Exhibit (a)(1) to Schedule TO-T
-------------------------------
Offer to Purchase for Cash
2,465,322 Shares of Class A Common Stock
(Including the Associated Preferred Stock Purchase Rights)
of
Interstate Hotels Corporation
at
$3.00 Net Per Share
by
Shaner Hotel Group Limited Partnership
--------------------------------------------------------------
THE OFFER, PRORATION PERIOD, AND WITHDRAWAL RIGHTS WILL
EXPIRE AT 5:00 P.M., PITTSBURGH, PENNSYLVANIA, TIME ON FRIDAY,
MAY 10, 2002, UNLESS THE OFFER IS EXTENDED.
--------------------------------------------------------------
SHANER HOTEL GROUP LIMITED PARTNERSHIP, A DELAWARE LIMITED PARTNERSHIP
("SHANER HOTEL GROUP" OR "PURCHASER"), HEREBY SEEKS TO ACQUIRE SHARES OF CLASS A
COMMON STOCK, PAR VALUE $0.01 PER SHARE, INCLUDING THE ASSOCIATED PREFERRED
STOCK PURCHASE RIGHTS ("CLASS A COMMON STOCK" OR "SHARES"), OF INTERSTATE HOTELS
CORPORATION, A MARYLAND CORPORATION ("INTERSTATE" OR "COMPANY"). THE PRINCIPAL
BUSINESS OF SHANER HOTEL GROUP IS THE MANAGEMENT AND OWNERSHIP OF HOTELS AND
MOTELS. THE GENERAL PARTNER OF SHANER HOTEL GROUP IS SHANER OPERATING CORP., A
DELAWARE CORPORATION. THE PRINCIPAL BUSINESS OF SHANER OPERATING CORP. IS ACTING
AS THE GENERAL PARTNER OF SHANER HOTEL GROUP.
SHANER HOTEL GROUP HEREBY OFFERS TO PURCHASE 2,465,322 SHARES OF CLASS
A COMMON STOCK ISSUED AND OUTSTANDING AS OF MARCH 18, 2002 (THE "OFFER DATE"),
AT A PURCHASE PRICE OF $3.00 NET PER SHARE IN CASH (THE "OFFER PRICE"), UPON THE
TERMS AND SUBJECT TO THE CONDITIONS SET FORTH IN THIS OFFER TO PURCHASE (THE
"OFFER TO PURCHASE" OR "OFFER") AND IN THE RELATED LETTER OF TRANSMITTAL AND
ACCOMPANYING DOCUMENTS, AS EACH MAY BE
SUPPLEMENTED OR AMENDED FROM TIME TO TIME (WHICH TOGETHER CONSTITUTE THE OFFER).
THE OFFER WILL EXPIRE AT 5:00 P.M., PITTSBURGH, PENNSYLVANIA, TIME ON FRIDAY,
MAY 10, 2002, OR SUCH OTHER DATE AS TO WHICH THIS OFFER MAY BE EXTENDED (THE
"EXPIRATION DATE").
THE SHARES OF CLASS A COMMON STOCK SOUGHT PURSUANT TO THIS OFFER
REPRESENT 44.92% OF THE TOTAL NUMBER OF SHARES OF CLASS A COMMON STOCK ISSUED
AND OUTSTANDING AS OF MARCH 18, 2002. SHANER HOTEL GROUP AND ITS AFFILIATES
CURRENTLY BENEFICIALLY OWN AN AGGREGATE OF 333,500 SHARES OF CLASS A COMMON
STOCK, OR APPROXIMATELY 6.08% OF THE TOTAL OF 5,487,885 SHARES OF CLASS A COMMON
STOCK ISSUED AND OUTSTANDING AS OF MARCH 18, 2002. IF THE OFFER IS SUCCESSFUL
AND SHANER HOTEL GROUP ACQUIRES ALL OF THE SHARES SOUGHT, IT AND ITS AFFILIATES
WILL BENEFICIALLY OWN APPROXIMATELY 51.0% OF THE ISSUED AND OUTSTANDING SHARES
OF CLASS A COMMON STOCK.
THE OFFER IS CONDITIONED ON, AMONG OTHER THINGS: (1) A MINIMUM OF
2,465,322 SHARES OF CLASS A COMMON STOCK BEING TENDERED; AND (2) THE PREFERRED
STOCK PURCHASE RIGHTS ISSUED UNDER INTERSTATE'S SHAREHOLDERS RIGHTS AGREEMENT
HAVING BEEN REDEEMED BY THE BOARD OF DIRECTORS, OR SHANER HOTEL GROUP BEING
SATISFIED, IN ITS REASONABLE JUDGMENT, THAT THE PREFERRED STOCK PURCHASE RIGHTS
ARE INVALID OR OTHERWISE INAPPLICABLE TO THE OFFER. THIS OFFER IS ALSO SUBJECT
TO OTHER CONDITIONS. SEE "INTRODUCTION" AND SECTION 14, "CERTAIN CONDITIONS TO
THIS OFFER," UNDER THE CAPTION "THE TENDER OFFER." THIS OFFER IS NOT CONDITIONED
UPON THE RECEIPT OF FINANCING.
IF, AS OF THE EXPIRATION DATE, MORE THAN 2,465,322 SHARES OF CLASS A
COMMON STOCK ARE VALIDLY TENDERED AND NOT PROPERLY WITHDRAWN, SHANER HOTEL GROUP
WILL ONLY ACCEPT FOR PURCHASE ON A PRO RATA BASIS 2,465,322 SHARES, SUBJECT TO
THE TERMS AND CONDITIONS IN THIS OFFER. SEE SECTION 4, "ACCEPTANCE FOR PAYMENT
AND PAYMENT; PRORATION," UNDER THE CAPTION "THE TENDER OFFER." A SHAREHOLDER MAY
TENDER ANY OR ALL SHARES OWNED BY SUCH SHAREHOLDER.
ii
IMPORTANT
Any holder of shares of Class A Common Stock issued and outstanding as
of March 18, 2002 (a "Shareholder"), who desires to tender all or any portion of
his, her, or its Shares, and the associated Preferred Stock Purchase Rights
("Rights"), should either:
1. (a) Complete and sign the Letter of Transmittal, or a facsimile of
the Letter, tendered in accordance with the instructions in the Letter of
Transmittal, (b) have your signature on the Letter guaranteed if required by
Instruction 1 to the Letter of Transmittal, (c) mail or deliver the Letter of
Transmittal, or a facsimile of the Letter, or, in the case of a book-entry
transfer effected pursuant to the procedure set forth in Section 2, "Procedure
for Tendering Shares," under the caption "The Tender Offer," an Agent's Message,
as defined in this Offer, and any other required documents to the Depository,
and (d) either deliver the certificates for the Shares and, if separate, the
certificate(s) representing the associated Rights, to the Depository along with
the Letter of Transmittal, or a facsimile of the Letter, or deliver the Shares
(and associated Rights, if applicable) pursuant to the procedure for book-entry
transfer set forth in Section 2, "Procedure for Tendering Shares," under the
caption "The Tender Offer;" or
2. Request your broker, dealer, commercial bank, trust company, or other
nominee to effect the transaction for you.
If you have Shares (and associated Rights, if applicable) registered in the
name of a broker, dealer, commercial bank, trust company, or other nominee, you
must contact such broker, dealer, commercial bank, trust company, or other
nominee if you desire to tender your Shares (and associated Rights, if
applicable).
If you desire to tender your Shares and the associated Rights and your
certificate(s) for your Shares (and associated Rights, if applicable) are not
immediately available, or you cannot comply with the procedures for book-entry
transfers described in this Offer to Purchase on a timely basis, or time will
not permit all required documents to reach the Depository prior to the
Expiration Date, your tender may be effected by following the procedure for
guaranteed delivery set forth in Section 2, "Procedure for Tendering Shares,"
under the caption "The Tender Offer" and in the Notice of Guaranteed Delivery
provided with this Offer.
A summary of the principal terms of the Offer appears at pages 1 to 6
of this Offer to Purchase.
Questions and request for assistance may be directed to N.S. Taylor &
Associates, Inc., the Information Agent, at its address and telephone number set
forth below and on the last page of this Offer to Purchase. Additional copies of
this Offer, the Letter of Transmittal, the Notice of Guaranteed Delivery, and
other related materials may be obtained from the Information Agent, or from
brokers, dealers, commercial banks, and trust companies.
iii
THE OFFER DOES NOT CONSTITUTE A SOLICITATION OF PROXIES FOR ANY MEETING OF
SHAREHOLDERS OF INTERSTATE. ANY SUCH SOLICITATION WILL BE MADE ONLY BY SEPARATE
PROXY MATERIALS ACCORDING TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF
1934, AS AMENDED.
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION. YOU SHOULD CAREFULLY READ BOTH DOCUMENTS IN THEIR
ENTIRETY BEFORE YOU MAKE A DECISION WITH RESPECT TO THE OFFER.
The Information Agent for the Offer is:
N.S. TAYLOR & ASSOCIATES, INC.
15 North Street, 2nd Floor
Dover-Foxcroft, Maine 04426
Banks and Brokers Call Collect: 207.564.8700
All Others Call Toll-Free: 866.470.4500
April 3, 2002
iv
TABLE OF CONTENTS
PAGE
SUMMARY TERM SHEET..................................................... 1
INTRODUCTION........................................................... 7
THE TENDER OFFER....................................................... 8
1. TERMS OF THIS OFFER; EXPIRATION DATE............................. 8
2. PROCEDURES FOR TENDERING SHARES.................................. 11
3. WITHDRAWAL RIGHTS................................................ 15
4. ACCEPTANCE FOR PAYMENT AND PAYMENT; PRORATION.................... 15
5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES.......................... 17
6. PRICE RANGE OF SHARES; DIVIDENDS................................. 18
7. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES; NASDAQ LISTING;
EXCHANGE ACT REGISTRATION; MARGIN SECURITIES..................... 19
8. CERTAIN INFORMATION CONCERNING THE COMPANY....................... 21
9. CERTAIN INFORMATION CONCERNING THE PURCHASER..................... 23
10. SOURCE AND AMOUNT OF FUNDS....................................... 24
11. BACKGROUND OF THIS OFFER; PAST CONTACTS, TRANSACTIONS OR
NEGOTIATIONS WITH THE COMPANY.................................... 24
12. PURPOSE OF THIS OFFER; PLANS FOR THE COMPANY..................... 30
13. DIVIDENDS AND DISTRIBUTIONS...................................... 31
14. CERTAIN CONDITIONS TO THIS OFFER................................. 32
15. CERTAIN LEGAL MATTERS............................................ 38
16. FEES AND EXPENSES................................................ 39
17. MISCELLANEOUS.................................................... 40
SCHEDULE I - DIRECTORS AND EXECUTIVE OFFICERS OF SHANER HOTEL GROUP
AND SHANER OPERATING CORP................................. 41
SCHEDULE II - CURRENT PORTFOLIO OWNED OR MANAGED BY SHANER HOTEL
GROUP.................................................... 43
v
SUMMARY TERM SHEET
The following are some of the questions you, as a shareholder of the
Company, may have and our answers to those questions. Please read carefully the
remainder of this offer to purchase and enclosed letter of transmittal. The
information in this section is only a summary, is not complete, and may not
contain all the information which may be important to you. Questions or requests
for assistance may be directed to the Information Agent at its address and
telephone number listed on the last page of this offer to purchase.
Who is offering to buy my shares?
Shaner Hotel Group Limited Partnership, a Delaware limited partnership, is
offering to purchase your shares. The general partner of Shaner Hotel Group is
Shaner Operating Corp., a Delaware corporation. For more information concerning
Shaner Hotel Group, Shaner Operating Corp., and their principals, see pages 7
and 23, and Schedules I and II.
What securities and how many of them are sought in the Offer?
We are seeking to purchase 2,465,322 shares of Class A Common Stock of the
Company. To the extent that more than 2,465,322 shares are tendered in the
offer, we will purchase only 2,465,322 shares on a pro rata basis, based upon
the number of shares properly tendered by each shareholder prior to or on the
expiration date of this offer and not withdrawn. No fractional shares will be
purchased. (See page 7)
How much are you offering?
We are offering to pay $3.00 per share, net to you in cash, without
interest. If you are the record owner of your shares and you tender shares in
this offer, you will not have to pay any brokerage or similar fees. If you own
your own shares through a broker or other nominee, however, and your broker
tenders your shares on your behalf, your broker or nominee may charge you a fee
for doing so. You should consult your broker or nominee to determine whether any
charges will apply. (See page 7)
Why are you making this offer?
We are making this offer to increase our investment in the Company because
we believe in the long-term value of the Company, in the business of owning and
operating hotels and motels, and in the synergies and operating efficiencies
which may be obtained by a business relationship between the Company and us. The
acquisition of shares under this offer, at a significant premium to the current
market price, demonstrates our commitment to the Company. The additional
investment will increase our incentive to see that the shares perform well. This
offer will give you an opportunity to sell some of your shares at a significant
premium and still retain an interest in the Company's future growth. (See
page 30)
What are your plans for the Company?
Our current plans for the Company are to complete this offer, subject to
the satisfaction or waiver of important conditions, to vote in favor of our
nominees to the board of directors of the Company at this year's annual meeting
of shareholders which we believe will be held on May 21, 2002, and to exercise
the rights of a common shareholder. In addition, following the completion of
this offer, and in accordance with all applicable requirements and restrictions
of the Company's articles of incorporation and bylaws, and of applicable law, we
will consider seeking to accomplish some or all of the following objectives in
cooperation with the appropriate persons or entities.
[X] Purchase a portion of the outstanding shares of Series B Preferred
Stock of the Company and encourage the Company to purchase back the
remaining portion of those shares.
[X] Encourage the Company to retire any and all outstanding 8.75%
Subordinated Convertible Notes due 2007.
[X] Encourage the Company to, and support an effort to, simplify and
conform the structure of the board of directors to reflect any and all
changes made to the Company's capital structure.
[X] Encourage the Company to enter into a business relationship with us,
which would involve the combination of both parties' management and
revenue from long-term management agreements, in order to achieve
operating synergies and efficiencies by combining the overhead
structures of both entities and eliminating duplication of effort.
[X] We will encourage the Company to investigate the following concerns and
issues and take any appropriate action based upon the results of that
investigation. We are concerned that, and believe that, in recent
years, the Company may have made a questionable investment in the
Renaissance Worldgate Hotel in Kissimmee, Florida, may have misstated
current assets in its recent financial statements, and may have paid
executive compensation out of line with the Company's financial
performance. (See page 30)
What are the conditions to this offer?
The most important conditions to this offer are: (1) A minimum of 2,465,322
shares of Class A Common Stock being tendered; and (2) the preferred stock
purchase rights issued under the Company's Shareholders Rights Agreement having
been redeemed by the board of directors, or Shaner Hotel Group being satisfied,
in its reasonable judgment, that the preferred stock purchase rights are invalid
or otherwise inapplicable to the offer. This offer is also subject to other
conditions. (See page 32) This offer is not conditioned upon the receipt of
financing.
2
We intend to vote our shares for, and to solicit proxies to vote for, our
two nominees for election to the Company's board of directors at the annual
shareholders meetings. We also intend to vote, and to solicit proxies to vote,
at the annual or any special meeting against any proposed transaction which we
believe would be less beneficial to the Company or its shareholders than the
transaction contained in this Offer.
We are requesting that the board of directors redeem the preferred stock
purchase rights or take other action to remove the impediments to the completion
of this offer which are represented by the Rights Agreement. We are also
requesting that the board of directors schedule this year's annual shareholders
meeting so as to enable us to complete this offer and vote the shares purchased
in it at the meeting and at any other special shareholder meetings.
What is the "poison pill" and why is it important?
How does it work? The poison pill refers to the Company's Shareholders
Rights Agreement adopted by the board of directors in 1999 and amended in 2000,
but never approved by the Company's shareholders. Under the Agreement the board
of directors has issued to common shareholders one preferred stock purchase
right for each common share. If we were to complete our purchase under our offer
and nothing were done to redeem or change the preferred stock purchase rights,
each right would entitle its holder, other than us (and our affiliates or
associates) to purchase, for $33.00, preferred stock of the Company having a
market value of $66.00. Alternatively, the board would be permitted to take
action that would result in the receipt by shareholders, other than us and our
affiliates and associates, of an equivalent amount of stock on a cashless
exercise basis. In some instances the board would also be permitted to exchange
one share of Class A Common Stock (or under a formula the equivalent of more
than one share of Class A Common Stock) in exchange for each right held by
shareholders other than us and our affiliates and associates.
What effect does it have? If we were to complete our purchase under our
offer while the rights remain in effect and unchanged, our ownership interest in
the Company would be unacceptably diluted. As a result, we will not proceed and
complete the purchase contemplated by our Offer, even if you wish to accept the
Offer, unless the rights are redeemed or made inapplicable to us. The Company
may maintain that this poison pill protects common shareholders by encouraging
suitors such as us to negotiate a shareholder-friendly transaction with the
Company. But in our case this is not true. We have offered several times to
discuss a transaction, but the board has rebuffed us each time.
How can you get around it? The Company's board has the power to remove the
pill if it wishes. It can redeem the rights at a penny apiece or make the pill
not applicable to us. We have asked the board to remove the pill from our path
in order to be able to give you the benefits of our proposal. (See page 32)
Do you have the financial resources to pay for the shares?
The total amount of funds required by us to purchase 2,465,322 shares under
this offer, and to pay related fees and expenses incurred as part of this offer,
is estimated at $7,600,000.
3
We have sufficient cash readily available to pay for the shares. Because we have
sufficient resources to fund this offer, we do not need alternative financing
arrangements and the offer is not conditioned on obtaining any financing. (See
page 24)
Is your financial condition relevant to my decision on whether to tender into
the offer?
We do not think our financial condition is relevant to your decision
whether to tender shares and accept the offer because we have sufficient cash
readily available to pay for the shares and the offer is not subject to any
financing condition. (See page 24)
How long do I have to decide whether to tender into this offer?
You have until the expiration date of this offer to tender your shares.
This offer currently is scheduled to expire at 5:00 p.m., Pittsburgh,
Pennsylvania, time, on Friday, May 10, 2002. We may extend this offer from time
to time. If this offer is extended, we will issue a press release announcing the
extension promptly following the date this offer was scheduled to expire. (See
page 8)
How do I accept this offer and tender my shares?
To tender your shares, you must completely fill out the enclosed letter of
transmittal and deliver it, along with your share certificates and any other
documents required by the letter of transmittal, to Manufacturers and Traders
Trust Company, the depositary for this offer, prior to the expiration of this
offer. If your shares are held through a broker, dealer or other nominee, your
shares can be tendered by your nominee through The Depository Trust Company. If
you cannot deliver all necessary documents to the depositary in time, you may be
able to complete and deliver to the depositary, in lieu of the missing
documents, the enclosed notice of guaranteed delivery, provided you are able to
comply fully with its terms. (See page 11)
If I accept this offer, when will I get paid?
Subject to the terms and conditions of this offer, we will pay for all
validly tendered and not withdrawn shares, subject to the proration provisions
noted in the offer to purchase, as soon as practicable after the expiration date
of this offer, subject to the satisfaction or waiver of the conditions to this
offer. (See page 15) We will pay for your validly tendered and not withdrawn
shares by depositing the purchase price with the depositary, which will act as
your agent for the purpose of receiving payments from us and transmitting such
payments to you. In all cases, payment for your tendered shares will be made
only after timely receipt by the depositary of certificates for such shares (or
of a confirmation of a book-entry transfer of the shares as described on page
11), a properly completed and duly executed letter of transmittal, and any other
required documents for the shares.
4
Can I withdraw my previously tendered shares?
You may withdraw a portion of or all your tendered shares by delivering a
written, manually executed or facsimile notice to the depositary at any time
prior to the expiration of this offer. Further, if we have not agreed to accept
your shares for payment within 60 days of the commencement of this offer, you
can withdraw them at any time after that 60-day period until we do accept your
shares for payment. Once shares are accepted for payment, they cannot be
withdrawn. Withdrawn shares may be retendered by following the tender procedures
before the offer expires. (See page 15)
Has the board of directors of the Company approved this offer?
The board of directors has not approved this offer. Within ten business
days after the date of this offer, the Company is required by law to publish,
send or give to you (and file with the Securities and Exchange Commission) a
statement as to whether it recommends acceptance or rejection of this offer,
that it has no opinion with respect to this offer, or that it is unable to take
a position with respect to this offer.
If I do not tender but this offer is successful, what will happen to my shares?
We believe that, if the offer is successful, the shares will continue to be
actively traded and the Company will continue to be subject to the Commission's
rules relating to publicly-held companies. (See page 19)
Are appraisal rights available in this offer?
Appraisal rights are not available in this offer.
What are the federal income tax consequences of the proposed transactions?
The receipt of cash in this offer in exchange for the Company shares will
be a taxable transaction for U.S. federal income tax purposes and may also be a
taxable transaction under applicable state, local or foreign income or other tax
laws.
You should consult your tax advisor about the particular effect the
proposed transactions will have on your shares. (See page 17)
What is the market value of my shares as of a recent date?
On March 29, 2002, the shares of the Company closed on Nasdaq at $2.10 per
share. You should obtain a recent quotation for your shares before you decide
whether or not to tender. (See page 18)
5
Whom should I call with questions?
You should call N.S. Taylor & Associates, Inc. at 866.470.4500 (toll-free)
with any questions you may have. N.S. Taylor & Associates, Inc. is acting as the
information agent for this offer. See the back cover of this offer for further
details.
6
INTRODUCTION
Shaner Hotel Group Limited Partnership, a Delaware limited partnership (the
"Purchaser" or "Shaner Hotel Group"), hereby offers to purchase 2,465,322 shares
of Class A Common Stock ("Shares") of Interstate Hotels Corporation, a Maryland
corporation (the "Company" or "Interstate"), including the associated Preferred
Stock Purchase Rights (the "Rights") issued pursuant to the Shareholders Rights
Agreement, dated as of July 8, 1999 and amended as of August 31, 2000 (as so
amended, the "Rights Agreement") between the Company and American Stock Transfer
and Trust Company, as Rights Agent (the "Rights Agent"), at a price of $3.00 per
share, net to the seller in cash, without interest thereon (the "Offer Price"),
upon the terms and subject to the conditions set forth in this Offer to Purchase
and in the related Letter of Transmittal (which, as amended from time to time,
together constitute the "Offer to Purchase" or "Offer"). Unless the context
otherwise requires, all references to Shares include the associated Rights and
all references to the Rights include the benefits that may inure to holders of
the Rights pursuant to the Rights Agreement, including the right to receive any
payment due upon redemption of the Rights. Based on publicly available
information, the Purchaser believes that one Right is currently associated with
each Share.
Brokers, dealers, commercial banks and trust companies and other nominees
will, upon request, be reimbursed by the Purchaser for customary clerical and
mailing expenses incurred by them in forwarding offering materials to their
clients. Class A Common Stock shareholders of the Company ("Shareholders") who
tender will not be obligated to pay brokerage fees or commissions. Except as set
forth in Instruction 7 of the Letter of Transmittal, tendering Shareholders will
not be obligated to pay stock transfer taxes on the purchase of Shares pursuant
to this Offer. The Purchaser will pay all charges and expenses of Manufacturers
and Traders Trust Company, as Depositary (the "Depositary"), and N.S. Taylor &
Associates, Inc., as Information Agent (the "Information Agent"), incurred in
connection with this Offer. See Section 16, "Fees and Expenses," under the
caption "The Tender Offer".
The purpose of this Offer is to increase, through the purchase of Shares,
our investment in the Company because we believe in the long-term value of the
Company, in the business of owning and operating hotels and motels, and in the
synergies and operating efficiencies which may be obtained by a business
relationship between the Company and the Purchaser. The Purchaser and its
affiliates currently are the beneficial owners of 333,500 Shares, representing
approximately 6.08% of the outstanding Shares. The Offer, at a significant
premium to the current market price, demonstrates the Purchaser's commitment to
the Company. The additional investment will increase the Purchaser's incentive
to see that the Shares perform well. This Offer will give the Shareholders an
opportunity to sell some of their Shares at a price substantially in excess of
the current market price and still retain a significant interest in the future
growth of the Company. See Section 12, "Purpose of this Offer; Plans for the
Company," under the caption "The Tender Offer."
Certain federal income tax consequences of the sale of Shares pursuant to
this Offer are described in Section 5, "Certain Federal Income Tax
Consequences," under the caption "The Tender Offer".
7
The Offer is conditioned on, among other things: (1) a minimum of 2,465,322
shares of Class A Common Stock being tendered; and (2) the Rights issued under
the Rights Agreement having been redeemed by the board of directors of the
Company (the "Board"), or the Purchaser being satisfied, in its reasonable
judgment, that the Rights are invalid or otherwise inapplicable to the Offer
(the "Rights Condition.") The Purchaser expressly reserves the right, in its
reasonable discretion, to waive any one or more of the conditions to this Offer.
See Section 1, "Terms of this Offer; Expiration Date," Section 14, "Certain
Conditions to this Offer," and Section 15, "Certain Legal Matters," under the
caption "The Tender Offer." This Offer is not conditioned upon the receipt of
financing.
IN THE EVENT THE OFFER IS TERMINATED OR NOT CONSUMMATED, OR AFTER THE
EXPIRATION DATE OF THE OFFER, IN ACCORDANCE WITH APPLICABLE LAW THE PURCHASER
MAY EXPLORE ANY AND ALL OPTIONS WHICH MAY BE AVAILABLE. IN THIS REGARD, AND
AFTER EXPIRATION OR TERMINATION OF THE OFFER, THE PURCHASER MAY SEEK TO ACQUIRE
ADDITIONAL SHARES, THROUGH OPEN MARKET PURCHASES, PRIVATELY NEGOTIATED
TRANSACTIONS, A TENDER OFFER OR EXCHANGE OFFER OR OTHERWISE, UPON SUCH TERMS AND
AT SUCH PRICES AS THE PURCHASER MAY DETERMINE, WHICH, IN THE CASE OF SHARES, MAY
BE MORE OR LESS THAN THE PRICE TO BE PAID PER SHARE PURSUANT TO THE OFFER AND
COULD BE FOR CASH OR OTHER CONSIDERATION.
THE OFFER DOES NOT CONSTITUTE A SOLICITATION OF PROXIES FOR ANY MEETING OF
SHAREHOLDERS OF THE COMPANY. ANY SUCH SOLICITATION WILL BE MADE ONLY PURSUANT TO
SEPARATE PROXY MATERIALS PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE
ACT OF 1934, AS AMENDED.
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION, AND YOU SHOULD CAREFULLY READ BOTH IN THEIR ENTIRETY
BEFORE YOU MAKE A DECISION WITH RESPECT TO THE OFFER.
THE TENDER OFFER
1. TERMS OF THIS OFFER; EXPIRATION DATE
Upon the terms and subject to the conditions of this Offer (including, if
this Offer is extended or amended, the terms and conditions of any extension or
amendment), the Purchaser will accept for payment and pay for up to 2,465,322
Shares validly tendered and not withdrawn prior to the expiration date.
"Expiration Date" means 5:00 p.m., Pittsburgh, Pennsylvania, time, on Friday,
May 10, 2002, unless and until the Purchaser, in its sole discretion, shall have
extended the period of time during which this Offer is open, in which event the
term "Expiration Date" shall mean the latest time and date at which this Offer,
as so extended by the Purchaser, will expire. To the extent more than 2,465,322
Shares are tendered, the Purchaser will only accept for purchase on a pro rata
basis 2,465,322 Shares in this Offer (with appropriate adjustments to avoid
purchase of fractional Shares) based on the number of Shares properly
8
tendered by each Shareholder prior to or on the Expiration Date and not
withdrawn. See Section 4, "Acceptance for Payment and Payment; Proration," under
the caption "The Tender Offer."
Subject to the applicable rules and regulations of the Securities and
Exchange Commission, the Purchaser expressly reserves the right, in its sole
discretion, at any time or from time to time, regardless of whether or not any
of the events set forth in Section 14, "Certain Conditions to this Offer," under
the caption "The Tender Offer," shall have occurred or shall have been
determined by the Purchaser to have occurred, (i) to extend the period of time
during which this Offer is open and thereby delay acceptance for payment of, and
the payment for, any Shares, by giving oral or written notice of such extension
to the Depositary, and (ii) to waive any condition to this Offering or to amend
this Offer in any respect by giving oral or written notice of such amendment to
the Depositary. During any such extension of this Offering, all Shares
previously tendered and not properly withdrawn shall remain subject to this
Offer, subject to the right of a tendering Shareholder to withdraw his or her
Shares. Under no circumstances will interest be paid on the purchase price for
tendered shares, whether or not the Purchaser exercises its right to extend this
Offer.
If by the Expiration Date any or all of the conditions to this Offer have
not been satisfied or waived, the Purchaser reserves the right (but shall not be
obligated), subject to the applicable rules and regulations of the Commission,
to (a) terminate this Offer and not accept for payment or pay for any Shares and
return all tendered Shares to tendering Shareholders, (b) waive all the
unsatisfied conditions and accept for payment and pay for all Shares validly
tendered prior to the Expiration Date and not theretofore withdrawn, (c) extend
this Offer and, subject to the right of Shareholders to withdraw Shares until
the Expiration Date, retain the Shares that have been tendered during the period
or periods for which this Offer is extended or (d) amend this Offer.
The rights reserved by the Purchaser in the foregoing two paragraphs are in
addition to the Purchaser's rights to terminate this Offer pursuant to Section
14, "Certain Conditions to this Offer," under the caption "The Tender Offer."
There can be no assurance that the Purchaser will exercise its right to extend
this Offer. Any extension, amendment or termination will be followed as promptly
as practicable by public announcement. In the case of an extension, Rule
14e-l(d) under the Securities and Exchange Act of 1934, as amended ("Exchange
Act"), requires that the announcement be issued no later than 9:00 a.m.,
Pittsburgh, Pennsylvania, time, on the next business day after the previously
scheduled Expiration Date in accordance with the public announcement
requirements of Rule 14d-4(c) under the Exchange Act. Subject to applicable law
(including Rules 14d-4(d) and 14e-l(d) under the Exchange Act), any material
change in the information published, sent or given to Shareholders in connection
with this Offer must be promptly disseminated to them in a manner reasonably
designed to inform Shareholders of such change, and without limiting the manner
in which the Purchaser may choose to make any public announcement, the Purchaser
will not have any obligation to publish, advertise or otherwise communicate any
such public announcement other than by making a release to the Dow Jones News
Service. "Business day" means any day other than Saturday, Sunday or a federal
holiday and shall consist of the time period from 12:01 a.m. through 12:00
midnight, Pittsburgh, Pennsylvania, time.
9
If the Purchaser extends this Offer, or if the Purchaser, whether before or
after its acceptance for payment of Shares, is delayed in its acceptance for
payment of or payment for Shares or is unable to pay for Shares pursuant to this
Offer for any reason, then, without prejudice to the Purchaser's rights under
this Offer, the Depositary may retain tendered Shares on behalf of the
Purchaser, and such Shares may not be withdrawn except to the extent tendering
Shareholders are entitled to withdrawal rights as described in Section 3,
"Withdrawal Rights," under the caption "The Tender Offer." However, the ability
of the Purchaser to delay the payment for Shares which the Purchaser has
accepted for payment is limited by Rule 14e-l(c) under the Exchange Act, which
requires that a bidder pay the consideration offered or return the securities
deposited by or on behalf of holders of securities promptly after the
termination or withdrawal of this Offer.
If the Purchaser makes a material change in the terms of this Offer or the
information concerning this Offer or waives a material condition of this Offer,
the Purchaser will disseminate additional tender offer materials and extend this
Offer to the extent required by Rules 14d-4(c), 14d-6(c) and 14e-l(d) under the
Exchange Act. The minimum period during which this Offer must remain open
following material changes in the terms of this Offer or information concerning
this Offer, other than a change in price or a change in percentage of securities
sought, will depend upon the facts and circumstances then existing, including
the relative materiality of the terms or information. With respect to a change
in price or a change in percentage of securities sought, a minimum 10-business
day period is generally required to allow for adequate dissemination to
Shareholders and investor response. If, prior to the Expiration Date, the
Purchaser should decide to increase the price per Share being offered in this
Offer, such increase will be applicable to all Shareholders whose Shares are
accepted for payment pursuant to this Offer regardless of when such Shares were
tendered.
As of the date of this Offer to Purchase, the Rights are evidenced by the
certificates representing Shares and do not trade separately. Accordingly, by
tendering a certificate representing Shares, a Shareholder is automatically
tendering a similar number of associated Rights. If, however, pursuant to the
Rights Agreement or for any other reason, the Rights detach and separate Rights
certificates are issued, Shareholders will be required to tender one Right for
each Share tendered in order to effect a valid tender of such Share.
On March 11, 2002, the Purchaser requested, pursuant to the Maryland
General Corporation Law, a Shareholder list for communicating with Shareholders.
The Company refused to make the Shareholder list available to the Purchaser. At
the time of the announcement of this Offer, the Purchaser will request, pursuant
to Rule 14d-5 under the Exchange Act, that the Company either provide a
Shareholder list to the Purchaser for the purpose of mailing this Offer and
related materials, to Shareholders, or mail those materials to Shareholders
itself. Within several business days of that request, this Offer to Purchase,
the related Letter of Transmittal and other relevant materials will be mailed to
record holders of Shares, and will be furnished to brokers, dealers, commercial
banks, trust companies and similar persons whose names, or the names of whose
nominees, appear on the Shareholder list, or, if applicable, who are listed as
participants in a clearing agency's security position listing, for subsequent
transmittal to beneficial owners of Shares.
10
2. PROCEDURES FOR TENDERING SHARES
VALID TENDER. For a Shareholder to validly tender Shares pursuant to this
Offer, either (a) a properly completed and duly executed Letter of Transmittal
(or facsimile thereof) relating to the Shares tendered, together with any
required signature guarantees, or, in the case of a book-entry transfer, an
Agent's Message (as defined below), and any other required documents, must be
received by the Depositary at its address set forth on the back cover of this
Offer to Purchase prior to the Expiration Date and either certificates for
tendered Shares ("Share Certificates") must be received by the Depositary at its
address or such Shares must be delivered pursuant to the procedures for
book-entry transfer set forth below (and a Book-Entry Confirmation (as defined
below) received by the Depositary), in each case prior to the Expiration Date,
or (b) the tendering Shareholder must comply with the guaranteed delivery
procedures set forth below.
BOOK-ENTRY TRANSFER. The Depositary will establish accounts with respect to
the Shares at The Depository Trust Company (the "Book-Entry Transfer Facility")
for purposes of this Offer within two business days after the date of this Offer
to Purchase. Any financial institution that is a participant in the Book-Entry
Transfer Facility's system may make book-entry delivery of Shares by causing the
Book-Entry Transfer Facility to transfer such Shares into the Depositary's
account in accordance with such Book-Entry Transfer Facility's procedures for
such transfer. However, although delivery of Shares may be effected through
book-entry transfer into the Depositary's account at a Book-Entry Transfer
Facility, the Letter of Transmittal (or facsimile thereof), properly completed
and duly executed, with any required signature guarantees, or an Agent's Message
(as defined below), and any other required documents, must, in any case, be
transmitted to, and received by, the Depositary at its address set forth on the
back cover of this Offer to Purchase prior to the Expiration Date, or the
tendering Shareholder must comply with the guaranteed delivery procedures
described below. The confirmation of a book-entry transfer of Shares into the
Depositary's account at the Book-Entry Transfer Facility as described above is
referred to herein as a "Book-Entry Confirmation." Delivery of documents to the
book-entry transfer facility in accordance with such book-entry transfer
facility's procedures does not constitute delivery to the depositary. "Agent's
Message" means a message transmitted by the Book-Entry Transfer Facility to, and
received by, the Depositary and forming a part of a Book-Entry Confirmation,
which states that such Book-Entry Transfer Facility has received an express
acknowledgment from the participant in such Book-Entry Transfer Facility
tendering the Shares that such participant has received and agrees to be bound
by the terms of the Letter of Transmittal and that the Purchaser may enforce
such agreement against such participant.
The method of delivery of Share Certificates, the Letter of Transmittal and
all other required documents, including delivery through the Book-Entry Transfer
Facility, is at the election and risk of the tendering Shareholder. Share
Certificates, the Letter of Transmittal and all other required documents will be
deemed delivered only when actually received by the Depositary (including, in
the case of a book-entry transfer, by Book-Entry Confirmation). If delivery is
by mail, registered mail with return receipt requested, properly insured, is
recommended. In all cases, sufficient time should be allowed to ensure timely
delivery.
11
SIGNATURE GUARANTEES. No signature guarantee is required on a Letter of
Transmittal if either (a) the Letter of Transmittal is signed by the registered
holder (which term, for purposes of this Section, includes any participant in
the Book-Entry Transfer Facility's system whose name appears on a security
position listing as the owner of the Shares) of Shares tendered therewith and
such registered holder has not completed either the box entitled "Special
Delivery Instructions" or the box entitled "Special Payment Instructions" on the
Letter of Transmittal or (b) such Shares are tendered for the account of a
financial institution (including most commercial banks, savings and loan
associations and brokerage houses) that is a participant in the Securities
Transfer Agents Medallion Program, the New York Stock Exchange ("NYSE")
Medallion Signature Guarantee Program or the Stock Exchange Medallion Program
(an "Eligible Institution"). In all other cases, all signatures on a Letter of
Transmittal must be guaranteed by an Eligible Institution. See Instructions 1
and 6 to the Letter of Transmittal. If Share Certificates are registered in the
name of a person other than the signer of a Letter of Transmittal, or if payment
is to be made or Share Certificates for Shares not tendered or not accepted for
payment are to be returned to a person other than the registered holder of the
Share Certificates surrendered, the tendered Share Certificates must be endorsed
or accompanied by appropriate stock powers, in either case signed exactly as the
name or names of the registered holders appear on the Share Certificates, with
the signatures on the Share Certificates or stock powers guaranteed as described
above. See Instructions 1 and 6 to the Letter of Transmittal.
GUARANTEED DELIVERY. If a Shareholder desires to tender Shares pursuant to
this Offer and such Shareholder's Share Certificates are not immediately
available or the procedure for book-entry transfer cannot be completed on a
timely basis or time will not permit all required documents to reach the
Depositary prior to the Expiration Date, such Shareholder's tender may be
effected if all the following conditions are met:
[X] the tender is made by or through an Eligible Institution;
[X] a properly completed and duly executed Notice of Guaranteed Delivery,
substantially in the form provided by the Purchaser, is received by the
Depositary, as provided below, prior to the Expiration Date; and
[X] the Share Certificates representing all tendered Shares, in proper form
for transfer (or a Book-Entry Confirmation with respect to all such
Shares), together with a properly completed and duly executed Letter of
Transmittal (or facsimile thereof), with any required signature
guarantees, or, in the case of a book-entry transfer, an Agent's
Message, and any other required documents are received by the
Depositary within three trading days after the date of execution of
such Notice of Guaranteed Delivery. A "trading day" is any day on which
Nasdaq is open for business.
A Notice of Guaranteed Delivery may be delivered by hand to the Depositary
or transmitted by facsimile transmission or mail to the Depositary and must
include a guarantee by an Eligible Institution in the form set forth in such
Notice of Guaranteed Delivery. The method of delivery of Shares and all other
required documents, including through the Book-Entry Transfer Facility, is at
your option and risk, and the delivery will be deemed to be made only
12
when actually received by the Depositary. If Share Certificates are sent by
mail, we recommend registered mail with return receipt requested, properly
insured.
Notwithstanding any other provision hereof, payment for Shares accepted for
payment pursuant to this Offer will in all cases be made only after timely
receipt by the Depositary of (a) Share Certificates for (or a timely Book-Entry
Confirmation with respect to) such Shares, (b) a Letter of Transmittal (or
facsimile thereof) relating to the Shares tendered, properly completed and duly
executed, with any required signature guarantees, or, in the case of a
book-entry transfer, an Agent's Message, and (c) any other documents required by
the Letter of Transmittal. Accordingly, tendering Shareholders may be paid at
different times depending upon when Share Certificates or Book-Entry
Confirmations with respect to Shares are actually received by the Depositary.
Under no circumstances will interest be paid on the purchase price of the Shares
to be paid by the Purchaser, regardless of any extension of this Offer or any
delay in making such payment.
The Purchaser's acceptance for payment of Shares validly tendered pursuant
to this Offer will constitute a binding agreement between the tendering
Shareholder and the Purchaser upon the terms and subject to the conditions of
this Offer.
GRANT OF PROXY. By executing a Letter of Transmittal as set forth above, a
tendering Shareholder irrevocably appoints designees of the Purchaser as such
Shareholder's attorneys-in-fact and proxies in the manner set forth in the
Letter of Transmittal, each with full power of substitution, to the full extent
of such Shareholder's rights with respect to the Shares tendered by such
Shareholder and accepted for payment by the Purchaser (and any and all other
Shares or other securities issued or issuable with respect of such Shares). All
such proxies will be irrevocable and considered coupled with an interest in the
tendered Shares. Such appointment will be effective when, and only to the extent
that, the Purchaser accepts such Shares for payment pursuant to this Offer. Upon
such acceptance for payment, all prior powers of attorney, proxies and consents
given by such Shareholder with respect to such Shares or other securities will,
without further action, be revoked and no subsequent powers of attorney,
proxies, consents or revocations may be given (and, if given, will not be deemed
effective). The designees of the Purchaser will thereby be empowered to exercise
all voting and other rights with respect to such Shares and other securities in
respect of any annual, special, adjourned or postponed meeting of the Company's
Shareholders, actions by written consent in lieu of any such meeting or
otherwise, as they in their sole discretion deem proper. The Purchaser reserves
the right to require that, in order for Shares to be deemed validly tendered,
immediately upon the Purchaser's acceptance for payment of such Shares, the
Purchaser must be able to exercise full voting, consent and other rights with
respect to such Shares and other securities or rights, including voting at any
meeting of Shareholders.
DISTRIBUTION OF RIGHTS. Shareholders will be required to tender one Right
for each Share tendered to effect a valid tender of such Share. Unless and until
the Distribution Date occurs, the Rights are represented by and transferred with
the Shares. See Section 14, "Certain Conditions to this Offer," under the
caption "The Tender Offer." Accordingly, if the Distribution Date does not occur
prior to the Expiration Date, a tender of Shares will constitute a tender of the
associated Rights. If a Distribution Date has occurred, certificates
representing a number of Rights equal to the number of Shares being tendered
must be delivered to the Depositary in order for such Shares to be validly
tendered. If a Distribution Date has occurred, a tender of Shares without Rights
constitutes an agreement by the tendering Shareholder to deliver certificates
representing a number of
13
Rights equal to the number of Shares tendered pursuant to the Offer to the
Depositary within three Nasdaq trading days after the date such certificates are
distributed. The Purchaser reserves the right to require that it receive such
certificates prior to accepting Shares for payment. If a Distribution Date has
occurred, unless the Rights are redeemed prior to the Expiration Date,
Shareholders who sell their Rights separately from their Shares and do not
otherwise acquire Rights may not be able to satisfy the requirements of the
Offer for the tender of Shares. The Purchaser will not pay any additional
consideration for the Rights tendered pursuant to this Offer.
DETERMINATION OF VALIDITY. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance for payment of any tender
of Shares will be determined by the Purchaser, in its sole discretion, whose
determination will be final and binding on all parties. The Purchaser reserves
the absolute right to reject any or all tendered Shares determined by it not to
be in proper form or the acceptance for payment of or payment for which may, in
the opinion of the Purchaser's counsel, be unlawful. The Purchaser also reserves
the absolute right to waive any defect or irregularity in the tender of any
Shares of any particular Shareholder whether or not similar defects or
irregularities are waived in the case of other Shareholders. No tender of Shares
will be deemed to have been validly made until all defects or irregularities
relating thereto have been cured or waived. None of the Purchaser, the
Depositary, the Information Agent or any other person will be under any duty to
give notification of any defects or irregularities in such tendered Shares or
incur any liability for failure to give any such notification. The Purchaser's
interpretation of the terms and conditions of this Offer (including the Letter
of Transmittal and the instructions thereto) will be final and binding on all
parties.
BACKUP WITHHOLDING. Under the federal income tax laws, the Depositary will
be required to withhold 27% of the amount of any payments made to certain
Shareholders pursuant to the Offer. In order to avoid such backup withholding,
you must provide the Depositary with your correct taxpayer identification number
and certify that you are not subject to such backup withholding by completing
the Substitute Form W-9 included in the Letter of Transmittal. If you are a
non-resident alien or foreign entity not subject to back-up withholding, you
must give the Depositary a completed Form W-8 Certificate of Foreign Status
prior to receipt of any payment.
LOST CERTIFICATES. If the Share Certificates that a registered holder wants
to surrender have been lost or destroyed, that fact should be indicated in the
appropriate space on the Letter of Transmittal. Certain representations and
agreements contained in the Letter of Transmittal are required to be made by
tendering Shareholders who have lost their Share Certificates. In addition, the
Information Agent or Depositary may forward to such registered holders
additional documentation necessary to be completed in order to effectively
surrender such lost or destroyed certificates. See Instruction 3 to the Letter
of Transmittal. All questions as to the validity, form, eligibility (including
time of receipt) and acceptance for payment of any tender of Shares will be
determined by the Purchaser, in its sole discretion, whose determination will be
final and binding on all parties.
14
3. WITHDRAWAL RIGHTS
Except as otherwise provided in this Section 3, tenders of Shares pursuant
to this Offer are irrevocable. Shares tendered pursuant to this Offer may be
withdrawn pursuant to the procedures set forth below at any time prior to the
Expiration Date and, unless such Shares are accepted for payment and paid for by
the Purchaser pursuant to this Offer, they may also be withdrawn at any time
after May 10, 2002, or such later date as may apply in case this Offer is
extended. Shares (and, if applicable, Rights) may not be withdrawn unless the
associated Rights are also withdrawn. A withdrawal of Shares (and, if
applicable, Rights) will also constitute a withdrawal of the associated Rights.
For a withdrawal to be effective, a written, manually executed or facsimile
notice of withdrawal must be timely received by the Depositary at its address
set forth on the back cover of this Offer to Purchase and must specify the name
of the person having tendered the Shares to be withdrawn, the number of Shares
to be withdrawn and the name of the registered holder of the Shares to be
withdrawn, if different from the name of the person who tendered the Shares. If
Share Certificates have been delivered or otherwise identified to the
Depositary, then, prior to the physical release of the Share Certificates, the
serial numbers shown on the Share Certificates must be submitted to the
Depositary and, unless the Shares have been tendered by an Eligible Institution,
the signatures on the notice of withdrawal must be guaranteed by an Eligible
Institution. If Shares have been delivered pursuant to the procedure for
book-entry transfer as set forth in Section 2, "Procedures for Tendering
Shares," under the caption "The Tender Offer," any notice of withdrawal must
also specify the name and number of the account at the Book-Entry Transfer
Facility to be credited with the withdrawn Shares and otherwise comply with the
Book-Entry Transfer Facility's procedures.
Withdrawals of tenders of Shares may not be rescinded, and any Shares
properly withdrawn will thereafter be deemed not validly tendered for purposes
of this Offer. However, withdrawn Shares may be retendered by again following
one of the procedures described in Section 2, "Procedures for Tendering Shares,"
under the caption "The Tender Offer," at any time prior to the Expiration Date.
All questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by the Purchaser, in its sole
discretion, whose determination will be final and binding on all parties. None
of the Purchaser, the Depositary, the Information Agent or any other person will
be under any duty to give notification of any defects or irregularities in any
notice of withdrawal or incur any liability for failure to give any such
notification.
4. ACCEPTANCE FOR PAYMENT AND PAYMENT; PRORATION
Upon the terms and subject to the conditions of this Offer (including, if
this Offer is extended or amended, the terms and conditions of any such
extension or amendment), the Purchaser will accept for payment and will pay for
up to 2,465,322 Shares validly tendered and not properly withdrawn in accordance
with Section 3, "Withdrawal Rights," under the caption "The Tender Offer," as
soon as practicable after the Expiration Date. To the extent more than 2,465,322
Shares are tendered in this Offer, the Purchaser will purchase only 2,465,322
Shares in
15
this Offer on a pro rata basis (with appropriate adjustments to avoid purchase
of fractional Shares) based on the number of Shares properly tendered by each
Shareholder prior to or on the Expiration Date and not withdrawn. See Section 3,
"Withdrawal Rights," under the caption "The Tender Offer." All questions as to
the satisfaction of such terms and conditions will be determined by the
Purchaser, in its sole discretion, whose determination will be final and binding
on all parties. See Section 1, "Terms of this Offer; Expiration Date," and
Section 14, "Certain Conditions to this Offer," under the caption "The Tender
Offer." The Purchaser expressly reserves the right, in its sole discretion, to
delay acceptance for payment of or payment for Shares in order to comply in
whole or in part with any applicable law. See Section 14, "Certain Conditions to
this Offer," under the caption "The Tender Offer." Any such delays will be
effected in compliance with Rule 14e-l(c) under the Exchange Act (relating to a
bidder's obligation to pay for or return tendered securities promptly after the
termination or withdrawal of such bidder's offer).
In all cases, payment for Shares accepted for payment pursuant to this
Offer will be made only after timely receipt by the Depositary of (a) Share
Certificates for (or a timely Book-Entry Confirmation with respect to) such
Shares, (b) the Letter of Transmittal (or facsimile thereof) relating to the
Shares tendered, properly completed and duly executed, with any required
signature guarantees, or, in the case of a book-entry transfer, an Agent's
Message, and (c) any other documents required by the Letter of Transmittal. The
per Share consideration paid to any Shareholder pursuant to this Offer will be
the highest per Share consideration paid to any other Shareholder pursuant to
this Offer.
For purposes of this Offer, the Purchaser will be deemed to have accepted
for payment, and thereby purchased, Shares validly tendered to the Purchaser and
not withdrawn as, if and when the Purchaser gives oral or written notice to the
Depositary of the Purchaser's acceptance for payment of such Shares. Payment for
Shares accepted for payment pursuant to this Offer will be made by deposit of
the purchase price therefore with the Depositary, which will act as agent for
validly tendering Shareholders for the purpose of receiving payment from the
Purchaser and transmitting payment to tendering Shareholders. Under no
circumstances will interest be paid on the purchase price of the Shares to be
paid by the Purchaser, regardless of any extension of this Offer or any delay in
making such payment. Upon the deposit of funds with the Depositary for the
purpose of making payments to tendering Shareholders, the Purchaser's obligation
to make such payment shall be satisfied and tendering Shareholders must
thereafter look solely to the Depositary for payment of amounts owed to them by
reason of the acceptance for payment of Shares pursuant to this Offer. The
Purchaser will pay any stock transfer taxes with respect to the transfer and
sale to it or its order pursuant to this Offer, except as otherwise provided in
Instruction 7 of the Letter of Transmittal, as well as any charges and expenses
of the Depositary and the Information Agent.
If the Purchaser is delayed in its acceptance for payment of or payment for
Shares or is unable to accept for payment or pay for Shares pursuant to this
Offer for any reason, then, without prejudice to the Purchaser's rights under
this Offer (but subject to compliance with Rule 14e-1(c) under the Exchange
Act), the Depositary may, nevertheless, on behalf of the Purchaser, retain
tendered Shares, and such Shares may not be withdrawn except to the extent
tendering Shareholders are entitled to exercise, and duly exercise, withdrawal
rights as described in Section
16
3. "Withdrawal Rights," under the caption "The Tender Offer."
If any tendered Shares are not purchased pursuant to this Offer for any
reason, including proration, Share Certificates for any such unpurchased Shares
will be returned, without expense to the tendering Shareholder (or, in the case
of Shares delivered by book-entry transfer of such Shares into the Depositary's
account at the Book-Entry Transfer Facility pursuant to the procedure set forth
in Section 2, "Procedures for Tendering Shares," under the caption "The Tender
Offer," such Shares will be credited to an account maintained at the Book-Entry
Transfer Facility), as soon as practicable after the expiration, termination or
withdrawal of this Offer.
If more than the 2,465,322 Shares are validly tendered and not withdrawn
prior to the Expiration Date, we will accept payment and pay for only 2,465,322
Shares on a pro rata basis based on the number of Shares properly tendered by
each Shareholder prior to or on the Expiration Date and not withdrawn.
Preliminary results of proration will be announced by press release as promptly
as practicable after the Expiration Date. Shareholders may obtain such
preliminary information from the Information Agent and may also be able to
obtain such preliminary information from their brokers.
5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The receipt of cash pursuant to this Offer will be a taxable transaction
for federal income tax purposes under the Internal Revenue Code of 1986, as
amended (the "Code"), and may also be a taxable transaction under applicable
state, local or foreign income or other tax laws. Generally, for federal income
tax purposes, a tendering Shareholder will recognize gain or loss equal to the
difference between the amount of cash received by the Shareholder pursuant to
this Offer and the aggregate tax basis in the Shares tendered by the Shareholder
and purchased pursuant to this Offer. If Shares are held by a Shareholder as
capital assets (i.e., generally assets held for investment), gain or loss
recognized by the Shareholder with respect to such Shares will be capital gain
or loss.
Capital gains recognized by an individual Shareholder will generally be
taxed at a maximum federal marginal tax rate of 20% if the Shareholder's holding
period for the shares exceeds 12 months. Capital gains recognized by a corporate
Shareholder will be taxed at a maximum federal marginal tax rate of 35%.
The foregoing discussion is included for general information only and may
not be applicable with respect to shares received pursuant to the exercise of
employee stock options or otherwise as compensation or with respect to holders
of Shares who are subject to special tax treatment under the Code, such as
non-U.S. persons, insurance companies, tax-exempt organizations, financial
institutions, broker-dealers and Shareholders who hold their Shares as part of a
hedge, straddle or conversion transaction, and otherwise may not apply to a
holder of Shares in light of particular circumstances. You are urged to consult
your tax advisors to determine the particular tax consequences to you (including
the application and effect of any state, local or foreign income and other tax
laws) of this Offer.
17
6. PRICE RANGE OF SHARES; DIVIDENDS
The Shares are quoted on the Nasdaq SmallCap Market ("Nasdaq"). The
following table sets forth, for each of the periods indicated, the high and low
sales prices per share as reported on Nasdaq, and dividends paid per Share,
based on published financial sources. The Company stated in its Annual Report on
Form 10-K for calendar year 2001 that it did not anticipate paying any dividends
on its Common Stock in the foreseeable future.
INTERSTATE HOTELS CORPORATION (NASDAQ: IHCO)
CALENDAR YEAR HIGH($) LOW ($) DIVIDEND($)
------------- ------- ------- -----------
2000
First Quarter 4.75 2.75 -0-
Second Quarter 3.75 1.69 -0-
Third Quarter 3.19 1.94 -0-
Fourth Quarter 3.06 1.53 -0-
2001
First Quarter 2.63 1.56 -0-
Second Quarter 3.15 2.00 -0-
Third Quarter 2.95 1.56 -0-
Fourth Quarter 1.74 1.25 -0-
2002
First Quarter 2.50 1.40 -0-
On March 29, 2002, the shares of the Company closed on Nasdaq at $2.10 per
share. You should obtain a recent quotation for your shares before you decide
whether or not to tender.
The Purchaser believes, based upon publicly available information, that as
of the date of this Offer to Purchase, the Rights are listed on the Nasdaq and
all Rights are attached to the associated Shares and are not traded separately.
As a result, the sale prices per Share set forth above are also the high and low
sale prices per Share and associated Right during all such periods. Upon the
occurrence of the Distribution Date, the Rights are to detach, and may trade
separately, from the Shares. See Section 11, "Background of this Offer; Past
Contacts, Transactions or Negotiations with the Company," under the caption "The
Tender Offer." The Purchaser believes that, as a result of the commencement of
the Offer on April 3, 2002, the Distribution Date may occur as early as April
17, 2002, unless prior to such date the Company's board redeems the Rights or
takes action to delay the Distribution Date. The Distribution Date may also
occur sooner. See Section 14, "Certain Conditions to this Offer," under the
caption "The Tender Offer." IF THE DISTRIBUTION DATE OCCURS AND THE RIGHTS BEGIN
TO TRADE SEPARATELY FROM THE SHARES, SHAREHOLDERS ARE ALSO URGED TO OBTAIN A
CURRENT MARKET QUOTATION FOR THE RIGHTS.
18
7. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES; NASDAQ LISTING;
EXCHANGE ACT REGISTRATION; MARGIN SECURITIES
MARKET FOR THE SHARES. Based on the Company's Annual Report on Form 10-K
for the year ended December 31, 2001, there were 1,877 registered stockholders
of record of Shares as of March 18, 2001. The purchase of Shares pursuant to
this Offer may reduce the number of holders of Shares and the number of Shares
that might otherwise trade publicly and could adversely affect the liquidity and
market value of the remaining Shares held by the public. The Purchaser does not
expect, however, that the number of holders of Shares will decrease
significantly and, following the completion of this Offer, the number of shares
of Class A Common Stock outstanding will be approximately 2,689,063.
NASDAQ LISTING. The Purchaser expects that, even if the Offer is
successful, the Shares will continue to be listed on the Nasdaq SmallCap Market
("Nasdaq"). However, there is a possibility that, depending upon the number of
Shares purchased pursuant to the Offer, the number of holders participating in
the Offer, or other factors, the Shares may no longer meet the requirements for
continued listing on the Nasdaq. According to the published guidelines of the
Nasdaq, the Nasdaq would normally give consideration to delisting the Shares
when, among other things:
[X] the total number of holders of Shares is less than 300;
[X] one of the following occurs: (i) the total shareholder equity is less
than $2.5 million, (ii) the market capitalization is less than $35
million, or (iii) the net income from continuing operations (in the
latest fiscal year or two of the last three fiscal years) is less than
$500,000;
[X] the total public float (Shares) is less than 500,000;
[X] the market value of the public float is less than $1 million;
[X] the minimum bid price for Shares is less than $1; or
[X] the Shares have less than two market makers.
If, as a result of the purchase of Shares pursuant to the Offer, the Shares
no longer meet the requirements for continued listing in Nasdaq and the listing
of Shares is discontinued, the market for the Shares could be adversely
affected. In the event that the Shares are delisted from Nasdaq, it is possible
that the Shares would continue to trade in the over-the-counter market and that
the price or other quotations may still be available from other sources. The
extent of the public market for the Shares and the availability of such
quotations would, however, depend upon such factors as the number of holders
and/or the aggregate market value of such Shares remaining at such time, the
interest in maintaining a market in such Shares on the part of securities firms,
the possible termination of registration of such Shares under the Exchange Act,
as described below, and other factors. The Purchaser cannot predict whether a
reduction in the number of Shares that might otherwise trade publicly would have
an adverse or beneficial effect
19
on the market price for or marketability of the Shares or whether it would cause
future market prices to be greater or less than the price paid in this Offer.
EXCHANGE ACT REGISTRATION. The Shares are currently registered under the
Exchange Act and the Purchaser expects continued registration after the Offer.
However, there is a remote possibility that, the Shares may be eligible for
deregistration either prior to or after this Offer depending upon certain
circumstances, including the number of recordholders of the Shares at such time.
Registration of the Shares under the Exchange Act may be terminated upon
application of the Company to the Commission if the Shares are neither listed on
a national securities exchange, nor held by 500 or more holders of record, where
total assets of the Company have not exceeded $10 million on the last day of the
Company's three most recent fiscal years. In order to be eligible to effect such
termination, however, the Company must be current on its periodic reporting
requirements under the Exchange Act. The Purchaser currently has no intention of
recommending the deregistration of the Shares.
Termination of registration of the Shares under the Exchange Act would,
assuming the Company were in compliance with its reporting obligations,
substantially reduce the information required to be furnished by the Company to
its Shareholders and to the Commission. Termination would also make certain
provisions of the Exchange Act no longer applicable to the Company, such as the
short-swing profit recovery provisions of Section 16(b) of the Exchange Act, the
requirement of furnishing a proxy statement pursuant to Section 14(a) of the
Exchange Act in connection with Shareholders' meetings and the related
requirement of furnishing an annual report to Shareholders and the requirements
of Rule 13e-3 under the Exchange Act with respect to "going private"
transactions. Furthermore, the ability of "affiliates" of the Company and
persons holding "restricted securities" of the Company to dispose of such
securities in compliance with Rule 144 or 144A promulgated under the Securities
Act of 1933, as amended, would be eliminated.
Based upon publicly available information, the Purchaser believes that, as
of the date of this Offer to Purchase, the Rights are attached to the Shares and
are not separately transferable. The Purchaser believes that, as a result of the
commencement of the Offer on April 3, 2002, the Distribution Date may occur as
early as April 17, 2002, unless prior to such date the Company Board redeems the
Rights or takes action to delay the Distribution Date. The Distribution Date may
also occur sooner. See Section 14, "Certain Conditions to this Offer," under the
caption "The Tender Offer." The Rights Agreement provides that, following the
Distribution Date, certificates evidencing the Rights will be sent to all
holders of Rights and Rights will become transferable apart from the Shares. See
Section 14, "Certain Conditions to this Offer," under the caption "The Tender
Offer." If the Distribution Date occurs and the Rights separate from the Shares,
the foregoing discussion with respect to the effect of the Offer on the market
for the Shares, stock exchange listings and Exchange Act registration would
apply to the Rights in a similar manner.
MARGIN SECURITIES. The Shares are currently "margin securities" under the
rules of the Board of Governors of the Federal Reserve System (the "Federal
Reserve Board"), which has the effect, among other things, of allowing brokers
to extend credit on the collateral of such Shares for the purpose of buying,
carrying or trading in securities. The Purchaser expects that
20
the Shares will continue to be "margin securities" after the Offer. However,
there is a remote possibility that, following the purchase of Shares pursuant to
this Offer or any subsequent open market or privately negotiated purchases,
depending upon factors such as the number of record holders of the Shares and
the number and market value of publicly held Shares, the Shares might no longer
constitute "margin securities" for purposes of the Federal Reserve Board's
margin regulations and therefore no longer be used as collateral for purposes of
loans made by brokers. In addition, if registration of the Shares under the
Exchange Act is terminated, the Shares would no longer be "margin securities" or
eligible for listing or Nasdaq SmallCap Market reporting.
8. CERTAIN INFORMATION CONCERNING THE COMPANY
COMPANY INFORMATION. The information concerning the Company contained in
this Offer to Purchase, including financial information, for the most part has
been taken from or based upon publicly available documents and records on file
with the SEC and other public sources. The Purchaser does not assume any
responsibility for the accuracy or completeness of the information concerning
the Company contained in such documents and records or for any failure by the
Company to disclose events which may have occurred or may affect the
significance or accuracy of any such information but which are unknown to the
Purchaser.
The Company is a Maryland corporation whose principal place of business is
Foster Plaza Ten, 680 Andersen Drive, Pittsburgh, Pennsylvania 15220 and its
telephone number is (412) 937-0600.
The Company is one of the largest independent hotel management companies in
the United States based upon number of properties, number of rooms and total
revenues produced for owners. As of December 31, 2001, the Company managed,
leased or performed related services for 134 hotels with a total of 28,316 rooms
in 37 states in the United States, as well as Canada and Russia.
The Company operates its hotels under two separate operating segments -
Interstate, which primarily operates luxury and upscale hotels, and Crossroads,
which primarily operates mid-scale, upper economy and budget hotels. The Company
competes for third-party hotel management agreements with international,
national, regional and local hotel management and franchise companies. The
Company competes with these companies on factors such as relationships with
hotel owners and investors, access to capital, financial performance, contract
terms, name recognition, marketing support and the willingness to provide funds
in connection with new management arrangements.
21
The following chart summarizes the capital structure of the Company.
Outstanding Conversion Price
Shares/ Holders Publicly into Class A
Class of Stock Amount (approx.) Traded Board Seats Common Stock
-------------- ------ --------- ------ ----------- ------------
Common Stock
Class A 5,487,885 1,877 Nasdaq five/1/ N/A
Class B 242,555 one No one See Note 2
Preferred Stock
Series A -0- -0- N/A none N/A/3/
Series B 725,000 five No five $4.00/4/ per share
Subordinated
Convertible Notes $25,000,000 one No N/A See notes 4 and 5
/1/ The terms of the five Class A Common Stock directors are staggered. Two
directors stand for election in 2002, one in 2003, and two in 2004. The
board seats presently held by Phillip H. McNeill and Thomas F. Hewitt,
Chairman of the Board and Chief Executive Officer of the Company, are up
for election in 2002.
/2/ Each share of Class B Common Stock is convertible into one share of Class
A Common Stock.
/3/ At the option of the board outstanding shares of Series A Preferred Stock
are exchangeable into shares of Class A Common Stock. See Section 14,
"Certain Conditions to this Offer," in "The Tender Offer."
/4/ Outstanding shares of Series B Preferred Stock and outstanding
Subordinated Convertible Notes are convertible into a maximum of 49% of
the outstanding shares of Class A Common Stock following conversion.
/5/ The Subordinated Convertible Notes are convertible into shares of Class A
Common Stock at a conversion rate of $4.00 per share.
Based upon recent trading prices of shares of Class A Common Stock, and assuming
that those prices remain approximately the same in the near future, it appears
unlikely that shares of Series B Preferred Stock, or the Convertible Notes, will
be converted into shares of Class A Common Stock, because those trading prices
are substantially below the above conversion prices. The holders of Class A
Common Stock are entitled to elect a maximum of five of the eleven members of
the Company's board of directors. Upon the completion of this Offer, the
Purchaser will be entitled to vote its shares for two Class A Common Stock
directors in 2002, one in 2003, and two in 2004.
22
AVAILABLE INFORMATION. The Company is subject to the information and
reporting requirements of the Exchange Act and is required to file reports and
other information with the SEC relating to its business, financial condition and
other matters. Information, as of particular dates, concerning the Company's
directors and officers, their remuneration, stock options granted to them, the
principal holders of the Shares, any material interests of such persons in
transactions with the Company and other matters is required to be disclosed in
proxy statements distributed to the Company's stockholders and filed with the
SEC. These reports, proxy statements and other information should be available
for inspection at the public reference facilities of the SEC located in
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and also should
be available for inspection and copying at prescribed rates at the following
regional offices of the SEC: Woolworth Building, 223 Broadway, New York, New
York 10048; and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of this material may also be obtained by mail, upon payment of the SEC's
customary fees, from the SEC's principal office at 450 Fifth Street, N.W.,
Washington, D.C. 20549. The SEC also maintains an Internet web site at
www.sec.gov that contains reports, proxy statements and other information. The
Shares are listed on the Nasdaq, and reports, proxy statements and other
information concerning the Company should also be available for inspection and
at the offices of the Nasdaq, One Liberty Plaza, New York, New York 10006.
9. CERTAIN INFORMATION CONCERNING THE PURCHASER
Shaner Hotel Group Limited Partnership is a Delaware limited partnership
formed on August 30, 1995 (the "Purchaser"). The main business of the Purchaser
is management and ownership of hotels and motels, and was started by the
Purchaser's principals in 1983. The Purchaser has its principal place of
business at 1965 Waddle Road, State College, Pennsylvania 16803 and its
telephone number is (814) 234-4460. As of the date of this Offer to Purchase,
the Purchaser is the beneficial owner of 333,500 Shares, which constitute
approximately 6.08% of the Shares outstanding as of the date of this Offer to
Purchase.
The general partner of the Purchaser is Shaner Operating Corp., a Delaware
corporation (the "General Partner"). The principal business of the General
Partner is acting as the general partner of the Purchaser. The General Partner
has its principal place of business at 1965 Waddle Road, State College,
Pennsylvania 16803 and its telephone number is (814) 234-4460. For certain
information concerning the directors and executive officers of the General
Partner and the Purchaser, see Schedule I to this Offer to Purchase.
The Purchaser, with over $260 million in assets, is a privately-held, fully
integrated hotel company which specializes in the acquisition, refurbishment,
repositioning, development and long-term ownership of full-service hotels. The
Purchaser also has extensive limited-service and extended-stay experience.
The Purchaser owns 22 hotels in 15 states as listed on Schedule II to this
Offer. These hotels represent ten different hotel brands, including, Comfort
Inn, Hampton Inns, Residence Inn, Holiday Inn, Holiday Inn Express, Holiday Inn
Sunspree, Marriott, Newport Hotel, Radisson, and Savery Hotel. The Purchaser
also manages hotels representing the following brands: Marriott, Radisson,
Renaissance, Residence Inn by Marriott, Comfort Inn, Hampton Inn
23
and Suites, Fairfield Inn by Marriott, and Springhill Suites by Marriott. As
part of the Purchaser's full-service management of hotels, it provides complete
in-house services: Operations, sales, marketing, and revenue management;
financial and tax reporting and payroll; human resources; in-house legal
counsel; development; franchise relationships; renovation, construction, design
and purchasing; information systems, equity capital for investment; and
conference and convention center management.
Except as set forth in this Offer to Purchase, including the Schedules
hereto, neither the Purchaser, the General Partner nor, to the best knowledge of
the Purchaser or the General Partner, any of the persons listed in Schedule I
hereto: (i) has had any contract, arrangement, understanding or relationship
with any other person with respect to any securities of the Company, including,
without limitation, any contract, arrangement, understanding or relationship
concerning the transfer of the voting of any securities of the Company, joint
ventures, loan or option arrangements, puts or calls, guaranties of loans,
guaranties against loss or the giving or withholding of proxies; or (ii) has had
any transactions with the Company, or any of its executive officers, trustees or
affiliates that would require reporting under the rules of the Commission.
Except as set forth in this Offer to Purchase, including the Schedules hereto,
there have been no contacts, negotiations or transactions between the Purchaser,
the General Partner nor, to the best knowledge of the Purchaser or the General
Partner, any of the persons listed in Schedule I hereto, on the one hand, and
the Company or its directors, executive officers, or affiliates, on the other
hand, concerning a merger, consolidation or acquisition, tender offer or other
acquisition of securities, election of directors, or a sale or other transfer of
a material amount of assets that would require reporting under the rules of the
Commission. Except as set forth in this Offer to Purchase, there have been no
transactions in the Shares that were effected during the sixty days prior to the
date of this Offer to Purchase by the Purchaser or any of its affiliates.
10. SOURCE AND AMOUNT OF FUNDS
The total amount of funds required by the Purchaser to purchase 2,465,322
Shares under this Offer, and to pay related fees and expenses incurred as part
of this Offer, is estimated at $7,600,000. The Purchaser has sufficient cash
readily available to pay for the Shares. Because it has sufficient resources to
fund this Offer, it does not need alternative financing arrangements and the
Offer is not conditioned on obtaining any financing.
11. BACKGROUND OF THIS OFFER; PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS
WITH THE COMPANY
Shaner Hotel Group has been aware of the Company and its long history of
performance in the hotel industry for many years. For some time, Shaner Hotel
Group has believed that combining the hotel management experience of the Company
and the management experience of Shaner Hotel Group would benefit both the
Company and Shaner Hotel Group.
On October 3, 2000, Lance T. Shaner, the Chairman and Chief Executive
Officer of Shaner Hotel Group, sent a letter to Mr. Thomas F. Hewitt, CEO and
Chairman of the Board of the Company. In that letter, Shaner Hotel Group
proposed an acquisition of all of the Common Stock of the Company at a price of
$4.125 per share and Mr. Shaner requested an opportunity to
24
meet with Mr. Hewitt or his representatives. The proposal was subject to due
diligence. The letter noted that the offer was a joint offer of Shaner Hotel
Group and Bruce S. Brickman & Associates, Inc.
On October 5, 2000, the Board of Directors of the Company determined that
pursuing the proposal of Shaner Hotel Group was not in the best interests of
stockholders. The Board reaffirmed its recommendation that stockholders approve
the previously announced investment by the investor group led by Lehman Brothers
(the "Investor Group").
Mr. Shaner sent a letter to Mr. J. William Richardson, the Vice Chairman of
the Company, on October 6, 2000, clarifying the proposal and requesting an
opportunity to meet with Interstate management.
On October 8, 2000, the Board of Directors announced that it had determined
that the proposal was not reasonably likely to be completed and that the
previously announced transaction with the Investor Group was financially
superior to the transaction proposed by Shaner Hotel Group.
On October 11, 2000, Mr. Shaner sent a letter further clarifying the
position of Shaner Hotel Group.
On October 20, 2000, the Company issued 8.75% Subordinated Convertible
Notes (the "Notes") for $25.0 million and 500,000 shares of its Series B
Convertible Preferred Stock, par value $.01 per share (the "Preferred Stock")
for $5.0 million. These securities were issued to CGLH Partners I LP and CGLH
Partners II LP, which were entities affiliated with Lehman Brothers Holdings
Inc.
From October of 2000 until December of 2001, Shaner Hotel Group continued
to closely monitor the performance of the Company. Shaner Hotel Group noted that
the Company did not appear to be using the funds from the Investor Group
investment in order to acquire new properties or contracts.
In December of 2001, Shaner Hotel Group acquired 320,000 shares of the
Class A Common Stock of the Company. In its Schedule 13D filing (filed on
January 9, 2002), Shaner Hotel Group stated that it is considering making a
proposal which might include an acquisition, merger or a joint venture between
Shaner Hotel Group and Interstate to manage, operate or own hotel and motel
properties.
On January 14, 2002, Mr. Shaner sent to Mr. Hewitt a letter setting forth a
proposal to combine the operations of the Company and Shaner Hotel Group. The
proposal provided for the acquisition of additional shares of Common Stock of
the Company by Shaner Hotel Group, the repayment of the Notes, the purchase of a
portion of the Preferred Stock and the redemption of all remaining Preferred
Stock and the combination of certain operations.
25
In a letter dated January 21, 2002, Mr. Hewitt stated that Mr. Shaner's
letter has been distributed to its Board of Directors and the Company's
independent advisors. Subsequent to the receipt of this letter, Mr. Shaner
attempted to contact Mr. Hewitt by telephone. On or about January 27, 2002, Mr.
Hewitt left Mr. Shaner a voice-mail indicating that the Board would consider the
proposal of Shaner Hotel Group at its next meeting, scheduled for February 11,
2002. In a letter dated January 28, 2002, Mr. Shaner requested an opportunity to
meet with Mr. Hewitt as well as an opportunity to make a presentation to the
independent directors of the Company prior to the February 11th Board meeting.
Also on January 28, 2002, Mr. Shaner sent a letter to each of the independent
directors of the Company requesting an appointment to meet and an opportunity to
make a presentation.
During the period prior to the February 11th Board meeting, Mr. Shaner made
calls to each of the independent directors as well as to several of the
directors elected by the Investor Group (the "Investor Directors"). Mr. Shaner
was unable to obtain a meeting with any of the independent directors or the
Investor Directors but did have several phone conversations in which he
explained the proposal.
In an e-mail to Mr. Shaner sent on Tuesday, January 29, 2002, Mr. Hewitt
suggested that he and Mr. Shaner meet on February 6, 2002. Mr. Shaner accepted
the offer to meet and on February 6, 2002, a meeting was held at the Company's
offices. Attending on behalf of Shaner Hotel Group were: Mr. Shaner, J.B.
Griffin (the CFO of Shaner Hotel Group) and Michael McNulty (a financial
consultant). Mr. Hewitt and Mr. Richardson represented the Company. At the
meeting on February 6, 2002, the Shaner Hotel Group representatives explained
the proposal.
In a letter dated February 14, 2002, from Mr. Hewitt to Mr. Shaner, Mr.
Hewitt wrote that the Board of Directors has concluded that the proposal does
not present an opportunity which is in the best interests of the Company's
public stockholders. The letter also stated that the proposal is contingent upon
its acceptance by the Investor Group and that the Investor Group has advised the
Board of Directors that it does not wish to dispose of its securities on the
terms set forth in the proposal.
On February 18, 2002, the Shaner Hotel Group sent to the Board of Directors
of the Company a Letter Agreement formalizing and expanding upon its proposal.
The proposal provided for the purchase of up to 680,000 shares of Class A Common
Stock and fifteen percent of the Class B Common Stock at a price of $2.70 per
share. It also provided for the purchase, redemption or repayment of the
securities owned by the Investor Group and for the combination of certain
operations between the Company and Shaner Hotel Group. The proposal stated that
it would remain open only until February 25, 2002.
On February 18, 2002, Shaner Hotel Group issued a press release. The press
release stated that the Company has received a new proposal from Shaner Hotel
Group. The press release noted that the previous proposal of Shaner Hotel Group
had been rejected. In the press release, Mr. Shaner observed that the Company
has not posted a winning quarter for several years. Mr. Shaner asserted that, as
one of the Company's largest stockholders, Shaner Hotel Group is intensely
concerned about shareholder value.
26
On February 19, 2002, Mr. Shaner sent an e-mail to Mr. Hewitt requesting a
meeting. Mr. Hewitt called Mr. Shaner on February 21, 2002. During the call on
February 21, 2002, Mr. Hewitt stated that Mr. Shaner will need to reach an
agreement with the Investor Group. Mr. Shaner asked Mr. Hewitt if Mr. Hewitt
would object to Mr. Shaner speaking directly to the Investor Group. Mr. Hewitt
stated that he had no objection. Mr. Shaner sent Mr. Hewitt a letter on February
21, 2002, confirming the call and thanking Mr. Hewitt for the comment that Mr.
Hewitt did not object to Mr. Shaner speaking directly to the Investor Group. Mr.
Shaner also wrote that he looked forward to hearing from Mr. Hewitt so that a
dinner could be scheduled.
Mr. Shaner had a conversation with a representative of the Investor Group,
Mahmood Khimji, on February 25, 2002. Mr. Khimji stated that, to be successful,
a proposal would need to gain favor with the Investor Group as well as the board
and management. Mr. Khimji indicated that the Investor Group would be willing to
discuss proposals but that the Investor Group would not accept the proposal set
forth in the Letter Agreement dated February 18, 2002.
On March 5, 2002, Shaner Hotel Group sent a revised proposal to the
Company. The revised proposal provided that Shaner Hotel Group would tender for
1,650,000 shares of the Class A Common Stock of the Company at a price of $3.00
per share. It also increased the consideration to be paid to the Investor Group
by $2.3 million. The proposal stated that it would remain open only until March
13, 2002.
On March 7, 2002, Mr. Hewitt sent Mr. Shaner an e-mail stating that the
Board was considering the proposal. Mr. Hewitt stated that the Company may not
be able to respond by March 13, 2002.
On March 11, 2002, Mr. Shaner wrote to Mr. Hewitt and asked to be advised
of when the Company could respond to the March 5th proposal. Once again, Mr.
Shaner requested a meeting. In addition, Mr. Shaner requested a copy of the
shareholder list of all current shareholders of the Company including mailing
addresses.
On March 11, 2002, Mr. Khimji returned a call from Mr. Shaner. Mr. Shaner
requested a meeting in the near future between Shaner Hotel Group and the
Investor Group representatives. Mr. Khimji emphasized that he would contact the
Investor Group and relay the request but stated that if Mr. Shaner did not hear
from Mr. Khimji in twenty-four hours, then Mr. Shaner should assume that the
Investor Group is not interested in meeting. Mr. Shaner asked why the Investor
Group showed so little interest in meeting. Mr. Khimji stated that the Investor
Group had its reasons. Mr. Shaner indicated that it was clear to him that the
Company was negotiating a merger or sale of the Company with a third person.
Based upon this conversation, Mr. Shaner concluded that negotiations with the
Investor Group had reached an impasse.
On March 12, 2002, Shaner Hotel Group released a press release. In the
press release Shaner Hotel Group announced that it had made an all-cash offer
for a controlling stake in the Company the prior week. In addition, the press
release announced that Mr. Hewitt received a request for the shareholder list
from Shaner Hotel Group. The press release described the offer sent to the
Company's Board on March 5, 2002. Mr. Shaner stated that "We are sincere and
highly committed to our vision for improving Interstate's performance. We want
to implement
27
our strategy while Interstate is still in a viable position. The time for Shaner
and Interstate to join forces is right now."
On March 13, 2002, Mr. Hewitt sent Mr. Shaner a letter responding to Mr.
Shaner's letter of March 11, 2002. Mr. Hewitt asserted that the proposal of
Shaner Hotel Group would consume approximately $30,000,000 of the Company's
available cash resources. Further, Mr. Hewitt stated that the Board needs to
obtain additional information in order to adequately review the proposal. Mr.
Hewitt requested details of the financing arrangement of Shaner Hotel Group and
details regarding the plans of Shaner Hotel Group regarding changes to the
equity structure, management and business organization of the Company following
the tender offer and the redemptions. In addition, Mr. Hewitt inquired about the
basis for the belief of Shaner Hotel Group that the Investor Group would consent
to the transaction. Finally, Mr. Hewitt stated that the Company is not prepared
to provide a list of shareholders.
Mr. Shaner sent a response on March 20, 2002. Mr. Shaner stated that he was
disappointed that Mr. Hewitt canceled their lunch scheduled for March 13, 2002.
Mr. Shaner proposed that he and Mr. Hewitt continue a dialogue. In this letter,
Mr. Shaner observed that $25,000,000 of cash on the Company's balance sheet is
in fact restricted. Mr. Shaner said that Shaner Hotel Group believes that the
Company's failure to use this cash is either one example of mismanagement or an
indication that the Investor Group is using its contractual rights to prevent
the Company from using the cash. Mr. Shaner assured Mr. Hewitt that the Shaner
Hotel Group has sufficient financing and stated that the restructuring
contemplated in the proposal is the same as the restructuring set forth in prior
proposals. Mr. Shaner stated that Shaner Hotel Group has been disappointed with
the unwillingness of the Investor Group to discuss a transaction with Shaner
Hotel Group. Mr. Shaner reiterated the request for a shareholder list. Mr.
Shaner also insisted that Shaner Hotel Group be given a level playing field with
any other proposal. Mr. Shaner asserted that any transaction negotiated with a
third party should exclude a subsequent transaction break-up fee if a
transaction with the Shaner Hotel Group is completed. Mr. Shaner stated that he
is willing to discuss the interest of Shaner Hotel Group at any time.
In a letter to the Board of Directors of the Company sent on March 21,
2002, Mr. Shaner addressed two issues. First he stated that he believes that the
financial statements of the Company set forth in its public filings are
misleading. Mr. Hewitt's letter of March 13, 2002, referred to available cash
resources. The Company's quarterly reports have shown the $25,000,000 proceeds
of the Investor Group Notes as current assets. However, such funds may only be
invested with the consent of the Managing General Partner of the joint venture
between the Company and certain members of the Investor Group. Mr. Shaner
maintained that the cash should have been shown as restricted on the balance
sheet. Mr. Shaner also raised issues with respect to the Worldgate investment.
Mr. Shaner noted that approximately one month after the Investor Group
financing, the Company made a $3,900,000 equity investment with affiliates of
the Investor Group, which investment had to be written off in its entirety
within nine months. Mr. Shaner stated that the timing of the Worldgate
transaction raises the question as to whether the Company made adequate
disclosure in its proxy filings to approve the issuance of the Investor Group
financing. Mr. Shaner concluded that, unless the Company or its auditors explain
the issues by March 25, 2002, he will communicate with the other shareholders of
the
28
Company in an effort to give them a more complete and accurate picture of the
Company's financial position.
In a letter dated March 21, 2002 to Mr. Khimji, Mr. Shaner raised issues
regarding the ownership interest of affiliates of Mr. Khimji. Mr. Shaner asked
Mr. Khimji to explain why a company with which Mr. Khimji was affiliated and
which apparently disposed of a significant ownership stake did not file a
Schedule 13D.
On March 25, 2002, Mr. Hewitt responded to Shaner Hotel Group's letters of
March 20 and 21, 2002. Mr. Hewitt stated that the Company's management and Board
were considering matters discussed in those letters and would respond following
the appropriate review.
In accordance with the Bylaws of the Company, on March 25, 2002, Shaner
Hotel Group sent to Timothy Q. Hudak, Secretary of the Company, written notice
of proposals to be considered at the annual meeting. The proposals relate to
redemption of the Rights created by the Company's Shareholders Rights Agreement
or the amendment of the Shareholders Rights Agreement to remove the impediments
to the consummation of this Offer. In that letter and in a follow-up letter on
March 28, 2002, Shaner Hotel Group also nominated Lance T. Shaner and Leo A.
Keevican, Jr. for election as Class A Directors at the Company's next annual
meeting.
On March 27, 2002, Shaner Hotel Group issued a press release announcing
that it would be initiating this Offer shortly.
On April 2, 2002, Shaner Hotel Group sent a letter to the Board of
Directors of the Company which contained two requests relating to this Offer.
First, Shaner Hotel Group asked the Board to act immediately to redeem the
Rights issued under its Shareholders Rights Agreement or take such action as is
necessary so that the Rights are invalid or otherwise inapplicable to this
Offer. Second, Shaner Hotel Group requested that the Board schedule the 2002
annual meeting of Shareholders, and set the record date for shareholders
entitled to notice of and to vote at that meeting, so as to enable Shaner Hotel
Group to complete this Offer and vote the Shares purchased in it at that meeting
and at any other special shareholder meeting.
On April 3, 2002, Shaner Hotel Group filed with the Securities and Exchange
Commission its Schedule TO-T relating to this Offer and incorporating this
Offer, the Letter of Transmittal, and other related documents.
On April 3, 2002, Shaner Hotel Group issued a press release announcing that
it was commencing this Offer.
On April 3, 2002, Shaner Hotel Group sent to Timothy Q. Hudak, Secretary of
the Company, a written request in connection with this Offer to notify Shaner
Hotel Group of the Company's election either to mail this Offer and related
offering materials to holders of record of Class A Common Stock, or to provide
Shaner Hotel Group with a shareholder mailing list to enable it to mail the
materials itself.
29
12. PURPOSE OF THIS OFFER; PLANS FOR THE COMPANY
The purpose of this Offer is to increase, through the purchase of Shares,
the Purchaser's investment in the Company because we believe in the long-term
value of the Company, in the business of owning and operating hotels and motels,
and in the synergies and operating efficiencies which may be obtained by a
business relationship between the Company and the Purchaser. The Purchaser and
its affiliates currently are the beneficial owner of 333,500 Shares,
representing approximately 6.08% of the outstanding Shares. The Offer, at a
significant premium to the current market price, demonstrates the Purchaser's
commitment to the Company. The additional investment will increase the
Purchaser's incentive to see that the Shares perform well. This offer will give
the Shareholders an opportunity to sell some of their Shares at a price
substantially in excess of the current market price and still retain a
significant interest in the future growth of the Company.
The Purchaser's current plans for the Company are to complete this Offer,
subject to the satisfaction or waiver of important conditions, to vote in favor
of its nominees to the board of directors of the Company at this year's annual
meeting of shareholders which we believe will be held on May 21, 2002, and to
exercise the rights of a common shareholder. In addition, following the
completion of this Offer, and in accordance with all applicable requirements and
restrictions of the Company's articles of incorporation and bylaws, and of
applicable law, we will consider seeking to accomplish some or all of the
following objectives in cooperation with the appropriate persons or entities.
|X| Purchase a portion of the outstanding shares of Series B Preferred
Stock of the Company and encourage the Company to purchase back the
remaining portion of those shares.
|X| Encourage the Company to retire any and all outstanding 8.75%
Subordinated Convertible Notes due 2007.
|X| Encourage the Company to, and support an effort to, simplify and
conform the structure of the board of directors to reflect any and all
changes made to the Company's capital structure.
|X| Encourage the Company to enter into a business relationship with us,
which would involve the combination of both parties' management and
revenue from long-term management agreements, in order to achieve
operating synergies and efficiencies by combining the overhead
structures of both entities and eliminating duplication of effort.
|X| We will encourage the Company to investigate the following concerns and
issues and take any appropriate action based upon the results of that
investigation. We are concerned that, and believe that, in recent
years, the Company may have made a questionable investment in the
Renaissance Worldgate Hotel in Kissimmee, Florida, may have misstated
current assets in its recent financial statements, and may have paid
executive compensation out of line with the Company's financial
performance. See Section 11, "Background of this Offer; Past Contacts,
Transactions or Negotiations with the Company," under the caption "The
Tender Offer."
30
The Purchaser has sufficient cash readily available to pay for the Shares and
complete this Offer. With additional cash readily available and its credit
facilities, the Purchaser has sufficient resources to fund its plans for the
Company as described above. The Purchaser does not need alternative financing
arrangements to complete this Offer and the Offer is therefore not conditioned
on obtaining any financing. To the extent information is available, the
Purchaser intends to continuously evaluate the Company and its prospects, and
the Purchaser reserves the right to propose changes in the future.
13. DIVIDENDS AND DISTRIBUTIONS
If, on or after April 3, 2002, the Company should (a) split, combine or
otherwise change the Shares or its capitalization from that disclosed in the
Company's Annual Report on Form 10-K for the year ended December 31,2001, (b)
acquire or otherwise cause a reduction in the number of outstanding Shares or
other securities, or (c) issue or sell additional Shares (other than the
issuance of Shares under option as of the date of this Offer, in accordance with
the terms of such options as such terms have been publicly disclosed in the
Company's Annual Report on Form 10-K for the year ended December 31, 2001,
shares of any other class of capital stock, other voting securities or any
securities convertible into, or rights, warrants or options, conditional or
otherwise, to acquire any of the foregoing), then, subject to the provisions of
Section 14, "Certain Conditions to this Offer," under the caption "The Tender
Offer," the Purchaser, in its sole discretion, may make such adjustments as it
deems appropriate in the Offer Price and other terms of this Offer, including
without limitation, the number or type of securities offered to be purchased.
If, after April 3, 2002, the Company should declare or pay any cash
dividend, on the Shares or other distribution on the Shares, or issue with
respect to the Shares any additional Shares, shares of any other class of
capital stock, other voting securities or any securities convertible into, or
rights, warrants or options, conditional or otherwise, to acquire, any of the
foregoing, payable or distributable to Shareholders of record on a date prior to
the transfer of the Shares purchased pursuant to this Offer to Purchase, or
their nominees or transferees on the Company's stock transfer records, then,
subject to the provisions of Section 14, "Certain Conditions to this Offer,"
under the caption "The Tender Offer" (a) the Offer Price may, in the sole
discretion of the Purchaser, be reduced by the amount of any such cash dividend
or cash distribution, and (b) the whole of any such noncash dividend,
distribution or issuance to be received by the tendering Shareholders will (i)
be received and held by the tendering Shareholders for the account of the
Purchaser and will be required to be promptly remitted and transferred by each
tendering Shareholder to the Depositary for the account of the Purchaser,
accompanied by appropriate documentation of transfer, or (ii) at the direction
of the Purchaser, be exercised for the benefit of the Purchaser, in which case
the proceeds of such exercise will promptly be remitted to the Purchaser.
Pending such remittance and subject to applicable law, the Purchaser will be
entitled to all rights and privileges as owner of any such noncash dividend,
distribution, issuance or proceeds and may withhold the entire Offer Price or
deduct from the Offer Price the amount or value thereof, as determined by the
Purchaser in its sole discretion.
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14. CERTAIN CONDITIONS TO THIS OFFER
IMPORTANT CONDITIONS. The most important conditions to this Offer are the
following.
1. A minimum of 2,465,322 shares of Class A Common Stock are tendered
into this Offer and not withdrawn.
2. The Preferred Stock Purchase Rights issued under the Company's
Shareholders Rights Agreement have been redeemed by the board of
directors, or our being satisfied, in our reasonable judgment, that
the Preferred Stock Purchase Rights are invalid or otherwise
inapplicable to this Offer ("Poison Pill Condition").
This Offer is also subject to other conditions described below. This Offer
is not conditioned upon the receipt of financing. Notwithstanding any other
provision of this Offer, we are not required to accept for payment or pay for
any Shares, and we may terminate the Offer prior to the Expiration Date, if any
of the above important conditions, or any of the other conditions described
below, have not been satisfied in our sole discretion or waived by us.
The Purchaser hereby requests that the board of directors of the Company
(i) redeem the Preferred Stock Purchase Rights, or (ii) take other action to
remove the impediments to the consummation of this Offer which are represented
by the Rights Agreement, including requesting, if appropriate, any required
action on the part of the holders of the Company's Series B Cumulative Preferred
Stock and of the Company's 8.75% Convertible Subordinated Notes. The Purchaser
hereby also requests that the board of directors of the Company set both (i) the
date of the 2002 annual meeting of the Company's shareholders, and (ii) the
record date for shareholders entitled to notice of and to vote at that meeting,
so as to permit the Purchaser to be able to complete this Offer and votes its
common shares at that meeting or at any special shareholders meeting.
POISON PILL CONDITION. The completion of the Offer is conditioned upon,
among other things, the Preferred Stock Purchase Rights ("Rights") issued under
the Rights Agreement having been redeemed by the board of directors of the
Company, or the Purchaser being satisfied, in its reasonable judgment, that the
Preferred Stock Purchase Rights are invalid or otherwise inapplicable to the
Offer (the "Rights Condition"). If the board of directors of the Company does
not take action to satisfy the condition, the Purchaser would suffer
unacceptable dilution of its interest in the Company were Purchaser to proceed
to complete its purchase of Shares.
Under applicable law and under the circumstances of this Offer, the board
is obligated by its fiduciary responsibilities to give careful consideration to
redeeming the Rights or rendering the Rights Agreement inapplicable to the
Offer. The Purchaser believes that failure to redeem the Rights or make the
Rights Agreement inapplicable to the Offer would be a violation of the board's
fiduciary duties to its common shareholders and a violation of law. If the board
does not act, the shareholders will be prevented from receiving the benefits of
the Offer even if they wish
32
to accept the Offer. There can be no assurance, however, that the board of
directors of the Company will take the required action.
The following summary of certain provisions of the Shareholder Rights
Agreement relating to the Rights (as amended, the "Rights Agreement") is based
upon the Company's Form 8-A regarding the Rights filed with the SEC on July 23,
1999, as amended a Form 8-A/A filed with the SEC on September 6, 2000, and is
not intended to be complete and is qualified in its entirety by reference to
those filings and the full Agreement, which is attached as an exhibit to those
filings. A copy of the filings and the Agreement may be obtained for free at the
SEC's website at www.sec.gov.
On June 9, 1999, the board of the Company approved the adoption of the
Rights Agreement. Pursuant to its terms, the board declared a dividend
distribution of one Right for each outstanding share of Common Stock of the
Company (including Class A and Class B Common Stock) to stockholders of record
as of the close of business on July 8, 1999. In addition, one Right
automatically attaches to each share of Common Stock issued between the Record
Date and the Distribution Date (as hereinafter defined). Each Right initially
entitles the registered holder thereof to purchase from the Company a unit
consisting of one one-thousandth of a share (a "Unit") of Series A Junior
Participating Cumulative Preferred Stock, par value $0.01 per share (the
"Preferred Stock"), at a cash exercise price of $33.00 per Unit (the "Exercise
Price"), subject to adjustment.
The Rights have not been exercisable and are attached to and have traded
with the outstanding shares of Common Stock. The Rights will separate from the
Common Stock and will become exercisable upon the earlier of (i) the close of
business on the tenth calendar day following the first public announcement that
a person or group of affiliated or associated persons has acquired beneficial
ownership of 10% or more of the outstanding shares of Common Stock (an
"Acquiring Person") (the date of said announcement being the "Stock Acquisition
Date"), or (ii) the close of business on the tenth business day (or such later
calendar day as the Board of Directors may determine) following the commencement
of a tender offer or exchange offer that could result upon its consummation in a
person or group becoming the beneficial owner of 10% or more of the outstanding
shares of Common Stock (the earlier of such dates being the "Distribution
Date").
The Rights are not exercisable until the Distribution Date and will expire
at the close of business on July 7, 2009, unless previously redeemed or
exchanged by the Company as described below. As soon as practicable after the
Distribution Date, Right Certificates are to be mailed to holders of record of
Common Stock as of the close of business on the Distribution Date.
Based upon publicly available information, the Purchaser believes that, as
of the date of this Offer, the Rights were not exercisable, Rights Certificates
have not been issued, and the Rights are evidenced by the Common Stock
Certificates. The Purchaser believes that, as a result of the Purchaser's public
announcement of the Offer, the Distribution Date will be no later than
Wednesday, April 17, 2002, unless prior to that date the board of directors of
the Company redeems the Rights or acts to delay the Distribution Date.
33
In the event that a Stock Acquisition Date occurs, each holder of a Right
(other than an Acquiring Person, whose Rights become null and void) is
thereafter to have the right to receive upon exercise that number of Units of
Preferred Stock of the Company having a market value of two times the exercise
price of the Right (such right being referred to as the "Subscription Right").
Alternatively, the board is permitted to take action that will result in the
receipt by shareholders other than the Acquiring Person of an equivalent amount
of stock on a cashless exercise basis. In some instances, the board is also
permitted to exchange one share of Class A Common Stock (or under a formula the
equivalent of more than one share of Class A Common Stock) in exchange for each
Right held by shareholders other than the Acquiring Person. In any case, the
existence of the Rights would greatly diminish the value of Shares acquired
pursuant to the Offer if the purchase were to be completed.
The Rights may be redeemed in whole, but not in part, at a price of $0.01
per Right (payable in cash, Class A Common Stock or other consideration deemed
appropriate by the Board of Directors) by the Board of Directors until the time
at which any person becomes an Acquiring Person. In addition, the Rights
Agreement may be amended by the Board of Directors to materially change its
terms only until the time at which any person becomes an Acquiring Person.
The amended articles of incorporation of the Company provide that the
Company through its board shall not redeem the Rights or otherwise render the
rights plan inapplicable to any person without obtaining the approval of the
holders of the Company's Series B Cumulative Preferred Stock and of the
Company's 8.75% Convertible Subordinated Notes. This approval is not required,
however, in connection with a transaction approved by unanimous vote of the
board members present and voting thereon (in all events including a majority of
those elected by the holders of the Company's Series B Cumulative Preferred
Stock) or if the board determines that the redemption, or other action to render
the rights plan inapplicable, is required by law or the requirements of a
national securities exchange.
Under this Offer, unless the Rights have been redeemed, shareholders are
required to tender one Right for each Share tendered in order to effect a valid
tender of the Share. If the Distribution Date does not occur prior to the
Expiration Date, a tender of Shares in this Offer will automatically constitute
a tender of the associated Rights. If the Distribution Date has occurred, the
separate Rights Certificates will have to be tendered with the certificates
evidencing the Shares tendered.
34
OTHER CONDITIONS. Notwithstanding any other provisions of this Offer, and
in addition to (and not in limitation of) the Purchaser's right to extend and
amend this Offer at any time in its sole discretion, the Purchaser shall not be
required to accept for payment or, subject to any applicable rules and
regulations of the Commission, including Rule 14e-l(c) under the Exchange Act
(relating to a bidder's obligation to pay for or return tendered securities
promptly after termination or withdrawal of such bidder's offer), pay for, and
may delay the acceptance for payment of or, subject to the restriction referred
to above, the payment for, any tendered Shares, may terminate or amend this
Offer as to any Shares not then paid for, if any of the following events shall
occur or be deemed by the Purchaser to have occurred after April 3, 2002, and on
or prior to the Expiration Date:
|X| The Purchaser shall have reached an agreement or understanding with the
Company providing for termination of this Offer;
|X| There shall be threatened, instituted or pending any action,
proceeding, application or counterclaim by any government or
governmental, regulatory or administrative authority or agency,
domestic, foreign or supranational (each, a "Governmental Entity"), or
by any other person, domestic or foreign, before any court or
Governmental Entity, (i) (A) challenging or seeking to, or which is
reasonably likely to, make illegal, delay or otherwise directly or
indirectly restrain or prohibit, or seeking to, or which is reasonably
likely to, impose voting, procedural, price or other requirements, in
addition to those required by Federal securities laws (each as in
effect on the date of this Offer to Purchase), in connection with the
making of this Offer, the acceptance for payment of, or payment for,
some of or all the Shares by the Purchaser or any other affiliate of
the Purchaser, (B) seeking to obtain material damages, or (C)
otherwise directly or indirectly relating to this Offer, (ii) seeking
to prohibit the ownership or operation by the Purchaser or any other
affiliate of the Purchaser of all or any portion of the Shares or of
the business or assets of the Company or any other affiliate of the
Company or to compel the Purchaser, or any other affiliate of the
Purchaser, to dispose of or hold separate the Shares or all or any
portion of the business or assets of the Company or any other
affiliate of the Company or seeking to impose any limitation on the
ability of the Purchaser or any other affiliate of the Purchaser to
conduct such business or own such assets, (iii) seeking to impose or
confirm limitations on the ability of the Purchaser or any other
affiliate of the Purchaser effectively to exercise full rights of
ownership of the Shares, including, without limitation, the right to
vote any Shares acquired or owned by the Purchaser or any other
affiliate of the Purchaser on all matters properly presented to the
Shareholders, (iv) seeking to require divestiture by the Purchaser or
any other affiliate of the Purchaser of any Shares, (v) seeking any
material diminution in the benefits expected to be derived by the
Purchaser or any other affiliate of the Purchaser as a result of this
Offer, or (vi) otherwise directly or indirectly relating to this Offer
or which otherwise, in the sole judgment of the Purchaser, might
materially adversely affect the Company or the Purchaser or any other
affiliate of the Purchaser or the value of the Shares;
35
|X| There shall be any action taken, or any statute, rule, regulation,
legislation, interpretation, judgment, order or injunction proposed,
enacted, enforced, promulgated, amended, issued or deemed applicable to
(i) the Purchaser or any other affiliate of the Purchaser or the
Company, or (ii) this Offer by any government, legislative body or
court, or Governmental Entity, that, in the sole judgment of the
Purchaser, might, directly or indirectly, result in any of the
consequences referred to in clauses (i) through (vi) of the immediately
preceding paragraph;
|X| The Purchaser shall have learned of any change that has, since the
filing of the Company's Annual Report on Form 10-K for the year ended
December 31, 2001, occurred or been threatened (or any condition, event
or development shall have occurred or been threatened involving a
prospective change) in the business, properties, assets, liabilities,
capitalization, shareholders' equity, condition (financial or
otherwise), operations, licenses or franchises, results of operations
or prospects of the Company that, in the sole judgment of the
Purchaser, is or may be materially adverse to the Company, or the
Purchaser shall have become aware of any facts that, in the sole
judgment of the Purchaser, have or may have material adverse
significance with respect to either the value of the Company or the
value of the Shares to the Purchaser;
|X| There shall have occurred or been threatened (i) any general suspension
of trading in, or limitation on prices for, securities on any national
securities exchange or in the over-the-counter market in the United
States, (ii) any extraordinary or material adverse change in the
financial markets or major stock exchange indices in the United
States, (iii) any material change in United States currency exchange
rates or any other currency exchange rates or a suspension of, or
limitation on, the markets therefore, (iv) a declaration of a banking
moratorium or any suspension of payments with respect to banks in the
United States, (v) any limitation (whether or not mandatory) by any
government, domestic, foreign or supranational, or Governmental Entity
on, or other event that, in the sole judgment of the Purchaser, might
affect the extension of credit by banks or other lending institutions,
(vi) a commencement of a war or armed hostilities or other national or
international calamity directly or indirectly involving the United
States or (vii) in the case of any of the foregoing existing at the
time of the commencement of this Offer, a material acceleration or
worsening thereof;
|X| The Company shall have (i) split, combined or otherwise changed, or
authorized or proposed a split, combination or other change of the
Shares or its capitalization, (ii) acquired or otherwise caused a
reduction in the number of, or authorized or proposed the acquisition
or other reduction in the number of, outstanding Shares other than a
redemption of the Rights in accordance with the terms of the Rights
Agreement, as publicly disclosed to be in effect on April 3, 2002 or
other securities, (iii) issued or sold, or authorized or proposed the
issuance, distribution or sale of, additional Shares (other than the
issuance of Shares under option as of the date of this Offer, in
accordance with the terms of such options as such terms have been
publicly disclosed in the Company's Annual Report on Form 10-K for the
year ended December 31, 2001, shares of any other class of capital
stock, any other class of preferred stock, other voting securities or
any
36
securities convertible into, or rights, warrants or options,
conditional or otherwise, to acquire, any of the foregoing), (iv)
declared or paid, or proposed to declare or pay, any dividend or other
distribution, whether payable in cash, securities or other property,
on or with respect to any shares of capital stock of the Company,
other than a redemption of the Rights in accordance with the terms of
the Rights Agreement, as publicly disclosed to be in effect on April
3, 2002, (v) altered or proposed to alter any material term of any
outstanding security (including the Rights), (vi) authorized,
recommended, proposed or entered into an agreement, agreement in
principle or arrangement or understanding with respect to any release
or relinquishment of any material contractual or other right of the
Company, (vii) amended or authorized or proposed any amendment (other
than any amendment which provides that the Rights are redeemed or that
the 10% ownership limitation is inapplicable to the Offer) to, the
Shareholder's Rights Agreement or Bylaws, or the Purchaser shall
become aware that the Company shall have proposed or adopted any such
amendment that was not disclosed in publicly available filings prior
to the date hereof; or (viii) without limiting the foregoing, amended
or authorized any amendment to the Bylaw provision providing that the
provisions of Title 7 of the Maryland General Corporation Law shall
not apply to any share of stock of the Company.
|X| A tender or exchange offer for any Shares shall have been made or
publicly proposed to be made by any other person (including the
Company or any of its subsidiaries or affiliates), or it shall have
been publicly disclosed or the Purchaser shall have otherwise learned
that (i) any person or "group" (within the meaning of Section 13(d)(3)
of the Exchange Act) shall have acquired or proposed to acquire
beneficial ownership of more than 5% of any class or series of capital
stock of the Company (including 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 5% of any class or series of
capital stock of the Company (including the Shares), other than
acquisitions for bona fide arbitrage purposes only and other than as
disclosed in a Schedule 13D or 13G on file with the Commission prior
to April 3, 2002, (ii) any such person, entity or group that prior to
April 3, 2002, had filed such a schedule with the Commission has
acquired or proposes to acquire, through the acquisition of stock, the
formation of a group or otherwise, beneficial ownership of 1% or more
of any class or series of capital stock of the Company (including the
Shares), or shall have been granted any right, option or warrant,
conditional or otherwise, to acquire beneficial ownership of 1% or
more of any class or series of capital stock of the Company (including
the Shares), (iii) any person or group shall have entered into a
definitive agreement or an agreement in principle or made a proposal
with respect to a tender offer or exchange offer or a merger,
consolidation or other business combination with or involving the
Company, or (iv) any person, other than the Purchaser, if not filed
prior to the date hereof, shall have filed a Notification and Report
Form under the Hart-Scott-Rodino Antitrust Improvement Act of 1976, as
amended (the "HSR Act") (or amended a prior filing to increase the
applicable filing threshold set forth therein) or made a public
announcement reflecting an intent to acquire the Company or any assets
or subsidiaries of the Company; or
37
|X| Any approval, permit, authorization or consent of any Governmental
Entity (including those described or referred to in Section 15,
"Certain Legal Matters," under the caption "The Tender Offer") shall
not have been obtained on terms satisfactory to the Purchaser in its
sole discretion;
which, in the sole judgment of the Purchaser in any such case, and regardless of
the circumstances (including any action or inaction by the Purchaser or any
other affiliate of the Purchaser) giving rise to any such condition, makes it
inadvisable for the Purchaser to proceed with this Offer and/or with such
acceptance for payment or payment.
The foregoing conditions are for the sole benefit of the Purchaser and may
be asserted by the Purchaser regardless of the circumstances giving rise to any
such condition or may be waived by the Purchaser in whole or in part at any time
and from time to time in its sole discretion. The failure by the Purchaser at
any time to exercise any of the foregoing rights will not be deemed a waiver of
any such right, the waiver of any such right with respect to particular facts
and circumstances will not be deemed a waiver with respect to any other facts
and circumstances and each such right will be deemed an ongoing right that may
be asserted at any time and from time to time. Any determination by the
Purchaser concerning the events described in this Section 14 will be final and
binding upon all parties.
Each reference in this Section 14 to the "sole judgment" or "sole
discretion" of the Purchaser with respect to the satisfaction of the conditions
set forth in this Section 14 shall be deemed to mean the "sole reasonable
judgment" and "sole reasonable discretion," respectively, of the Purchaser.
15. CERTAIN LEGAL MATTERS
GENERAL. Except as otherwise disclosed in this Section 15, based on a
review of publicly available information filed by the Company with the
Commission, the Purchaser is not aware of (i) any license or regulatory permit
that appears to be material to the business of the Company and its subsidiaries,
taken as a whole, that might be adversely affected by the acquisition of Shares
by the Purchaser pursuant to this Offer, or (ii) any approval or other action,
by any governmental, administrative or regulatory agency or authority, domestic,
foreign or supranational, that would be required for the acquisition or
ownership of Shares by the Purchaser as contemplated herein. Should any such
approval or other action be required or desirable, the Purchaser currently
contemplates that such approval or action would be sought. While the Purchaser
does not currently intend to delay the acceptance for payment of Shares tendered
pursuant to this Offer pending the outcome of any such matter, there can be no
assurance that any such approval or action, if needed, would be obtained or
would be obtained without substantial conditions or that adverse consequences
might not result to the business of the Company, or the Purchaser, or that
certain parts of the businesses of the Company, or the Purchaser might not have
to be disposed of in the event that such approvals were not obtained, or any
other actions were not taken. The Purchaser's obligation under this Offer to
accept for payment and pay for Shares is subject to certain conditions. See
Section 14, "Certain Conditions to this Offer," under the caption "The Tender
Offer."
38
ANTITRUST. The Purchaser believes that the HSR Act is inapplicable to this
Offer in light of the size of the transaction. If the provisions of the HSR Act
were applicable to this Offer, the acquisition of Shares under this Offer could
be consummated only following the expiration of a fifteen (15) calendar day
waiting period following the filing by the Purchaser of a Notification and
Report Form with respect to this Offer, unless the Purchaser received a request
for additional information or documentary material from the Antitrust Division
or the FTC or early termination of the waiting period is granted. If, within the
initial fifteen (15) day waiting period, either the Antitrust Division or the
FTC requested additional information or material from the Purchaser concerning
this Offer, the waiting period would be extended and would expire at 11:59 p.m.,
Pittsburgh, Pennsylvania time, on the tenth calendar day after the date of
substantial compliance by the Purchaser with such request. Only one extension of
the waiting period pursuant to a request for additional information is
authorized by the HSR Act. Thereafter, such waiting period may be extended only
by court order or with the consent of the Purchaser. In practice, complying with
a request for additional information or material can take a significant amount
of time. In addition, if the Antitrust Division or the FTC raises substantive
issues in connection with a proposed transaction, the parties frequently engage
in negotiations with the relevant governmental agency concerning possible means
of addressing those issues and may agree to delay consummation of the
transaction while such negotiations continue.
The Antitrust Division and the FTC frequently scrutinize the legality of
transactions under the antitrust laws. At any time before or after Purchaser's
acquisition of the Shares pursuant to this Offer, the Antitrust Division or the
FTC could take such action under the antitrust laws as it deems necessary or
desirable in the public interest, including seeking to enjoin the purchase of
the Shares pursuant to this Offer or seeking the divestiture of the Shares
acquired by the Purchaser. Private parties may also bring legal action under the
antitrust laws under certain circumstances. There can be no assurance that a
challenge to this Offer on antitrust grounds will not be made or, if such a
challenge is made, of the result thereof.
16. FEES AND EXPENSES
N.S. Taylor & Associates, Inc. has been retained by the Purchaser as
Information Agent in connection with this Offer. The Information Agent may
contact holders of Shares by mail, telephone, facsimile and personal interview
and may request brokers, dealers and other nominee Shareholders to forward
material relating to this Offer to beneficial owners of Shares. The Purchaser
will pay the Information Agent reasonable and customary compensation for all
such services in addition to reimbursing the Information Agent for reasonable
out-of-pocket expenses in connection therewith. The Purchaser has agreed to
indemnify the Information Agent against certain liabilities and expenses in
connection with this Offer, including, without limitation, certain liabilities
under the federal securities laws.
Manufacturers and Traders Trust Company has been retained as the
Depositary. The Purchaser will pay the Depositary reasonable and customary
compensation for its services in connection with this Offer, will reimburse the
Depositary for its reasonable out-of-pocket expenses in connection therewith and
will indemnify the Depositary against certain liabilities and expenses in
connection therewith, including, without limitation, certain liabilities under
the federal securities laws.
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Brokers, dealers, commercial banks and trust companies and other nominees
will, upon request, be reimbursed by the Purchaser for customary clerical and
mailing expenses incurred by them in forwarding offering materials to their
clients. No soliciting dealers fees shall be paid to any person or entity with
respect to tendered Shares beneficially owned by such person or entity.
17. MISCELLANEOUS
This Offer is not being made to (nor will tenders be accepted from or on
behalf of) holders of Shares in any jurisdiction in which the making of this
Offer or the acceptance thereof would not be in compliance with the securities
or other laws of such jurisdiction. The Purchaser is not aware of any
jurisdiction in which the making of this Offer or the acceptance thereof would
not be in compliance with the laws of such jurisdiction. If the Purchaser
becomes aware of any jurisdiction where the making of this Offer or the tender
of Shares is not in compliance with any applicable law, the Purchaser will make
a good faith effort to comply with such law. If, after such good faith effort,
the Purchaser cannot comply with such law, this Offer will not be made to (nor
will tenders be accepted from or on behalf of) the holders of Shares residing in
such jurisdiction. To the extent the Purchaser becomes aware of any law that
would limit the class of offerees in this Offer, the Purchaser will amend this
Offer and, depending on the timing of such amendment, if any, will extend this
Offer to provide adequate dissemination of such information to such holders of
Shares prior to the expiration of this Offer. In any jurisdiction the securities
or other laws of which require this Offer to be made by a licensed broker or
dealer, this Offer shall be deemed to be made on behalf of the Purchaser by one
or more registered brokers or dealers licensed under the laws of such
jurisdiction.
No person has been authorized to give any information or to make any
representation on behalf of the Purchaser not contained herein or in the Letter
of Transmittal and, if given or made, such information or representation must
not be relied upon as having been authorized.
The Purchaser has filed with the Commission a tender offer statement on
Schedule TO (the "Schedule TO") pursuant to rule 14d-3 under the Exchange Act,
together with exhibits, furnishing certain additional information with respect
to this Offer, and may file amendments thereto. Such Schedule TO and any
amendments thereto, including exhibits, may be inspected and copies may be
obtained in the manner set forth in Section 8, "Certain Information Concerning
the Company," under the caption "The Tender Offer," with respect to the Company
(except that such material will not be available at the regional offices of the
Commission).
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SCHEDULE I - DIRECTORS AND EXECUTIVE OFFICERS OF SHANER HOTEL
GROUP AND SHANER OPERATING CORP
Set forth below are the name, business address and present principal
occupation or employment, and material occupations, positions, offices or
employment for the past five years of each executive officer of the Purchaser.
The business address of each officer is 1965 Waddle Road, State College,
Pennsylvania 16803, and telephone number of each officer is (814) 234-4460. Each
such person is a United States citizen.
Name Position
---- --------
Lance T. Shaner Chairman of the Board and Vice President of
the General Partner and Chairman and CEO of
the Purchaser
Frederick J. Shaner President of the General Partner and of the
Purchaser
Peter K. Hulburt Vice President-Legal and Secretary of the
General Partner and of the Purchaser
J. B. Griffin Vice President-Finance and Treasurer of the
General Partner and of the Purchaser
The shareholders of the General Partner ("GP Shareholders"), and the
members of its board of directors ("Directors"), are Lance T. Shaner and
Frederick J. Shaner, who are brothers. Lance T. Shaner serves as Chairman of the
Board and Vice President of the General Partner and as Chairman and CEO of the
Purchaser. Frederick J. Shaner serves as President of the General Partner and of
the Purchaser. Peter K. Hulburt is Vice President-Legal and Secretary of the
General Partner and of the Purchaser. J.B. Griffin serves as Vice
President-Finance and Treasurer of the General Partner and of the Purchaser.
These four executive officers of the General Partner are referred to as the
"Officers" in this Offer to Purchase.
Lance T. Shaner has been Chairman of the Board and Vice President of the
General Partner, and Chairman and CEO of the Purchaser, since 1995. Mr. Shaner
has served as the Chairman of the Board of Shaner Energy, Inc. for the past five
years. Shaner Energy, Inc. is a gasoline and home heating distributing company
selling both products at wholesale and retail in the Huntingdon, Clearfield, and
Port Royal, Pennsylvania area. For the last five years, Lance T. Shaner and
Frederick J. Shaner have been principal officers, directors and stockholders of
Shaner Cable, Inc. an owner of several cable television systems in the southern
tier of New York. Lance T. Shaner and Frederick J. Shaner have been the
principal officers, directors and shareholders of Shaner Development
Corporation, the owner of several residential properties in the southern tier of
New York. Lance T. Shaner is the principal officer, stockholder, and director of
several affiliate corporations that are general partners and/or managing
partners in Jelms Hotel Company Limited Partnership, Lance Shaner Hotel Limited
Partnership and Shaner Family Partners, LLC that owns various interests in hotel
properties. The interest in these entities started on or about September 1,
1997.
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Frederick J. Shaner has been President of the General Partner and of the
Purchaser since 1995. Mr. Shaner is a thirty percent shareholder of the General
Partner. For the last five years, Lance T. Shaner and Frederick J. Shaner have
been principal officers, directors and stockholders of Shaner Cable, Inc. an
owner of several cable television systems in the southern tier of New York.
Lance T. Shaner and Frederick J. Shaner have been the principal officers,
directors and shareholders of Shaner Development Corporation, the owner of
several residential properties in the southern tier of New York.
Peter K. Hulburt has been the Vice President-Legal of the General Partner
since January 1, 1995 and Secretary of the General Partner since August 6, 1998.
He has also served as the Vice President-Legal since January 1, 1995 and
Secretary of the Purchaser since August 6, 1998.
J.B. Griffin has been Vice President Finance of the General Partner since
October 10, 1997 and Treasurer of the General Partner since August 6, 1998. He
has also served as Vice President Finance of the Purchaser since October 10,
1997 and Treasurer of the Purchaser since August 6, 1998.
None of the Purchaser, the General Partner, the GP Shareholders, the
Directors, or the Officers has, during the last five years (i) been convicted in
a criminal proceeding (excluding traffic violations or similar misdemeanors), or
(ii) been a party to a civil proceeding of a judicial or administrative body of
competent jurisdiction as a result of which such person was or is subject to a
judgment, decree, or final order enjoining future violations of, or prohibiting
or mandating activities subject to, federal or state securities laws or finding
a violation with respect to such laws.
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SCHEDULE II - CURRENT PORTFOLIO OWNED OR MANAGED BY
SHANER HOTEL GROUP
NAME LOCATION
---- --------
1. Holiday Inn August, Georgia
2. Holiday Inn Birmingham, Alabama
3. Comfort Inn Cromwell, Connecticut
4. Radisson Cromwell, Connecticut
5. Savery Hotel Des Moines, Iowa
6. Marriott at the Civic Center Durham, North Carolina
7. Residence Inn Edina, Minnesota
8. Holiday Inn Sunspree Resort Jacksonville Beach, Florida
9. Newport Harbor Hotel & Marina Newport, Rhode Island
10. Holiday Inn Statesville, North Carolina
11. Holiday Inn Express & Suites Statesville, North Carolina
12. Holiday Inn Express Charleston, West Virginia
13. Holiday Inn Convention Center Alexandria, Louisiana
14. Marriott Chattanooga, Tennessee
15. Radisson Paramus, New Jersey
16. Holiday Inn Shreveport, Louisiana
17. Holiday Inn Express State College, Pennsylvania
18. Hampton Inn & Suites State College, Pennsylvania
19. Hampton Inn Andover, Massachusetts
20. Holiday Inn Muscatine, Iowa
21. Marriott City Center Pittsburgh, Pennsylvania
22. Holiday Inn & Suites Dayton, Ohio
HOTELS EXPECTED TO BE OPEN WITHIN THE NEXT 12 MONTHS
1. Spring Hill Suites State College, Pennsylvania
2. Fairfield Inn Jacksonville Beach, Florida
3. Marriott Courtyard Newark, Delaware
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Manually signed facsimile copies of the Letter of Transmittal will be
accepted. The Letter of Transmittal, certificates for Shares and any other
required documents should be sent or delivered by you or your broker, dealer,
commercial bank, trust company or other nominee to the Depositary at its address
set forth below.
The Depositary for the Offer is:
MANUFACTURERS AND TRADERS TRUST COMPANY
Facsimile Copy Number: 716.842.5867
Confirm by Telephone: 716.842.4640
By First Class Mail, by Overnight Courier, By Hand:
MANUFACTURERS AND TRADERS TRUST COMPANY
Attention: Corporate Trust Administration
One M & T Plaza, 7th Floor
Buffalo, New York 14203
Questions and requests for assistance should be directed to the Information
Agent at its respective address or telephone numbers set forth below. Additional
copies of this Offer to Purchase, the Letter of Transmittal and all other tender
offer materials may be obtained from the Information Agent as set forth below,
and will be furnished promptly at the Purchaser's expense. You may also contact
your broker, dealer, commercial bank, trust company or other nominee for
assistance concerning this Offer.
The Information Agent for this Offer is:
N.S. TAYLOR & ASSOCIATES, INC.
15 North Street, 2nd Floor
Dover-Foxcroft, Maine 04426
Banks and Brokers Call Collect: 207.564.8700
All Others Call Toll-Free: 866.470.4500
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