects with the obligations and covenants
required by the Merger Agreement to be performed or complied with by it,
effective up to the Effective Time. The provisions of the Merger Agreement
described in the immediately preceding sentence will terminate at the Effective
Time and thereupon become null and void.
(iii) CONFIDENTIALITY AGREEMENT. The Company and an affiliate of
Purchaser, Hampstead Investments, Inc. ("HII") entered into a Confidentiality
Agreement, dated July 14, 1994 (the "Confidentiality Agreement"), relating to
HII's receipt and review of certain confidential evaluation materials and
information furnished by or on behalf of the Company (the "Evaluation
Materials"). Pursuant to the Confidentiality Agreement, HII agreed to use the
Evaluation Materials solely for the purpose of evaluating a possible investment
in the Company, to refrain from allowing such information to be used for private
use or commercial purpose and to take all appropriate measures to safeguard the
confidentiality of the Evaluation Materials. Pursuant to the Confidentiality
Agreement, HII also agreed, on behalf of itself and its principals, not to
actively engage in the purchase of Shares on the open market and not to contact
any mortgagee, note holder, bond holder, lessor or hotel franchisor of the
Company, without prior approval.
The foregoing description of the Confidentiality Agreement is
qualified in its entirety by reference to the complete text of the
Confidentiality Agreement, a copy of which has been filed as a exhibit hereto
and is incorporated herein by reference.
(iv) LETTER AGREEMENT. Purchaser, the Company and Harvey Hotel Co.,
Ltd. entered into a letter agreement dated as of November 4, 1994 (the "Letter
Agreement"). Pursuant to the Letter Agreement, the Company agreed that: (a) it
would immediately cease and cause to be terminated any existing negotiations, or
prior negotiations with any party previously conducted, with respect to a
business combination or a change in control (a "Change in Control Transaction");
(b) from the date of the Letter Agreement until the signing of a definitive
agreement, but not later than January 31, 1995 (the "Exclusivity Period"), it
would not, and it would cause its respective representatives not to, solicit any
offers from any other party relating to a Change in Control Transaction; and (c)
it would, during the Exclusivity Period, exclusively negotiate with Purchaser in
good faith to reach a definitive agreement and enter into definitive
documentation relating to a business combination, except as otherwise required
by fiduciary obligations under applicable law, as advised by counsel in respect
of Another Proposal (as hereinafter defined). The Letter Agreement also
provided that Purchaser could terminate its negotiations with the Company if the
Company were to receive an unsolicited proposal providing for a Change in
Control Transaction from any person or entity who or which was not given an
opportunity prior to the date of the Letter Agreement to propose a Change in
Control Transaction, which unsolicited proposal was on financial and legal terms
more favorable to the Company than Purchaser's proposal ("Another Proposal"),
and the Company in the exercise of its fiduciary duties under applicable law
elected to commence negotiations with respect to Another Proposal. In the event
that Purchaser were to terminate its negotiations in connection with a
Unsolicited Proposal or the Company were to enter into an agreement providing
for a Change in Control Transaction with any person other than Purchaser or its
affiliates prior to the expiration of the Exclusivity Period, the Company would
reimburse Purchaser up to $500,000 for all reasonable out-of-pocket expenses
incurred from and after October 26, 1994, relating to matters contemplated by
Purchaser's proposal to the Company. In addition, if Purchaser were to
terminate its negotiations pursuant to Another Proposal, then the Company would
pay to Purchaser a fee in an amount equal to $500,000 if Purchaser were to
receive notice of Another Proposal on or before November 10, 1994, or in an
amount equal to $1.0 million if Purchaser were to receive notice of Another
Proposal after November 10 and on or before November 20, 1994 or in an amount
equal to $1.5 million if Purchaser were to receive notice of Another Proposal
after November 20, 1994 but prior to the expiration of the Exclusivity Period.
In addition, the Company agreed to indemnify and hold Purchaser and its
affiliates harmless for any loss, cost, damage, expense (including reasonable
attorneys' fees and charges) or liability relating to, resulting from or arising
out of any action, suit or proceeding initiated by any stockholder, other
security holder or lender of the Company, any
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employee or former employee of the Company or by any other person or entity
based upon or relating to, in whole or in part, facts arising out of the
negotiations between Purchaser and the Company during the Exclusivity Period or
relating to the Letter Agreement.
The foregoing description of the Letter Agreement is qualified in
its entirety by reference to the complete text of the Letter Agreement, a copy
of which has been filed as an exhibit hereto and is incorporated herein by
reference.
(v) COCKROFT AGREEMENT. Purchaser and Cockroft Consolidated
Corporation ("Cockroft Consolidated") have entered into an agreement (the
"Cockroft Agreement") pursuant to which Purchaser has agreed to provide that the
expiration date of the Offer will occur in January 1995, subject to extension
only as provided in the Merger Agreement, and further agreed that, regardless of
whether the Cash/Stock Option is made available, Purchaser will, either pursuant
to the Merger Agreement as presently in effect or otherwise, subject to
conditions no more favorable to Purchaser than those contained in the Merger
Agreement as presently in effect, provide nontendering stockholders an
opportunity following the consummation of the Offer to receive cash in an amount
at least equal to the Per Share Amount in exchange for each Share not tendered
pursuant to the Offer.
Pursuant to the Cockroft Agreement, Cockroft Consolidated has
agreed to tender pursuant to the Offer and not withdraw all of the 1,209,214
Shares held by Cockroft Consolidated (the "Cockroft Shares"), constituting
approximately 45.4% of the total number of Shares. In addition, Cockroft
Consolidated has granted to Purchaser an irrevocable option (the "Cockroft
Option") to purchase all (but not less than all) of the Cockroft Shares. The
Cockroft Option is exercisable on or after January 1, 1995 and on or prior to
March 31, 1995, provided that one of the events referred to in clause (c) (4) or
(5) under the heading "The Merger Agreement -- Conditions to the Offer" above
has occurred. The price per share payable upon the exercise of the Cockroft
Option is the greater of (a) the Per Share Amount and (b) the per share amount
of any competing offer which gives Purchaser the right to terminate the Merger
Agreement in the manner described in the second paragraph under the heading "The
Merger Agreement -- Exclusive Negotiations" above.
Pursuant to the Cockroft Agreement, Cockroft Consolidated has
represented to Purchaser that Cockroft Consolidated has good and valid title to
all of the Cockroft Shares and sole and unrestricted voting power and power of
disposition with respect thereto. In addition, Cockroft Consolidated has
agreed, prior to the expiration of the Cockroft Option, not to, among other
things, (a) sell or otherwise dispose of or encumber any of the Cockroft Shares,
(b) grant any proxy with respect to any of the Cockroft Shares (other than to
Purchaser), or (c) exercise any voting or consent rights with respect to the
Cockroft Shares in a manner inconsistent with the intent and purposes of the
Merger Agreement or the Cockroft Agreement.
Mr. Don Cockroft, Chief Executive Officer, President and a
director of the Company, Mr. Robert Cockroft and Mrs. Janet Virgin, both
directors of the Company, and Mrs. Katherine Lammons, beneficially own a
controlling interest in Cockroft Consolidated. The foregoing description of the
Cockroft Agreement is qualified in its entirety by reference to the complete
text of the Cockroft Agreement, a copy of which has been filed as an exhibit
hereto and is incorporated herein by reference.
(vi) SEVERANCE AGREEMENTS. In June 1987, the Company entered into
severance agreements with certain executive officers of the Company. Under the
agreements with Mr. Augustus B. Randle, III and Mr. J. Don Miller, they would be
entitled to severance compensation in the event that their employment is
terminated following a change in control of the Company. The amount of
compensation would be equal to a maximum of 200% of their base compensation for
the twelve months prior to the their termination. The maximum amount of
compensation which would be payable to Messrs. Randle and Miller, if their
employment were terminated, as of November 14, 1994 would be $172,000 and
$178,000, respectively, plus an additional amount for benefits.
-12-
The foregoing description of the severance agreements is
qualified in its entirety by reference to the complete text of the severance
agreements, a copy of which have been filed as exhibits hereto and are
incorporated herein by reference.
Except as set forth above, to the best knowledge of the Company,
there are no contracts, agreements or understandings or any actual or potential
conflicts of interest between the Company or its affiliates, and (a) the
Company's executive officers, directors or affiliates or (b) Purchaser or their
respective executive officers, directors or affiliates.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a) (i) RECOMMENDATION REGARDING THE OFFER AND THE CASH MERGER. At a
special meeting of the Company's Board of Directors held on November 14, 1994,
the Board of Directors unanimously (a) determined that the Offer and the cash
Merger are in the best interests of the Company's stockholders, (b) approved the
Merger Agreement and the transactions contemplated thereby, including the Offer
and the cash Merger, and (c) resolved to recommend that the Company's
stockholders accept the Offer. The Company's Board of Directors recommends that
the Company's stockholders accept the Offer and tender their Shares to Purchaser
in the Offer. A copy of a form of letter to stockholders communicating the
Board of Director's recommendation is filed as an exhibit to this Schedule 14D-9
and is incorporated herein by reference.
(ii) NO RECOMMENDATION REGARDING THE POSSIBLE CASH/STOCK OPTION. The
Company's Board of Directors (a) has not made and does not intend to make any
determination with respect to the Cash/Stock Option, including whether the
Cash/Stock Option or any amendment to the Merger Agreement to provide for the
Cash/Stock Option would be in the best interests of the Company's stockholders,
(b) has not approved and does not intend to approve the Cash/Stock Option or any
amendment to the Merger Agreement with respect thereto, and (c) has not made and
does not intend to make any recommendation to the Company's stockholders with
respect to the Cash/Stock Option or any amendment to the Merger Agreement with
respect thereto.
(b) (i) BACKGROUND. The Company owns and operates 25 hotel properties
located in selected cities in the Southern United States. The Company operates
hotels under the Holiday Inn, Holiday Inn Express, Days Inn, Hampton Inns,
Howard Johnson and Ramada flags. The Company's hotels are located in Atlanta,
Georgia (8 hotels), Jackson, Mississippi (4 hotels), Houston and Dallas, Texas
(8 hotels), Colorado Springs, Colorado (2 hotels), Scottsdale and Flagstaff,
Arizona (2 hotels) and Santa Barbara, California (1 hotel). In addition, the
Company owns 11 non-hotel properties, principally land, in the same cities as
the above hotel properties.
During the mid to late 1980's the hotel industry in the United States
was characterized by over-building and intense competition. Room rates remained
relatively fixed because of the intense competitive pressures, although
operating expenses tended to increase because of increases in the prevailing
wage rates and increases in the cost of other goods and services. Due to these
factors as well as the war in the Middle East and its negative impact on
domestic travel, the Company experienced poor operating results in 1990, 1991
and 1992.
As a result of these conditions and following a restructuring of the
Company's debt, in mid-1993, the Company engaged Michael S. McNulty ("McNulty"),
on an informal basis, and Geller & Co. ("GellerCo") to explore certain plans to
enhance stockholder value. The initial purpose in retaining these advisors was
to obtain a review of the Company's operations and to obtain suggestions on
improving operating results.
In July 1994, the Company retained Smith Barney Inc. ("Smith Barney")
to act as financial advisor to the Company to assist the Company in exploring
various strategic alternatives to
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maximize stockholder value, including the possible sale of all or a portion of
the Company's assets. On July 12, 1994, the Company issued a press release
announcing its retention of Smith Barney in this regard.
At a Board of Directors' meeting held on September 9, 1994, the Board
reviewed the status of efforts to identify potentially desirable strategic
transactions for the Company, and the Board was advised that (a) approximately
100 persons both within and outside the hotel industry had been identified and
contacted for an indication of interest on their part with regard to a
transaction involving the Company, (b) a memorandum containing detailed
information regarding the Company and its assets, properties and operations had
been distributed to approximately one-half of the persons contacted, and (c)
preliminary proposals regarding possible transactions involving the Company had
been received. At this meeting, the Board of Directors authorized the Company's
representatives to assemble and make available to these interested parties
additional information regarding the Company.
On October 27, 1994, the Board of Directors held a special meeting at
which the Board reviewed, with its financial and legal advisors, proposals
submitted by three entities, including Purchaser, together with, among other
items, a proposed form Agreement and Plan of Merger which had been submitted to
the potential bidders. After extensive discussion, the Board authorized the
Company's representatives to continue discussions with these three entities.
A special meeting of the Board of Directors was held on November 1,
1994, at which the Board reviewed the newly revised terms of the three
proposals, two of which were all-cash proposals. One of the all-cash proposals
was from Purchaser. Following this Board meeting on November 1, 1994, the
Company issued a press release announcing that it had entered into negotiations
regarding an all-cash business combination, a copy of which is attached to this
Schedule 14D-9 as an exhibit and is incorporated herein by reference.
On November 3, 1994, the Board of Directors held a special meeting to
review the status of the discussions with the two all-cash bidders. The
November 3 special meeting of the Board of Directors was reconvened on November
4, 1994 to review the final proposals of the two all-cash bidders. The Board of
Directors extensively discussed the terms and conditions of the two final
proposals. At the conclusion of this meeting, the Board of Directors authorized
the Company's representatives to negotiate with Purchaser or its affiliates the
terms of an agreement whereby the Company would agree under certain
circumstances not to solicit or enter into or continue negotiations with respect
to alternative proposals (a "no-shop agreement"), as well as the terms of a
definitive Merger Agreement.
Following this Board meeting on November 4, 1994, the Company's
representatives negotiated the terms of, and the Company entered into, a no-shop
agreement with The Hampstead/Harvey Group, an affiliate of Purchaser, in the
form of the letter agreement, a copy of which is attached as an exhibit hereto
and which is incorporated herein by reference. On that date, the Company issued
a press release with respect to this no-shop agreement, a copy of which is
attached hereto and which is incorporated herein by reference. Also, during the
ensuing ten days, the Company's representatives negotiated with representatives
of Purchaser the terms of the Merger Agreement, a copy of which is attached as
an exhibit hereto and which is incorporated herein by reference.
At a special meeting of the Board of Directors held on November 14,
1994, Smith Barney delivered to the Board its written opinion to the effect
that, as of such date and based upon and subject to certain matters stated in
such opinion, the cash consideration to be received by holders of Shares
pursuant to the Offer and the Merger was fair to such stockholders from a
financial point of view.
Following considerable deliberation at this November 14 Board of
Directors' meeting, the Board unanimously (a) determined that the Offer and the
cash Merger are in the best interests of the Company's stockholders, (b)
approved the Merger Agreement and the transactions contemplated thereby,
including the Offer and the cash Merger, and (c) resolved to recommend that the
Company's stockholders
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accept the Offer. Following the conclusion of this meeting, on November 14,
1994, the parties entered into the Merger Agreement and later that afternoon,
the Company issued a press release announcing the execution of the Merger
Agreement, a copy of which is attached hereto and which is incorporated herein
by reference.
(ii) REASONS FOR RECOMMENDATION REGARDING THE OFFER AND THE CASH
MERGER. On November 14, 1994, the Company's Board of Directors met to review
the terms of the Merger Agreement (including all Annexes, Schedules and Exhibits
thereto) which had been previously distributed to the Board. Prior to approving
the Merger Agreement and the transactions contemplated thereby, the Board of
Directors reviewed the terms and conditions of the Offer and the Merger with the
Company's management, legal counsel and financial advisor. In reaching its
conclusion set forth in Item 4(a) (i) above, the Board of Directors considered a
number of factors, including, without limitation, the following:
(a) The Company's industry profile, including an analysis of the
Company's competitive position in the hotel industry and the necessity for
substantial capital improvements to be made to upgrade a number of the Company's
hotel properties.
(b) The Board's belief that the process undertaken by the Company in
obtaining proposals with respect to a business combination with the Company was
comprehensive and that, after consultation with Smith Barney based on its
involvement in such process, the Company had received the best and final offer
from interested parties.
(c) The Board's belief that the Offer represents an attractive
opportunity for stockholders to promptly receive fair value in cash for their
investment in light of the Company's current and prospective financial condition
and the inherent risks in the hotel industry.
(d) A review of various financial and other considerations, including
the Company's historical and recent stock prices, values placed by the market on
certain other publicly-traded hotel companies and a comparative analysis of the
capitalization rate (based on the earnings of the Company before income taxes,
depreciation and amortization) of the Company's cash flow as compared to the
capitalization rate of other similarly situated companies.
(e) The written opinion of Smith Barney dated November 14, 1994, to
the effect that, as of such date and based upon and subject to certain matters
stated in such opinion, the cash consideration to be received by holders of
Shares in the Offer and the Merger was fair to such stockholders from a
financial point of view. The full text of Smith Barney's written opinion, which
sets forth the assumptions made, matters considered and limitations on the
review undertaken by Smith Barney, is attached as an exhibit hereto and is
incorporated herein by reference. Smith Barney's opinion is directed only to
the fairness, from a financial point of view, of the cash consideration to be
received by holders of Shares pursuant to the transactions contemplated by the
Merger Agreement and is not intended to constitute, and does not constitute, a
recommendation as to whether any stockholder should tender Shares pursuant to
the Offer. Stockholders are urged to read such opinion carefully in its
entirety.
(f) The fact that the consideration to be paid to the Company's
stockholders in the Offer is all cash and is for all of the outstanding Shares.
(g) The terms and conditions of the Offer and the Merger Agreement,
which the Board believes are fair and reasonable, including the absence of any
financing condition.
(h) The provisions of the Merger Agreement that could have a
detrimental effect on third parties who might be interested in a proposed
business combination with the Company. These provisions include the obligation
of the Company to pay a termination fee of up to $1.5 million and reimburse
Purchaser for its out-of-pocket expenses up to $1.0 million if the Offer does
not go forward under certain
-15-
circumstances. In addition, the Company has agreed not to solicit or engage in
any negotiations relating to or providing information with respect of any
"change of control" transaction except in the event that the Company receives an
unsolicited proposal regarding a business combination from a person or an entity
(other than a person or entity which participated in the solicitation process
described above), in which event, in the exercise of its fiduciary duties under
applicable law, the Company may commence negotiations with such person or entity
submitting the unsolicited proposal. In that event, Purchaser will have the
option to terminate the Merger Agreement and be reimbursed for its expenses and
be paid a termination fee (as described above). The Company has further agreed
that if a person or entity which participated in the solicitation process as
described above makes an unsolicited proposal, the Company will not make a
positive recommendation to its stockholders with respect to such unsolicited
proposal. The Board recognized that these and certain other terms were required
by Purchaser as a condition to entering into the Merger Agreement.
In view of the wide variety of factors considered in connection with
its evaluation of the Offer and the Merger, the Board of Directors did not find
it practicable to, and did not, quantify or otherwise attempt to assign relative
weights to the specific factors considered in reaching its determination.
(iii) REASONS FOR NO RECOMMENDATION REGARDING THE POSSIBLE CASH/STOCK
OPTION. In determining not to approve or make any recommendation regarding the
Cash/Stock Option, the Board of Directors considered a number of factors,
including, without limitation, the following:
(a) The fact that the Company has not assessed and does not intend to
assess the value of any noncash consideration that may be received by holders of
Shares pursuant to the Merger or any other transaction if the Merger Agreement
is amended to provide for the Cash/Stock Option or otherwise.
(b) The fact that the written opinion of Smith Barney does not
address and is not intended to address the fairness, from a financial point of
view, to the holders of Shares of any noncash consideration that may be received
by such stockholders pursuant to the Merger or any other transaction if the
Merger Agreement is amended to provide for the Cash/Stock Option or otherwise,
and the fact that Purchaser has not sought or obtained any advice or opinion
from an independent financial advisor with respect thereto.
(c) The fact that as described in the Offer to Purchase, whether
Purchaser will amend the Merger Agreement to provide for the Cash/Stock Option
will depend upon a number of factors and will be subject to compliance with
applicable legal requirements, and Purchaser states that no assurance can be
given as to whether the Cash/Stock Option will be made available or, if so, the
timing thereof.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The Company retained Smith Barney as financial advisor to the Company to
furnish financial advisory and investment banking services in connection with a
potential sale or other transfer of all or substantially all of the outstanding
capital stock or assets of the Company to one or more potential purchasers (a
"Transaction"). The Company has agreed to pay Smith Barney for its services an
aggregate financial advisory fee in an amount equal to 1.25% of the total
proceeds and other consideration paid or received in connection with a
Transaction which occurs during Smith Barney's engagement or, with respect to
certain parties, during a period of 12 months thereafter. The Company also has
agreed to reimburse Smith Barney for its reasonable out-of-pocket expenses
(including reasonable travel and legal expenses) and to indemnify Smith Barney
and certain related parties against certain liabilities, including liabilities
under the federal securities laws, arising out of Smith Barney's engagement.
Pursuant to a Consulting Agreement, dated August 13, 1993 (the "Geller
Consulting Agreement"), the Company retained GellerCo for a one-year period as a
financial advisor to the Company to develop and assist in the implementation of
a strategic plan for the future operation of the Company. Under the Geller
-16-
Consulting Agreement, the Company agreed to pay GellerCo a monthly retainer of
$12,500 and awarded GellerCo 25,000 shares of Common Stock and granted to
GellerCo options to purchase 35,000 shares of Common Stock. On August 31, 1994,
Smith Barney, GellerCo, Laurence Geller (together with GellerCo, "Geller") and
the Company entered into a compensation agreement (the "Compensation
Agreement"), pursuant to which the parties agreed, among other things, that
Geller would receive a fee from Smith Barney equal to 20% of the Transaction Fee
received by Smith Barney from the Company in the event that the Company
successfully completes a Transaction within 12 months of the of the date of the
Compensation Agreement.
In July 1994, the Company formally retained Michael S. McNulty ("McNulty")
to explore certain plans for the Company's operations to enhance stockholder
value. In consideration for such services, the Company has agreed to pay
McNulty a fee of $124,000 and an additional incentive bonus of $50,000 upon
completion of the Offer by Purchaser.
Except as set forth above, neither the Company nor any person acting on its
behalf intends to employ, retain or compensate any person to make solicitations
or recommendations to stockholders on its behalf concerning the Offer.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) Pursuant to the Geller Consulting Agreement, on August 13, 1994,
25,000 shares of the Company's Common Stock issued to GellerCo became fully
vested and options to purchase 35,000 shares of the Company's Common Stock
granted to GellerCo became exercisable, at an exercise price of $4.55 per share.
The Common Stock issued and issuable upon the exercise of options to GellerCo is
required to be registered under the Securities Act. In connection with the
foregoing, the Company filed a Registration Statement on Form S-1 (Reg. No. 33-
54925), with the SEC on August 4, 1994, as amended by Amendment No. 1 thereto
filed with the SEC on September 26, 1994, Amendment No. 2 thereto filed with the
SEC on October 13, 1994, Amendment No. 3 thereto filed with the SEC on October
31, 1994, and Amendment No. 4 thereto filed with the SEC on November 4, 1994.
On February 11, 1994, the Company granted pursuant to its 1993 Stock
Incentive Plan to each of four directors of the Company, Robert L. Cockroft,
Howard W. Loveless, Janet C. Virgin and Robert J. Wareham, an option to purchase
up to 1,000 shares of Common Stock at an exercise price of $12.87 per share.
All such options become immediately exercisable upon a Change in Control as
defined in the 1993 Stock Incentive Plan.
On November 21, 1994, Purchaser and Cockroft Consolidated entered into
the Cockroft Agreement. See Item 3 above for a description of the Cockroft
Agreement.
Except as set forth above, to the best of the Company's knowledge,
neither the Company nor any director, executive officer, affiliate or subsidiary
of the Company has effected transactions in the Shares during the past 60 days.
(b) To the best of the Company's knowledge, GellerCo and each of the
directors described in Item 6(a) intend to exercise his/her option and tender at
least a majority of all Shares held of record or beneficially by them pursuant
to the Offer. To the best of the Company's knowledge, its executive officers,
other directors and affiliates currently intend to tender at least a majority of
all Shares held of record or beneficially by them pursuant to the Offer.
-17-
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
(a) On November 14, 1994, the Company, Purchaser, United/Harvey and Merger
Sub entered into the Merger Agreement. See Item 3 above for a description of
the Merger Agreement and certain other agreements and transactions relating
thereto.
Except as described in Items 2 and 3(b) above, no negotiation is
underway or is being undertaken by the Company in response to the Offer which
relates to or could result in: (i) an extraordinary transaction such as a merger
or reorganization, involving the Company or any of its subsidiaries; (ii) a
purchase, sale or transfer of a material amount of assets by the Company or any
of its subsidiaries; (iii) a tender offer for or other acquisition of securities
by or of the Company; or (iv) any material change in the present capitalization
or dividend policy of the Company.
(b) Except as described in Items 3(b) and 4 hereof, there are no
transactions, board resolutions, agreements in principle or signed contracts in
response to the Offer, which relate to or would result in one or more of the
matters referred to in Item 7(a).
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
None.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
Exhibit Description
- ------- -----------
No.
---
1. Agreement and Plan of Merger among the Company, Purchaser,
United/Harvey and Merger Sub, dated as of November 14, 1994.
2. Press release issued by the Company on November 1, 1994.
3. Press release issued by the Company on November 4, 1994.
4. Press release issued by the Company and Purchaser on November 14,
1994.
5. Confidentiality Agreement between the Company and HII, dated July
14, 1994.
6. Letter agreement among the Company, Purchaser and Harvey Hotel
Co., Ltd., dated November 4, 1994.
7. Agreement between Purchaser and Cockroft Consolidated, dated
November 21, 1994.
8. Agreement between the Company and Augustus B. Randle, III, dated
June 1, 1987.
9. Agreement between the Company and J. Don Miller, dated June 1,
1987.
*10. Letter from the Company to the Company's stockholders, dated
November 23, 1994.
*11. Opinion of Smith Barney Inc., dated November 14, 1994.
______________________
* Exhibits 10 and 11 are being distributed to all stockholders.
-18-
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: November 23, 1994 UNITED INNS, INC.
By: /s/ Don Wm. Cockroft
-----------------------------
Don Wm. Cockroft
President, Chief Executive
Officer and Director
-19-
ANNEX A
UNITED INNS, INC.
5100 POPLAR AVENUE
SUITE 2300, CLARK TOWER
MEMPHIS, TENNESSEE 38137
INFORMATION STATEMENT PURSUANT TO
SECTION 14(F) OF THE SECURITIES
EXCHANGE ACT OF 1934 AND RULE 14F-1 THEREUNDER
This Information Statement, which is being mailed on or about November 23,
1994 to holders of record of shares of Common Stock as of November 10, 1994, is
being furnished in connection with the possible designation by Purchaser
pursuant to an Agreement and Plan of Merger, dated as of November 14, 1994 (the
"Merger Agreement"), among United Inns, Inc. (the "Company"), United/Harvey
Holdings, L.P. ("Purchaser"), United/Harvey Hotels, Inc. ("United/Harvey") and
United/Harvey Sub, Inc. ("Merger Sub") of certain persons to be elected to the
Board of Directors (the "Board") of the Company by means other than through a
meeting of the Company's stockholders. This Information Statement is being
distributed with the Company's Schedule 14D-9, to which this Information
Statement is attached as Annex A thereto.
Pursuant to the Merger Agreement, Purchaser commenced a cash tender offer
on November 21, 1994 to acquire all of the issued and outstanding shares of
Common Stock (the "Shares") at a price of $25.00 per Share (such amount, or such
other amount in cash as Purchaser may pay pursuant to the Offer, being
hereinafter referred to as the "Per Share Amount"), net to the seller thereof in
cash, upon the terms and subject to the conditions set forth in Purchaser's
Offer to Purchase, dated November 21, 1994, and the related Letter of
Transmittal. The Merger Agreement also provides that after completion of the
Offer, subject to the terms and conditions set forth in the Merger Agreement,
Merger Sub will be merged with and into the Company and the Company will survive
as the surviving corporation (the "Surviving Corporation"). Each outstanding
Share, other than those held by United/Harvey or in the treasury of the Company
or by any subsidiary of the Company (all of which will be cancelled) and other
than Shares held by holders who have demanded and perfected and not withdrawn or
lost the right for appraisal of such Shares under the Delaware General
Corporation Law, will be converted at the effective time (the "Effective Time")
of the Merger into the right to receive the Per Share Amount, in cash, without
interest thereon.
The Merger Agreement provides that, promptly upon the purchase by Purchaser
of a majority of the outstanding Shares pursuant to the Offer (the "Share
Acquisition"), Purchaser shall be entitled, subject to compliance with
applicable law, to designate up to that number of members, rounded up to the
nearest whole number, of the Board as will make the percentage of the members
designated by Purchaser equal to the percentage of outstanding Shares held by
Purchaser and its affiliates (other than the Company and its subsidiaries). The
Company has agreed to increase the size of its Board and/or use its reasonable
efforts to secure the resignation of such number of directors as is necessary to
enable Purchaser's designees to be elected to the Board and will cause
Purchaser's designees to be so elected effective immediately upon Purchaser's
acquisition of a majority of the outstanding Shares pursuant to the Offer or
otherwise. In connection with the foregoing, the Board has taken written action
to (a) increase the number of directors of the Company from six to nine, such
increase to be effective immediately prior to the Share Acquisition, (b) elect
Messrs. J. Peter Kline, Donald J. McNamara and Robert A. Whitman (collectively,
the "Purchaser Designees"), as designees of Purchaser, to fill the vacancies
created by such increase, with such elections to be effective immediately upon
the Share Acquisition, and (c) accept the written
resignation as a director of the Company of each of the existing members of the
Board, such resignations being effective immediately upon the Share Acquisition;
the Company has represented to Purchaser that such action will be in effect
immediately prior to the Share Acquisition. In addition, the Company has agreed
to cause persons designated by Purchaser to constitute the same percentage
(rounded up to the nearest whole number) on each of the following as the
designees of Purchaser then constitutes on the Board: (a) each committee of
such Board designated by Purchaser, (b) each board of directors of each
subsidiary designated by Purchaser, and (c) each committee of each such board
designated by Purchaser. The Company's obligation to appoint Purchaser
Designees to its Board is subject to Section 14(f) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act") and Rule 14f-1 promulgated
thereunder.
NO ACTION IS REQUIRED BY THE STOCKHOLDERS OF THE COMPANY IN CONNECTION WITH
THE ELECTION OF THE PURCHASER DESIGNEES TO THE BOARD. HOWEVER, SECTION 14(F) OF
THE EXCHANGE ACT REQUIRES THE MAILING TO THE COMPANY'S STOCKHOLDERS OF THE
INFORMATION SET FORTH IN THIS INFORMATION STATEMENT PRIOR TO A CHANGE OF A
MAJORITY OF THE COMPANY'S DIRECTORS.
The purpose of this Information Statement is to satisfy the requirements of
Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder in
connection with the reconstitution of the Board pursuant to the Merger
Agreement, and to provide information regarding the Board and executive officers
of the Company and the Purchaser Designees. The information contained in this
Information Statement concerning the Purchaser Designees has been furnished to
the Company by Purchaser and the Company assumes no responsibility for the
accuracy or completeness of such information and Purchaser shall be solely
responsible for such information.
BOARD OF DIRECTORS
GENERAL
The shares of Common Stock are the only class of voting securities of the
Company outstanding. Each share of Common Stock is entitled to one vote on each
matter to be considered at meetings of stockholders, including the election of
directors. As of November 14, 1994, there were 2,665,899 shares of Common Stock
outstanding.
The Certificate of Incorporation of the Company provides that directors of
the Company shall be not less than three nor more than ten and shall be elected
by the stockholders at their annual meeting to serve for a term of one year or
until their successors are duly elected and qualified.
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY AS OF NOVEMBER 14, 1994
The following table sets forth certain information with respect to each of
the current directors and executive officers of the Company including their
names, ages, principal occupations for the past five years, (in the case of
directors) their directorships with other corporations and their terms as
directors and executive officers:
-2-
PRINCIPAL OCCUPATION DURING EXECUTIVE
THE PAST FIVE YEARS DIRECTOR OFFICER
NAME AGE AND OTHER DIRECTORSHIPS SINCE SINCE
---- --- --------------------------- ----- -----
DIRECTORS:
Don Wm. Cockroft 56 President and Chief Executive Officer of the Company 1967 1966
(a) (brother of Robert L. Cockroft and Janet C. Virgin,
brother-in-law of J. Howard Lammons)
J. Howard Lammons 65 Private investor (brother-in-law of Don Wm. 1957 --
(a) Cockroft, Robert L. Cockroft and Janet C. Virgin);
Advisory Director of Memphis, NationsBank of TN
Robert L. Cockroft 53 Physician - Memphis Radiological Professional 1971 --
(c) Corporation (brother of Don Wm. Cockroft and Janet
C. Virgin, brother-in-law of J. Howard Lammons)
Howard W. Loveless 67 Private consultant 1977 --
(b) and (c)
Janet C. Virgin 60 Private investor (sister of Don Wm. Cockroft and 1991 --
(a) Robert L. Cockroft, sister-in-law of J. Howard
Lammons)
Ronald J. Wareham 50 President - R.J. Wareham & Company, Incorporated, a 1993 --
(a), (b) and (c) corporate financial advisory firm
NON-DIRECTOR EXECUTIVE
OFFICERS:
Augustus B. Randle, III 53 Secretary and General Counsel -- 1972
J. Don Miller 59 Vice President-Finance -- 1975
John M. Dollar 53 Vice President -- 1973
<FN>
(a) Member of the Executive Committee of the Board.
(b) Member of the Audit Committee of the Board.
(c) Member of the Compensation Committee of the Board.
The above directors and executive officers have had the principal
occupations set forth above for at least five years, except for Mr. Wareham, Mr.
Lammons and Mr. Loveless. Mr. Wareham has been President of R.J. Wareham &
Company, Incorporated, a corporate financial advisory firm since 1991. From
1984 to 1991, he was a managing director of Dean Witter Reynolds' Corporate
Finance Office in Atlanta, Georgia. Mr. Lammons has been principally involved
in private investment activities since his retirement from the Company in March
1994. Prior to his retirement, Mr. Lammons served as Executive Vice-President
of the Company since 1978. Mr. Loveless has been
-3-
principally involved in private consulting activities since January 1, 1994.
Prior to that date and for over five years, Mr. Loveless served as President of
Haas, Inc., a private investment advisory company.
INDIVIDUALS DESIGNATED BY PURCHASER AS PURCHASER DESIGNEES
The following table sets forth certain information with respect to each of
the Purchaser Designees including their names, ages, principal occupations for
the past five years and their directorships with other corporations:
PRINCIPAL OCCUPATION DURING
THE PAST FIVE YEARS
NAME AGE AND OTHER DIRECTORSHIPS
- ---- --- ---------------------------
Donald J. McNamara 41 Chairman of the Board of Directors and Co-
Chief Executive Officer of The Hampstead
Group, Inc. (which makes and manages real
estate and health-care related investments);
director of LaQuinta Inns, Inc. (which owns
and operates hotels); director of Forum
Retirement, Inc., the general partner of
Forum Retirement Partners, L.P., a public
master limited partnership (which owns
retirement communities) director of FelCor
Suite Hotels (a real estate investment
trust).
Robert A. Whitman 41 President and Co-Chief Executive Officer of
The Hampstead Group, Inc., from 1992 to
present; Chairman of the Board of Forum
Group, Inc. (which owns and operates
retirement communities) from June 1993 to
present; President and Chief Executive
Officer of Forum Group, Inc. from June 1993
to October 1994; Managing Partner and Chief
Executive Officer for Trammel Crow Ventures
(the real estate investment, banking and
investment management unit of the Trammel
Crow Company) from prior to 1989 to 1992; and
Chief Financial Officer for Trammel Crow
Group and Trammel Crow Company from prior to
1988 to 1991.
J. Peter Kline 47 President of Harvey Hotels, Inc., (which owns
and operates hotels) from prior to 1983 to
present.
-4-
MEETINGS AND COMMITTEES OF THE BOARD
The Company's Board conducted nine meetings during fiscal year 1994, four
of which were regular meetings and five of which were special meetings of the
Board. Each of the directors attended at least 75% of the meetings of the Board
and any Committee of the Board on which they serve, except for Mr. Loveless who
attended 66-2/3% of the Board meetings.
Among the three Committees of the Board are an Executive Committee, an
Audit Committee and a Compensation Committee. The Company does not have a
standing Nominating Committee of the Board of Directors. The Audit Committee
(a) meets and reviews with the independent auditors their audit and non-audit
services, (b) meets and reviews with management the audit and non-audit
services, (c) meets and reviews with management the audit and non-audit services
of the independent auditors, and (d) makes such recommendations to management
and the independent auditors as it deems appropriate. The Audit Committee held
one meeting during fiscal year 1994. The Compensation Committee determines the
salaries, bonuses and other remuneration of the officers of the Company,
administers the Company's Bonus Plan, and makes recommendations to the Board
with respect to the Company's compensation policies. The Compensation Committee
held one meeting during fiscal year 1994.
COMPENSATION OF DIRECTORS
For fiscal year 1994 all directors are to be paid a fee of $750 for each
Board meeting attended. In addition, directors who are not employees of the
Company are to be paid a quarterly fee of $1,500, plus $400 for each Board
Committee meeting attended.
The Company has a consulting arrangement with R.J. Wareham & Company,
Incorporated ("Wareham & Co."), under the terms of which Wareham & Co. is to be
paid by the Company for Ronald J. Wareham's time and expenses for financial
advice to the Company related to a variety of corporate projects. Mr. Wareham
is the sole shareholder of Wareham & Co. The Company has made payments in the
aggregate amount of $26,450 to Wareham & Co., during the Company's fiscal year
ended September 30, 1994.
The Company's 1993 Stock Incentive Plan provides that each director who is
not also an employee of the Company and who is incumbent at the date of each of
the five consecutive annual meetings of stockholders beginning with the
Company's 1994 annual meeting of stockholders shall automatically be granted,
immediately after the conclusion of each such annual meeting, an option to
purchase 1,000 shares of Common Stock. In connection with the Company's 1994
annual meeting of stockholders held on February 11, 1994, the Company granted to
each of Robert L. Cockroft, Howard W. Loveless, Janet C. Virgin and Ronald J.
Wareham, an option to purchase up to 1,000 shares of Common Stock at an exercise
price of $12.87 per share of Common Stock.
-5-
EXECUTIVE COMPENSATION
The following table sets forth the compensation awarded to, earned by or
paid to the Company's Chief Executive Officer and its other most highly
compensated executive officer, whose total annual salary and bonus for the
Company's 1994 fiscal year exceeded $100,000, for services rendered in all
capacities during the fiscal years ended September 30, 1994, 1993 and 1992.
ANNUAL COMPENSATION
ALL OTHER
FISCAL SALARY COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($)(2) ($)(1)(3)
- --------------------------- ------ ------ ------------
Don Wm. Cockroft 1994 233,250 11,174
President and Chief Executive 1993 216,000 169,262
Officer 1992 216,000
John M. Dollar 1994 117,167 8,272
Vice President 1993 113,000 47,191
1992 113,000
<FN>
(1) In accordance with transitional provisions of the rules of the Securities
and Exchange Commission (the "SEC") on executive compensation disclosure,
amounts of All Other Compensation have not been included for fiscal year
1992.
(2) Salary includes base salary earned and paid in cash during the fiscal year
and the amount of base salary deferred at the election of the executive
officer under the United Inns, Inc. Retirement Savings Plan (401(K) Plan)
for fiscal years 1992, 1993, and 1994.
(3) All Other Compensation consists of (a) the amount ($3,585) in insurance
premiums provided to each executive officer through the Company's Group
Health Insurance Plan that is not available generally to all salaried
employees, and (b) matching contributions to the United Inns, Inc.
Retirement Savings Plan (401(K) Plan); Such amounts, respectively were as
follows for 1994: Mr. Cockroft, $7,589; and Mr. Dollar, $4,687.
REPORT ON EXECUTIVE COMPENSATION OF THE
COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
The compensation of the Company's executives consists of three basic
components: base salary, an executive bonus plan, if applicable, and long-term
incentives. The Compensation Committee of the Board, based upon recommendations
of the chief executive officer of the Company, determines the compensation of
the executive officers of the Company, approves the funding of the executive
bonus plan, if applicable, determines the awards of long-term incentives and the
individuals to whom such awards are made, and establishes the compensation of
the chief executive officer of the Company. For fiscal year 1994, the members
of the Company's Compensation Committee were Mr. Howard W. Loveless, who was the
Chairman, and Messrs. Robert L. Cockroft and Ronald J. Wareham.
BASE SALARY
The establishment of competitive base compensation for the Company's
executives is the primary objective in setting base salaries. The Company
considers a number of factors to determine base salary including company and
individual performance, business conditions, the relative
-6-
importance of an executive officer's position, the extent of accountability of
the position and the skills required to perform the duties of the position.
None of the factors mentioned above is given any particular weight in
determining base compensation. Other factors also may influence such
determination, such as the relative extent of an individual's experience or a
desire to retain a valuable executive.
EXECUTIVE BONUS PLAN
The Company has an executive bonus plan under which individual
discretionary awards can be made to the full-time executive officers of the
Company. The sum to be distributed ranges from 1% to 3% of the consolidated net
income of the Company before income taxes. No cash amounts have been paid under
such plan since fiscal year ending September 30, 1985.
LONG-TERM INCENTIVES
Stock options are authorized to be granted as long-term incentives to
certain key employees of the Company, including executive officers, under the
Company's 1993 Stock Incentive Plan (the "1993 Plan"). Under the terms of this
plan, the Company may grant options to key employees (determined by the
Compensation Committee) to purchase such number of shares of the Common Stock of
the Company as is determined by the Compensation Committee.
The number of shares for which options will be granted to executive
officers will be determined by the Compensation Committee based upon
performance, potential and other subjective factors. However, no set criteria
will be used and other factors may influence the Compensation Committee's
determination with respect to the number of shares granted, such as the
promotion of an individual to a higher position, a desire to retain a valued
executive or the number of shares then available for grant under 1993 Plan. The
stock option holdings of an individual at the time of a grant will not generally
be considered in determining the size of a grant to that individual.
STOCK PERFORMANCE GRAPH
The Stock Performance Graph below shall not be deemed incorporated by
reference by any general statement incorporating by reference this Information
Statement into any filing under the Securities Act of 1933, as amended, or under
the Exchange Act, except to the extent that the Company specifically
incorporates this information by reference, and shall not otherwise be deemed
filed under such Acts.
The following graph shows changes over the past five fiscal years in the
value of $100 invested on September 30, 1989, in (a) the Common Stock, (b) the
Standard & Poor's 500 Composite Index, and (c) the Dow Jones Lodging Index.
-7-
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG THE COMPANY, THE S & P 500 INDEX
AND THE DOW JONES LODGING INDEX
9/89 9/90 9/91 9/92 9/93 9/94
United Inns, Inc. 100 31 13 7 20 56
S & P 500 100 91 119 132 149 155
D J Lodging 100 32 47 55 79 100
EMPLOYEE BENEFIT PLANS
The material which follows in this section describes the provisions of
employee benefit plans now in effect, or in effect during the Company's last
fiscal year, other than group life and accident insurance, group hospitalization
and other similar group payments and benefits, in which some or all of the
employees of the Company participate.
1993 STOCK INCENTIVE PLAN
On November 19, 1993, the Company's Board of Directors adopted the 1993
Plan, which was approved by the Company's stockholders at the Company's annual
meeting of stockholders held on February 11, 1994 (the "1994 Annual Meeting").
The 1993 Plan provides for the granting of options to purchase for cash an
aggregate of not more than 300,000 shares of Common Stock. Such options may be
granted to key employees, including officers of the Company and its
subsidiaries, as may be designated by the Compensation Committee of the Board.
At November 14, 1994, the
-8-
Company had granted an aggregate of 4,000 options to non-employee directors of
the Company at an exercise price of $12.87 per share of Common Stock.
Under the terms of the 1993 Plan, the Compensation Committee may from time
to time grant options to key employees to purchase Common Stock at a price which
may not be less than the fair market value of the shares, as determined by the
mean between the high and low prices of the stock on the New York Stock Exchange
on the date the option is granted. In addition, the 1993 Plan provides that
each director who is not also an employee of the Company and who is incumbent at
the date of each of the five consecutive annual meetings of stockholders
beginning with the 1994 Annual Meeting shall automatically be granted,
immediately after the conclusion of each such annual meeting, an option to
purchase 1,000 Shares. Each person who is not also an employee of the Company
and who is elected or appointed a director during such five-year period other
than at an annual meeting shall, upon such election or appointment, be granted
an option to purchase 1,000 shares of Common Stock. The exercise price of
options granted to directors under the 1993 Plan must be equal to the mean
between the high and low prices of the stock on the New York Stock Exchange on
the date of grant of the option and the right to exercise such options will vest
one year from the date of the grant, if not earlier upon the occurrence of
certain specified events as described below.
Options may not be exercised later than five years after the date of grant.
Subject to the limitations imposed by the provisions of the Internal Revenue
Code, certain of the options granted under the 1993 Plan to key employees may be
designated "incentive stock options." The Company may make interest-free demand
loans to holders of options not designated as incentive stock options for the
purpose of exercising such options and paying any tax liability associated with
such exercise.
Except as provided herein, no option may be exercised until the optionee
has completed one year of service after the option is granted, except in the
case of termination of an employee's employment or a director's directorship
because of death or disability, nor may an option be exercised after termination
of an employee's employment or a director's directorship for any reason other
than death, disability, retirement or for cause. Options may be exercised
within twelve months (a) after the optionee retires, (b) after termination of an
employee's employment or a director's directorship on account of permanent
disability, or (c) after death when in the service of the Company or any of its
subsidiaries. Options may also be exercised within three months after
termination of an employee's employment or director's directorship if
termination is for reasons other than death, disability or retirement so long as
such termination is not for cause, as determined by the Compensation Committee.
If termination is for cause, all unexercised options of optionee terminated for
cause shall immediately terminate and be of no further force or effect. In the
event of death within the twelve-month period following termination of an
employee's employment or a director's directorship for retirement or permanent
disability, options may be exercised by the optionee's legal representative
within twelve months following the date of death. However, under no
circumstances may an option be exercised after the expiration of the stated
period of the option.
No cash consideration is paid for the granting of the options. Payment in
full of the option price must be made upon exercise of any option.
The 1993 Plan provides for the use of treasury shares.
No options or awards may be granted under the 1993 Plan after October 1,
2003, but options or awards granted prior to October 1, 2003, may extend beyond
that date. The 1993 Plan
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may be discontinued by the Company's Board of Directors, but no termination may
impair options or awards granted prior thereto.
Upon the occurrence of a Change in Control (as defined in the 1993 Plan) of
the Company, each holder of an unexpired option under the 1993 Plan will have
the right to exercise the option in whole or in part without regard to the date
that such option would be first exercisable, except no option may be exercised
less than six months from the date of grant, and such right will continue, with
respect to any such holder whose employment with the Company or subsidiary or
whose directorship terminates following a change in control, for a period ending
on the earlier of the date of expiration of such option or the date which is
twelve months after such termination of employment or directorship.
The Compensation Committee may alter or amend the 1993 Plan at any time.
No amendment by the Compensation Committee, however, may increase the total
number of shares reserved for purposes of the 1993 Plan, reduce the option price
to an amount less than the fair market value at the time the option was granted,
extend the duration of the 1993 Plan or modify the provision for the automatic
grant of options to directors, unless such amendment is approved by the
stockholders. No amendment or alteration may impair the rights of optionees
with respect to options theretofore granted, except the Compensation Committee
may revoke and cancel any outstanding options which, in the aggregate, would
create a significant adverse effect on the Company's financial statement in the
event that the Financial Accounting Standards Board issues a statement requiring
an accounting treatment which causes such adverse effect with respect to options
then outstanding. The Compensation Committee has the power to interpret the
1993 Plan and to make all other determinations necessary or advisable for its
administration.
Under current federal tax law, non-incentive stock options granted under
the 1993 Plan will not result in any taxable income to the optionee at the time
of grant or any tax deduction to the Company. Upon the exercise of such option,
the excess of the market value of the shares acquired over their cost is taxable
to the optionee as compensation income and is generally deductible by the
Company. The optionee's tax basis for the shares is the market value thereof at
the time of exercise.
Neither the grant nor the exercise of an option designated as an incentive
stock option results in any federal tax consequences to either the optionee or
the Company. At the time the optionee sells shares acquired pursuant to the
exercise of an incentive stock option, the excess of the sale price over the
exercise price will qualify as a capital gain, provided the applicable holding
period is satisfied. If the optionee disposes of such shares within two years
of the date of grant or within one year of the date of exercise, an amount equal
to the lesser of (a) the difference between the fair market value of the shares
on the date of exercise and the exercise price, or (b) the difference between
the exercise price, and the sale price will be taxed as ordinary income and the
Company will be entitled to a deduction in the same amount. The excess, if any,
of the sale price over the sum of the exercise price and the amount taxed as
ordinary income will qualify as capital gain if the applicable holding period is
satisfied. If the optionee exercises an incentive stock option more than three
months after his or her termination of employment due to retirement, he or she
is deemed to have exercised a non-incentive stock option.
-10-
CHANGE IN CONTROL CONTRACTS
On June 1, 1987, the Company entered into a severance agreement with Mr.
John M. Dollar. Under this agreement, Mr. Dollar would be entitled to severance
compensation in the event that his employment is terminated following a change
in control of the Company. The amount of compensation would be equal to a
maximum of 200% of his base compensation for the twelve months prior to his
termination plus an additional amount for benefits. The maximum amount of
compensation which would be payable to Mr. Dollar, if his employment was
terminated, as of November 14, 1994, would be $236,000 plus an additional amount
for benefits.
EFFECT OF MERGER
Pursuant to the Merger Agreement, the Surviving Corporation will maintain,
for at least a one year period after the Effective Time, the employee plans of
the Company in effect on the date of the Merger Agreement or provide benefits to
employees of the Surviving Corporation who were employees of the Company and its
subsidiaries immediately prior to the Effective Time ("United Employees") that
are at least substantially comparable to the benefits provided to similarly
situated employees of the Surviving Corporation who are not United Employees.
BENEFICIAL OWNERS OF MORE THAN
5% OF COMMON STOCK
The following table sets forth the ownership of the Common Stock by the
persons, companies or groups known to the Company on the basis of internal
records and/or required filings under Section 13 of the Exchange Act to be the
beneficial owner of more than 5% of the outstanding shares of Common Stock on
November 14, 1994. As used in this information statement, beneficial ownership
means generally the power to vote or dispose of the shares, regardless of any
personal economic interest therein. Unless otherwise noted these individuals or
entities have sole voting and investment power with respect to their shares.
-11-
NAME AND ADDRESS TITLE NUMBER OF SHARES PERCENT OF
OF BENEFICIAL OWNER OF CLASS BENEFICIALLY OWNED CLASS
- ------------------- -------- ------------------ -----
Cockroft Consolidated Common 1,209,214(1) 45.4
Corporation
Suite 2300
5100 Poplar Avenue
Memphis, TN 38137
Dimensional Fund Advisors Inc. Common 182,400(2) 6.8
1299 Ocean Avenue, Ste. 650
Santa Monica, CA 90401
Mario J. Gabelli Common 581,300(3) 21.8
One Corporate Center
Rye, NY 10580
(1) Don Wm. Cockroft, Robert L. Cockroft, Janet Virgin, and Katherine Lammons
beneficially own a controlling interest in Cockroft Consolidated
Corporation.
(2) According to Schedule 13G as filed with the SEC by Dimensional Fund
Advisors Inc., reporting ownership as of February 19, 1991, Dimensional
Fund Advisors Inc. has beneficial ownership of 182,400 shares. Dimensional
Fund Advisors Inc. has sole voting and sole dispositive power over 116,600
of these shares and officers of Dimensional Fund Advisors Inc. have sole
voting and dispositive power over 65,800 of these shares. The shares of
Dimensional Fund Advisors Inc., a registered investment advisor, are held
in portfolios of DFA Investment Dimensions Group Inc., a registered open-
end investment company, or the DFA Group Trust, an investment vehicle for
qualified employee benefit plans, for both of which Dimensional Fund
Advisors Inc. serves as investment manager. Dimensional Fund Advisors Inc.
disclaims beneficial ownership of all such shares.
(3) According to Schedule 13D as filed with the SEC by Gabelli Funds, Inc.,
Gamco Investors, Inc., Gabelli International Limited II, and Mario J.
Gabelli (the "Reporting Persons") reporting ownership as of June 6, 1994,
Gamco Investors, Inc. is deemed to have beneficial ownership of 420,800 of
these shares; Gabelli Funds, Inc. is deemed to have beneficial ownership of
160,000 of these shares; Gabelli International Limited II is deemed to have
beneficial ownership of 500 of these shares; Mario J. Gabelli is deemed to
have beneficial ownership of all of the 581,300 shares; and Gabelli Funds,
Inc. is deemed to have beneficial ownership of the securities owned by each
of the foregoing persons other than Mario J. Gabelli. Each of the
Reporting Persons has the sole power to vote and sole power to dispose of
the securities reported except that Gamco Investors, Inc. does not have the
authority to vote 50,000 of the reported shares; except that Gabelli Funds,
Inc. has sole dispositive and voting power with respect to the shares held
by The Gabelli Asset Fund, The Gabelli Growth Fund, The Gabelli Convertible
Securities Fund, The Gabelli Value Fund, Inc., The Gabelli Small Cap Growth
Fund, The Gabelli Equity Income Fund, The Gabelli Equity Trust, The Gabelli
Global Telecommunications Fund, The Gabelli Global Convertible Securities
Fund, The Gabelli Interactive Couch Potato Fund, and/or The Gabelli ABC
Fund with respect to the 160,000 shares held by one or more of such funds,
and except that the power of Mr. Mario J. Gabelli and Gabelli Funds, Inc.
is indirect with respect to securities beneficially owned directly by other
Reporting Persons. The Reporting Persons do not admit that they constitute
a group.
-12-
SECURITIES BENEFICIALLY OWNED BY DIRECTORS,
MANAGEMENT AND PURCHASER DESIGNEES
The following table sets forth, as of November 14, 1994, the amount and
percentage of the Shares beneficially owned by each director, executive officer
and Purchaser Designee and by the directors, officers and Purchaser Designees,
as a group:
AMOUNT AND NATURE OF PERCENT OF
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP OWNERSHIP
- ------------------------ -------------------- ---------
DIRECTORS:
Don Wm. Cockroft 1,891(1) *
J. Howard Lammons 950(1) *
Robert L. Cockroft 0 --
Howard W. Loveless 500 *
Janet C. Virgin 31 *
Ronald J. Wareham 0 --
NON-DIRECTOR EXECUTIVE OFFICER:
John M. Dollar 24 *
PURCHASER DESIGNEES:
Donald J. McNamara 0 --
Robert A. Whitman 0 --
J. Peter Kline 0 --
All directors, officers and Purchaser Designees
as a group (12 persons) 4,996(2) *
*Less than 1%
(1) Includes: (a) 1,800 shares owned by the wife and dependent child of Don
Wm. Cockroft; and (b) 490 shares owned by the wife of J. Howard Lammons.
Except as noted hereinabove, all of the shares are owned directly by said
persons with sole voting and investment power.
(2) Does not include 1,209,214 shares owned by Cockroft Consolidated
Corporation. The controlling shareholders of Cockroft Consolidated
Corporation are Don Wm. Cockroft, Robert L. Cockroft, Katherine Lammons,
the wife of J. Howard Lammons, and Janet C. Virgin.
-13-
EXHIBIT INDEX
Exhibit
No. Description
--- -----------
1. Agreement and Plan of Merger among the Company, Purchaser,
United/Harvey and Merger Sub, dated as of November 14, 1994.
2. Press release issued by the Company on November 1, 1994.
3. Press release issued by the Company on November 4, 1994.
4. Press release issued by the Company and Purchaser on November 14,
1994.
5. Confidentiality Agreement between the Company and HII, dated July
14, 1994.
6. Letter agreement among the Company, Purchaser and Harvey Hotel
Co., Ltd., dated November 4, 1994.
7. Agreement between Purchaser and Cockroft Consolidated, dated
November 21, 1994.
8. Agreement between the Company and Augustus B. Randle, III, dated
June 1, 1987.
9. Agreement between the Company and J. Don Miller, dated June 1,
1987.
10. Letter from the Company to the Company's stockholders, dated
November 23, 1994.
11. Opinion of Smith Barney Inc., dated November 14, 1994.