SMITH BARNEY
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November 14, 1994
United Inns, Inc.
5100 Poplar Avenue
Suite 2300
Memphis, Tennessee 38137
Members of the Board:
You have requested our opinion as to the fairness, from a financial point of
view, to the holders of the common stock of United Inns, Inc. ("United Inns") of
the consideration to be received by such holders pursuant to the terms and
subject to the conditions set forth in the Agreement and Plan of Merger, dated
as of November 14, 1994 (the "Merger Agreement"), by and among United Inns,
United Harvey/Holdings, L.P. ("U/H Holdings"), United/Harvey Sub, Inc.
("Merger Sub") and United Inns. As more fully described in the Merger
Agreement, (i) U/H Holdings will make a tender offer to purchase all of the
outstanding shares of the common stock, par value $1.00 per share, of United
Inns (the "UI Common Stock") at a purchase price per share of $25.00, not to the
seller in cash (the "Tender Offer") and (ii) subsequent to the Tender Offer,
Merger Sub will be merged with and into United Inns (the "Merger" and, together
with the Tender Offer, the "Transaction") and each outstanding share of UI
Common Stock not previously tendered will be converted in the Merger into the
right to receive $25.00 in cash.
In arriving at our opinion, we reviewed the Merger Agreement and held
discussions with certain senior officers, directors and other representatives
and advisors of United Inns and certain senior officers and other
representatives and advisors of U/H Holdings concerning the business, operations
and prospects of United Inns. We examined certain publicly available business
and financial information and other data relating to United Inns which were
provided to us by the management of United Inns. We reviewed the financial
terms of the Transaction as set forth in the Merger Agreement in relation to,
among other things: current and historical market prices and trading volumes of
the UI Common Stock; the historical earnings of United Inns; and the
capitalization and financial condition of United Inns. We also considered, to
the extent publicly available, the financial terms of certain other similar
transactions recently effected which we considered comparable to the Transaction
and analyzed certain financial, stock market and other publicly available
information relating to the businesses of other companies whose operations we
considered comparable to those of United Inns. In addition to the foregoing, we
conducted such other analyses and examinations and considered such other
financial, economic and market criteria as we deemed necessary to arrive at our
opinion.
In rendering our opinion, we have assumed and relied, without independent
verification, upon the accuracy and completeness of all financial and other
information publicly available or furnished to or
The Board of Directors
United Inns, Inc.
November 14, 1994
Page 2
otherwise reviewed by or discussed with us. With respect to financial and other
information and data provided to or otherwise reviewed by or discussed with us,
including, without limitation, estimates of liability for environmental, tax
and other matters, reserves established with respect thereto and estimates of
expenses in connection therewith, we have been advised by the management of
United Inns that such financial and other information and data were reasonably
prepared on bases reflecting the best currently available estimates and
judgments of the management and other representatives of United Inns. Except
for an evaluation prepared by legal and accounting advisors for United Inns as
to certain tax matters, we have not made or been provided with an independent
evaluation or appraisal of the assets or liabilities (contingent or otherwise)
of United Inns. In connection with our engagement, we approached, and held
discussions with, certain third parties to solicit indications of interest in a
possible acquisition of United Inns. Our opinion is necessarily based upon
information available to us, and financial, stock market and other conditions
and circumstances existing and disclosed to us, as of the date hereof.
Smith Barney has been engaged to render financial advisory services to United
Inns in connection with the Transaction and will receive a fee for our services,
a significant portion of which is contingent upon the consummation of the
Transaction. We also will receive a fee upon the delivery of this opinion. In
the ordinary course of our business, we may actively trade the equity securities
of United Inns for our own account or for the account of our customers and,
accordingly, may at any time hold a long or short position in such securities.
Our advisory services and the opinion expressed herein are provided solely for
the use of the Board of Directors of United Inns in its evaluation of the
proposed Transaction and are not on behalf of, and are not intended to confer
rights or remedies upon, U/H Holdings, or is affiliates, any stockholder of
United Inns, U/H Holdings or their respective affiliates, or any person other
than the Board of Directors of United Inns. Our opinion may not be published or
otherwise used or referred to, nor shall any public reference to Smith Barney be
made, without our prior written consent.
Based upon and subject to the foregoing, our experience as investment bankers,
our work as described above and other factors we deemed relevant, we are of the
opinion that, as of the date hereof, the cash consideration to be received by
holders of UI Common Stock in the Transaction is fair, from a financial point of
view, to such holders.
Very truly yours,
/s/ Smith Barney Inc.
SMITH BARNEY INC.