SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(6)(2)
[_] Definitive Proxy Statement
[X] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-12
SUBURBAN LODGES OF AMERICA, INC.
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(Name of Registrant as Specified in Its Charter)
N/A
------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1)(4) and
0-11.
(1) Title of each class of securities to which transaction
applies: N/A
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(2) Aggregate number of class of securities to which transaction
applies: N/A
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(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how it
was determined):
----------------------------------------------
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
O-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: N/A
---------------------------------------------
(2) Form, Schedule or Registration Statement No.: N/A
-----------------------
(3) Filing Party: N/A
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(4) Date Filed: N/A
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================================================================================
The following Definitive Additional Materials were first sent or given to
the registrant's security holders on April 27, 2001.
[COMPANY LOGO APPEARS HERE]
April 26, 2001
Dear Fellow Shareholder:
The accompanying press release contains important information, which I
urge you to read carefully.
RECENT DEVELOPMENTS
EARLY LAST WEEK, IN A REQUIRED FILING WITH THE U.S. SECURITIES AND
EXCHANGE COMMISSION, AN INVESTOR GROUP LED BY RAYMOND ADAM D'OLIER FRENCH (THE
"FRENCH GROUP") DISCLOSED ITS INTENTION TO SEEK THE ELECTION OF TWO OF ITS OWN
HAND-PICKED NOMINEES, INCLUDING MR. FRENCH, TO YOUR COMPANY'S BOARD OF
DIRECTORS. The French Group includes Mr. French (age 31) and several entities
domiciled outside of the U.S., including investment vehicles based in Luxembourg
and the Channel Islands. Collectively, members of the French Group own 778,100
shares (or 6.5%) of the Company's Common Stock.
THE FRENCH GROUP CLAIMS ITS NOMINEES WILL ADVOCATE UNSPECIFIED
IMPROVEMENTS TO THE COMPANY'S OPERATING MARGINS AND A SALE OF OUR COMPANY-OWNED
HOTELS. If the hotels cannot be sold "within a reasonable period of time," they
will advocate a sale of the entire Company. IN OTHER WORDS, THE FRENCH GROUP'S
NOMINEES WANT TO PURSUE THE SAME SHARE VALUE ENHANCEMENT INITIATIVES ALREADY
IMPLEMENTED BY YOUR COMPANY'S BOARD AND MANAGEMENT.
AS INDICATED IN THE ACCOMPANYING PRESS RELEASE, SIX MONTHS AGO, LONG
BEFORE THE FRENCH GROUP PURCHASED MANY OF ITS SHARES, WE HIRED SALOMON SMITH
BARNEY, A NATIONAL INVESTMENT BANKING FIRM WITH A RECOGNIZED EXPERTISE IN THE
HOTEL INDUSTRY, TO ASSIST US IN EVALUATING OPTIONS TO MAXIMIZE OUR SHARE VALUE.
The strategic options explored by Salomon Smith Barney included a sale of a
portion or all of the Company's assets and a merger of the Company with (or a
sale of the Company to) a third party. If a transaction resulted from its
efforts, Salomon Smith Barney would have been paid a very substantial fee.
FORTY-FIVE POTENTIAL BUYERS OF ALL OR PART OF THE COMPANY WERE
CONTACTED IN THIS PROCESS. AFTER NEARLY SIX MONTHS OF EXPLORATION, WE RECEIVED
ONLY ONE HIGHLY-CONDITIONAL PROPOSAL TO ACQUIRE THE COMPANY.
THE PROPOSAL WAS CONDITIONED UPON THE BUYER'S ABILITY TO OBTAIN
REQUIRED FINANCING, WHICH WOULD BE DIFFICULT IN THE CURRENT WEAK MARKET
ENVIRONMENT. OUR SUBSEQUENT EFFORTS TO NEGOTIATE AN ELIMINATION OF THE FINANCING
CONDITION RESULTED IN NEW PROPOSALS WITH NEW CONDITIONS FROM THE WOULD-BE
ACQUIRER, INCLUDING A PROPOSED FOUR-MONTH DUE DILIGENCE PERIOD. However, in our
opinion, such negotiations did not result in a better offer than the only
written proposal received by the Company, which was deemed inadequate due to,
among other things, the financing condition. FOR THESE REASONS, AMONG OTHERS,
THE PROPOSAL WAS REJECTED UNANIMOUSLY BY YOUR BOARD.
The Company also received an inquiry from a third party regarding a
potential merger of equals. However, after serious consideration and
exploration, each of the parties determined not to pursue the concept.
AFTER LENGTHY DELIBERATION, WE HAVE CONCLUDED THAT, AT THIS TIME, THE
BEST WAY TO MAXIMIZE VALUE FOR SHAREHOLDERS IS TO CONTINUE WITH SUCCESSFUL
EFFORTS TO GROW THE SUBURBAN LODGE AND GUESTHOUSE INTERNATIONAL FRANCHISES,
COMPLEMENTED BY ONGOING SHARE REPURCHASES AND OPPORTUNISTIC SALES OF REAL ESTATE
ASSETS. We believe this program will result in increased earnings per share,
which will be reflected favorably in the market price of the Company's Common
Stock.
YOUR COMPANY'S BOARD AND MANAGEMENT ARE MINDFUL OF THE OPTIONS
AVAILABLE TO US. IF WE ARE PRESENTED WITH ONE OR MORE APPROPRIATE OPPORTUNITIES
TO GROW SHARE VALUE, WE ARE PREPARED TO ACT PROMPTLY.
HOTELTOOLS
THE FRENCH GROUP ALSO CLAIMS THAT, IF ELECTED, ITS NOMINEES WOULD
DIRECT YOUR COMPANY'S MANAGEMENT TO FIND A BUYER FOR THE COMPANY'S HOTELTOOLS
LOAN AND WARRANTS. Once again, the French Group is claiming it will do what your
Board and management already have begun.
IN EARLY MARCH, LONG BEFORE THE FRENCH GROUP DECLARED ITS PLANS FOR
HOTELTOOLS, YOUR BOARD AND MANAGEMENT ENCOURAGED HOTELTOOLS TO SEEK A BUYER OF
HOTELTOOLS. Since then, we have been informed by HotelTools that it is actively
engaged in discussions with several prospective buyers.
WHAT'S WRONG WITH THE FRENCH GROUP?
FIRST, THE COMPANY'S BOARD AND MANAGEMENT ALREADY ARE PURSUING WHAT THE
FRENCH GROUP ADVOCATES FOR YOUR COMPANY AND WE HAVE BEEN DOING THIS FOR SOME
TIME. We have no reason to believe the French Group's nominees would add value
to this process.
SECOND, IN OUR OPINION, THE FRENCH GROUP'S PUBLIC DECLARATIONS ALREADY
HAVE UNDERMINED OUR EFFORTS TO GROW SHARE VALUE. We believe the French Group has
demonstrated an alarming insensitivity to the concerns of our existing and
potential franchisees and a superficial grasp of the most effective ways to
enhance share value.
SHARE VALUE WILL NOT BE MAXIMIZED IN A "FIRE SALE."
WE ALREADY HAVE COMMITTED OURSELVES TO THE SALE AND CONVERSION OF
COMPANY-OWNED HOTELS INTO NEW FRANCHISED HOTELS. THESE EFFORTS ARE ONGOING.
WE BELIEVE THE FRENCH GROUP'S PUBLIC DEMAND FOR A MORE "AGGRESSIVE"
APPROACH TO THE SALE OF OUR COMPANY-OWNED HOTELS IS UNDERMINING OUR EFFORTS TO
OBTAIN THE BEST PRICE FOR THE PROPERTIES FROM INTERESTED THIRD-PARTIES. Ask
yourself, would you "pay up" for our Company-owned properties if you believed we
were under pressure to sell the properties?
SIMILARLY, WE ALREADY HAVE EXPLORED A POSSIBLE SALE OF THE COMPANY. The
French Group's public statements have only contributed to franchisee anxiety
over our long-term commitment to the Suburban Lodge and GuestHouse International
brands.
IN SUMMARY, WE BELIEVE THE FRENCH GROUP HAS YET TO PROPOSE ANYTHING
BETTER THAN WHAT WE ALREADY ARE DOING TO INCREASE THE VALUE OF YOUR SHARES. WE
ALSO BELIEVE THE FRENCH GROUP'S ACTIONS ALREADY HAVE UNDERMINED EFFORTS TO GROW
SHARE VALUE TODAY.
INCREASING THE VALUE OF OUR INVESTMENT
YOU SHOULD KNOW THAT I OWN 2,750,437 SHARES (OR 22.9% OF THE COMPANY'S
OUTSTANDING SHARES) - - MORE THAN THREE AND ONE-HALF TIMES THE NUMBER OF SHARES
OWNED BY THE FRENCH GROUP. I am the Company's single largest owner and,
therefore, no one has a greater interest in the Company's share price than I do.
LIKE YOU, I WANT TO SEE THE VALUE OF MY INVESTMENT INCREASE NOW AND
OVER TIME. I can assure you that, like me, your Company's Board and management
is committed to the aggressive pursuit of all options to maximize the value of
our investment in the Company.
Unfortunately, the proxy contest now threatened by the French Group
will be disruptive. Ultimately, our performance will be undermined at least to
some degree.
Under the circumstances, including renewed franchisee concerns over our
commitment to the Company's brands, we believe the presence of one or more of
the French Group's nominees on the Board threatens to be even more disruptive
and costly for shareholders. FOR THESE REASONS, AMONG OTHERS, WE SUPPORT
ELECTION OF YOUR BOARD'S NOMINEES AND OPPOSE ELECTION OF THE FRENCH GROUP'S
NOMINEES TO YOUR COMPANY'S BOARD OF DIRECTORS.
WE STRONGLY URGE YOU TO REJECT THE FRENCH GROUPS' NOMINEES BY REFUSING
TO SIGN OR RETURN THE GOLD PROXY CARD SENT TO YOU BY THE FRENCH GROUP OR ITS
AGENTS. Separately, if you have not already signed and returned the WHITE proxy
card sent to you by the Company's Board of Directors, we urge you to sign, date
and return the enclosed WHITE proxy card, using the postage-paid envelope
provided.
In the coming weeks, we plan to communicate with you again regarding
the issues raised in this election. You also will be receiving communications
from the French Group.
In the meantime, if you need assistance in voting your shares, please
call D. F. King & Co., Inc., which is assisting us with the solicitation of your
vote, toll-free at 1-800-488-8035.
We look forward to keeping you informed.
Sincerely yours,
/s/ David E. Krischer
David E. Krischer
Chief Executive Officer
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[COMPANY LOGO APPEARS HERE]
PRESS RELEASE
SUBURBAN LODGES REPORTS INCREASED FIRST QUARTER EARNINGS
BEFORE UNUSUAL ITEMS
ATLANTA, GEORGIA, April 25, 2001 - Suburban Lodges of America, Inc.
(Nasdaq: SLAM), owner/franchisor of the Suburban Lodge and GuestHouse
International hotel brands and operator of 65 Company-owned Suburban Lodge
hotels, announced today that, excluding two unusual charges discussed below, the
Company's net income for the calendar quarter ended March 31, 2001 was $696,000
(or $0.06 per share) versus $555,000 (or $0.04 per share) in the year-ago
period.
Total revenues in the first quarter of 2001 increased by 9% to $18.7
million from $17.1 million in the first quarter of 2000. Income from franchising
operations also increased by 31% in the first quarter of 2001 versus the
year-ago period.
As previously announced, shortly after the close of the first quarter,
the Company completed a lengthy review of its strategic alternatives to maximize
share value. Expenses of $475,000 incurred in connection with the strategic
review have been charged against the Company's 2001 first quarter earnings.
One of the results of the strategic review was a decision to sell
eleven unimproved sites the Company was holding for its own future development.
This decision resulted in the recording of an impairment reserve of
approximately $6.7 million, the majority of which was for development expenses
incurred prior to 1999.
The after-tax impact of these reserves was $4.6 million (or $0.38 per
share). As a result of the two charges discussed above, the Company has reported
a net loss of $3.9 million (or $0.32 per share) in the first quarter of 2001
versus a net gain of $555,000 (or $0.04 per share) in the year-ago period.
In the first quarter of 2001, Average Weekly Rates (AWR) for
Company-owned hotels increased by 2% to $200 from $197 in the prior year
quarter, with an average occupancy rate of 78% in 2001 versus 74% a year
earlier. For the quarter ended March 31, 2001, weekly revenue per available room
(RevPAR) for Company-owned hotels increased by 7% to $155 per available room
from $144 per available room in the first quarter of 2000.
David E. Krischer, Chairman and Chief Executive Officer, stated: "We
are extremely pleased with our first quarter results. Our RevPAR growth of 7% is
clearly in the forefront of the overall lodging industry. Moreover, the growth
of our franchise development pipeline is very encouraging, particularly in the
current weak economic environment. While the slowing U. S. economy could dampen
RevPAR increases in the coming quarter or two, we remain optimistic that the
nature of our extended stay product will fare well, even in this environment."
MAXIMIZING THE VALUE OF SUBURBAN LODGES
Earlier this month, the Company announced plans to resume open market
purchases of stock under a previously authorized stock buyback program. In
October of last year, the Company suspended its stock repurchase program and
engaged Salomon Smith Barney, a national investment banking firm with recognized
expertise in the hotel industry, to assist the Company in evaluating options to
maximize share value.
The strategic alternatives explored by Salomon Smith Barney included,
among other possibilities, a merger or sale of the Company, other possible
business combinations or joint ventures, a sale of all or a portion of the
Company's assets, a continuation of the Company's growth strategy and possible
changes to that strategy. Forty-five potential buyers of all or part of the
Company were contacted in the process. After nearly six months of exploration,
the Company received only one highly-conditional proposal to acquire the
Company.
The proposal was conditioned upon financing, which would be difficult
to obtain in the current weak market environment. Subsequent efforts by the
Company's board of directors (the "Board") and management to negotiate an
elimination of the financing condition resulted in new proposals with new
conditions from the would-be acquirer, including a proposed four-month due
diligence period. However, in the opinion of the Board and management, such
negotiations did not result in a better offer than the only written proposal
received by the Company, which was deemed inadequate due to, among other things,
the financing condition. For these reasons, among others, the proposal was
rejected unanimously by the Board.
The Company also received an inquiry from a third party regarding a
potential merger of equals. However, after serious consideration and
exploration, each of the parties determined not to pursue the concept.
After lengthy deliberation, the Company's Board and management
concluded that, at this time, the best way to maximize value for shareholders is
to continue with successful efforts to grow the Suburban Lodge and GuestHouse
International franchises, complemented by ongoing share repurchases and
opportunistic sales of real estate assets.
Accordingly, the Company's Board and management are continuing their
efforts to sell and convert Company-owned hotels into franchised hotels and the
Company is attempting to add new franchisees in all of its target markets. The
Company's Board and management believe this
program will result in increased earnings per share, which will be reflected
favorably in the market price of the Company's common stock.
The Company's Board and management are mindful of the options available
to the Company. If presented with one or more appropriate opportunities to grow
share value, the Company's Board and management are prepared to act promptly.
MAXIMIZING THE VALUE OF HOTEL TOOLS
HotelTools, Inc. is an independent developer of Internet-based
enterprise management systems for the hospitality industry. The HotelTools
system was designed to provide the Company and other multi-property lodging
owners and operators with enhanced real-time, low-cost and centralized access to
critical operating data, including, among other things, property, guest, rate
and reservations management information.
The Board and management of the Company believe the Company can achieve
significant top-line and bottom-line improvements to the Company's operating
results through use of the HotelTools software system. For this reason, the
Company is pursuing rapid deployment of HotelTools software in all Company-owned
hotels.
Experts in the hospitality industry believe the industry will migrate
toward the HotelTools model over the next several years. Recognizing this
potential, the Company resolved to support development and marketing of the
HotelTools system to third-parties, including the Company's franchisees and
owners and operators of other multi-property lodging chains.
The Company's loans to HotelTools, which totaled approximately $10
million as of March 31, 2001, began at a time when the public and private
markets generally were supportive of companies with similar products and
prospects. At that time, it appeared to the Company and others that third-party
financing for development of HotelTools would be readily available.
Unfortunately, the prospects for funding development of products such
as the HotelTools software have changed dramatically over the past twelve
months. As a result, the Company has acted to preserve the value of the
HotelTools system to the Company, while supporting the efforts of HotelTools to
attract third-party financing.
The board of directors and management of Suburban Lodges believe
HotelTools still offers great potential value to the Company and its
shareholders. However, the Company's board and management are mindful of growing
shareholder concerns over the extent of the Company's commitment to HotelTools.
For this reason, among others, in early March, the Company encouraged the
management of HotelTools to solicit offers for the purchase of HotelTools. In
any such sale, the Company will seek to retain a license to use the HotelTools
software with all upgrades. The Company has been informed by HotelTools that
HotelTools is actively engaged in discussions with several prospective buyers.
# # #
FORWARD-LOOKING STATEMENTS
This news release contains statements concerning the Company's plans,
beliefs and expectations for future periods. These "forward-looking statements"
may be identified by the use of words such as "intends," "contemplates,"
"believes," "anticipates," "expects," "should," "could," "would" and words of
similar impact. These forward-looking statements involve known and unknown risks
and uncertainties that could cause actual results to differ materially from the
expectations expressed or implied in such statements. These risks and
uncertainties include, among others, changes in economic conditions, financial
markets or consumer demand for extended stay and other forms of lodging, the
level of competition in the extended stay and other lodging markets, the
Company's ability to enter into contracts with its franchisees, development
risks and inefficiencies, weather delays, zoning delays, the Company's financial
condition and other risks and uncertainties set forth in the Company's filings
with the Securities and Exchange Commission. Forward-looking statements included
in this news release concerning HotelTools are subject to the foregoing risks
and uncertainties affecting the Company and additional risks and uncertainties
including, but not limited to, uncertainty as to HotelTools' ability to operate
within its budget, its future profitability, its ability to meet development
schedules, its ability to develop and implement operational and financial
systems to manage rapidly growing operations, uncertainty as to the demand for
its products and services, the risk that competitors will be able to develop and
market products and services that produce results similar to those produced by
HotelTools' products and services, and the risk that HotelTools may not be able
to obtain financing on acceptable terms and in amounts that are sufficient to
meet its needs.
All forward-looking statements included in this press release are based
upon management's present expectations and the information available at this
time. The Company does not undertake any obligation to publicly update or revise
any forward-looking statements, whether as a result of new information, future
events or other factors.
Suburban Lodges of America, Inc. owns, franchises and manages Suburban
Lodge hotels, the nation's largest economy extended stay lodging chain, and
franchises GuestHouse International hotels, the owner-friendly brand of
mid-market nightly hotels.
SUBURBAN LODGES OF AMERICA, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
(Unaudited)
March 31, December 31,
2001 2000
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ASSETS
Current assets:
Cash and cash equivalents $ 7,345 $ 10,856
Accounts receivable, net of reserves of
$437 (2001) and $327 (2000) 1,758 1,520
Hotel inventory and supplies 2,538 2,538
Prepaid and refundable income taxes 260
Deferred income taxes 469 469
Prepaid expenses and other current assets 2,175 2,081
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Total current assets 14,285 17,724
Assets held for sale 9,553
Property and equipment, net of accumulated depreciation and
amortization of $30,302 (2001) and $27,863 (2000) 283,569 299,392
Notes receivable from HotelTools, Inc. 10,192 7,997
Other notes receivable 4,556 4,508
Acquired intangible assets - net 3,428 3,515
Deferred loan costs 1,999 2,097
Other assets 2,646 2,393
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TOTAL ASSETS $ 330,228 $ 337,626
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 1,668 $ 1,547
Construction accounts payable 1,402 1,314
Trade accounts payable 1,641 3,161
Accrued property taxes 1,106 720
Accrued wages and benefits 1,214 703
Other accrued liabilities 2,594 1,504
Other current liabilities 726 648
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Total current liabilities 10,351 9,597
Long-term debt, excluding current portion 117,702 119,574
Deferred income taxes 1,529 3,958
Other liabilities 172 167
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Total liabilities 129,754 133,296
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Shareholders' equity:
Common stock 157 157
Additional paid-in capital 202,280 202,280
Retained earnings 20,752 24,608
----------- -----------
223,189 227,045
Less treasury stock, at cost 22,715 22,715
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Shareholders' equity, net 200,474 204,330
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 330,228 $ 337,626
=========== ===========
SUBURBAN LODGES OF AMERICA, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(Unaudited)
Three Months Ended
March 31, 2001 March 31, 2000
----------------- -----------------
Revenue:
Hotel revenues $ 17,477 $ 15,959
Franchising revenue 1,023 781
Management and other revenue 175 355
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Total revenue 18,675 17,095
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Operating costs and expenses:
Hotel operating expenses 9,785 9,115
Corporate operating expenses 2,999 2,859
Expenses incurred in conjunction with
review of strategic alternatives 475
Undeveloped site carrying costs 47 44
Depreciation and amortization 2,526 2,398
Impairment of long-lived assets 6,687
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Operating costs and expenses - net 22,519 14,416
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Income (loss) from operations (3,844) 2,679
Other income (expense):
Interest income 234 245
Interest expense (2,430) (2,046)
Other 1 10
----------------- -----------------
Income (loss) before income taxes (6,039) 888
Provision (credit) for income taxes (2,183) 333
----------------- -----------------
Net income (loss) $ (3,856) $ 555
================= =================
Earnings (loss) per common share:
Basic $ (0.32) $ 0.04
================= =================
Diluted N/A $ 0.04
================= =================
Weighted average number of common
shares outstanding:
Basic 12,004 13,870
================= =================
Diluted N/A 13,870
================= =================
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SUBURBAN LODGES OF AMERICA, INC.
300 GALLERIA PARKWAY
SUITE 1200
ATLANTA, GEORGIA 30339
-----------------
SUPPLEMENT
TO PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS - MAY 17, 2001
This Supplement (this "Supplement"), including the enclosed proxy card,
is furnished in connection with the solicitation of proxies by the Board of
Directors of Suburban Lodges of America, Inc. (the "Company") for use at the
Annual Meeting of Shareholders of the Company to be held at The Cobb Galleria
Centre, Room 119, Two Galleria Parkway N.W., Atlanta, Georgia 30339 on May 17,
2001, at 10:00 a.m. and any adjournments or postponements thereof. This
Supplement supplements, and should be read in conjunction with, the Company's
Proxy Statement dated April 10, 2001 which has previously been mailed to
shareholders of record as of the record date for the Annual Meeting (the "Proxy
Statement"). It is anticipated that this Supplement and the accompanying proxy
card will first be mailed to shareholders on or about April 26, 2001.
WE URGE YOU TO COMPLETE, DATE AND SIGN THE ENCLOSED WHITE PROXY CARD
AND RETURN IT PROMPTLY IN THE ENVELOPE PROVIDED, EVEN IF YOU HAVE ALREADY SIGNED
AND RETURNED A PROXY CARD. Any proxy given pursuant to this solicitation may be
revoked prior to the meeting by delivering an instrument revoking it or a duly
executed proxy bearing a later date to the Secretary of the Company. If the
proxy is properly completed and returned by the shareholder and is not revoked,
it will be voted at the meeting in the manner specified thereon. Any proxy given
pursuant to this solicitation also may be revoked by any shareholder who attends
the meeting and gives written notice of his or her election to vote in person,
without compliance with any other formalities. IF THE PROXY CARD IS RETURNED BUT
NO CHOICE IS SPECIFIED THEREON, IT WILL BE VOTED "FOR" JAMES R. KUSE AND MICHAEL
MCGOVERN, WHO HAVE BEEN NOMINATED BY THE BOARD OF DIRECTORS FOR RE-ELECTION TO
THE BOARD, AND IN THE DISCRETION OF THE PROXY HOLDERS ON SUCH OTHER MATTERS AS
MAY LAWFULLY COME BEFORE THE MEETING.
This Supplement is being distributed to provide certain additional
information concerning the solicitation of proxies for the Annual Meeting that
was not included in the Company's Proxy Statement mailed to shareholders on or
about April 10, 2001 (the "Proxy Statement"). This Supplement is necessary as a
result of a threatened contest over the election of directors at the Company's
2001 Annual Meeting. It provides updated and additional information that is
required to be provided to shareholders in contested elections.
SOLICITATION OF PROXIES
Solicitation of proxies may be made by directors and officers of the
Company and other persons listed below by means of personal interview,
telephone, telegraph, telefax or electronic communications. No additional
compensation will be paid for any such services. Certain information concerning
the directors and officers of the Company and other persons who may solicit
proxies, including share ownership information and information concerning
transactions between such persons and the Company, is set forth below and in the
Proxy Statement.
Costs of the solicitation will be borne by the Company. Upon
request, the Company will reimburse the reasonable fees and expenses of banks,
brokerage houses or other nominees or fiduciaries for forwarding proxy materials
to, and obtaining authority to execute proxies from, beneficial owners for whose
accounts they hold shares of Common Stock. The Company has retained D.F. King &
Co., Inc. ("D.F. King") to assist in the solicitation of proxies. Pursuant to
the Company's agreement, D.F. King will provide various proxy advisory and
solicitation services for the Company at a fee that is estimated not to exceed
$75,000, plus reasonable out-of-pocket expenses and indemnification against
certain liabilities. It is expected that D.F. King will use approximately 25
persons in such solicitation. Although no precise estimate can be made at this
time, the Company anticipates that the aggregate amount to be spent by the
Company in connection with the solicitation of proxies by the Company will not
be in excess of approximately $200,000, of which the Company estimates
approximately $50,000 has been incurred to date. This amount includes the
estimated fees payable to D.F. King but excludes (i) the salaries and expenses
of officers, directors, and employees of the Company; and (ii) the normal
expenses of an uncontested election. The aggregate amount to be spent will vary
depending on, among other things, any developments that may occur in a proxy
contest that a group of shareholders of the Company has indicated it intends to
conduct.
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED WHITE PROXY CARD AND
RETURN IT PROMPTLY IN THE ENVELOPE PROVIDED, EVEN IF YOU HAVE ALREADY SIGNED AND
RETURNED A PROXY CARD. If your shares are held in "street name," only your bank
or broker can vote your shares and only upon receipt of your specific
instructions. Please contact the person responsible for your account and
instruct him or her to vote the WHITE proxy card. If you have signed and
returned a proxy card, you may revoke your previously signed proxy by delivering
a written notice of revocation or a later dated WHITE proxy card in the enclosed
envelope.
SUBURBAN LODGES OF AMERICA, INC.
April 26, 2001
INFORMATION CONCERNING CERTAIN PERSONS
WHO MAY SOLICIT PROXIES
The following tables set forth the name, principal occupation or
employment and the name, principal business and address of any corporation or
other organization in which their employment is carried on, of the directors and
certain officers of the Company and other persons ("Participants") who may also
solicit proxies from stockholders of the Company. Unless otherwise indicated,
the principal occupation refers to such person's position with the Company and
such person's business address is Suburban Lodges of America, Inc., 300 Galleria
Parkway, Suite 1200, Atlanta, Georgia 30339.
DIRECTORS
The principal occupations of the Company's directors who are deemed
Participants in the solicitation are set forth on page 4 of the Company's Annual
Meeting Proxy Statement dated April 10, 2001. The principal business address of
Mr. Krischer and Mr. Berman is that of the Company. The name and business
address of the other director-Participants' organization of employment are as
follows:
NAME BUSINESS ADDRESS
---- ----------------
James R. Kuse...............................Kuse Enterprises
400 Perimeter Center Terrace
Suite 595
Atlanta, Georgia 30346
Michael McGovern............................McGovern Enterprises, Inc.
P.O. Box 420528
Atlanta, Georgia 30328
John W. Spiegel.............................SunTrust Banks, Inc.
303 Peachtree Street, NE
Atlanta, Georgia 30308
CERTAIN EXECUTIVE OFFICERS AND OTHER PARTICIPANTS
NAME PRINCIPAL OCCUPATION
---- --------------------
David E. Krischer............................ Chairman of the Board and Chief Executive Officer
Gregory C. Plank............................. President
Dan J. Berman................................ Vice President of Franchising (Suburban Lodge Brand)
Robert N. Wilson, Jr......................... Vice President of Franchising (Guesthouse International Brand)
Paul A. Criscillis, Jr....................... Vice President and Chief Financial Officer
Kevin R. Pfannes............................. Vice President, General Counsel and Secretary
2
In addition, Seth Christian, Chief Executive Officer of HotelTools,
Inc., a hospitality industry technology company ("HotelTools"), may discuss
HotelTools and its prospects with shareholders of the Company. As a result, he
may be deemed to be soliciting proxies on behalf of the Company and to be a
participant in the solicitation, and Mr. Christian is included within the
definition of "Participants" herein. Mr. Christian's business address, and the
principal business address of his organization of employment, is HotelTools,
Inc., 100 Galleria Parkway, Suite 1020, Atlanta, Georgia 30339. Mr. Christian is
the former Vice President of Operations of the Company and currently is the sole
shareholder of HotelTools.
INFORMATION CONCERNING OWNERSHIP OF
THE COMPANY'S SECURITIES BY PARTICIPANTS
The number of shares of common stock of the Company beneficially owned
by each of the directors of the Company and each of Messrs. Criscillis, Pfannes
and Plank is set forth on pages 2 and 3 of the Proxy Statement. The number of
shares of Common Stock of the Company beneficially owned by the other
Participants as of the date of this Supplement is set forth below. The
information includes shares that may be acquired by the exercise of stock
options within 60 days of the date hereof. No Participant owns any shares of the
Company's Common Stock of record but not beneficially.
SHARE
NAME OWNERSHIP
---- ---------
Seth Christian........................................... 80,094
Robert N. Wilson, Jr..................................... 13,334
INFORMATION CONCERNING TRANSACTIONS IN
THE COMPANY'S SECURITIES BY PARTICIPANTS
The following table sets forth purchases and sales of the Company's
securities by the Participants listed below during the past two years. Except as
otherwise noted, all transactions were in the public market.
NUMBER OF SHARES
OF COMMON STOCK
PURCHASED ("P")
NAME DATE OR SOLD ("S")
---- ---- -------------
Seth Christian(1).....................................05/01/00 20,000 S
07/12/00 5,000 S
09/15/00 10,500 S
Gregory C. Plank......................................11/22/99 1,050 P
Dan J. Berman.........................................08/03/99 5,000 S
08/04/99 5,000 S
08/05/99 5,000 S
08/06/99 5,000 S
08/09/00 5,000 S
08/10/00 10,000 S
Paul A. Criscillis, Jr................................08/18/99 5,000 P
08/20/99 3,000 P
- -------------------------
(1) The shares sold by Mr. Christian were acquired by the Company under its
share repurchase program at prices not exceeding the then-current market price
per share.
In addition, during 2000 the Company purchased from four of its
executive officers, including Messrs. Krischer, Berman and Pfannes, certain
options to purchase Common Stock, as further described on page 7 of the Proxy
Statement. The non-employee directors of the Company, including Messrs. Kuse,
McGovern and Spiegel, also have been issued shares of Common Stock under the
Directors' Plan, as further described on page 5 of the Proxy Statement.
3
ADDITIONAL INFORMATION CONCERNING PARTICIPANTS
Except as described in this Supplement or in the Proxy Statement, none
of the Participants nor any of their respective affiliates or associates
(together, the "Participant Affiliates"), (i) beneficially owns any shares of
Common Stock of the Company or any securities of any subsidiary of the Company
or (ii) has had any relationship with the Company in any capacity other than as
a stockholder, employee, officer or director. Furthermore, except as described
in this Supplement or in the Proxy Statement, no Participant or Participant
Affiliate is either a party to any transaction or series of transactions since
January 1, 2000, or has knowledge of any currently proposed transaction or
series of transactions, (i) to which the Company or any of its subsidiaries was
or is to be a party, (ii) in which the amount involved exceeds $60,000, and
(iii) in which any Participant or Participant Affiliate had or will have, a
direct or indirect material interest.
Except for the Change in Control Agreements described in the Proxy
Statement, no Participant or Participant Affiliate has entered into any
agreement or understanding with any person respecting any future employment by
the Company or its affiliates or any future transactions to which the Company or
any of its affiliates will or may be a party. Except as described in this
Supplement or in the Proxy Statement, there are no contracts, arrangements or
understandings by any Participant or Participant Affiliate within the past year
with any person with respect to the Company's Common Stock.
Seth Christian, who may be deemed to be a participant in the
solicitation and is included within the definition of Participants herein, is
the Chief Executive Officer and sole shareholder of HotelTools. Mr. Christian
was an officer of the Company at the time HotelTools was formed. He subsequently
resigned his position with the Company in order to devote his full efforts to
HotelTools. David E. Krischer, the Company's Chief Executive Officer and
Chairman of the Board, is a member of the Board of Directors of HotelTools. In
the early stages of its existence--before it was fully staffed--HotelTools often
required management, consulting and administrative support services from third
parties. The Company was compensated directly by HotelTools for such services as
were provided by Company personnel during normal business hours. However, to
reflect private efforts made on behalf of HotelTools by certain Company
personnel after normal business hours, HotelTools granted to such individuals
options to purchase shares of non-voting common stock of HotelTools, at an
exercise price of $0.50 per share. Such option grants included options for
250,000 shares granted to Mr. Krischer, and for 50,000 shares granted to each of
Gregory C. Plank, Dan J. Berman, Paul A. Criscillis, Jr. and Kevin R. Pfannes.
No services were provided by Company employees to HotelTools after normal
business hours at the expense of the Company. To the extent such assistance was
provided during normal business hours, HotelTools obtained the required
assistance on a cost-effective basis, and the Company provided such assistance
at no loss to the Company. To the extent such assistance was provided after
normal business hours, HotelTools obtained required assistance on a cost-
effective basis at no cost to the Company. Finally, each of the directors of
HotelTools, including Mr. Krischer, has been awarded an option to purchase
50,000 shares of HotelTools' common stock at a price of $0.50 per share.
To date, all funding for HotelTools' operations has been provided, in
the form of secured loans, by the Company and from the proceeds of an equipment
sale-leaseback transaction. The loans are payable on demand and bear interest at
a rate of 7% per annum. In exchange for its financial support, the Company
received from HotelTools a stock purchase warrant to purchase up to 20 million
shares of HotelTools, Inc. common stock at a nominal exercise price. During
2000, the Company made loans of $8.7 million to HotelTools, of which
approximately $1.1 million was repaid from the proceeds of the sale-leaseback.
As of December 31, 2000, the Company had outstanding loans to HotelTools of
approximately $8.0 million, and at March 31, 2001, the Company had outstanding
loans to HotelTools of approximately $10.2 million.
4
================================================================================
SUBURBAN LODGES OF AMERICA, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
FOR THE 2001 ANNUAL MEETING OF SHAREHOLDERS.
The undersigned hereby appoints David E. Krischer and Dan J. Berman, or either
of them, with power of substitution to each, the proxies of the undersigned,
hereby revoking any proxies previously granted, to vote all of the undersigned's
shares of the Common Stock of Suburban Lodges of America, Inc. at the Annual
Meeting of Shareholders of SUBURBAN LODGES OF AMERICA, INC. to be held at 10:00
a.m. at The Cobb Galleria Centre, Room 119, Two Galleria Parkway, NW, Atlanta,
Georgia 30339, on May 17, 2001, and at any adjournments or postponements
thereof, as directed below and in their discretion upon matters incident to the
conduct of the Annual Meeting and such other matters as may properly be
presented at the meeting.
THE BOARD OF DIRECTORS FAVORS A VOTE "FOR "THE ELECTION OF THE BOARD NOMINEES,
AND, UNLESS INSTRUCTIONS TO THE CONTRARY ARE INDICATED IN THE SPACE PROVIDED,
THE PROXY WILL BE SO VOTED. If any nominee for director is unable or declines to
serve as a director, this proxy will be voted for the election of any
replacement nominee that the present Board of Directors designates.
Proposal 1. ELECTION OF DIRECTORS: Nominees: James R. Kuse and Michael McGovern
FOR all nominees listed above /_/
WITHHOLD AUTHORITY to vote for the nominees /_/
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
the nominee's name in this space provided below.)
- --------------------------------------------------------------------------------
(Continued, and to be signed and dated on the other side)
[This text appears on reverse side of Proxy Card]
The undersigned hereby acknowledges receipt of the Notice of Annual Meeting of
Shareholders dated April 10, 2001 and the Proxy Statement furnished therewith.
This proxy is revocable at or at any time prior to the meeting.
PLEASE COMPLETE, DATE, SIGN AND RETURN THIS PROXY IN THE ACCOMPANYING PRE-PAID
ENVELOPE.
If you need assistance in voting your shares, please call D. F. King & Co.,
Inc., proxy solicitor for Suburban Lodges of America, toll-free at
1-800-488-8035.
Date__________________________________,2001
_______________________________________
_______________________________________
Note:(Signature(s) should be exactly as name
or names appear on this proxy. If stock is
held jointly, each holder should sign. If
signing is by an attorney, executor,
administrator, trustee or guardian, please
give full title.)
4
================================================================================
The following press release was issued by the registrant on April 27, 2001.
PRESS RELEASE
CONTACT:
Greg Lehman
D.F. King & Co., Inc.
212/493-6965
FOR IMMEDIATE RELEASE
- ---------------------
SUBURBAN LODGES RELEASES LETTER TO SHAREHOLDERS
ATLANTA, GEORGIA, April 27, 2001 . . . Suburban Lodges of America, Inc. (NASDAQ:
SLAM), owner/franchisor of the Suburban Lodge and GuestHouse International hotel
brands and operator of 65 Company-owned hotels, announced today that it has
mailed its first quarter earnings press release and the following letter to its
shareholders:
April 26, 2001
Dear Fellow Shareholder:
The accompanying press release contains important information, which I urge you
to read carefully.
Recent Developments
- -------------------
Early last week, in a required filing with the U.S. Securities and Exchange
Commission, an investor group led by Raymond Adam D'Olier French (the "French
Group") disclosed its intention to seek the election of two of its own
hand-picked nominees, including Mr. French, to your Company's Board of
Directors. The French Group includes Mr. French (age 31) and several entities
domiciled outside of the U.S., including investment vehicles based in Luxembourg
and the Channel Islands. Collectively, members of the French Group own 778,100
shares (or 6.5%) of the Company's Common Stock.
(M O R E)
Suburban Lodges of America, Inc.
Suburban Lodges Release Letter to Shareholders
April 27, 2001
page 2 of 6
The French Group claims its nominees will advocate unspecified improvements to
the Company's operating margins and a sale of our Company-owned hotels. If the
hotels cannot be sold "within a reasonable period of time," they will advocate a
sale of the entire Company. In other words, the French Group's nominees want to
pursue the same share value enhancement initiatives already implemented by your
Company's Board and management.
As indicated in the accompanying press release, six months ago, long before the
French Group purchased many of its shares, we hired Salomon Smith Barney, a
national investment banking firm with a recognized expertise in the hotel
industry, to assist us in evaluating options to maximize our share value. The
strategic options explored by Salomon Smith Barney included a sale of a portion
or all of the Company's assets and a merger of the Company with (or a sale of
the Company to) a third party. If a transaction resulted from its efforts,
Salomon Smith Barney would have been paid a very substantial fee.
Forty-five potential buyers of all or part of the Company were contacted in this
process. After nearly six months of exploration, we received only one
highly-conditional proposal to acquire the Company.
The proposal was conditioned upon the buyer's ability to obtain required
financing, which would be difficult in the current weak market environment. Our
subsequent efforts to negotiate an elimination of the financing condition
resulted in new proposals with new conditions from the would-be acquirer,
including a proposed four-month due diligence period. However, in our opinion,
such negotiations did not result in a better offer than the only written
proposal received by the Company, which was deemed inadequate due to, among
other things, the financing condition. For these reasons, among others, the
proposal was rejected unanimously by your Board.
The Company also received an inquiry from a third party regarding a potential
merger of equals. However, after serious consideration and exploration, each of
the parties determined not to pursue the concept.
After lengthy deliberation, we have concluded that, at this time, the best way
to maximize value for shareholders is to continue with successful efforts to
grow the Suburban Lodge and GuestHouse International franchises, complemented by
ongoing share repurchases and opportunistic sales of real estate assets. We
believe this program will result in increased earnings per share, which will be
reflected favorably in the market price of the Company's Common Stock.
Your Company's Board and management are mindful of the options available to us.
If we are presented with one or more appropriate opportunities to grow share
value, we are prepared to act promptly.
(M o r e)
Suburban Lodges of America, Inc.
Suburban Lodges Release Letter to Shareholders
April 27, 2001
page 3 of 6
HotelTools
- ----------
The French Group also claims that, if elected, its nominees would direct your
Company's management to find a buyer for the Company's HotelTools loan and
warrants. Once again, the French Group is claiming it will do what your Board
and management already have begun.
In early March, long before the French Group declared its plans for HotelTools,
your Board and management encouraged HotelTools to seek a buyer of HotelTools.
Since then, we have been informed by HotelTools that it is actively engaged in
discussions with several prospective buyers.
What's Wrong With the French Group?
- -----------------------------------
First, the Company's Board and management already are pursuing what the French
Group advocates for your Company and we have been doing this for some time. We
have no reason to believe the French Group's nominees would add value to this
process.
Second, in our opinion, the French Group's public declarations already have
undermined our efforts to grow share value. We believe the French Group has
demonstrated an alarming insensitivity to the concerns of our existing and
potential franchisees and a superficial grasp of the most effective ways to
enhance share value.
Share Value Will Not be Maximized in a "Fire Sale"
- --------------------------------------------------
We already have committed ourselves to the sale and conversion of Company-owned
hotels into new franchised hotels. These efforts are ongoing.
We believe the French Group's public demand for a more "aggressive" approach to
the sale of our Company-owned hotels is undermining our efforts to obtain the
best price for the properties from interested third-parties. Ask yourself, would
you "pay up" for our Company-owned properties if you believed we were under
pressure to sell the properties?
Similarly, we already have explored a possible sale of the Company. The French
Group's public statements have only contributed to franchisee anxiety over our
long-term commitment to the Suburban Lodge and GuestHouse International brands.
In summary, we believe the French Group has yet to propose anything better than
what we already are doing to increase the value of your shares. We also believe
the French Group's actions already have undermined efforts to grow share value
today.
Increasing the Value of Our Investment
- --------------------------------------
You should know that I own 2,750,437 shares (or 22.9% of the Company's
outstanding shares) - - more than three and one-half times the number of shares
owned by the French Group. I am the Company's single largest owner and,
therefore, no one has a greater interest in the Company's share price than I do.
(M O R E)
Suburban Lodges of America, Inc.
Suburban Lodges Release Letter to Shareholders
April 27, 2001
page 4 of 6
Like you, I want to see the value of my investment increase now and over time. I
can assure you that, like me, your Company's Board and management is committed
to the
( M O R E )
3
Suburban Lodges of America, Inc.
Suburban Lodges Release Letter to Shareholders
April 27, 2001
page 5 of 6
aggressive pursuit of all options to maximize the value of our investment in the
Company.
Unfortunately, the proxy contest now threatened by the French Group will be
disruptive. Ultimately, our performance will be undermined at least to some
degree.
Under the circumstances, including renewed franchisee concerns over our
commitment to the Company's brands, we believe the presence of one or more of
the French Group's nominees on the Board threatens to be even more disruptive
and costly for shareholders. For these reasons, among others, we support
election of your Board's nominees and oppose election of the French Group's
nominees to your Company's Board of Directors.
We strongly urge you to reject the French Groups' nominees by refusing to sign
or return the GOLD proxy card sent to you by the French Group or its agents.
Separately, if you have not already signed and returned the WHITE proxy card
sent to you by the Company's Board of Directors, we urge you to sign, date and
return the enclosed WHITE proxy card, using the postage-paid envelope provided.
In the coming weeks, we plan to communicate with you again regarding the issues
raised in this election. You also will be receiving communications from the
French Group.
In the meantime, if you need assistance in voting your shares, please call D. F.
King & Co., Inc., which is assisting us with the solicitation of your vote,
toll-free at 1-800-488-8035.
We look forward to keeping you informed.
Sincerely yours,
/s/
David E. Krischer
Chief Executive Officer
ABOUT SUBURBAN LODGES OF AMERICA, INC.
Suburban Lodges of America, Inc. owns, franchises and manages Suburban Lodge
hotels, the nation's largest economy extended stay lodging chain, and franchises
GuestHouse International hotels, the owner-friendly brand of mid-market nightly
hotels.
(M O R E)
SUBURBAN LODGES OF AMERICA, INC.
SUBURBAN LODGES RELEASES LETTER TO SHAREHOLDERS
April 27, 2001
page 6 of 6
Forward-looking Statements
- --------------------------
This news release includes statements concerning the Company's plans, beliefs
and expectations for future periods. These "forward-looking statements" may be
identified by the use of words such as "intends," "contemplates," "believes,"
"anticipates," "expects," "should," "could," "would" and words of similar
import. These forward-looking statements involve known and unknown risks and
uncertainties that could cause actual results to differ materially from the
expectations expressed or implied in such statements. These risks and
uncertainties include, among others, changes in economic conditions, financial
markets or consumer demand for extended stay and other forms of lodging, the
level of competition in the extended stay and other lodging markets, the
Company's ability to enter into contracts with its franchisees, development
risks and inefficiencies, weather delays, zoning delays, the Company's financial
condition and other risks and uncertainties set forth in the Company's filings
with the Securities and Exchange Commission. Forward-looking statements included
in this news release concerning HotelTools are subject to the foregoing risks
and uncertainties affecting the Company and additional risks and uncertainties
including, but not limited to, uncertainty as to HotelTools' ability to operate
within its budget, its future profitability, its ability to meet development
schedules, its ability to develop and implement operational and financial
systems to manage rapidly growing operations, uncertainty as to the demand for
its products and services, the risk that competitors will be able to develop and
market products and services that produce results similar to those produced by
HotelTools' products and services, and the risk that HotelTools may not be able
to obtain financing on acceptable terms and in amounts that are sufficient to
meet its needs.
All forward-looking statements included in this press release are based upon
management's present expectations and the information available at this time.
The Company does not undertake any obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or other factors.
NOTE TO EDITORS:
- ----------------
The press release referenced in the letter reproduced above was issued by the
Company on April 25, 2001. Copies are available from D.F. King & Co., Inc. at
1-800-488-8035.
# # #