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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO
SECTION 14(D)(4) OF THE SECURITIES EXCHANGE ACT OF 1934
HOST MARRIOTT SERVICES CORPORATION
(NAME OF SUBJECT COMPANY)
HOST MARRIOTT SERVICES CORPORATION
(NAME OF PERSON(S) FILING STATEMENT)
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COMMON STOCK, NO PAR VALUE
(TITLE OF CLASS OF SECURITIES)
440914-10-9
(CUSIP NUMBER OF CLASS OF SECURITIES)
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JOE P. MARTIN, ESQ.
SENIOR VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
HOST MARRIOTT SERVICES CORPORATION
6600 ROCKLEDGE DRIVE
BETHESDA, MARYLAND 20817
(301) 380-7000
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO
RECEIVE NOTICE AND COMMUNICATIONS ON BEHALF OF
THE PERSON(S) FILING STATEMENT)
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Copies to:
<TABLE>
<S> <C>
BRUCE E. ROSENBLUM, ESQ. SCOTT C. HERLIHY, ESQ.
LATHAM & WATKINS LATHAM & WATKINS
1001 PENNSYLVANIA AVENUE, N.W., 1001 PENNSYLVANIA AVENUE, N.W.,
SUITE 1300 SUITE 1300
WASHINGTON, D.C. 20004-2505 WASHINGTON, D.C. 20004-2505
(202) 637-2200 (202) 637-2200
</TABLE>
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ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is Host Marriott Services Corporation, a
Delaware corporation ("the Company"). The address of the principal executive
offices of the Company is 6600 Rockledge Drive, Bethesda, Maryland 20817. This
Solicitation/Recommendation Statement on Schedule 14D-9 (this "Schedule 14D-9")
relates to the common stock, no par value, of the Company (the "Common Stock"),
together with the associated preferred share purchase rights (the "Rights")
issued pursuant to the Rights Agreement, dated as of December 22, 1995 (as
amended, the "Rights Agreement"), between the Company and First Chicago Trust
Company of New York, as Rights Agent (the "Rights Agent"). References in this
Schedule 14D-9 to "Shares" shall mean shares of Common Stock and, unless the
context otherwise requires, shall include the Rights.
ITEM 2. TENDER OFFER OF THE BIDDER.
This Schedule 14D-9 relates to the cash tender offer (the "Offer")
disclosed in a Tender Offer Statement on Schedule 14D-1, dated July 28, 1999
(the "Schedule 14D-1"), as filed with the Securities and Exchange Commission
(the "SEC") by Autogrill Acquisition Co., a Delaware corporation ("Purchaser")
and a wholly-owned subsidiary of Autogrill Overseas S.A., a Luxembourg company
and a wholly-owned subsidiary of Autogrill S.p.A., an Italian corporation
("Parent"), to purchase all outstanding Shares at a price of $15.75 per Share
(the "Offer Price"), net to the seller in cash, without interest, upon the terms
and subject to the conditions set forth in the Offer to Purchase, dated July 30,
1999, and the related Letter of Transmittal.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of July 26, 1999, among the Company, Parent and Purchaser (the "Merger
Agreement"), a copy of which is filed as Exhibit 1 hereto and incorporated
herein by reference. The Offer is subject to certain conditions, including the
condition that at least two-thirds of the total issued and outstanding Shares on
a fully diluted basis shall have been validly tendered and not withdrawn prior
to the expiration of the Offer. The Offer is not subject to a financing
condition. As described in the response to Item 3(b) below, the Merger Agreement
provides, among other things, that upon the terms and subject to the conditions
set forth in the Merger Agreement, and in accordance with the General
Corporation Law of the State of Delaware (the "DGCL"), as soon as practicable
following completion of the Offer, Purchaser will be merged with and into the
Company (the "Merger"), with the Company continuing as the surviving corporation
(the "Surviving Corporation") as an indirect wholly owned subsidiary of Parent.
A copy of the joint press release issued by the Company and Parent on July 26,
1999 announcing the execution of the Merger Agreement is filed as Exhibit 1
hereto and incorporated herein by reference.
The Schedule 14D-1 states that the principal executive offices of each of
Parent and Purchaser are located at Via Caldera, 21 20153 Milan, Italy.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and business address of the Company, which is the entity
filing this Schedule 14D-9, are set forth in the response to Item 1 above.
(b) Except as described or referred to below, to the knowledge of the
Company, as of the date hereof, there are no material contracts, agreements,
arrangements or understandings or any actual or potential conflicts of interest
between the Company or its affiliates and: (1) the Company, its executive
officers, directors or affiliates; or (2) Parent, Purchaser or the respective
officers, directors or affiliates of Parent or Purchaser.
ARRANGEMENTS WITH DIRECTORS, EXECUTIVE OFFICERS OR AFFILIATES OF THE
COMPANY
Certain contracts, agreements, arrangements and undertakings between the
Company and certain of its directors, executive officers and affiliates are
described in the Information Statement attached hereto as Schedule I in the
sections entitled "Compensation of Directors", "Report on Executive Compensation
by the Company's Compensation Policy Committee", "Executive Compensation" and
"Certain Transactions".
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In addition, on May 17, 1999, the Company adopted the Host Marriott
Services Corporation Change in Control Plan, which became effective immediately
upon its adoption. The Change of Control Plan is intended to retain key
executives, to the benefit of the Company, by ensuring that executives covered
by the Change in Control Plan are treated in a fair and consistent manner,
receiving a defined benefit from the Change in Control Plan in consideration of
their continued employment with the Company. The Change of Control Plan applies
only to termination of a participant in the event of a change in control.
A change in control of the Company is defined in the Change of Control Plan
as: (i) the acquisition of at least 20 percent of the common stock of the
Company, sufficient to allow a person or persons to elect a majority of the
Board of Directors or otherwise effectively control the management of the
Company; or (ii) a merger, dissolution, or other corporate transaction in which
the Company or its successor-in-interest is not the surviving entity or the
Company or its successor-in-interest becomes a subsidiary or affiliate of
another entity; or (iii) a determination by the Board of Directors of the
Company, or a court or administrative agency with jurisdiction over the matter,
that a change of control has occurred in the Company, or its successor entity;
but (iv) a change of control will not occur if Richard E. Marriott or J.W.
Marriott, Jr. shall increase their ownership of the Company's common stock.
In the event of a change of control and the termination of employment of a
participant of the Change in Control Plan, such participant will be entitled to
a severance payment based on three levels of seniority. Level one, consisting of
the President and Chief Executive Officer, entitles participants to three years
of base salary plus three years of normal bonus. Level two, consisting of all
Executive Vice Presidents and Senior Vice Presidents reporting directly to the
Chief Executive Officer, entitles participants to two years of base salary plus
two years of normal bonus. Level three, consisting of all other participating
officers, entitles participants to one and one-half years base salary plus one
and one-half years normal bonus.
The Company's nine senior officers are currently participants of the Change
in Control Plan.
The foregoing summary of the Change in Control Plan is qualified in its
entirety by reference to the complete text of the Change in Control Plan, a copy
of which is filed as Exhibit 2 hereto and is incorporated by reference. All
references to contracts, agreements, arrangements and undertakings are qualified
in their entirety by reference to the complete text of certain Company plans,
copies of which are filed as Exhibits 3-5 hereto and are incorporated by
reference.
THE MERGER AGREEMENT
The following is a summary of the material terms of the Merger Agreement
and is qualified in its entirety by reference to the complete text of the Merger
Agreement, a copy of which is filed as Exhibit 6 hereto and is incorporated by
reference.
The Merger. The Merger Agreement requires that as soon as practicable
after the purchase of Shares pursuant to the Offer and the satisfaction or
waiver of the conditions set forth in the Merger Agreement, the Purchaser and
its stockholder shall take all necessary and appropriate action (including
voting their Shares) to cause the Purchaser to be merged with the Company, which
will be the surviving corporation of the Merger (the "Surviving Corporation").
As a result of the Merger (i) the stockholder of the Purchaser will become the
sole stockholder of the Company, and (ii) all the pre-Merger stockholders of the
Company, other than the Purchaser, will receive cash equal to the Offer Price.
Recommendation. The Merger Agreement states that the Company's Board of
Directors has unanimously (i) determined that the Offer and the Merger, taken
together, are fair to, and in the best interests of, the stockholders of the
Company, (ii) approved and declared advisable the Merger Agreement and the
transaction contemplated thereby and (iii) recommends that the Company's
stockholders accept the Offer, tender their Shares in response to the Offer and
approve and adopt the Merger and the Merger Agreement. The Board may withdraw,
modify or refrain from making its recommendation if, after consultation with and
based upon the advice of independent legal counsel, the Board determines that
such action is necessary for the Board to comply with its fiduciary duty under
applicable law. The Company has been advised by each of its directors and by
each executive officer who, on July 26, 1999, was actually aware of the Offer,
that they intend
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either to tender all Shares beneficially owned by them pursuant to the Offer or
to vote such Shares in favor of the approval and adoption of the Merger, unless
the recommendation of the Company's Board of Directors shall have been withdrawn
or materially modified as permitted by the Merger Agreement.
Stock of the Company. At the effective date of the Merger, (a) each Share
which is not owned by the Purchaser will become the right to receive $15.75 in
cash, or any other price per share paid with regard to the Shares tendered in
response to the Offer (which may not be less than $15.75 per Share) and (b) each
Share owned by the Purchaser (or by the Company or its subsidiaries) will be
cancelled and no payment will be made with respect to those Shares.
Stock of the Purchaser. At the effective date of the Merger, each share of
common stock of the Purchaser which is outstanding immediately before the
effective date of the Merger will be converted into and become one share of
common stock of the Surviving Corporation. Therefore, the stockholder of the
Purchaser will become the sole stockholder of the Surviving Corporation.
Certificate of Incorporation. The Merger Agreement provides that the
Certificate of Incorporation of the Company will remain as the Certificate of
Incorporation of the Surviving Corporation following the Merger. However,
subject to the terms of the Merger Agreement, immediately following the Merger,
the Parent and the Purchaser intend to amend and restate the Certificate of
Incorporation to read substantially similar to the Certificate of Incorporation
of the Purchaser.
Company Stock Options. The holder of each employee stock option
outstanding immediately prior to the effective date of the Merger (each, an
"Employee Option") which is unexercised and vested or which would vest on or
prior to January 2, 2000 pursuant to the applicable vesting schedule in effect
as of the date of the Merger Agreement which is terminated immediately prior to
the effective date of the Merger, shall be entitled to receive at the effective
time of the Merger from the Company or as soon as practicable thereafter from
the Surviving Corporation, in consideration for such termination, an amount in
cash equal to (i) the product of (A) the number of Shares subject to such
Employee Option and (B) the excess, if any, of the Offer Price over the exercise
price per share of Common Stock subject to such Employee Option, (ii) less any
required withholding taxes.
Stockholder Vote Required to Approve Merger. The affirmative vote of
holders of shares representing not less than sixty-six and two-thirds percent
(66 2/3%) of the voting power of the Company is required to approve the Merger.
However, the DGCL also provides that if a parent company owns at least 90% of
each class of stock of a subsidiary, the parent company can effect a short-form
merger with that subsidiary without the action of the other stockholders of the
subsidiary. Accordingly, if, as a result of the Offer or otherwise, the
Purchaser acquires or controls the voting power of at least 90% of the
outstanding Shares, the Purchaser could (and, under the Merger Agreement, is
required to) effect the Merger using the "short-form" merger procedures without
prior notice to, or any action by, any other stockholder of the Company
Stockholders Meeting. If approval by the Company's stockholders is
required in order to consummate the Merger, the Company will hold a special
meeting of its stockholders as soon as practicable after the acquisition by the
Purchaser of Shares in the Offer for the purpose of adopting the Merger
Agreement and approving the Merger. In connection with any such meeting of
stockholders, the Company shall, through its Board of Directors, recommend to
its stockholders that they vote in favor of the approval of the Merger and the
adoption of the Merger Agreement; provided, however, that the Company's Board
may withdraw, modify or change such recommendation to the extent that the
Company's Board, after consultation with and based upon the advice of
independent legal counsel, determines in good faith that such action is
necessary for the Company's Board to comply with its fiduciary duties under
applicable law.
No Solicitations. In the Merger Agreement, the Company has agreed that the
Company shall, and shall cause its subsidiaries to, cause their respective
officers, directors, employees and representatives and agents (the "Company
Representatives") to immediately cease any existing discussions or negotiations,
if any, with any Person conducted with respect to an Acquisition Proposal (as
defined below) or any inquiries or the making of any proposal that constitutes,
or may reasonably be expected to lead to, any Acquisition Proposal. In addition,
the Company has agreed that unless and until the Merger Agreement shall have
been terminated
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in accordance with its terms, except as otherwise expressly provided below,
neither the Company nor the Company Representatives shall (i) solicit or
initiate the making of any Acquisition Proposal, (ii) participate in
negotiations with any person or group (other than the Parent, the Purchaser and
their respective designees) concerning an Acquisition Proposal, or (iii)
disclose or furnish, in connection with an Acquisition Proposal, any material
non-public information or provide access to its properties, books or records, or
otherwise take action that would facilitate or lead to any Acquisition Proposal,
except as required by law or pursuant to a governmental request for information.
The term "Acquisition Proposal" means any proposal to acquire in any manner,
directly or indirectly, in one or a series of transactions, all or more than 20%
of the Company's business, assets or capital shares whether by merger,
consolidation, other business combination, purchase of assets, tender or
exchange offer or otherwise.
Notwithstanding anything to the contrary set forth above, prior to
acceptance for payment of, and payment by the Purchaser for, Shares pursuant to
the Offer, the Company and the Company Representatives may, to the extent the
Company's Board of Directors, after consultation with and based upon the advice
of independent legal counsel, determines in good faith that such action is
necessary for the Company's Board of Directors to comply with its fiduciary
duties under applicable law, participate in discussions or negotiations with,
and furnish non-public information to, and afford access to the properties,
books, records, officers, employees and representatives of the Company to any
Person, entity or group after such Person, entity or group has delivered to the
Company, in writing, an Acquisition Proposal not solicited by the Company or
such representative which the Company's Board of Directors determines in good
faith is, if accepted, reasonably likely to be consummated (taking into account
all legal, financial, regulatory and other aspects of the proposal and the
Person making the proposal) and believes in good faith, after consultation with
its financial advisors, if consummated would be more favorable to the Company or
its stockholders from a financial point of view than the transactions
contemplated by the Merger Agreement (a "Superior Proposal"); provided, however,
that prior to taking such action, the Company shall (to the extent practicable)
provide notice to the Parent to the effect that it is taking such action.
Subject to the payment of the termination fee described below, in the event the
Company receives a Superior Proposal, the Merger Agreement does not prevent the
Board of Directors of the Company from executing or entering into an agreement
relating to a Superior Proposal and recommending such Superior Proposal to its
stockholders, if the Board determines in good faith that it is appropriate to do
so; in such case, the Board of Directors of the Company may withdraw, modify or
refrain from making its recommendation of the Offer, the Merger and the Merger
Agreement; provided however that the Company shall (i) provide the Parent at
least 24 hours prior written notice of the Company's intention to execute or
enter into an agreement relating to such Superior Proposal to enable the Parent
to match such Superior Proposal, in which case, the Company's Board of Directors
shall recommend to the Company's stockholders to accept the proposal of the
Parent; and (ii) where the Parent does not match such Superior Proposal,
terminate the Merger Agreement by written notice to the Parent given no sooner
than 48 hours after the Parent's receipt of a copy of such Superior Proposal (or
a description of the significant terms and conditions thereof). Nothing
contained in this referenced provision of the Merger Agreement prohibits the
Company Board from complying with Rule 14e-2 promulgated under the Exchange Act
with regard to a tender or exchange offer.
Conditions to the Merger. The respective obligations of the Company and
the Purchaser to carry out the Merger will be conditioned on the following
conditions: (i) the approval of the Company's stockholders, if required by
applicable law or by the rules of the NYSE (if they are applicable); (ii) no
temporary restraining order, preliminary or permanent injunction or other order
issued by a court or other governmental entity of competent jurisdiction shall
be in effect and have the effect of making the Merger illegal or otherwise
prohibiting consummation of the Merger; (iii) any applicable waiting period
under the HSR Act shall have expired or been terminated; and (iv) the Purchaser
or its affiliates shall have purchased all the Shares which are properly
tendered in response to the Offer and not withdrawn.
Termination of the Merger Agreement. The Merger Agreement may be
terminated at any time prior to the effective date of the Merger by action taken
or authorized by the Board of Directors of the terminating
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party, whether before or after approval of the terms of the Merger Agreement and
the matters contemplated thereby by the stockholders of the Company:
(1) By mutual written consent of the Parent and the Company by action
of their respective Board of Directors;
(2) By the Company, if it is not in material breach of its obligations
under the Merger Agreement and (i) the Purchaser fails to commence the
Offer as provided in the Merger Agreement, (ii) the Purchaser shall not
have accepted for payment and paid for all Shares tendered pursuant to the
Offer in accordance with the terms thereof on or before October 30, 1999
(the "Outside Date") or (iii) the Purchaser fails to purchase validly
tendered Shares in violation of the terms of the Offer or the Merger
Agreement;
(3) By the Company or the Parent, if the Offer is terminated or
withdrawn pursuant to its terms without any Shares being purchased
thereunder; provided that the Parent may terminate the Merger Agreement
pursuant to this provision only if the Parent's or the Purchaser's
termination or withdrawal of the Offer is not in violation of the terms of
the Merger Agreement or the Offer;
(4) By the Company or the Parent if any governmental entity of
competent jurisdiction shall have issued, entered, enacted, promulgated or
enforced any order, decree, judgment, statute, regulation or ruling or
taken any other action permanently restraining, enjoining or otherwise
prohibiting the transactions contemplated by the Merger Agreement, and such
order, decree, judgment, statute, regulation, ruling or other action shall
have become final and nonappealable;
(5) By the Parent, prior to purchase by the Purchaser of Shares of
pursuant to the Offer, if (i) the Company's Board of Directors shall have
withdrawn or materially and adversely modified its recommendation of the
Offer, the Merger or the Merger Agreement (it being understood, however,
that for all purposes, the fact that the Company has supplied any Person
with information regarding the Company or has entered into discussions or
negotiations with such Person as permitted by the Merger Agreement, or the
disclosure of such facts, shall not be deemed a withdrawal or modification
of the Board's recommendation of the Offer, the Merger or the Merger
Agreement); (ii) the Company's Board of Directors shall have recommended to
the stockholders of the Company that they approve a Superior Proposal other
than the transactions contemplated by the Merger Agreement and at least two
business days have elapsed since the recommendation; or (iii) a tender
offer or exchange offer that, if successful, would result in any Person or
"group" becoming a "beneficial owner" (such terms having the meaning
ascribed to them under Regulation 13D under the Exchange Act) of 20% or
more of the issued and outstanding Shares on a fully diluted basis is
commenced (other than by the Parent or an affiliate of the Parent) and the
Company's Board recommends that the stockholders of the Company tender
their shares in such tender or exchange offer or the Company's Board of
Directors announces a neutral position or fails to make a recommendation
with respect to such offer within the shorter of the ten business days
after such tender offer or exchange offer is commenced or the period
remaining until the Outside Date;
(6) By the Company, prior to the purchase by the Purchaser of Shares
pursuant to the Offer, if the Company enters into a definitive agreement
with respect to a Superior Proposal;
(7) By the Parent, prior to the purchase by the Purchaser of Shares
pursuant to the Offer, upon a material breach of any covenant or agreement
on the part of the Company set forth in the Merger Agreement, or if any
representation or warranty of the Company in the Merger Agreement shall at
such time be inaccurate and such inaccuracy would be reasonably likely to
have a material adverse effect on the Company, in either case which breach
or inaccuracy is not reasonably capable of being cured without expenditures
in excess of $6 million by the Company or, if capable of such cure, has not
been cured without expenditures in excess of $6 million by the Company
within ten business days after the Company has knowledge thereof;
(8) By the Company, prior to the purchase by the Purchaser of any
Shares pursuant to the Offer, upon a material breach of any covenant or
agreement on the part of the Parent or the Purchaser set forth in this
Agreement, or if any representation or warranty of the Parent or the
Purchaser shall, at such time,
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be inaccurate and such inaccuracy would be reasonably likely to materially
and adversely affect the ability of the Parent and the Purchaser to perform
their obligations hereunder, in either case which breach or inaccuracy is
not reasonably capable of being cured by the Parent or the Purchaser or, if
capable of cure, has not been cured within ten business days after either
the Parent or the Purchaser has knowledge thereof; or
(9) By the Parent, if it is not in material breach of its obligations
hereunder or under the Offer and no Shares shall have been purchased
pursuant to the Offer by the Outside Date.
Effect of Termination of the Merger Agreement; Fees. In the event of
termination of the Merger Agreement by either the Company or the Parent, the
Merger Agreement shall forthwith become void and there shall be no liability or
obligation on the part of any party to the Merger Agreement or their respective
officers, directors, employees or stockholders except with respect to (i) any
liabilities or damages incurred or suffered by a party to the Merger Agreement
as a result of the willful breach by another party to the Merger Agreement of
any of its covenants or other agreements set forth in the Merger Agreement and
(ii) any liabilities or damages incurred or suffered by the Company as a result
of the failure of the Parent or the Purchaser to consummate the Offer or the
Merger as required by the Merger Agreement, including, without limitation, by
reason of an inability to obtain the requisite financing to do so.
In the event that the Merger Agreement is terminated pursuant to clause (5)
or (6) described under the section captioned "Termination of the Merger
Agreement" in this Section 3(a), then the Company is required to pay to the
Parent a cash fee of $20 million, which amount shall be payable by wire transfer
of immediately available funds no later than two business days after such
termination.
The Company's Board of Directors. The Merger Agreement provides that,
promptly upon the acceptance for payment of, and payment by the Purchaser in
accordance with the Offer for, not less than two-thirds of the outstanding
Shares on a fully diluted basis pursuant to the Offer, the Purchaser shall be
entitled to designate such number of members of the Company's Board of
Directors, rounded up to the next whole number, equal to that number of
directors which equals the product of the total number of directors on the
Company's Board of Directors (giving effect to the directors elected pursuant to
this sentence) multiplied by the percentage that such number of Shares owned in
the aggregate by the Purchaser or the Parent, upon such acceptance for payment,
bears to the number of Shares outstanding; provided, however, that until the
effective date of the Merger there shall be at least three directors of the
Company who were directors at the date of the Merger Agreement (the "Continuing
Directors"). Upon the written request of the Purchaser, the Company shall, on
the date of such request take all actions necessary to (i) either increase the
size of the Company's Board or secure the resignations of such number of its
incumbent directors as is necessary to enable the Purchaser's designees to be so
elected to the Company's Board of Directors and (ii) cause the Purchaser's
designees to be so elected. At such time, the Company shall also use its
reasonable best efforts to cause the Purchaser's designees to constitute no less
than the same percentage as persons designated by the Purchaser shall constitute
of the Company's Board of Directors of each committee of the Company's Board,
each board of directors of each subsidiary of the Company and each committee of
each such board, in each case only to the extent permitted by applicable law. In
the Merger Agreement, the Company has agreed to mail to the Company's
stockholders an Information Statement containing the information required by
Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder, and, if
necessary, seeking the resignation of one or more existing directors. However,
the Merger Agreement further provides that until the earlier of the time
Purchaser acquires two-thirds of the outstanding Shares and the effective date
of the Merger, the Company will use its reasonable best efforts to ensure that
it retains as members of its Board of Directors all of the current members of
the Board who are not employee of the Company at the date of the Merger
Agreement ("Company Designees"). The Merger Agreement also provides that
following the time that the Purchaser's designees to the Company's Board of
Directors constitute a majority of the Board, any amendment of the Merger
Agreement or the Company's Certificate of Incorporation, any termination of the
Merger Agreement by the Company, any extension of time for performance of any of
the obligations of the Purchaser or the Parent under the Merger Agreement, any
waiver of any condition to the obligations of the Company or of any of the
Company's rights under the Merger Agreement or other action by the Company under
the Merger Agreement which materially and adversely affects the interests of the
stockholders of the Company may be
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effected only by the action of a majority of the Company Designees, provided
that if there shall be no such Company Designees, such actions may be effected
by unanimous vote of the entire Board of Directors.
Employee Benefits. Except as provided below, the Parent has agreed to
maintain, or cause the Surviving Corporation to maintain, until January 1, 2002,
in effect benefit plans which in the aggregate provide benefits that are at
least as favorable to employees as the arrangements (other than equity-related
benefit plans) currently provided by the Company pursuant to the benefit plans
of the Company in effect on the date of the Merger Agreement. For purposes of
determining eligibility to participate, vesting and accrual or entitlement to
benefits where length of service is relevant under any employee benefit plan or
arrangement of the Parent, the Surviving Corporation or any of their respective
subsidiaries, employees of the Company and its subsidiaries as of the effective
date of the Merger shall receive service credit for service with the Company and
its subsidiaries and their respective predecessors to the same extent such
service credit was granted under the Company's employee benefit plans, subject
to offsets for previously accrued benefits and without duplication of benefits.
Except as any employee may otherwise agree, the Parent has agreed to cause the
Surviving Corporation to assume and honor in accordance with their terms all
written employment, change in control, severance and termination plans and
agreements of employees of the Company and its subsidiaries.
Directors' and Officers' Insurance; Indemnification. The Merger Agreement
provides that the Surviving Corporation shall, and that the Parent shall cause
the Surviving Corporation to, maintain in effect (i) for a period of six years
after the effective date of the Merger Agreement, the current provisions
regarding indemnification of current or former officers or directors (each an
"Indemnified Party") contained in the Certificate of Incorporation and By-Laws
of the Company and its subsidiaries and in any agreements between an Indemnified
Party and the Company or any of its subsidiaries, provided that in the event any
claim or claims are asserted or made within such six year period, all rights to
indemnification in respect of any claim or claims shall continue until final
disposition of any and all such claims, and (ii) for a period of six years, the
current policies of directors' and officers' liability insurance and fiduciary
liability insurance maintained by the Company (provided that the Parent or the
Surviving Corporation may substitute therefor policies of at least the same
coverage and amounts containing terms and conditions which are, in the
aggregate, no less advantageous to the insured and provided that such
substitution shall not result in any gaps or lapses in coverage with respect to
matters occurring at or prior to the effective date of the Merger) with respect
to claims arising from facts or events that occurred at or before the effective
date of the Merger; provided, that if such insurance cannot be so maintained or
obtained at a premium not greater than 150% of the premium for the Company's
current directors' and officers' liability insurance, the Parent may maintain or
obtain as much of such insurance as can be maintained or obtained at a cost
equal to 150% of the current annual premiums of the Company for such insurance.
Representations and Warranties. The Merger Agreement contains various
customary representations and warranties made by the Company to the Parent and
the Purchaser, including with respect to, among other things, organization,
capitalization, financial statements, public filings, litigation, compliance
with laws, the absence of certain changes with respect to the Company,
intellectual property, insurance, non-contravention, consents and Year 2000
issues.
Credit Agreement. In the Merger Agreement, the Company has agreed to use
its reasonable best efforts to obtain all necessary waivers and consents prior
to the consummation of the Offer so that the transactions contemplated by the
Merger Agreement will not result in or constitute a default under the Company's
credit agreement.
Rights Agreement. In the Merger Agreement, the Company has agreed to take
all actions necessary to cause the provisions of the Rights Agreement to be
inapplicable to the transactions contemplated by the Merger Agreement, without
any payment to holders of Rights.
Fees and Expenses. The Merger Agreement provides that, except as provided
above under the section captioned "Effect of Termination of Merger Agreement;
Fees" above, all Expenses incurred in connection with the Merger Agreement and
the transactions contemplated thereby shall be paid by the party incurring such
Expenses. The term "Expenses" includes all out-of-pocket expenses (including,
without limitation, all fees and expenses of counsel, accountants, investment
bankers, experts and consultants to a party hereto and
7
<PAGE> 9
its affiliates) incurred by a party or on its behalf in connection with or
related to the authorization, preparation, negotiation, execution and
performance of the Merger Agreement and the transactions contemplated thereby,
including the preparation, printing, filing and mailing of the documents related
to the Offer and the Proxy Statement and the solicitation of stockholder
approvals and all other matters related to the transactions contemplated hereby.
Other provisions. The Merger Agreement also contains provisions requiring
the Company to operate its business in the ordinary course, including precluding
the Company from issuing stock, precluding the Company from amending its
certificate of incorporation or by-laws, precluding the Company from paying
dividends (other than payments by subsidiaries of the Company to the Company or
to other wholly owned subsidiaries of the Company) or taking other steps
regarding its stock, precluding the Company from taking any action with respect
to its accounting policies or procedures, and precluding any action such would
result in any of the representations or warranties or the Merger Agreement being
untrue or in any of the conditions to the Merger set forth in the Merger
Agreement not being satisfied until the Effective Time.
CONFIDENTIALITY/STANDSTILL AGREEMENT
On March 15, 1999, the Company's agent Deutsche Bank Securities Inc.
(formerly and alternatively known as BT Alex. Brown, BT Wolfensohn and Deutsche
Alex. Brown, and herein referred to as "Deutsche Bank Securities") and Parent
entered into a confidentiality/standstill letter agreement (the
"Confidentiality/ Standstill Agreement"). Pursuant to the terms of the
Confidentiality/Standstill Agreement, Parent agreed, on its behalf and on behalf
of its affiliates, including Purchaser, and representatives, to, among other
things, (1) keep confidential certain business and financial information
concerning the Company and its subsidiaries and (2) for a period of three years
not to, without the prior written consent of the Company or the Company Board,
among other things; (i) propose any form of business combination relating to the
Company, (ii) acquire any voting securities or assets or options to acquire any
voting securities or assets of the Company, (iii) make, or in any way
participate, in any solicitation of any proxy to vote or seek to advise or
influence any person or entity with respect to the voting of any voting
securities of the Company, (iv) form, join or in any way participate in a
"group" within the meaning of Section 13(d)(3) of the Securities Exchange Act of
1934, as amended with respect to any voting securities of the Company, (v) enter
into any discussions, negotiations, arrangements or understandings with any
third party with respect to any of the foregoing, (vi) disclose any intention,
plan or arrangement inconsistent with the foregoing, or (vii) otherwise act,
alone or in concert with others, to seek control of the management, board of
directors, or policies of the Company.
The foregoing summary of the Confidentiality/Standstill Agreement is
qualified in its entirety by reference to the complete text of the
Confidentiality/Standstill Agreement, a copy of which is filed as Exhibit 7
hereto and is incorporated herein by reference.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a) RECOMMENDATION AND BACKGROUND.
The Board of Directors of the Company at a special meeting held on July 22,
1999 at which all directors were in attendance with the exception of Mr. Richard
Marriott, unanimously (i) determined that the Offer and the Merger, taken
together, are fair to, and in the best interests of, the Company's stockholders,
(ii) approved and declared advisable the Merger Agreement and (iii) recommended
that the Company's stockholders accept the Offer, tender their Shares thereunder
and approve and adopt the Merger and the Merger Agreement.
In December, 1998, management of the Company met with representatives of
Deutsche Bank Securities to discuss the range of strategic options available to
the Company. In January, 1999, the Company agreed to engage Deutsche Bank
Securities to provide advisory services with respect to strategic alternatives
that might lead to a transaction involving the Company and to assist the Company
in identifying and evaluating its potential strategic partners. Prior to this
time, Deutsche Bank Securities had, from time to time, provided strategic advice
to the Company under an existing consulting agreement with the Company. As part
of this
8
<PAGE> 10
process, Deutsche Bank Securities was asked to contact potential partners to
determine whether they would be interested in some form of joint investment or
business combination.
Beginning in January, Deutsche Bank Securities contacted companies that
were believed to be the most likely to be interested in, and capable of
successfully consummating a potential transaction with the Company. On March 16,
1999, Deutsche Bank Securities contacted Goldman, Sachs & Co., Parent's
financial advisor, to determine whether Parent was interested in acquiring an
equity interest in, or all of the Shares of, the Company. Parent and Deutsche
Bank Securities executed a confidentiality agreement dated as of March 15, 1999
relating to its review of the Company's business, results of operations and
financial condition.
On March 26, 1999, management of the Company together with representatives
of Deutsche Bank Securities met with representatives of Parent. Deutsche Bank
Securities delivered to Parent on behalf of the Company certain financial
diligence materials. During the period between March 15, 1999 and April 6, 1999,
Parent and its financial advisors conducted a limited financial, operational and
business due diligence review of the Company. As part of this process,
representatives of Company management met with Parent and its financial
advisors.
On April 6, 1999, the chief executive officers of the Company and Parent
met in Milan, Italy and discussed the strategies of the two companies and the
possibility of a combination. On April 7, 1999, management of the Company and
representatives of Deutsche Bank Securities met with representatives of Parent,
and representatives of Goldman, Sachs to discuss a strategic business review,
certain financial highlights and a long-range plan.
From April 14, 1999 through April 20, 1999, Parent's advisors visited the
Company's headquarters to conduct preliminary due diligence which included a
visit to certain facilities of the Company. During the week of April 26, 1999,
executives of Parent visited certain of the Company's facilities in the United
States.
At a meeting of the Board of Directors, on May 11, 1999, management of the
Company reviewed alternative actions being taken to strengthen the Company's
performance as an independent public company, while not closing off the
possibility of a business combination in the future. In this regard, Company
management requested the Board of Directors' authorization to proceed with a
plan to refinance its senior notes and bank credit facility.
On May 25, 1999 the financial advisors of Parent met with the
representatives of Deutsche Bank Securities and certain executives of the
Company to review the principal assumptions of the Company's long-term plan.
On June 3, 1999, Parent submitted to the Company a written preliminary
non-binding expression of interest to purchase a 51% interest in the Company for
a price ranging from $11.00 to $14.00 per Share. The proposal was subject to
several conditions, including a two month period to conduct due diligence and
Parent also requested exclusivity during this period. Subsequently,
representatives of Deutsche Bank Securities and Goldman, Sachs spoke as to the
terms and condition of Parent's preliminary non-binding expression of interest.
The Company advised Parent that it would not be interested in consummating a
transaction with Parent on the terms of its letter dated June 3, 1999
During June and July, management of the Company engaged in discussions with
another party that had verbally communicated to the Company a preliminary
non-binding expression of interest in acquiring the outstanding stock of the
Company. The Company permitted the party and its representatives to conduct
business in legal due diligence. These contacts did not result in any firm
proposal being presented to the Company.
On July 6, 1999, Parent delivered a letter to the Company revising its
preliminary expression of interest in acquiring 100% of the outstanding capital
stock of the Company at a price ranging from $11.00 to $15.00 per Share.
Deutsche Bank Securities advised Goldman, Sachs that this price range was not
acceptable. The Company advised Parent that it would not be interested in
consummating a transaction with Parent on the terms of its letter dated July 6,
1999.
9
<PAGE> 11
On July 8, 1999, Parent delivered a letter to the Company increasing the
price range set forth in its July 6, 1999 letter to $14.00 to $16.00 per Share.
On July 9, 1999, the Company advised Parent that the Company would be
interested in pursuing further discussions with Parent based upon the terms of
the Parent's July 8, 1999 letter and invited Parent, its legal counsel and its
financial advisors and other representatives to conduct due diligence with
respect to the Company during the period from Monday, July 12, 1999 through
Friday, July 16, 1999 at the offices of the Company's legal counsel.
Beginning on July 12, 1999 and continuing through the preparation of final
agreements dated July 26, 1999, Parent conducted extensive business and legal
due diligence.
On July 13, 1999, the Board of Directors of the Company held a meeting at
which all members were present (except Rosemary Collyer, who was not in
attendance) as well as management of the Company, legal counsel to the Company
and representatives of Deutsche Bank Securities, at which it considered the
proposal Parent's expression of interest. Management reviewed with the Board the
analysis of strategic alternatives available to the Company that had been
considered by the Board in its previous meetings. Management presented to the
Board the details of Parent's expression of interest as well as background
information concerning Parent. The Board also discussed management's plans to
refinance the Company's outstanding debt and the effect thereon of the ongoing
discussions with Parent. The Board authorized Company management to pursue
negotiations with Parent on an expedited basis.
During the weeks of July 12 and July 19, the Company and the Parent and
their respective legal and financial advisors negotiated the Merger Agreement.
On July 22, 1999, the Parent submitted a proposal to the Company offering
to acquire 100% of the Shares at a price of $15.75 per Share. The Parent's
proposal was subject to the satisfaction of certain conditions relating to,
among other things, the terms of the Merger Agreement and the continuation of
the Company's rights to certain intellectual property used in its business.
On the evening of July 22, 1999, the Board of Directors of the Company held
a special meeting at which all directors (except Mr. Richard Marriott) were in
attendance in person or by telephone to consider Parent's proposal. At this
meeting, the Board considered the terms and conditions of Parent's proposal. The
terms and conditions were reviewed with the Company's management, the Company's
legal counsel and representatives of Deutsche Bank Securities. The Board heard
and participated in a presentation by Deutsche Bank Securities with respect to
the financial terms of the proposed transaction. At the conclusion of its
presentation, representatives of Deutsche Bank Securities delivered the
preliminary opinion of Deutsche Bank Securities to the Board to the effect that,
as of such date, the consideration to be received by the holders of the
Company's stock pursuant to the Offer and the Merger is fair to such
stockholders from a financial point of view. The Board was advised that the
preliminary opinion was subject to approval by the fairness committee of
Deutsche Bank Securities.
The Directors unanimously (i) determined that the Offer and the Merger,
taken together, are fair to and in the best interests of the Company's
stockholders, (ii) approved and declared advisable the Merger Agreement and the
transactions contemplated thereby, and (iii) recommended that shareholders
accept the Offer and tender their Shares thereinto and approve and adopt the
Merger and the Merger Agreement, based upon such discussions, presentations and
opinions, however, the Board's approval and recommendation were conditioned upon
management of the Company and Parent reaching agreement within the parameters
set by the Board as to the remaining conditions and the issues discussed by the
Board (including, among other things, the amount of any break-up fee payable by
the Company in connection with the termination of the Merger Agreement in
connection with any superior proposal accepted by the Board), the final form of
the Merger Agreement and delivery to the Board of Deutsche Bank's final written
fairness opinion dated the date of the Merger Agreement. The Board instructed
management of the Company to reconvene the Board in the event that any remaining
issue or condition was not resolved within the parameters set by the Board. The
Board also instructed Joe. P. Martin, Senior Vice President, General Counsel and
Secretary to inform the Board when all conditions to the Board's approval had
been satisfied.
10
<PAGE> 12
From July 23, 1999 through July 25, 1999, management of the Company,
representatives of Parent and their respective legal counsel negotiated the form
of the Merger Agreement and the conditions and the remaining issues within the
parameters set by the Board. Deutsche Bank Securities delivered its final
written fairness opinion to the Board. A copy of the Deutsche Bank Securities
fairness opinion is filed as Exhibit 8 and incorporated by reference herein.
On the evening of July 25, 1999, Mr. Martin informed each director (other
than Mr. Richard Marriott) that all of the Board's conditions to its approval
had been satisfied as of such date, thereby making the Board's approval full,
final and complete.
On July 26, 1999, the Board of Directors of Parent held a meeting in Milan,
Italy to approve the Merger Agreement and the transactions contemplated
thereunder.
Thereafter, on July 26, 1999, the Parent, the Purchaser, and the Company
executed the Merger Agreement.
The Company and Parent issued a joint press release on July 26, 1999,
announcing the Offer and the Merger to the public. A copy of the press release
is filed as Exhibit 1 and incorporated by reference herein.
On August 2, 1999, the Purchaser commenced the Offer.
A copy of a letter to the stockholders of the Company communicating the
recommendation of the Board of Directors is filed as Exhibit 9 and incorporated
by reference herein.
(b) REASONS FOR THE RECOMMENDATION
In approving the Merger Agreement and the transactions contemplated thereby
and in making the recommendation described in the response to Item 4(a) above,
the Board of Directors considered a number of factors, including the following:
(1) The determination of the Board of Directors that, as a result of
the Board's extensive exploration, with the participation of the Company's
senior management, Deutsche Bank Securities and Donaldson Lufkin & Jenrette
Securities, Inc., of strategic alternatives available to the Company and
its review and evaluation of the results of that process, the Offer and the
Merger represent the most attractive alternatives available to the
Company's stockholders;
(2) The presentation of Deutsche Bank Securities concerning the
Company and the financial aspects of the Offer and the Merger and the
opinion of Deutsche Bank Securities, to the effect that, as of the date
thereof, and as of the date of the Merger Agreement, the consideration to
be received by the Company's stockholders pursuant to the Merger Agreement
was fair to such stockholders from a financial point of view;
(3) The terms and conditions of the Merger Agreement, including (1)
the proposed structure of the Offer and the Merger involving an immediate
cash tender offer followed by a merger for the same consideration, (2) the
fact that the Offer and the Merger are not conditioned upon the receipt of
financing, thereby enabling the Company's stockholders to promptly obtain
cash for their Shares, and (3) the ability of the Company pursuant to the
Merger Agreement to furnish non-public information concerning the Company
and its business, properties or assets to, and to engage in discussions or
negotiations with, any third party which has indicated an interest in
making a bona fide acquisition proposal, if the Board of Directors
concludes in good faith after consulting with its outside legal counsel and
financial advisors, that if consummated, that such acquisition proposal
would be more favorable to the Company or its shareholders from a financial
point of view than the Offer and the Merger.
(4) The determination of the Board of Directors, based on discussions
with management and Deutsche Bank Securities that Parent's proposed price
of $15.75 per share was firm and that Parent was not likely to increase its
offer price for the Shares;
(5) The availability of appraisal rights under Section 262 of the DGCL
in connection with the Merger to stockholders of the Company who perfect
and preserve such rights; and
11
<PAGE> 13
(6) The Board of Directors' familiarity with the Company's business,
financial condition, results of operations, current business strategy and
future prospects, the nature of the markets in which the Company operates,
the Company's position in such markets, the historical and current market
prices for the Shares.
The foregoing discussion of the information and factors considered by the
Company Board is not intended to be exhaustive. In view of the variety of
factors considered, the Board of Directors did not find it practicable to, and
did not, provide specific assessments of, quantify or otherwise assign relative
weights to the specific factors considered in reaching its determination and
recommendation. The determination of the Board of Directors to recommend that
the Company's stockholders accept the Offer and tender their Shares into the
Offer was made after consideration of all of the factors taken as a whole. In
addition, individual members of the Board of Directors may have given different
weight to different factors.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The Company entered into a letter agreement with Deutsche Bank Securities
(the "Deutsche Bank Securities Agreement") on February 3, 1999, pursuant to
which the Company engaged Deutsche Bank Securities to provide advisory and
investment banking services with respect to the exploration of strategic
alternatives leading to possible a sale, merger or joint venture involving the
Company and another company in the food service or travel concession industry (a
"Strategic Transaction").
According to the terms and conditions of the Deutsche Bank Securities
Agreement, the Company agreed to pay Deutsche Bank Securities a cash fee: (a) in
the event that the Company announces in a press release an agreement in
principle to consummate a Strategic Transaction, or executes a definitive
agreement in respect of a Strategic Transaction or requests, and Deutsche Bank
Securities delivers, a fairness opinion, a fee of $1,000,000; and (b) in the
event a Strategic Transaction is consummated, a fee, payable at closing, equal
to 0.8 percent of the aggregate consideration payable to the Company or its
shareholders in such Strategic Transaction, and (c) 20% of any breakup fee
received by the Company in connection with a Strategic Transaction. Therefore,
in accordance with the terms of the Deutsche Bank Securities Agreement, the
Company will pay Deutsche Bank Securities a fee of $1,000,000 as a result of the
execution of the Merger Agreement and, in the event that the Merger is
consummated, the Company will pay to Deutsche Bank Securities a fee of 0.8
percent of the aggregate consideration payable to the Company shareholders in
respect of the Offer and the Merger.
The Company has reached an agreement with Donaldson, Lufkin & Jenrette
Securities Corporation ("DLJ") pursuant to which DLJ has performed advisory and
investment banking services to the Company in respect of the evaluation of the
Offer. Pursuant to this agreement, in the event that the Merger is consummated,
the Company will pay to DLJ fee of 0.4 percent of the aggregate consideration
payable to the Company shareholders in respect of the Offer and the Merger.
Pursuant to the engagements of Deutsche Bank Securities and DLJ, the
Company has also agreed to reimburse each of Deutsche Bank Securities, Inc. and
DLJ respectively, for certain reasonable out-of-pocket expenses (including the
reasonable fees and disbursements of legal counsel) and to indemnify each of
Deutsche Bank Securities, Inc. and DLJ and certain of their respective related
parties from and against certain liabilities, including liabilities under the
federal securities laws, arising out of their respective engagements.
Neither the Company nor any person acting on its behalf has employed,
retained or compensated any other person to make solicitations or
recommendations to stockholders on its behalf concerning the Offer or the
Merger.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) During the past 60 days, the Company repurchased shares of common stock
in brokerage transactions effected on the New York Stock Exchange pursuant to
the Company's 1.9 million share repurchase program, authorized by the Board of
Directors in 1998. The following table sets forth the date,
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<PAGE> 14
number of shares, price per share and total purchase price for each repurchase
by the Company of Company Common Stock during the past 60 days:
<TABLE>
<CAPTION>
DATE OF NUMBER OF PRICE PER TOTAL
REPURCHASE SHARES SHARE PURCHASE PRICE
---------- --------- --------- --------------
<S> <C> <C> <C>
June 2,
1999....... 5,000 $8.125 $ 40,625
June 3,
1999....... 5,000 8.000 40,000
June 8,
1999....... 5,000 8.438 42,187
June 11,
1999....... 3,500 7.875 27,703
June 17,
1999....... 30,000 7.625 228,750
</TABLE>
The Company has no knowledge of any transactions in the securities of the
Company effected during the past 60 days by any executive, officer, director,
affiliate or subsidiary of the Company.
(b) To the best knowledge of the Company, its executive officers,
directors, affiliates and subsidiaries presently intend to tender, pursuant to
the Offer, all Shares which are held of record or beneficially owned by such
persons or to vote such Shares in favor of the approval and adoption of the
Merger, unless the recommendation of the Company's Board of Directors shall have
been withdrawn or materially modified or permitted by the Merger Agreement.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
(a) Except as set forth in this Schedule 14D-9, no negotiation is being
undertaken or is underway by the Company in response to the Offer which relates
to or would result in: (1) an extraordinary transaction such as a merger or
reorganization, involving the Company or any subsidiary of the Company; (2) a
purchase, sale or transfer of a material amount of assets by the Company or any
subsidiary of the Company; (3) a tender offer for or other acquisition of
securities by or of the Company; or (4) any material change in the present
capitalization or dividend policy of the Company.
(b) Except as set forth in this Schedule 14D-9, there are no transactions,
board resolutions, agreements in principle or signed contracts in response to
the Offer which relate to or would result in one or more of the matters referred
to in Item 7(a) above.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
(a) The Information Statement attached as Schedule I hereto is being
furnished in connection with the possible designation by Purchaser, pursuant to
the Merger Agreement, of certain persons to be appointed to the Company's Board
of Directors other than at a meeting of the Company's stockholders.
(b) As a Delaware corporation, the Company is subject to the provisions of
Section 203 of the DGCL ("Section 203"). In general, Section 203 prevents an
"interested stockholder" (defined generally as a person who owns or has the
right to acquire 15% or more of a corporation's outstanding voting stock) from
engaging in a "business combination" (defined generally to include mergers and
certain other transactions) with a Delaware corporation for a period of three
years following the time such person became an interested stockholder unless,
among other things, the corporation's board of directors approves such business
combination or the transaction in which the interested stockholder becomes an
interested stockholder prior to the time the interested stockholder becomes
such. As described in the response to Item 3(b) above, the Merger Agreement
provides that the Company and the Company Board, subject to its fiduciary
duties, will have granted such approvals, if any, and will have taken such
actions, if any, as are necessary so that the transactions contemplated by the
Merger Agreement may be consummated as promptly as practicable on the terms
contemplated thereby and otherwise will have acted to render inapplicable,
eliminate or minimize the effects of Section 203 or any other similar statute as
may be applicable to the transactions to be undertaken pursuant to the Merger
Agreement. Article Fifteenth of the Company's Certificate of Incorporation
imposes similar restrictions with respect to business combination transactions
with an interested shareholder (as defined therein).
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<PAGE> 15
In accordance with the Merger Agreement, Section 203 and Article Fifteenth
of the Company's Certificate of Incorporation, at its meeting on July 22, the
Board of Directors unanimously approved the Offer and the Merger and determined
to make the restriction of Section 203 and Article Fifteenth inapplicable to the
Offer and the Merger and the other transaction contemplated under the Merger
Agreement.
(c) In December, 1995, the Company's Board of Directors approved and
adopted the Rights Agreement and declared a dividend of one right for each share
outstanding at the close of business on December 29, 1995. On December 22, 1995,
the Company and First Chicago Trust Company of New York, as Rights Agent,
entered into the Rights Agreement.
In connection with the execution and delivery of the Merger Agreement, the
Company and the Rights Agent executed an amendment to the Rights Agreement
effective July 26, 1999, pursuant to which Parent and its affiliates including
Purchaser, are excluded from the definition of Acquiring Person for purposes of
the Rights Agreement in connection with the acquisition of beneficial ownership
of Shares pursuant to the Offer or the Merger, in each case in accordance with
the terms of the Merger Agreement. In addition, the amendment provides that a
Distribution Date (as defined therein) will not be deemed to have occurred
solely as a result of the approval, execution or delivery of the Merger
Agreement or the making or acceptance for payment of Shares pursuant to the
Offer or the consummation of the Merger, in each case in accordance with the
Merger.
The foregoing summary of the Rights Agreement and the amendment thereto is
qualified by reference to the complete texts of the Rights Agreement and
amendment thereto, copies of which are filed as Exhibits 10 and 11 hereto,
respectively, and incorporated by reference herein.
(d) Under Section 253 of the DGCL, if Purchaser acquires, pursuant to the
Offer or otherwise, at least 90% of the outstanding Shares, Purchaser will be
able to effect the Merger after consummation of the Offer without a vote of the
Company's stockholders. However, if Purchaser does not acquire at least 90% of
the outstanding Shares pursuant to the Offer or otherwise, a vote of the
Company's stockholders is required under the DGCL.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<S> <C>
Exhibit 1 -- Press Release issued by the Company and Parent, on July 26,
1999 (incorporated by reference to Exhibit 20.1 to the
Company's Form 8-K, filed by the Company on July 7, 1999).
Exhibit 2 -- Change in Control Plan.
Exhibit 3 -- Restated Comprehensive Stock Plan.
Exhibit 4 -- Employee Stock Purchase Plan.
Exhibit 5 -- Non-Employee Directors' Deferred Stock Compensation Plan
(incorporated by reference to Exhibit 4.1 to Form S-8, filed
by the Company on June 21, 1996).
Exhibit 6 -- Agreement and Plan of Merger, dated as of July 26, 1999, by
and among Parent, Purchaser and the Company
Exhibit 7 -- Confidentiality/Standstill Agreement, dated March 15, 1999,
between Parent and Deutsche Bank Securities.
Exhibit 8 -- Opinion of Deutsche Bank Securities, Inc., dated July 26,
1999.
Exhibit 9 -- Letter to Stockholders dated as of July 30, 1999.*
Exhibit 10 Rights Agreement, dated as of December 22, 1995, between the
Company and First Chicago Trust Company of New York
(incorporated by reference to Exhibit 4.2 to the Company's
Annual Report on Form 10-K for 1995).
Exhibit 11 Amendment to the Rights Agreement, dated as of July 26,
1999, between the Company and First Chicago Trust Company of
New York.
</TABLE>
- ---------------
* Included in materials being distributed to stockholders by Company.
14
<PAGE> 16
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: July 30, 1999
HOST MARRIOTT SERVICES CORPORATION
By: /s/ JOE P. MARTIN
------------------------------------
Name: Joe P. Martin
Title: Senior Vice President,
General Counsel and
Secretary
15
<PAGE> 17
SCHEDULE I
HOST MARRIOTT SERVICES CORPORATION
6600 ROCKLEDGE DRIVE
BETHESDA, MARYLAND 20817
------------------------
INFORMATION STATEMENT PURSUANT TO SECTION 14(F) OF THE
SECURITIES EXCHANGE ACT OF 1934 AND RULE 14F-1 THEREUNDER
This Information Statement is being mailed on or about July 30, 1999, as
part of the Solicitation/ Recommendation Statement on Schedule 14D-9 (as amended
from time to time, the "Schedule 14D-9") of Host Marriott Services Corporation,
a Delaware corporation ("the Company"), to the holders of record of shares of
common stock, no par value per share, of the Company (the "Common Stock").
Capitalized terms used and not otherwise defined herein shall have the meaning
ascribed to them in the Schedule 140-9. You are receiving this Information
Statement in connection with the possible election of persons designated by
Purchaser to a majority of the seats on the Company's Board of Directors. The
Merger Agreement requires that the Company, after the purchase by the Purchaser
pursuant to the Offer of not less than sixty-six and two-thirds percent of the
outstanding Shares on a fully diluted basis, cause the Purchaser's designees to
be elected to a majority of the seats on the Board of Directors, as set forth
below.
This Information Statement is required by Section 14(f) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and Rule 14f-1 thereunder.
You are urged to read this Information Statement carefully. You are not,
however, required to take any action.
Pursuant to the Merger Agreement, Purchaser commenced the Offer on July 30,
1999. The Offer is scheduled to expire at 12:00 Midnight, New York City time, on
August 26, 1999, unless the Offer is extended.
The information contained in or incorporated by reference into this
Information Statement concerning Parent, Purchaser and the Purchaser's Designees
(as hereinafter defined) has been furnished to the Company by Parent, and the
Company assumes no responsibility for the accuracy or completeness of such
information.
BOARD OF DIRECTORS AND EXECUTIVE OFFICERS
GENERAL
The Shares are the only class of voting securities of the Company
outstanding. Each Share has one vote. As of July 26, 1999, there were 33,569,652
Shares issued and outstanding. The number of directors comprising the Company
Board is fixed by the bylaws, which provide that the Company Board shall consist
of no fewer than three directors, with the exact number to be fixed by
resolution of the Company Board. Pursuant to a resolution adopted by the Company
Board, the Company Board currently consists of eight members. Each director
holds office until such director's successor is elected and qualified. Subject
to the Company's certificate of incorporation and applicable law, any director
or the entire the Company Board may be removed, with or without cause, at any
meeting of the Company's stockholders by 66 2/3% of the Shares represented and
entitled to vote.
THE DESIGNEES
The Merger Agreement provides that, promptly upon the acceptance for
payment of, and payment by Purchaser in accordance with the Offer for not less
than 66 2/3% of the total issued and outstanding Shares on a fully diluted
basis, Purchaser shall be entitled to designate such number of members of the
Company Board (the "Designees"), rounded up to the next whole number, equal to
that number of directors which equals the product of the total number of
directors on the Company Board (including vacancies, if any, and subject to
I-1
<PAGE> 18
adjustment for newly created directorships) multiplied by the percentage that
such number of Shares owned, beneficially or of record, in the aggregate by
Parent and Purchaser bears to the total number of Shares issued and outstanding
on a fully diluted basis. Parent intends to cause Purchaser to designate the
Parent Designees. Notwithstanding the foregoing, the Merger Agreement further
provides that, until the Effective Time (as defined in the Merger Agreement),
there shall be at least three directors on the Company's Board of Directors who
were directors as of the date of the Merger Agreement (the "Continuing
Directors") and that certain actions to be taken by the Company's Board of
Directors following such time as the Designees constitute at least a majority of
the Company Board and until the Effective Time shall require the vote of not
less than a majority of Continuing Directors provided that if such vote is not
permitted under applicable law, the Parent and Purchaser shall use their
respective reasonable best efforts to have such action approved by unanimous
vote of the entire Board of Directors.
The Parent has informed the Company that is will choose its Designees from
the executive officers of Parent listed in Annex A attached hereto. The
Purchaser has informed the Company that each of the Designees listed in Annex A
has consented to act as a director of the Company, if so designated. Unless
otherwise indicated, the business address of each Designee on Annex A is c/o
Autogrill S.p.A., Via Caldera, 21 20153, Milan, Italy and each Designee is a
citizen of Italy.
The Parent has informed the Company that none of the Designees (1) is
currently a director of, or holds any position with, the Company, (2) has a
family relationship with any of the directors or executive officers of the
Company, or (3) to the best knowledge of Parent, beneficially owns any
securities (or rights to acquire any securities) of the Company. The Company has
been advised by Parent that, to the best of Parent's knowledge, none of the
Designees has been involved in any transactions with the Company or any of its
directors, executive officers or affiliates which are required to be disclosed
pursuant to the rules and regulations of the Securities and Exchange Commission
(the "SEC"), except as may be disclosed herein or in the Schedule 14D-9.
BOARD OF DIRECTORS OF THE COMPANY
The names of the current members of the Company Board of Directors, their
ages, and certain information about them are set forth below. Each person is a
citizen of the United States, and the business address of each person is c/o
Host Marriott Services Corporation, 6600 Rockledge Drive, Bethesda, Maryland
20817.
DIRECTORS OF THE COMPANY
The names, ages and principal occupation for the past five years and
directorships of the Company's directors and executive offices is as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
William J. Shaw................................ 53 Chairman
J. Willard Marriott, Jr. ...................... 67 Director
Richard E. Marriott............................ 60 Director
William W. McCarten............................ 50 President, Chief Executive Officer
and Director
Rosemary M. Collyer............................ 53 Director
R. Michael McCullough.......................... 60 Director
Gilbert T. Ray................................. 54 Director
Andrew J. Young................................ 67 Director
</TABLE>
WILLIAM J. SHAW is Chairman of the Board of Host Marriott Services
Corporation. He is also President, Chief Operating Officer and a director of
Marriott International. Mr. Shaw also serves as Chairman of the Board of
Directors of Sodexho Marriott Services, Inc. Mr. Shaw joined Marriott
Corporation in 1974, was elected Corporate Controller in 1979 and a Vice
President in 1982. In 1986, Mr. Shaw was elected Senior Vice
President -- Finance and Treasurer. He was elected Executive Vice President and
Chief Financial
I-2
<PAGE> 19
Officer in April 1988. In February 1992, he was elected President of the
Marriott Service Group, which comprised Marriott Corporation's and later
Marriott International's contract services line of business. Mr. Shaw also
serves on the Board of Trustees of the University of Notre Dame and the Suburban
Hospital Foundation. In addition to his responsibilities as Chairman of the
Board, Mr. Shaw also serves as Chair of the Executive Committee of the Company's
Board.
J. WILLARD MARRIOTT, JR. is Chairman of the Board and Chief Executive
Officer of Marriott International. He is a director of Host Marriott
Corporation, General Motors Corporation and the U.S.-Russia Business Council.
Mr. Marriott also serves on the Board of Trustees of the National Geographic
Society and the Board of Directors of Georgetown University. He is a member of
the Executive Committee of the World Travel & Tourism Council, and a member of
the Business Council. J. Willard Marriott, Jr. and Richard E. Marriott are
brothers.
RICHARD E. MARRIOTT is Chairman of the Board of Host Marriott Corporation,
and a director of Marriott International. Prior to his election as Chairman of
the Board of Directors of Host Marriott Corporation, he served as Vice Chairman
of the Board and as an Executive Vice President of Marriott Corporation, before
it changed its name to Host Marriott Corporation. He also serves as Chairman of
the Board of First Media Corporation, President and Trustee for the Marriott
Foundation for People with Disabilities, and as a director of Gallaudet
University, Federal City Council, Polynesian Cultural Center, Primary Children's
Center, Boys and Girls Club of America, Southeast Region, and the J. Willard
Marriott Foundation. He is a past President of the National Restaurant
Association. Richard E. Marriott and J. Willard Marriott, Jr. are brothers.
WILLIAM W. MCCARTEN is President and Chief Executive Officer of the
Company. He served as President of Host Marriott Corporation's Operating Group,
which conducted substantially all of Host Marriott Corporation's airport,
tollroad and other businesses now conducted by the Company. He joined Marriott
Corporation in 1979, was elected Vice President, Corporate Controller and Chief
Accounting Officer in 1985 and Senior Vice President in 1986. He was named
Executive Vice President, Host and Travel Plazas in 1991 and President, Host and
Travel Plazas in 1992. In 1993, he became President of Host Marriott
Corporation's Operating Group and in 1995 was elected President and Chief
Executive Officer and a director of the Company. Mr. McCarten has served on the
Advisory Board of the McIntire School at the University of Virginia and is a
past chairman.
ROSEMARY M. COLLYER is a partner with the law firm of Crowell & Moring LLP
in Washington, D.C., where she practices labor and employment law and has served
as Chairman of the firm's Management Committee. Prior to joining Crowell &
Moring, Ms. Collyer served as General Counsel of the National Labor Relations
Board. Ms. Collyer previously served as Chairman of the Federal Mine Safety and
Health Review Commission. Ms. Collyer was an attorney with the law firm of
Sherman and Howard in Denver, Colorado before her government service. Ms.
Collyer currently serves as Chair of the Compensation Policy Committee of the
Company's Board.
R. MICHAEL MCCULLOUGH is the Retired Chairman and CEO of the international
management consulting firm of Booz-Allen & Hamilton Inc. During his more than 30
years with Booz-Allen, he was elected a partner in 1971 and he was elected
Chairman and CEO in 1984. He is currently a Managing Director of Ariston
Partners. He has been a member of the Board of Directors of the Professional
Services Council from 1980-1994, serving as President from 1982 until 1985. He
has served as a member of the Advisory Council of the Graduate School of
Business at Stanford University, the Boards of Directors of the Wolf Trap
Foundation, Caterair International, and the University of Detroit. He currently
serves on the Boards of Directors of Capital Automotive REIT, O'Sullivan
Corporation, and Watson Wyatt Worldwide.
GILBERT T. RAY is a partner with the law firm of O'Melveny & Myers LLP in
Los Angeles, California. He has extensive experience with corporate and
international financings, as well as tax-exempt securities. He also heads the
governmental relations practice for the firm. Mr. Ray is a director of the
Automobile Club of Southern California and a member of numerous other boards
including the Los Angeles Convention & Visitors Bureau (Chairman of the Board
for 1994 -- 1995), the Los Angeles Area Chamber of Commerce (Executive
Committee -- since 1998), the John Randolph Haynes and Dora Haynes Foundation,
and Ashland University (Ohio).
I-3
<PAGE> 20
ANDREW J. YOUNG has served as Chairman of GoodWorks International LLC since
1997. Ambassador Young has spent more than 40 years in public service. He was
elected to three terms in the U.S. Congress, representing the Fifth
Congressional District of Georgia. In 1977, he was appointed U.S. Ambassador to
the United Nations. He was elected Mayor of Atlanta, Georgia in 1981, and
reelected in 1985. He is a director of Delta Airlines, Thomas Nelson Publishing
Company, Cox Communications, Film Fabricators, the Martin Luther King, Jr.
Center, and the Argus Board. Ambassador Young also serves as Chairman of the
Southern Africa Enterprise Development Fund (SAEDF). Ambassador Young currently
serves as Chair of the Nominating and Corporate Governance Committee of the
Company's Board.
THE BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD
The Board of Directors is composed of eight members. Mr. McCarten is the
only employee of the Company who serves on the Board. The Board met four times
in 1998.
The Board has four standing Committees: (i) Executive, (ii) Audit, (iii)
Compensation Policy, and (iv) Nominating and Corporate Governance.
The members of the Executive Committee are William J. Shaw (Chair), William
W. McCarten and R. Michael McCullough. When the Board of Directors is not in
session, this Committee is authorized to exercise all powers of the Board of
Directors, subject to specific restrictions as to powers retained by the full
Board of Directors. No change in the membership of the Executive Committee is
contemplated for 1999. The Committee met once in 1998.
The Audit Committee is composed of three directors who are not employees of
the Company: R. Michael McCullough (Chair), Gilbert T. Ray and Rosemary M.
Collyer. The Audit Committee meets at least five times a year with the
independent auditors, management representatives, internal auditors and the
Company's General Counsel; recommends to the shareholders appointment of
independent auditors; approves the scope of audits and other services to be
performed by the independent and internal auditors; and reviews the results of
internal and external audits, the accounting principles applied in financial
reporting, and financial and operational controls. The independent auditors,
internal auditors and the General Counsel of the Company have unrestricted
access to the Audit Committee and vice versa. The Committee met eight times in
1998.
The Compensation Policy Committee is composed of three directors who are
not employees of the Company: Rosemary M. Collyer (Chair), Gilbert T. Ray and R.
Michael McCullough. The Compensation Policy Committee's duties include
establishing policies and procedures relating to senior executive compensation
and various employee stock plans, and approval of senior executive bonuses and
stock awards. The Committee also establishes performance standards for senior
executives and determines annually whether these performance standards have been
satisfied. The Committee met eight times in 1998.
The Nominating and Corporate Governance Committee is composed of three
directors who are not employees of the Company: Ambassador Andrew J. Young
(Chair), Rosemary M. Collyer, and R. Michael McCullough. It considers candidates
for election as directors and is responsible for making recommendations with
regard to corporate governance. In addition, the Committee fulfills an advisory
function with respect to a range of matters affecting the Board of Directors and
its Committees, including the making of recommendations with respect to
qualifications of director candidates, compensation of directors, the selection
of committee chairs, committee assignments and related matters affecting the
functioning of the Board. The Committee met once in 1998.
Women and minorities hold three of the seven non-employee director
positions on the Board. The Compensation Policy Committee is chaired by a woman
and the Nominating and Corporate Governance Committee is chaired by an
African-American man. Three of the four Committees of the Board (Audit,
Compensation Policy and Nominating and Corporate Governance) have a majority of
their membership composed of women and minorities.
During 1998, no incumbent member of the Company's Board of Directors
attended fewer than 75% of the aggregate of (1) the total number of Board
meetings held and (2) the total number of meetings of committees of the Board on
which he or she served.
I-4
<PAGE> 21
COMPENSATION OF DIRECTORS
Mr. McCarten, the only employee director of the Company, receives no
additional compensation for his services as a director. Directors who are not
employees (which are all other directors of the Company) receive an annual
retainer fee of $25,000 (with the exception of the Chairman of the Board of
Directors, who receives an annual retainer of $50,000) as well as an attendance
fee of $1,250 for each shareholders' meeting, meeting of the Board of Directors
or meeting of a committee of the Board of Directors, regardless of the number of
meetings held on a given day. The Chair of each committee of the Board of
Directors receives an additional annual retainer fee of $1,250, with the
exception of the Executive Committee Chair. Mr. Shaw does not receive an annual
retainer fee for his duties as Chair of the Executive Committee. Directors are
reimbursed for ordinary and reasonable travel expenses and other out-of-pocket
costs incurred in attending meetings.
OWNERSHIP OF COMPANY SECURITIES
As of July 30, 1999, the Company had one outstanding class of equity or
equity-linked securities, common stock, no par value per share.
The following table sets forth information as to the shares of Common Stock
beneficially owned (or deemed to be beneficially owned pursuant to the rules of
the Securities and Exchange Commission) as of July 1, 1999. The information is
provided for directors, nominees, the chief executive officer and the four
additional most highly compensated executive officers of the Company, as well as
by all directors and executive officers of the Company as a group. It also
includes, to the best of the Company's knowledge, beneficial owners of 5% or
more of the outstanding shares of Common Stock.
<TABLE>
<CAPTION>
SHARES OF COMPANY % OF COMMON STOCK
COMMON STOCK BENEFICIALLY OUTSTANDING AS OF
NAME OWNED AS OF JULY 1, 1999 JULY 1, 1999
---- ---------------------------- -----------------
<S> <C> <C>
DIRECTORS:
Rosemary M. Collyer....................... 1,000 *
J. Willard Marriott, Jr. ................. 2,566,930(2)(5) 7.64%
Richard E. Marriott....................... 2,512,507(3) 7.48%
William W. McCarten....................... 599,973(4) 1.78%
R. Michael McCullough..................... (5) *
Gilbert T. Ray............................ (5) *
William J. Shaw........................... 37,150(5)(6) *
Andrew J. Young........................... (5) *
NON-DIRECTOR EXECUTIVE OFFICERS:
Brian W. Bethers.......................... 139,612(7) *
Joe P. Martin............................. 116,231(8) *
John J. McCarthy.......................... 268,872(9) *
Thomas G. O'Hare.......................... 197,579(10) *
All directors and executive officers as a
group: 5,852,395 17.42%
Beneficial Owners of 5% or more:
Wanger Asset Management, L.P. ......... 2,845,900(11) 8.43%
FMR Corp. ............................. 2,832,100(12) 8.41%
Prudential Insurance Company of
America.............................. 1,918,245(13) 5.71%
</TABLE>
- ---------------
* Less than one percent (1%).
(1) Based on the number of shares outstanding, plus the number of shares
acquirable by the specified person(s) by stock option exercise within 60
days of July 26, 1999. The Common Stock ownership for Wanger Asset
Management, L.P., FMR Corp., and Prudential Insurance Company were recorded
at dates other than July 26, 1999. Refer to notes 11-13.
(2) Includes (i) shares held in family trusts for which Mr. Marriott serves as
a trustee or co-trustee; (ii) shares held in family trusts in which he is a
beneficiary or co-beneficiary; (iii) shares held in
I-5
<PAGE> 22
partnerships in which the General Partner is indirectly controlled by Mr.
Marriott; and (iv) shares held by the J. Willard Marriott Foundation, for which
Mr. Marriott serves as a trustee with Richard E. Marriott and Alice Marriott.
The Foundation holds 601,657 shares, which is included in the total
beneficial ownership for both J. W. Marriott, Jr. and Richard E. Marriott,
but the Foundation's shares are counted only once in reporting the total
number of shares owned by all directors, nominees and executive officers as
a group. The shares do not include 39,177 shares held in a charitable
annuity trust created by the will of J.W. Marriott, Sr., in which J.W.
Marriott, Jr. and Richard E. Marriott have a remainder interest and of
which Alice Marriott is the trustee. It also does not include shares held
by members of the Marriott family other than J.W. Marriott, Jr. and Richard
E. Marriott. J.W. Marriott, Jr. does not hold any options to acquire shares
of Company Common Stock.
(3) Includes (i) shares held in family trusts for which Mr. Marriott serves as
a trustee or co-trustee; (ii) shares held in family trusts for which he is
a beneficiary or co-beneficiary; (iii) shares held by First Media Limited
Partners, whose General Partner is indirectly controlled by Mr. Marriott;
(iv) shares held by the J. Willard Marriott Foundation, for which Mr.
Marriott serves as a Trustee with J.W. Marriott, Jr. and Alice Marriott.
The Foundation holds 601,657 shares, which is included in the total
beneficial ownership for both Richard E. Marriott and J.W. Marriott, Jr.
but the Foundation's shares are counted only once in reporting the total
number of shares owned by all directors, nominees and executive officers as
a group; (v) options to acquire 11,140 shares within 60 days of July 26,
1999; and (vi) 45,160 shares of restricted stock.
(4) Includes (i) options to acquire 8,650 shares within 60 days of July 26,
1999; and (ii) 286,682 shares of restricted stock. Mr. McCarten did not
sell any Company Common Stock in 1998. These shares do not include stock
options that would vest in the event of a change in control.
(5) As a non-employee director, this director has requested that a percentage
of eligible director compensation be deferred toward the acquisition of
Common Stock pursuant to the Company's Non-employee Directors' Deferred
Stock Compensation Plan ("Directors' Plan"). These shares do not have
voting rights until distribution to the director upon retirement from the
Board. As of July 26, 1999, the following directors were deferring 100% of
their compensation into the Directors' Plan. The shares were attributed to
each participating director as follows: J.W. Marriott, Jr. 4,747 shares, R.
Michael McCullough 9,088 shares, Gilbert T. Ray 13,997 shares, William J.
Shaw 8,920 shares. Ambassador Young has requested 50% of his eligible
compensation be deferred into the Plan. As of July 26, 1999, Ambassador
Young had 3,742 shares attributed to him.
(6) Includes 1,400 shares of restricted stock.
(7) Includes (i) 14,676 shares attributed to Mr. Bethers' profit sharing plan
account; (ii) options to acquire 7,830 shares within 60 days of July 26,
1999; and (iii) 70,882 shares of restricted stock. These shares do not
include stock options that would vest in the event of a change in control.
(8) Includes (i) 13,650 shares attributed to Mr. Martin's profit sharing plan
account; (ii) options to acquire 473 shares within 60 days of July 26,
1999; and (iii) 61,869 shares of restricted stock. These shares do not
include stock options that would vest in the event of a change in control.
(9) Includes (i) 53,843 shares attributed to Mr. McCarthy's profit sharing
account; (ii) options to acquire 2,830 shares within 60 days of July 26,
1999; and (iii) 101,952 shares of restricted stock. These shares do not
include stock options that would vest in the event of a change in control.
(10) Includes (i) 55,824 shares attributed to Mr. O'Hare's profit sharing
account; (ii) options to acquire 1,820 shares within 60 days of July 26,
1999; and (iii) 89,013 shares of restricted stock. These shares do not
include stock options that would vest in the event of a change in control.
(11) Wanger Asset Management, L.P. and Wanger Asset Management, Ltd., which is
the general partner of Wanger Asset Management, L.P., report that they have
shared voting and dispositive power with respect to 2,845,900 shares of
Company Common Stock. Their principal address is 227 West Monroe Street,
Suite 3000, Chicago, Illinois 60606. Based on Schedule 13G dated February
8, 1999.
(12) FMR Corp. reports that it has sole dispositive power with respect to
2,832,100 shares of Company Common Stock and beneficially owns 2,832,100
shares of Company Common Stock. These shares are
I-6
<PAGE> 23
held by the Fidelity Magellan Fund. Edward C. Johnson 3d and Abigail
Johnson each has sole power to dispose of 2,832,100 shares. The address of
FMR Corp., Edward C. Johnson 3d and Abigail Johnson is 82 Devonshire
Street, Boston, Massachusetts 02109. Based on Amendment 3 to Schedule 13G
dated February 1, 1999. (13) The Prudential Insurance Company of America
reports that it has shared voting and dispositive power with respect to
1,062,145 shares of Company Common Stock and has sole voting and
dispositive power with respect to 856,100 shares of Company Common Stock.
Their principal address is 751 Broad Street, Newark, New Jersey 07102.
Based on Schedule 13G dated February 2, 1999.
EXECUTIVE OFFICERS
Provided below is information regarding the persons who are executive
officers (but not directors) of the Company.
<TABLE>
<CAPTION>
NAME BUSINESS EXPERIENCE PRIOR TO BECOMING
AND TITLE AGE AN EXECUTIVE OFFICER OF THE COMPANY
- -------------------------------- --- ---------------------------------------------
<S> <C> <C>
JOHN J. MCCARTHY 53 JOHN J. MCCARTHY joined Host International,
Executive Vice President, Inc. in 1974 as General Manager for the Tampa
Malls and International Business Airport Hotel. In 1978 he was promoted to
Director of Real Estate and he served as Vice
President, Hotel Operations beginning in
1979. In 1982 he was promoted to Regional
Vice President of Marriott Corporation's
Airport Division, Northeast. He was appointed
Vice President of Marriott Corporation's
Travel Plazas Division in 1989. In 1991, he
served as Senior Vice President, Travel
Plazas Operations. In 1992, he was appointed
Senior Vice President, Corporate Development
and Marketing. Mr. McCarthy was appointed
Senior Vice President of Host Marriott
Corporation's Operating Group in 1993. In
1995, Mr. McCarthy was appointed Executive
Vice President, Business Development for the
Executive Vice President, Company. In 1998,
Mr. McCarthy was appointed Malls and
International Executive Vice President, Malls
and International Business.
THOMAS G. O'HARE 47 THOMAS G. O'HARE joined Host International,
Executive Vice President, Inc. in 1975 as a Food and Beverage
North America Business Supervisor at Detroit Metro Airport. He was
promoted to General Manager at Newark
International Airport in 1978. In 1984, he
was named Vice President of Corporate
Development. He returned to Operations in
1987 as Regional Vice President and became
Senior Vice President for Airports in 1993.
Mr. O'Hare was appointed Senior Vice
President of Host Marriott Corporation's
Operating Group in 1993 and assumed the
position of Senior Vice President for
Operations in 1994. In 1995, Mr. O'Hare was
appointed Executive Vice President,
Operations for the Company. In 1998, Mr.
O'Hare became Executive Vice President, North
American Business.
</TABLE>
I-7
<PAGE> 24
<TABLE>
<CAPTION>
NAME BUSINESS EXPERIENCE PRIOR TO BECOMING
AND TITLE AGE AN EXECUTIVE OFFICER OF THE COMPANY
- -------------------------------- --- ---------------------------------------------
<S> <C> <C>
BRIAN W. BETHERS 39 BRIAN W. BETHERS joined Marriott Corporation
Executive Vice President and in 1985 as a financial analyst in the
Chief Financial Officer Operation, Planning and Control Department.
In 1989, he was promoted to Director of the
Host Operating Group Financial Planning
Department. In 1992, he became Senior
Director, Corporate Development. He was
appointed Vice President, Corporate
Development in 1993. Mr. Bethers returned to
Finance in 1995 when he was appointed Senior
Vice President and Chief Financial Officer of
the Company. In 1999, Mr. Bethers became
Executive Vice President and Chief Financial
Officer.
JOE P. MARTIN 52 JOE P. MARTIN joined Marriott Corporation in
Senior Vice President, General 1988 as Assistant General Counsel for Labor
Counsel and Secretary Law and Litigation. In 1992, he became Chief
Labor Counsel for Marriott Corporation's
Lodging Group and in 1993 became Associate
General Counsel of Host Marriott Corporation,
responsible for labor, employment litigation,
employee benefits, and executive compensation
matters. Prior to joining Marriott
Corporation, he was a trial and appellate
litigation with the law firm of Fulbright &
Jaworski, and held senior trial attorney
positions with the Civil Rights Division of
the United States Department of Labor, J.C.
Penney Company and CIGNA Corporation. Mr.
Martin became Senior Vice President and
General Counsel of the Company in 1995 and
Secretary in 1997.
TIMOTHY H. PEASE 39 TIMOTHY H. PEASE joined Host Marriott
Vice President, Controller and Services in 1995 as the Senior Director of
Chief Accounting Officer Corporate Accounting. Prior to joining Host
Marriott Services, Mr. Pease was a senior
manager with Arthur Andersen LLP. In 1998,
Mr. Pease was appointed Vice President,
Controller and Chief Accounting Officer of
the Company.
</TABLE>
I-8
<PAGE> 25
REPORT ON EXECUTIVE COMPENSATION BY
THE COMPANY'S COMPENSATION POLICY COMMITTEE
THE COMMITTEE
The Compensation Policy Committee (the "Committee") of the Board of
Directors of the Company oversees the compensation of senior executives of the
Company to ensure that compensation serves to motivate and retain senior
executives while also being in the best interests of the Company and its
shareholders.
THE OBJECTIVES OF EXECUTIVE COMPENSATION
The Company has established three key objectives for its executive
compensation:
-- To build a strong relationship between shareholder return and executive
compensation by providing a compensation structure that motivates the
achievement of objectives that drive shareholder value.
-- To provide performance-based rewards that effectively link compensation
to the achievement of results.
-- To provide positive incentives that motivate achievement of both short
and long term goals by offering competitive compensation that maintains
a strategic balance between base compensation and incentive compensation
so as to instill a willingness to take well-calculated risks.
EXECUTIVE COMPENSATION
The Committee conducts an annual review of the components of executive
compensation to ensure the competitiveness of the compensation of the Chief
Executive Officer and the individuals who report directly to the CEO. The
Committee determines the compensation of direct reports of the Chief Executive
Officer ("CEO"), and makes recommendations regarding the compensation of the CEO
to the Board of Directors. The recommendations of the Committee regarding CEO
compensation have never been modified or rejected by the Board. The compensation
of persons other than the CEO and his direct reports is determined by the
management of the Company. To assist the Committee, the Company's Vice President
of Compensation presents compensation recommendations to the Committee for the
CEO and his direct reports based on data obtained from independent compensation
consultants, which reflects compensation practices of industry companies of
approximately the Company's size. The Committee establishes executive
compensation based on this information. The Committee generally sets executive
cash compensation (base salary plus targeted bonus) at the median level of the
survey data.
Due to the Committee's and the Company's emphasis on pay for performance
and the objective of building a strong relationship between shareholder return
and executive compensation, executive compensation is weighted toward long-term
stock incentives.
ANNUAL CASH COMPENSATION
Annual cash compensation is made up of two components -- base salary and
annual cash incentive (bonus). The Committee annually reviews base salaries and
annual cash incentives for the CEO and the CEO's direct reports and approves the
appropriate compensation and annual incentives. As discussed above, the
Committee determines annual base salaries for the direct reports of the CEO
based on recommendations made to the Committee by the CEO and the Company's Vice
President of Compensation and Towers Perrin, the Committee's outside independent
compensation consultant retained to assist the Committee. The annual cash
incentive for each executive is based on annual performance goals set by the
Committee. For 1998, the performance goals included: targeted levels of EBIT
(earnings before interest and taxes) and interest income and business
development growth. The Committee determined that annual cash incentive payouts
to the CEO and his direct reports for 1998, under their individual bonus plans,
would range from 33.1% to 55.2% of their respective base salaries.
I-9
<PAGE> 26
STOCK INCENTIVES
The Company has made stock awards and will make future awards under the
Company's shareholder approved Comprehensive Stock Plan (the "CS Plan"). The
Committee is responsible for administering the CS Plan.
Restricted stock is the current primary long-term incentive vehicle for the
CEO and his direct reports. The CS Plan permits the Committee to approve awards
subject to either "General Restrictions", usually relating to continued
employment, or "Performance Restrictions." The Committee believes that
performance-based awards are in the best interest of shareholders and thus the
stock awards it makes are weighted more heavily toward such awards.
In August 1998, the Committee made new grants of restricted stock and
performance-based stock options to Mr. McCarten and certain senior executives.
The grants are intended to reward Mr. McCarten and his management team if they
significantly increase shareholder value. The grants consist of a time-based
award of restricted stock, which vests in three equal installments beginning
August 1999, so long as the executive continues in employment, and a long term
performance award intended to vest when the Company meets or exceeds the 75th
percentile of Total Shareholder Return of the Russell 2000 index, over a period
of not less than 3 years. The performance awards will vest after seven years
from the date of the grant (August 2005) if the performance goals have not been
satisfied. The annual grant consists of restricted shares and the long term
performance award is a mix of restricted stock and stock options. The grants
were based on calibrated multiples of each recipient's base salary. The
multiples ranged from one to two and one half times base salary for the annual
grants, and three to six times base salary for the performance grants. Each of
these grants is made on a pretax basis. As a result, in all cases, the number of
shares released to the executive will be reduced by at least the current 28%
federal income tax withholding requirement and the applicable state income tax
rate. Taxes are paid in shares withheld at the time of vesting.
The Committee's performance standards for earning release of the 1998
installment of previously granted restricted shares were targeted levels of
return on investment, profitability and liquidity. The Committee determined that
only 57.2% of the available restricted shares were earned by Mr. McCarten and
the senior executives.
1998 COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
The Committee recommends the total cash compensation of Mr. McCarten, which
must be approved by the full Board of Directors. The Board has never modified or
rejected any recommendation by the Committee regarding the CEO's compensation.
The Committee is solely responsible for establishing performance-based
compensation goals for the CEO's bonus and the release of restricted stock and
for determining whether the Committee's goals have been satisfied. In 1998, Mr.
McCarten earned a base salary of $485,000. The Committee, with the approval of
the Board, established a 1998 annual cash incentive plan through which he could
have earned 75% of his base salary. The Committee determined that in 1998 Mr.
McCarten earned a payout of 55.2% of his base salary.
In 1993, when the Company was part of Host Marriott Corporation, Mr.
McCarten received a five year grant of Host Marriott Corporation restricted
stock which expired at the end of 1998. Forty percent of the award was
time-based restricted stock, which required him to continue in employment, and
sixty percent of the shares awarded were performance-based, requiring
achievement of performance targets. On February 2, 1996, Mr. McCarten converted
all of his remaining restricted shares of Host Marriott Corporation stock into
Company restricted stock. The converted Company restricted shares were also
forty percent time-based and sixty percent performance-based. The Committee sets
the annual performance goals which Mr. McCarten must achieve for release of his
performance-based restricted stock. For 1998, the Committee targeted levels of
return on investment, profitability and liquidity. On a pretax basis, Mr.
McCarten earned release of 60,174 performance-based restricted shares for 1998
and also earned release of 70,132 shares of time-based restricted stock. A total
of 45,025 shares of restricted stock were not earned in 1998. Under the terms of
the 1993 grant, the unearned performance-based shares will be available to Mr.
McCarten upon his retirement from the Company.
I-10
<PAGE> 27
POLICY ON DEDUCTIBILITY OF EXECUTIVE COMPENSATION UNDER INTERNAL REVENUE CODE
SECTION 162(m)
Section 162(m) of the Internal Revenue Code of 1986, as amended ("Code"),
limits the deductibility of compensation paid to certain executive officers to
$1 million unless certain requirements are met. Any compensation considered
performance-based is not subject to the $1 million limitation on deductibility.
The Committee's intention is to establish performance-based compensation for the
Company's senior management and qualify appropriate compensation under the
performance requirements of Section 162(m).
Respectfully submitted,
Rosemary M. Collyer, Chair,
Gilbert T. Ray, Member,
R. Michael McCullough, Member,
Compensation Policy Committee
I-11
<PAGE> 28
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following Summary Compensation Table sets forth the compensation paid
during the past three fiscal years to the listed executive officers. The
compensation amounts in the following table represent all compensation paid to
each individual in connection with his position with the Company in 1998, 1997
and 1996. There are no employment agreements between the Company and the listed
executives. The listed executives do participate in various Company employee
benefit plans and have vested rights under certain of these plans. These plans
include the Company's Employee Profit Sharing, Retirement and Savings Plan and
Trust, the Company's Executive Deferred Compensation Plan and the Company's
Change in Control Plan. The executives also have rights under the restricted
stock awards made by the Compensation Policy Committee and the Board, which
generally vest the unvested shares in the event of certain contingencies such as
the death, permanent disability of the executive, retirement with the approval
of the Board, or a change in control.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
-------------------------------- -------------------------------------------------
OTHER
ANNUAL RESTRICTED STOCK LTIP ALL OTHER
NAME AND FISCAL SALARY BONUS COMPENSATION STOCK AWARDS OPTIONS PAYOUTS COMPENSATION
PRINCIPAL POSITION YEAR (1)($) (2)($) (3)($) (4)(5)(8)($) (#) (6)($) (7)($)
------------------ ------ ------- ------- ------------ ------------ ------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
William W McCarten 1998 485,000 267,720 0 990,635 245,518 470,139 35,109
Chief Executive 1997 465,000 290,625 0 0 0 1,352,070 26,802
Officer and President 1996 458,654 326,103 0 0 0 1,071,767 27,975
John J. McCarthy 1998 297,000 150,901 0 303,834 125,501 132,688 367,346
Executive Vice 1997 285,000 165,870 0 0 0 381,600 98,278
President, Malls and 1996 280,288 185,551 0 240,002 0 396,945 39,999
International Business
Thomas G. O'Hare 1998 260,000 131,880 0 265,530 109,682 121,633 24,770
Executive Vice 1997 249,000 144,918 0 0 0 349,800 25,154
President, North 1996 244,615 161,935 0 220,002 0 332,445 12,636
America Business
Brian W. Bethers 1998 214,000 98,864 0 218,548 90,276 88,459 18,654
Executive Vice 1997 205,000 104,345 0 0 0 254,400 18,855
President and Chief 1996 188,558 115,586 0 240,002 0 201,661 8,341
Financial Officer
Joe P. Martin 1998 184,000 85,005 0 187,919 77,621 77,403 17,170
Senior Vice President, 1997 176,000 93,104 0 0 0 217,300 10,319
General Counsel and 1996 173,269 106,214 0 140,001 0 124,049 7,840
Secretary
</TABLE>
- ---------------
(1) Salary amounts include base salary earned and paid in cash during the fiscal
year and the amount of base salary deferred at the election of the executive
officer under the Company's Employees' Profit Sharing, Retirement and
Savings Plan and Trust (the "Profit Sharing Plan") and the Company's
Executive Deferred Compensation Plan (the "Deferred Compensation Plan").
(2) Bonus (annual cash incentive) includes the amount of cash bonus earned
pursuant to the named individual's bonus plan during the fiscal year and
paid subsequent to the end of each fiscal year. The 1998 bonus payments were
paid in February 1999.
(3) Perquisites and other personal benefits, securities or property are not
reported since they were equal to the lesser of $50,000 or 10% of the total
of annual salary and bonus for each executive officer for each year.
(4) This column of the table reports restricted stock and deferred bonus stock
awards. Deferred bonus stock awards are discussed in footnote 5 below. The
restricted shares reported in this column are shares subject to "General
Restrictions" (see footnote 8). Restricted shares with "Performance
Restrictions" (see footnote 8) are reported as long-term incentive plan
("LTIP") awards and are not reported as restricted
I-12
<PAGE> 29
stock awards on this table. The pretax value of restricted stock with
"Performance Restrictions" which vested in 1998 is reported in the table as
"LTIP Payouts." The restricted stock awards for 1996 listed on this table
vested ratably over a three year period (1996-1998) for Mr. Bethers, and
vested ratably over a two year period (1997-1998) for Mr. McCarthy, Mr.
O'Hare and Mr. Martin. No new restricted stock award was made in 1996 to Mr.
McCarten. However, he continued to ratably vest through December 31, 1998 a
Host Marriott Corporation restricted stock award made in 1993 which was
converted into restricted Company shares on February 2, 1996. Holders of
restricted stock would be entitled to dividends, if any, paid by the Company
to holders of Common Stock. No dividends were paid in 1996, 1997 or 1998. In
1998, new restricted stock awards were made to the executives listed in the
Table. The new 1998 awards vest ratably over a three year period beginning
August 1998, and are subject to General Restrictions, including that the
executive remains employed by the Company. The values of the 1998 awards
were calculated at $10.344 per share, the average of the high and low of
Company Common Stock on the New York Stock Exchange on the last day of the
1998 fiscal year.
(5) The Company no longer makes Deferred Stock Bonus Awards. The Deferred Stock
Bonus Awards included in the Table in the "Restricted Stock Awards" column,
are stock awards granted by Host Marriott Corporation prior to the
Distribution, which were generally derived based on dividing 20% of each
individual's annual cash bonus award by the average of the high and low
trading prices for a share of Host Marriott Corporation common stock on the
New York Stock Exchange on the last trading day of the fiscal year. No
voting rights or dividends are attributed to these Deferred Stock Bonus
Award shares until such award shares are distributed. Awards may be
denominated as current (pre-retirement) awards or deferred (retirement)
awards. A current award is distributed in 10 annual installments commencing
one year after the award is granted. A vested deferred award is distributed
in a lump sum or in up to 10 annual installments following termination of
employment. These awards generally are not subject to forfeiture once the
employee reaches age 55 and has 10 years of service, or after 20 years of
service with Board approval; however, the awards are not subject to
forfeiture for any reason if the employee dies or becomes permanently
disabled. Each share of Host Marriott Corporation Deferred Stock Bonus
Awards held by each executive listed in the Summary Compensation Table was
split at the Distribution into one share of Company Deferred Bonus Stock for
each five shares of Host Marriott Corporation Deferred Bonus Stock. Under
the terms of the restricted stock grants made to them, Mr. McCarten, Mr.
McCarthy, Mr. O'Hare and Mr. Martin were not eligible to receive awards of
Deferred Bonus Stock in 1994, 1995, 1996, and in 1997, the Company decided
to no longer make Deferred Stock Bonus Awards. Each of these individuals
received Deferred Bonus Stock awards for years prior to 1994 from Host
Marriott Corporation, which were split into Host Marriott Corporation and
Company deferred shares, which will continue to be distributed pursuant to
the terms of the awards. Mr. Bethers was eligible to receive Deferred Bonus
Stock Awards in 1994 and 1995, but did not receive restricted stock in those
years. In 1996, Mr. Bethers received a restricted stock award and became
ineligible for 1996 and thereafter to receive any further Deferred Bonus
Stock Awards. In January 1999, Mr. McCarten, Mr. McCarthy, Mr. O'Hare, Mr.
Bethers and Mr. Martin received a distribution of Company deferred stock
from previous awards as follows: Mr. McCarten, 81 shares valued at $821; Mr.
McCarthy, 284 shares valued at $2,877; Mr. O'Hare, 62 shares valued at $628;
Mr. Bethers, 184 shares valued at $1,864 and Mr. Martin, 38 shares valued at
$385. Values are based on $10.125 per share, the average of the high and low
of the trading prices of the Company stock on the New York Stock Exchange as
of January 4, 1999, the date the shares were released to each executive.
(6) For 1998, the pre-tax amounts attributed to LTIP Payouts represent the value
of the Company performance-based restricted stock awards that vested
following the close of the fiscal year. The value stated is based on $7.8125
per share, the average of the high and low trading prices of a share of
Company Stock on February 1, 1999, on the New York Stock Exchange, the date
the performance restrictions were removed.
(7) For 1998, amounts included as "All Other Compensation" represent Company
contribution amounts received under one or more of the Profit Sharing Plan,
the Deferred Compensation Plan or the Supplemental Retirement Plan for
certain employees. For 1998 for Mr. McCarten, $2,301 was attributable to the
Profit Sharing Plan and $25,608 was attributable to the Deferred
Compensation Plan.
I-13
<PAGE> 30
For 1998 for Mr. McCarthy, $2,301 was attributable to the Profit Sharing
Plan, $14,372 was attributable to the Deferred Compensation Plan, and
$340,473 was attributable to the Supplemental Retirement Plan. For 1998 for
Mr. O'Hare, $2,301 was attributable to the Profit Sharing Plan and $12,269
was attributable to the Deferred Compensation Plan. For 1998 for Mr.
Bethers, $2,301 was attributable to the Profit Sharing Plan and $9,153 was
attributable to the Deferred Compensation Plan. For 1998 for Mr. Martin,
$2,301 was attributable to the Profit Sharing Plan and $7,669 was
attributable to the Deferred Compensation Plan. Each of these Executives
also received $7,200 as a car allowance. Mr. O'Hare and Mr. McCarthy also
are eligible for up to $3,000 per year for supplemental medical expenses.
(8) Restricted stock grants presently held by Company executives consist of two
awards: shares subject to restrictions relating primarily to the passage of
time and continued employment ("General Restrictions" or "time-based"
restrictions) which vest ratably over a three year period, and an award of
stock subject to performance objectives such as financial performance of the
Company ("Performance Restrictions" or "performance-based" restrictions),
which vest in a lump sum when the specified performance goals are reached,
or in the event of the death, permanent disability of the executive,
retirement with approval of the Board or a change in control of the Company.
The performance goal for vesting the Long Term Incentive 1998
performance-based award is to meet or exceed the 75th percentile of Total
Shareholder Return of the Russell 2000 index, over a period of not less than
three years. Performance-based restricted stock awards were made by the
Committee to Mr. McCarten, Mr. Bethers, Mr. Martin, Mr. McCarthy and Mr.
O'Hare in August 1998. The Compensation Policy Committee administers the
restricted stock awards of the executives pursuant to performance criteria
set by the Committee. The 1998 "LTIP Payments" reflect the pretax, fair
market value of the released shares from the prior awards (made in 1993 to
Mr. McCarten, and in 1996 to the other executive officers) to Mr. Bethers,
Mr. Martin, Mr. McCarten, Mr. McCarthy and Mr. O'Hare, on February 1, 1999,
the date of release of the performance-based restricted stock shares for the
1998 fiscal year. All restricted stock awards subject only to General
Restrictions are presented on the Summary Compensation Table as "Restricted
Stock Awards", and the value stated in the Summary Compensation Table is the
fair market value on the date of the grant. As of January 1, 1999, the total
number and value of time-based and performance-based restricted shares held
by each executive is as follows: Mr. McCarten: 334,666 shares valued at
$3,461,785; Mr. McCarthy: 127,406 shares valued at $1,317,888; Mr. O'Hare:
112,614 shares valued at $1,164,879; Mr. Bethers: 90,082 shares valued at
$931,808; and Mr. Martin 77,756 shares valued at $804,308.
PERFORMANCE GRAPH
The graph below compares the cumulative total return of the Company's
common stock against the cumulative total return of the S&P 500 Composite Stock
Index and the Russell 2000 index from the Distribution on December 29, 1995
through January 1, 1999, the end of the 1998 fiscal year. The Russell 2000 index
contains companies with a range of market capitalizations comparable to the
Company. The Company has elected not to use a published industry or
line-of-business index because it believes that the Company has certain, but
important, differences from traditional food and beverage specialty companies,
and it believes the indexes chosen better reflect the performance of the
Company. These differences from traditional food and beverage specialty
companies are more fully reflected in the Company's Annual Report and its Annual
Report on Form 10-K for 1998. The Company believes there is no published index
with the exact product and service mix of the Company.
The phrase "total cumulative return" assumes that $100 was invested on
December 29, 1995 in the Company's common stock and in each index and that all
dividends (there were no dividends paid by the Company) were reinvested during
the specified periods. The price performance of the Company's common stock shown
below should not be viewed as being indicative of future performance.
I-14
<PAGE> 31
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
HMSC S&P 500 RUSSELL 2000
---- ------- ------------
<S> <C> <C> <C>
12/29/95 100.00 100.00 100.00
1/3/97 137.50 124.18 116.31
1/3/98 206.25 164.77 142.31
1/1/99 148.21 210.85 139.28
</TABLE>
STOCK OPTIONS
The tables below set forth information regarding the award and exercise
during fiscal year 1998 of certain options by each of the persons listed on the
preceding Summary Compensation Table and the value on January 1, 1999, the end
of the Company's fiscal year, of all unexercised options held by such
individuals. No stock appreciation rights were awarded to the listed persons by
the Company in fiscal year 1998.
AGGREGATE STOCK OPTION EXERCISES IN
LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES*
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED IN-
UNEXERCISED THE-MONEY OPTIONS/
OPTIONS/SARS AT SARS AT FISCAL
FISCAL YEAR END(#) YEAR END($)(1)
SHARES ACQUIRED ON --------------------------- ---------------------------
NAME EXERCISE(#) VALUE REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------------ ----------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
William W. McCarten.......... 600 5,081 8,650 0 89,476 0
John J. McCarthy............. 240 2,137 3,470 0 35,894 0
Thomas G. O'Hare............. 0 0 1,820 0 18,826 0
Brian W. Bethers............. 0 0 7,830 0 80,994 0
Joe P. Martin................ 180 1,524 473 0 4,893 0
</TABLE>
- ---------------
* No Stock Appreciation Rights (SARs) were granted in 1998.
(1) Based on a per share price for Company Common Stock of $10.344. This price
reflects the average of the high and low trading prices on the New York
Stock Exchange on January 1, 1999. The value of the options reflect the gain
on the exercise of the option that would have been realized if the options
had been exercised on January 1, 1999.
I-15
<PAGE> 32
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
# OF TOTAL STOCK
OPTIONS GRANTED GRANT DATE IN-THE-MONEY
STOCK OPTIONS TO EMPLOYEES IN EXERCISE PRICE EXPIRATION PRESENT VALUE ON
NAME GRANTED(1)(#) FISCAL YEAR ($/SHARE) DATE(2) VALUE(3)($) 3/18/99(3)($)
---- ------------- ---------------- -------------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
William W. McCarten............. 245,518 14.4 $13.47 8/5/08 1,455,000 0
John J. McCarthy................ 125,501 7.3 $13.47 8/5/08 743,750 0
Thomas G. O'Hare................ 109,682 6.4 $13.47 8/5/08 650,000 0
Brian W. Bethers................ 90,276 5.3 $13.47 8/5/08 535,000 0
Joe P. Martin................... 77,621 4.5 $13.47 8/5/08 460,000 0
</TABLE>
- ---------------
(1) The stock options set forth in this table are performance-based options
granted by the Compensation Policy Committee in connection with the long
term performance incentive plan to reward executive officers for
significantly increasing shareholder value. The options can vest in not less
than 3 years, absent certain contingencies previously described, when the
Company meets or exceeds the 75th percentile of Total Shareholder Return of
the Russell 2000 index.
(2) The options vest, in a lump sum, on or before August 5, 2005, and must be
exercised on or before August 4, 2008. The options cannot vest prior to
August 5, 2001, absent certain contingencies previously described.
(3) The Black-Scholles option pricing model was used to determine the present
value of the options on the date of the grant. As of March 18, 1999, the
options were not in-the-money.
LONG-TERM INCENTIVE AWARDS
The Compensation Policy Committee of the Company made Long-Term Incentive
Plan ("LTIP") awards to the Company's executive officers in 1998. To motivate
senior executives and align their interests with shareholders for the purpose of
significantly increasing shareholder value, the Compensation Policy Committee
made new, long term performance stock awards to the Company's executive officers
in August 1998. With the advice of the Committee's independent compensation
consultant, Towers Perrin, and the Company's Vice President for Compensation,
the Committee made an annual award of performance-based restricted stock and
performance-based stock options to senior executives, including Mr. McCarten,
the President and CEO; Mr. Bethers, Executive Vice President and Chief Financial
Officer; Mr. Martin, Senior Vice President and General Counsel and Secretary;
Mr. McCarthy, Executive Vice President and Mr. O'Hare, Executive Vice President.
The performance-based awards for each executive are set forth below. The
performance restricted stock and stock options vest in a lump sum when the
performance goal established by the Compensation Policy Committee is satisfied,
or at the end of seven years from the grant (August 2005). The performance goal
is to meet or exceed 75th percentile of Total Shareholder Return of the Russell
2000 index, over a period of not less than three years. These awards are more
fully discussed in this Proxy Statement in the Report on Executive Compensation
by the Compensation Policy Committee.
LONG TERM INCENTIVE PLANS -- AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
ESTIMATED FUTURE PAYOUTS UNDER
NON-STOCK PRICE-BASED PLANS
NUMBER OF SHARES, PERFORMANCE OR OTHER -------------------------------
UNITS OR OTHER PERIOD UNTIL MATURATION OR THRESHOLD TARGET MAXIMUM
NAME RIGHTS (#)(1) PAYOUT(2)(3) ($ OR #) ($ OR #) ($ OR #)
---- ----------------- -------------------------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
William W. McCarten......... 133,698 3-7 years N/A N/A N/A
John J. McCarthy............ 68,342 3-7 years N/A N/A N/A
Thomas G. O'Hare............ 59,728 3-7 years N/A N/A N/A
Brian W. Bethers............ 49,160 3-7 years N/A N/A N/A
Joe P. Martin............... 42,269 3-7 years N/A N/A N/A
</TABLE>
- ---------------
(1) The awards were made by the Company Compensation Policy Committee from the
Company's Comprehensive Stock Plan on August 5, 1998. The shares awarded are
performance-based restricted stock. The awards are subject to applicable
federal and state taxes, which must be satisfied in shares. The pre-tax
adjusted value of the awards on the date of the grants at $13.47 per share,
were: Mr. McCarten $1,800,912; Mr. McCarthy $920,567; Mr. O'Hare $804,536;
Mr. Bethers $662,185 and Mr. Martin $569,363.
I-16
<PAGE> 33
(2) The awards may vest in a lump sum not less than 3 years from August 1998,
except in the event of certain contingencies, death, permanent disability or
change in control.
(3) The pre-tax values of the LTIP awards, using the average of the high and low
of the company stock traded on the New York Stock Exchange on January 1,
1999 which was $10.344 per share are as follows: Mr. McCarten $1,382,972;
Mr. McCarthy $706,930; Mr. O'Hare $617,826; Mr. Bethers $508,511; and Mr.
Martin $437,231.
COMPREHENSIVE STOCK OPTION PLAN
Stock Options and other stock awards to Company management and executives
are made under the Company's Restated Comprehensive Stock Plan (Exhibit 3 to the
Company's 14D-9, incorporated by reference herein).
Pursuant to the Company Comprehensive Stock Plan, the Company may make to
participating employees (i) awards of restricted shares of the Company Common
Stock, (ii) deferred awards of shares of Company Common Stock and (iii) awards
of options to purchase Company Common Stock. The principal terms and conditions
of each such aspect of the plan are summarized below. The Company has authorized
reservation of 10 million shares of Company Common Stock for issuance under the
Company Comprehensive Stock Plan.
Restricted Stock Awards. The plan provides compensation incentives to key
employees in the form of shares of restricted stock of the Company. The Company
expects that only top executives of the Company are to receive restricted stock
awards under the plan. Delivery of shares are conditioned upon requirements such
as (i) continued employment over a prescribed period of time, (ii) the
participant refraining from engaging in activities in competition with the
Company or which are otherwise adverse to the Company's best interests, and
(iii) satisfaction of such performance conditions as the Compensation Policy
Committee of the Company's Board of Directors may specify.
Deferred Stock Awards. The Company's purpose in granting deferred awards
of the Company Common Stock is to attract, hold and reward key employees by
allowing them to participate in the future success of the Company through the
grant of deferred stock. Under the plan, deferred shares of the Company Common
Stock are granted to participants annually as Deferred Stock Bonus Awards or
Deferred Stock Agreements.
Deferred Stock Bonus Awards represent a part of the annual performance
bonus awards to employees. Award recipients are able to elect either a current
award or a deferred award, unless the recipient is classified by the Company as
below a specified salary, in which case only a current award is available.
Current Awards are distributed in 10 annual installments commencing one
year after the award is granted. If an employee dies before distribution of all
shares to which the employee is entitled, the remaining shares are distributed
in one distribution to the employee's designated beneficiaries or, in the
absence of such beneficiaries, to the employee's estate. Any undistributed
shares subject to a current award are forfeited and the award terminated if the
employee's employment with the Company is terminated for any reason other than
termination of employment at or beyond age 55 with 10 years of service,
termination after 20 years of service with retirement approval from the
Compensation Policy Committee of the Company's Board of Directors or its
designee, permanent disability or death. Any undistributed shares not subject to
forfeiture continue to be paid to the employee under the distribution schedule
which would have applied to those shares if the employee had not terminated
employment, or over such shorter period as the Chief Executive Officer of the
Company may direct.
A deferred award is distributed to the recipient, as elected by such
recipient, in a lump sum or in up to 10 installments beginning the January
following termination of employment. Deferred award shares contingently vest pro
rata in annual installments commencing one year after the award is granted to
the employee, and continuing on each January 2 thereafter until the expiration
of a 10 year period from the commencement date. All shares subject to the
deferred award vest upon termination of employment after reaching age 55 with 10
years of service with the Company, termination of employment after 20 years of
Company service with
I-17
<PAGE> 34
retirement approval from the Compensation Policy Committee of the Company's
Board of Directors or its designee, permanent disability or death. Vesting stops
when employment terminates for any other reason.
Deferred shares awarded pursuant to a Deferred Stock Agreement will be
distributed in 10 consecutive annual installments commencing the January
following the date the employee retires or becomes permanently disabled or
attains at least age 65 and is not an employee of the Company, or over such
shorter period as the Chief Executive Officer of the Company, in his sole
discretion, may direct. Shares contingently vest over a specified term or in pro
rata annual installments until age 65. If employment is terminated for any
reason, including death, permanent disability, or retirement prior to age 65,
all universal shares are forfeited.
Stock Option Awards. The Company's purpose in granting options to purchase
Company Common Stock is to provide additional long-term incentives to management
employees. Under the Company Comprehensive Stock Plan, options may be granted
either on a non-qualified tax basis or as "Incentive Stock Options" within the
meaning of Section 422 of the Internal Revenue Code. The option price may not be
less than 100% of the fair market value of the Company Common Stock on the date
the option is granted. Directors of the Company or any subsidiary who are not
also full-time salaried employees will not be eligible to receive options.
No option may be exercised within one year from the date of its grant,
Options granted by the Company may have a term of up to 15 years. If an optionee
ceases to be an employee, other than by reason of death, while holding an
exercisable option, the option generally terminates if not exercised within the
following three months. A different rule applies, however, to optionees who
retire and meet the retirement provisions of the plan. Non-qualified options
granted by the Company to optionees who subsequently become "approved retirees"
(qualifying combination of age and length of service that equals or exceeds
seventy-five years) do not expire until the earlier of (i) the expiration of the
option in accordance with its original term or (ii) one year from the date on
which the option granted latest in time to the optionee has fully vested.
Options are not transferrable except that (i) if an optionee dies while an
employee or an approved retiree of the Company more than one year from the date
the options are granted, a legatee may exercise the remaining options until the
earlier of the expiration date for such options or one year after the optionee's
death or (ii) if an optionee who is not an approved retiree dies after
termination of employment, a legatee may exercise the remaining options to the
same extent and during the same period that the optionee could have exercised
the options if the optionee had not died.
When exercising a non-qualified option, an employee is taxed on the gain as
ordinary income represented by the difference between the option price and the
market price on the day of exercise, times the number of shares for which the
option is exercised. The Company receives a corresponding deduction in the same
amount. For incentive stock options, the individual is not taxed at the time of
exercise. If the employee subsequently sells the shares within one year from the
date of exercise, the employee recognizes ordinary income equal to the amount of
gain and the company may take a corresponding deduction. If the shares are held
for a period in excess of one year, the gain recognized by the employee upon
sale of the shares is treated as a long-term gain and the company receives no
deduction.
COMPANY STOCK PURCHASE PLAN
The Company has also adopted the Host Marriott Services Employee Stock
Purchase Plan (Exhibit 4 to the Company's 14D-9, incorporated by reference
herein). Pursuant to the Company Stock Purchase Plan, all active, non-temporary
employees of the Company and participating subsidiaries on the first business
day of January of each year (with the limited exception of those holding 5% or
more of the Company's outstanding shares) are eligible for participation in the
Company Stock Purchase Plan provided they customarily work more than five months
per year and more than 20 hours per week. Non-employee directors are not
eligible to participate. The plan currently provides Company employees with an
opportunity, through payroll deduction, to purchase common stock of the company
and thereby increase their interest in the Company's growth and success. Each
year, participants may contribute between 5% and 10% of their base pay to
purchase shares of Company Common Stock on the last business day of January of
the subsequent year at a price per share equal to the lower of (i) 100% of its
fair market value on the first business day of the preceding January, or
I-18
<PAGE> 35
(ii) 100% of its fair market value on the last business day of January.
Participation is on an annual basis and employees may withdraw at any time and
receive a refund of their contributions. No employee may purchase shares of the
Company Common Stock in any one year having a fair market value on the first day
of the plan year in excess of $25,000. Host Marriott, as sole shareholder of the
Company, has authorized the reservation of 1,250,000 shares of Company Common
Stock for issuance under the Company Stock Purchase Plan.
VESTING OF STOCK AWARDS TO EXECUTIVES UPON CHANGE OF CONTROL
Restricted stock awards and stock options granted to William W. McCarten,
John J. McCarthy, Thomas G. O'Hare, Brian W. Bethers, Joe P. Martin and other
Company executives become free of restrictions or vest, as applicable, according
to the terms of applicable award agreements between the Company and such
persons, upon a change of control of the Company, as defined therein. The Offer
and the Merger, if consummated according to their terms, will constitute a
change of control of the Company and, as a result, the restricted stock awards
and stock options granted to such executives and disclosed herein (see, "Summary
Compensation Table," above) will become vested and payable.
NON-EMPLOYEE DIRECTORS' DEFERRED STOCK COMPENSATION PLAN
On December 30, 1995, the Company adopted and put into effect the Host
Marriott Services Corporation Non-Employee Directors' Deferred Stock
Compensation Plan (the "Directors' Plan") (Exhibit 5 to the Company's 14D-9,
incorporated by reference herein). The Directors' Plan is intended to advance
the interests of the Company and its shareholders by providing a means to
attract and retain highly-qualified persons to serve as non-employee directors
and to promote ownership by non-employee directors of a greater proprietary
interest in the Company, thereby aligning such directors' interests more closely
with the interests of shareholders of the Company. Each director who is not an
employee of the Company is eligible to defer fees due from the Company under the
Directors' Plan.
All fees deferred pursuant to the Directors' Plan are credited to a stock
unit account as of the date the fees would otherwise have been paid to the
participating director and converted to Stock Units as follows: The number of
stock units credited equals the deferred fees divided by the fair market value
of one share of Company Common Stock on the date such deferral is made. The
Company must settle participants' stock unit accounts as soon as
administratively feasible following notification of such participant's
termination of service. "Termination of service" is defined in the Directors'
Plan to mean termination of service as a director in any of the following
circumstances: (a) where the participant voluntarily resigns or retires; (b)
where the participant is not re-elected (or elected in the case of an appointed
Director) to the Board by the shareholders; or (c) where the participant dies.
The Merger Agreement provides that, upon purchase of at least 66 2/3% of
the total issued and outstanding Shares on a fully-diluted basis, Purchaser will
be entitled to designate a commensurate percentage of the Company's directors,
but allowing three Continuing Directors to serve on the Board until the
Effective Time (see "Board of Directors and Executive Officers" -- "The
Designees," above). Therefore, all or substantially all of the current directors
of the Company will be forced, as a result of the Merger, to resign or be
replaced as members of the Board of Directors. Any such resignation or removal
would be deemed a "termination of service" under the Directors' Plan and entitle
the director to payment of any amounts in his or her stock unit account.
CERTAIN TRANSACTIONS
RELATIONSHIP BETWEEN THE COMPANY AND HOST MARRIOTT CORPORATION AND MARRIOTT
INTERNATIONAL, INC. AND SODEXHO MARRIOTT SERVICES, INC.
J.W. Marriott, Jr. and Richard E. Marriott beneficially own approximately
7.64% and 7.48%, respectively, of the outstanding shares of Common Stock. By
reason of their ownership of such shares of Common Stock and their positions as
Directors, J.W. Marriott, Jr. and Richard E. Marriott, who are also directors of
Host Marriott Corporation ("HMC") and Marriott International, Inc., would be
deemed in control of the
I-19
<PAGE> 36
Company within the meaning of the federal securities laws. Other members of the
Marriott family might also be deemed in control of the Company by reason of
their ownership of Company shares and/or their relationship to other family
members.
Prior to the spin-off of the Company to the shareholders of HMC on December
29, 1995, the Company and HMC entered into a Distribution Agreement, which
provided for, among other things, (i) certain asset transfers to occur prior to
the Distribution, (ii) the Distribution, (iii) the division between the Company
and HMC of certain liabilities and (iv) certain agreements governing the
relationship between the Company and HMC following the Distribution.
Among the other agreements between the Company and HMC are:
(i) Tax Sharing Agreement. This Agreement defines the parties' rights
and obligations with respect to deficiencies and refunds of federal, state
and other income or franchise taxes relating to the Company for tax years
prior to the Distribution and with respect to certain tax matters of the
Company after the Distribution.
(ii) Employee Benefits Allocation Agreement. This Agreement allocates
certain responsibilities with respect to employee compensation, benefits
and other employment and labor matters.
(iii) Transitional Services Agreements. The Company and HMC also
entered into a number of agreements pursuant to which each company agreed
to provide certain services to the other and their respective subsidiaries
for a transitional period which has now expired. Such services were
provided on market terms and conditions.
In addition, HMC has agreed to guarantee the Company's performance in
connection with certain concessions operated by the Company. HMC has not been
required to make any payments pursuant to these guarantees and the Company does
not anticipate that any such payments will be made in 1999.
Also, in connection with the Distribution, the Company and Marriott
International, Inc. ("Marriott International") have entered into service
agreements substantially similar to pre-existing agreements between HMC and
Marriott International or, alternatively, the Company has accepted an assignment
of certain agreements between HMC and Marriott International. These include
agreements for administrative, consulting and procurement services ("MI
Agreements"). The amount of the payments to be made to Marriott International
under the MI Agreements in fiscal year 1999 will depend on the level of services
and supplies provided thereunder. In 1998, the approximate value of food and
supplies the Company purchased from affiliates of Marriott International was
$75.4 million. The Company also paid Marriott International $8.8 million in 1998
for corporate services such as computer systems support and other services.
There is a noncompetition agreement between the Company and Sodexho Marriott
Services, Inc. ("Sodexho Marriott Services"). The noncompetition agreement
extends to October 2000. The agreement provides, generally, that Sodexho
Marriott Services will not seek to enter the Company's venues of airports,
tollroads, and related venues, and the Company will not seek to enter Sodexho
Marriott Services venues related to institutional/ contract food services.
Mr. Shaw is Chairman of the Board of Sodexho Marriott Services. Mr. Shaw is
also a director of Marriott International and serves as its President and Chief
Operating Officer. J. W. Marriott Jr. is Chairman of the Board and Chief
Executive Officer of Marriott International and Richard E. Marriott is a
director of Marriott International.
LEGAL SERVICES PROVIDED BY PARTNERSHIPS OF BOARD MEMBERS
During fiscal year 1998, the members of the Compensation Policy Committee
were Rosemary M. Collyer, Gilbert T. Ray, and R. Michael McCullough. In 1998,
the Company requested legal services from the law firm of Crowell & Moring, the
total of which is less than $50,000. Rosemary M. Collyer is a partner at the
firm. In 1998, the Company requested legal services for certain international
legal services from the law firm of O'Melveny & Myers, the total of which is
less than $50,000. Mr. Ray is a partner at the firm. All stock and compensation
awards of the Committee were separately approved by all other non employee
directors of the Board.
I-20
<PAGE> 37
ACCELERATION OF RIGHTS UNDER PREVIOUS STOCK AWARDS
The consummation of the Offer and the Merger will result in the accelerated
vesting and/or lifting of restrictions on Restricted Stock and Stock Option
Awards granted to Company executives (see "Stock Options" -- "Comprehensive
Stock Option Plan," above).
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities ("Reporting Persons"), to
file reports of ownership and changes in ownership with the Securities and
Exchange Commission and the New York Stock Exchange. Specific due dates for
these reports have been established, and the Company is required to report in
this Proxy Statement any failure to file by these dates for 1998. None of the
Company's Reporting Persons failed to file any of the required reports on a
timely basis with respect to transactions in the Company's equity securities in
1998; however, due to an administrative processing error, one required report
for 1998, filed in February 1999, failed to correctly state the total of
restricted shares held by Mr. McCarten, Mr. McCarthy, Mr. O'Hare, Mr. Bethers
and Mr. Martin. As soon as the error was discovered, amended filings were made.
OTHER COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The law firm Crowell & Moring, of which Board member Rosemary M. Collyer is
a Partner, rendered legal services to the Company (see "Certain
Transactions" -- "Legal Services"). The law firm O'Melveny & Myers, of which
Board member Gilbert T. Ray is a Partner, rendered legal services to the Company
in 1998 (see "Certain Transactions" -- "Legal Services," above).
I-21
<PAGE> 38
EXHIBIT 8
[DEUTSCHE BANK LETTERHEAD]
July 26, 1999
Board of Directors
Host Marriott Services Corporation
6600 Rockledge Drive
Bethesda, Maryland 20817
Gentlemen:
Deutsche Bank Securities Inc. ("Deutsche Bank") has acted as financial
advisor to Host Marriott Services Corporation ("HMS" or the "Company") in
connection with the proposed acquisition of the Company by Autogrill S.p.A., a
corporation organized under the laws of the Republic of Italy ("Autogrill"),
pursuant to the Agreement and Plan of Merger, dated July 26, 1999 among the
Company, Autogrill and Autogrill Acquisitions, Inc. ("Sub"), a wholly-owned
subsidiary of Autogrill, (the "Merger Agreement"), pursuant to which Autogrill
will commence a tender offer (the "Tender Offer") for all the outstanding shares
of the Company's Common Stock, no par value, (the "Company Common Stock"), at a
price of $15.75 per share (the "Consideration"), net to the seller in cash, and,
after the consummation of the Tender Offer, the Sub will merge with and into the
Company (the "Merger", and the Merger and the Tender Offer together, the
"Transaction"), and each outstanding share of Company Common Stock not acquired
in the Tender Offer, other than shares of Company Common Stock held in treasury
or held by Autogrill or as to which dissenters' rights have been perfected, will
be converted into the right to receive in cash, without interest, the same
consideration per share paid in the Tender Offer. The terms and conditions of
the Transaction are more fully set forth in the Merger Agreement.
You have requested Deutsche Bank's opinion, as investment bankers, as to
the fairness, from a financial point of view, to the holders of Company Common
Stock of the Consideration to be received by them in the Transaction.
In connection with Deutsche Bank's role as financial advisor to the
Company, and in arriving at its opinion, Deutsche Bank has reviewed certain
publicly available financial and other information concerning the Company and
certain internal analyses and other information furnished to it by the Company.
Deutsche Bank has also held discussions with members of the senior management of
the Company regarding the business and prospects of the Company. In addition,
Deutsche Bank has (i) reviewed the reported prices and trading activity for
Company Common Stock, (ii) compared certain financial and stock market
information for the Company with similar information for certain other relevant
companies whose securities are publicly traded, (iii) reviewed the financial
terms of certain recent business combinations which it deemed comparable, (iv)
reviewed the financial terms of the Merger Agreement and certain related
documents, and (v) performed such other studies and analyses and considered such
other factors as it deemed appropriate.
Deutsche Bank has not assumed responsibility for independent verification
of, and has not independently verified, any information, whether publicly
available or furnished to it, concerning the Company, including, without
limitation, any financial information, forecasts or projections considered in
connection with the rendering of its opinion. Accordingly, for purposes of its
opinion, Deutsche Bank has assumed and relied upon the accuracy and completeness
of all such information and Deutsche Bank has not conducted a physical
inspection of any of the properties or assets, and has not prepared or obtained
any independent evaluation or appraisal of any of the assets or liabilities, of
the Company. With respect to the financial forecasts and projections made
available to Deutsche Bank and used in its analyses, Deutsche Bank has assumed
that they
<PAGE> 39
[DEUTSCHE BANK LETTERHEAD]
have been reasonably prepared on bases reflecting the best currently available
estimates and judgments of the management of the Company as to the matters
covered thereby. In rendering its opinion, Deutsche Bank expresses no view as to
the reasonableness of such forecasts and projections or the assumptions on which
they are based. Deutsche Bank's opinion is necessarily based upon economic,
market and other conditions as in effect on, and the information made available
to it as of, the date hereof.
For purposes of rendering its opinion, Deutsche Bank has assumed that, in
all respects material to its analysis, the representations and warranties of the
Company contained in the Agreement and Plan of Merger are true and correct and
all conditions to the obligations of the Company to consummate the Transaction
will be satisfied without any waiver thereof.
This opinion is addressed to, and for the use and benefit of, the Board of
Directors of the Company and is not a recommendation to the stockholders of the
Company to accept the Tender Offer. This opinion is limited to the fairness,
from a financial point of view, to the Company of the Consideration, and
Deutsche Bank expresses no opinion as to the merits of the underlying decision
by the Company to engage in the Transaction.
Deutsche Bank will be paid a fee for its services as financial advisor to
the Company in connection with the Transaction. A significant portion of such
fee is contingent upon consummation of the Transaction. We are an affiliate of
Deutsche Bank AG (together with its affiliates, the "DB Group"). Over the past
three years we have provided financial advisory services to HMS, for which we
were paid a retainer fee. In the ordinary course of business, members of the DB
Group may actively trade in the securities and other instruments and obligations
of the Company for their own accounts and for the accounts of their customers.
Accordingly, the DB Group may at any time hold a long or short position in such
securities, instruments and obligations.
Based upon and subject to the foregoing, it is Deutsche Bank's opinion as
investment bankers that the Consideration to be paid to the holders of Company
Common Stock in connection with the Transaction is fair, from a financial point
of view, to such holders.
Very truly yours,
DEUTSCHE BANK SECURITIES INC.
<PAGE> 40
ANNEX A
DESIGNEE DIRECTORS OF
PARENT AND PURCHASER
Purchaser has indicated to the Company that its initial Designees will
include Mr. Carlo Santoiemma, Mr. Luca Schinelli and Mr. Carmine Meoli. As of
the date of this Information Statement, Purchaser has not determined who its
other Designees, if any, will be. However, such other Designees will be selected
from the following list of directors and executive officers of Parent along with
the initial Designees upon the purchase by the Purchaser pursuant to the Offer
of Shares representing not less than 66 2/3% of the outstanding shares of Common
Stock of the Company on a fully diluted basis. The information contained herein
concerning Parent and Purchaser and their respective directors and executive
officers has been furnished by Parent and Purchaser. The Company assumes no
responsibility for the accuracy or completeness of such information.
Set forth in the table below are the name, age, principal occupation and
business experience of each of the initial Designees and other persons who may
be designated by the Purchaser as additional Designees.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR
NAME EMPLOYMENT AND FIVE-YEAR EMPLOYMENT HISTORY
- ---- -------------------------------------------
<S> <C>
Gilberto Benetton......................... Age 58; Director and Chairman of the Board of Directors
of Parent since May 1997. Mr. Benetton has also served
as the Chairman of the Board of Directors of Edizione
Holding S.p.A. (holding company, Italy) since June 1987,
the Chairman of the Board of Directors of Benetton Group
S.p.A. (textiles, clothing, sporting equipment and
accessories, Italy) since December 1985, and on the
Board of the Directors of Gruppo G.S. S.p.A. (retail
distribution, Italy) since December 1996. The current
business address of Mr. Benetton is Benetton Group
S.p.A., Villa Minelli, 31050 Ponzano, Veneto, Treviso,
Italy.
Paolo Prota Giurleo....................... Age 56; Director of Purchaser since July 1997. Director
and Chief Executive Officer of Parent since March 1992.
Mr. Prota is a graduate of the Cattolica University
(Economics) in Milan, Italy and Insead in Fontainbleau,
France. Mr. Prota served as Vice President of Parent and
President of the Executive Committee of Parent from
February 1987 to March 1992.
Alessandro Benetton....................... Age 35; Director of Parent since August 1997. Mr.
Benetton is a graduate of the University of Boston
(Science) and Harvard (Business Administration). Mr.
Benetton has also served on the Boards of Directors of
Benetton Group S.p.A. (textiles, clothing, sporting
equipment and accessories, Italy) since May 1988, Banca
Nazionale del Lavoro (banking, Italy) since December
1998, Roncadin S.p.A. (ice-cream and frozen food, Italy)
since May 1999 and Grupo Picking Pack S.A. (office
products and communication services, Spain) since May
1999. In addition, Mr. Benetton has served on the Boards
of Directors of, 21, Investimenti S.p.A. (investment
banking, Italy) since February 1993 (as Managing
Director), Edizione Holding S.p.A. (holding company,
Italy) since June 1992, Societe Centrale pour
L'Industrie (investment bank, France) since April 1998
(and as President of the Supervisory Board since May
1998). The current business address of Mr. Benetton is
c/o 21, Investimenti S.p.A., Piazza Filodrammatici 3,
31100, Treviso, Italy.
</TABLE>
A-1
<PAGE> 41
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR
NAME EMPLOYMENT AND FIVE-YEAR EMPLOYMENT HISTORY
- ---- -------------------------------------------
<S> <C>
Giorgio Brunetti.......................... Age 62; Director of Parent since January 1997. Mr.
Brunetti is a graduate of Bocconi University in Milan,
Italy. Mr. Brunetti is a Professor of Business
Administration at Bocconi University. Mr. Brunetti has
also served on the Board of Directors of Carraro S.p.A.
(axles and transmissions, Italy) since June 1997. In
addition, Mr. Brunetti served on the Boards of Directors
of Societa' Finanziaria Meridionale S.p.A. (state
holding company, Italy) from 1995 to 1996 and Gruppo
G.S. S.p.A. (retail distribution, Italy) from 1995 to
1997. The current business address of Mr. Brunetti is
c/o Istituto di Economia, Aziendale, Via Isonzo 23,
20100, Milan, Italy.
Antontio Bulgheroni....................... Age 56; Director of Parent since August 1997. Mr.
Bulgheroni has also served on the Boards of Directors of
Lindt & Sprungli S.p.A. (chocolate manufacturing, Italy)
since 1990 (as President), Ferro Tubi Lamiere Rossi
S.p.A. (steel products, Italy) since 1990 (as
President), Avionholding S.p.A. (charter flights, Italy)
since 1991 (as President), Banca Popolare di Luino e di
Varese (banking, Italy) since 1997 (as President),
Caffarel S.p.A. (chocolate manufacturing, Italy) since
1998 (as President), Banca Popolare Commercio e
Industria (banking, Italy) since 1997 (as Vice
President), Industria & Universita s.r.l. (law and
business administration, Italy) since 1990,
Pallacanestro Varese S.p.A. (Varese basketball team)
since 1992, Societa Editrice la Prealpina s.r.l.
(publishing, Italy) since 1995, Unione degli Industriali
della Provincia di Varese (industry association, Italy)
since 1995 and Comitato Tecnico Scuola Formazione e
Ricerca di Confindustria (industry association, Italy)
since 1996. Mr. Bulgheroni has also been employed by
Lindt & Sprungli S.p.A. since 1974. Mr. Bulgheroni has
also served in various capacities for Cattaneo
University in Varese, Italy since 1993 (as President),
LUISS University in Roma, Italy, since 1990 (as
Director) and Iniziativa University in Varese, Italy
since 1990. The current business address of Mr.
Bulgheroni is Via Buccari, 33, I-21056, Induno Olona,
Varese, Italy.
</TABLE>
A-2
<PAGE> 42
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR
NAME EMPLOYMENT AND FIVE-YEAR EMPLOYMENT HISTORY
- ---- -------------------------------------------
<S> <C>
Marco Desiderato.......................... Age 53; Director of Parent since April 1996. Mr.
Desiderato has also served on the Boards of Directors of
San Paolo Leasint S.p.A. (leasing, Italy) since April
1989 (as Chairman), Leasint Servizi Integrati S.p.A.
(leasing, Italy) since April 1997 (as Chairman), San
Paolo Riscossioni Genova S.p.A. (tax collection agent,
Italy) since April 1995 (as Chairman), FILSE S.p.A.
(Italy) since April 1999 (as Chairman), BIC Liguria
S.p.A. (regional development agent, Italy) since April
1999 (as Chairman), Banca Italo Romena S.p.A. (banking,
Italy) since April 1992 and Lertora & Partners Insurance
Brokers S.r.l (insurance, Italy) since October 1997. In
addition, Mr. Desiderato served on the Boards of
Directors of Istituto Bancario San Paolo di Torino
S.p.A. (banking, Italy) from January 1992 to April 1998,
Efibanca S.p.A. (banking, Italy) from March 1992 to
March 1998 and Mediocredito Ligure S.p.A. (banking,
Italy) from February 1989 to January 1994. The current
business address of Mr. Desiderato is c/o San Paolo
Riscossioni Genova S.p.A., Via XII Ottobre, 1, 16121
Genova, Italy.
Sergio P. Erede........................... Age 59; Director of Parent since May 19, 1997. Mr. Erede
is a graduate of the University of Milan (Jurisprudence)
and Harvard Law School. Mr. Erede was the founder and
Managing Partner of Erede & Associati, a law firm in
Milan, Italy, from October 1969 until March 1999. Mr.
Erede is currently a Senior Partner of Bonelli Erede
Pappalardo, also a law firm in Milan. Mr. Erede is also
a Vice Chairman of the Board of Directors of Marzotto
S.p.A. (textiles and clothing, Italy) and Telecom Italia
S.p.A. (telecommunications, Italy) and serves on the
Board of Directors of Hugo Boss (clothing and
accessories, Germany), Parmalat Finanziaria S.p.A.
(dairy and food products, Italy), Editoriale L'Espresso
S.p.A. (publishing, Italy), Interpump Group S.p.A.
(water pumps and hydraulics, Italy), Manuli Rubber
Industries S.p.A. (rubber tubing and related products,
Italy), Carraro S.p.A. (axles and transmissions, Italy),
Seat Pagine Gialle S.p.A. (telephone directories, Italy)
and Olivetti S.p.A. (telecommunications and office
products, Italy). The current business address of Mr.
Erede is c/o Bonelli Erede Pappalardo, Via Serbelloni,
12, 20122 Milan, Italy.
</TABLE>
A-3
<PAGE> 43
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR
NAME EMPLOYMENT AND FIVE-YEAR EMPLOYMENT HISTORY
- ---- -------------------------------------------
<S> <C>
Vito Alfonso Gamberale.................... Age 54; Director of Parent since April 1999. Mr.
Gamberale is a graduate of the University of Roma. Mr.
Gamberale is also a Vice President of 21, Investimenti
S.p.A. (investment banking, Italy) since October 1998
and an executive officer of Telecom Italia S.p.A.
(telecommunications, Italy) since 1994. Mr. Gamberale
also served on the Board of Directors of SIP S.p.A.
(telecommunications, Italy) from April 1994 to July 1995
(as Chairman), Telecom Italia Mobile S.p.A.
(telecommunications, Italy) from July 1995 to April 1998
(as Chief Executive Officer) and from April 1998 to July
1998 (as Chairman) and Telecom Italia S.p.A.
(telecommunications, Italy) from February 1998 to June
1998 (as General Manager). The current business address
of Mr. Gamberale is c/o Edizione Holding S.p.A.,
Calmaggiore, 23, 31100 Treviso, Italy.
Gianni Mion............................... Age 55; Director of Purchaser since July 1997. Director
of Parent since January 1995. Mr. Mion is a graduate of
the Venice University (Economics). Mr. Mion has also
served on the Boards of Directors of Edizione Holding
S.p.A. (holding company, Italy) since October 1986 (as
Managing Director), Benetton Group S.p.A. (textiles,
clothing, sporting equipment and accessories) since
April 1993, Gruppo GS S.p.A. (retail distribution,
Italy) since June 1999 (as Chairman) and Jolly Hotel
S.p.A. (hotel management, Italy) since May 1997. The
current business address of Mr. Mion is c/o Edizione
Holding S.p.A., Calmaggiore, 23, 31100 Treviso, Italy.
Carmine Meoli............................. Age 51; Director of Purchaser since July 1997. Chief
Financial Officer of Parent since January 1997. Mr.
Meoli is a graduate of the University of Rome (Political
Science). From June 1995 to January 1997, Mr. Meoli was
employed by Edizione Holding S.p.A. (investment company,
Italy) as a Director of SME Research Services. Mr. Meoli
also served on the Boards of Directors of NCA S.p.A.
(ship building, Italy) from March 1994 to June 1995 (as
President), and GEPI S.p.A. (investment company) from
June 1992 to February 1994 (as Managing Director). Prior
to June 1992, Mr. Meoli held various positions with GEPI
S.p.A.
Eugenio Marco Airoldi..................... Age 39; General Manager International Operations of
Parent since April 1998. Mr. Airoldi is a graduate of
Bocconi University. Mr. Airoldi was the Sales and
Logistics Manager -- Motorway Division -- Italy of
Parent from 1996 to 1997. Prior to his employment with
Parent, Mr. Airoldi was a Manager with The Boston
Consulting Group.
</TABLE>
A-4
<PAGE> 44
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR
NAME EMPLOYMENT AND FIVE-YEAR EMPLOYMENT HISTORY
- ---- -------------------------------------------
<S> <C>
Mario Aspesi.............................. Age 50; General Manager Italian Operations of Parent
since July 1992. Mr. Aspesi is a graduate of Cattolica
University in Milan, Italy. Prior to his employment with
Parent, Mr. Aspesi was a General Manager of Gruppo GS
S.p.A. (retail distribution, Italy).
Enrico Ceccato............................ Age 38; General Manager of Strategic Marketing and Quick
Service Restaurant Business since June 1998. Mr. Ceccato
is a graduate of the University of Padua (Political
Science). Prior to his employment with Parent, Mr.
Ceccato was the General Manager of Fila Sport S.p.A.
(clothing, sporting equipment and accessories, Italy)
from March 1997 to June 1998, Vice President of Killer
Look S.p.A. (manufacturer of articles and accessories
for extreme sports, Italy) from 1993 to March 1997.
Enrico Biraghi............................ Age 59; General Manager of New Business of Parent since
May 1998. Mr. Biraghi has been continuously employed by
Parent since February 1980.
Roberto Degli Esposti..................... Age 35; Manager of Human Resources of Parent since March
1998. Mr. Degli also acted as Human Resources
Development Head from June 1997 to March 1998. Prior to
his employment with Parent, Mr. Degli was employed by
Towers Perrin (benefits and compensation consultants,
Italy).
Carlo Santoiemma.......................... Age 32; Director of Autogrill Overseas S.A. since July
1999. Mr. Santoiemma has been an employee of Societe
Europeenne de Banque, Luxembourg in the Companies
Department, Trustee Services since March 1996. Prior to
March 1996, Mr. Santoiemma did not hold any corporate
positions. The current business address of Mr.
Santoiemma is c/o Societe Europeenne de Banque, 19-21,
31, Boulevard du Prince Henri, L-1724, Luxembourg, The
Grand Duchy of Luxembourg.
Luca Schinelli............................ Age 27; Director of Autogrill Overseas S.A. since July
1999. Mr. Schinelli has been an employee of Societe
Europeenne de Banque, Luxembourg in the Companies
Department, Trustee Services since November 1996. Mr.
Schinelli has also served on the Board of Directors of
European Cosmetic Group S.A. (The Grand Duchy of
Luxembourg), since November 1998. Prior to November
1996, Mr. Schinelli did not hold any corporate
positions. The current business address of Mr. Schinelli
is c/o Societe Europeenne de Banque, 19-21, 31,
Boulevard du Prince Henri, L-1724, Luxembourg, The Grand
Duchy of Luxembourg.
</TABLE>
A-5
<PAGE> 1
EXHIBIT 2
May 17, 1999, as amended on July 22, 1999.
HOST MARRIOTT SERVICES CORPORATION
CHANGE IN CONTROL PLAN
1. Title.
This Plan shall be entitled the "Host Marriott Services Corporation Change
in Control Plan" (hereinafter "Plan").
2. Effective Date.
The Plan shall be effective when the Secretary of the Board of Directors
shall certify to the Plan Administrator that the Compensation Policy Committee
of Host Marriott Services Corporation has approved all terms and conditions of
the Plan. The Plan shall be immediately effective on certification by the
Secretary.
3. Plan Administrator.
The Administrator of the Plan shall be the Vice President of Compensation
and Benefits of Host Marriott Services Corporation, or such other person as the
Compensation Policy Committee of the Board of Directors shall designate from
time to time. The Administrator of the Plan shall not be a Plan Participant.
4. Plan Sponsor.
The Plan is adopted by the Compensation Policy Committee of the Host
Marriott Services Corporation Board of Directors on behalf of the Plan sponsor,
Host Marriott Services Corporation (hereinafter "Company").
5. Purpose.
The Plan is intended to retain key executives, to the benefit of the
Company, by ensuring that executives covered by the Plan are treated in a fair
and consistent manner, receiving a defined benefit from the Plan in
consideration of their continued employment with the Company after the effective
date of the Plan. The Plan applies only to termination of a Participant in the
event of a change in control.
6. Participants.
The participants ("Participants") in the Plan shall be the President and
Chief Executive Officer ("CEO"), and Senior Corporate Officers who are direct
reports of the CEO, and such other Corporate Officers as the CEO shall
designate, provided, however, that all Participants shall be approved by the
Compensation Policy Committee of the Company. The Participants recommended by
the CEO and approved by the Committee are attached as Schedule I to the Plan.
<PAGE> 2
7. Conditions Precedent to Receive Payments.
To receive any payments from the Plan, a Participant must:
1. Be an approved Participant and listed on Schedule I to this Plan;
and
2. Be notified of termination from employment, as defined in the Plan;
and
3. Execute a full and complete waiver and release of any legal claims
the Participant may have against the Company, such waiver and
release to be satisfactory to the Company, in its sole discretion;
and
4. Execute an agreement providing that the Participant, following
termination of employment, shall protect all confidential
information, proprietary information, and trade secrets of the
Company and shall not disclose any of such information without the
prior written consent of the Company; and
5. Execute an agreement that the Participant, while receiving payments
from the Plan, shall not directly or indirectly solicit, induce, or
otherwise seek to influence any management employee of the Company
to leave the employment of the Company.
If all such conditions have been satisfied, the Participant shall be
entitled to receive the payments specified in the Plan.
8. Termination of Employment.
For purposes of the Plan, a termination of employment shall mean only the
following and no other events of termination:
A change in control of the Company, in connection with which the
Participant is not continued in his or her same position, reporting
relationship, base salary and norm bonus, and location of work, and
is not offered a comparable alternative position. A change in
control shall have the meaning set forth in Schedule 2 to this Plan.
A comparable alternative position shall mean a position for which
the Participant, in the judgment of the Company, is qualified to
perform; is at the same or greater base salary and bonus of the
Participant; does not involve a change in reporting relationship;
and does not require relocation to an office outside fifty (50)
miles of the Corporate Headquarters of the Company.
9. Plan Payments to Participants.
In the event of a termination of employment, as defined in Section 8 of
the Plan, the following severance payments shall be made:
Level 1: President and Chief Executive Officer: Three (3) years of the
then current base salary and three (3) years of norm bonus.
Level 11: All Executive Vice Presidents and Senior Vice Presidents who
report directly to the Chief Executive Officer at the time the
Plan is effective, or who thereafter
<PAGE> 3
become approved Participants directly reporting to the CEO:
Two (2) years of their then current base salary and two (2)
years of norm bonus.
Level III: Other Corporate Officers: On e and one-half (1.5) years of
their then base salary and one and one-half (1.5) years of
norm bonus.
Payments shall be made in regular, bi-weekly payments, except for norm
bonus, which shall be paid in a lump sum, each February 15 for the preceding
fiscal year to which the norm bonus relates. All payments are subject to
federal, state, and local income and social security taxes, and deductions for
any benefit plans in which the Participant continues to participate. Any excise
or other special taxes shall be paid by the Company.
10. Participation in Company Employee Benefit Plans.
Participants in the Plan shall continue to participate in all Company
employee benefit plans during their period of severance payments set forth in
Section 9 of the Plan. The termination of the Participant' s employment shall
occur on the last day of the applicable severance period of the Participant. The
employee costs of each benefit plan shall be deducted from the severance
payments received by the Participant.
11. Disputes.
All claims for payments and other benefits under the Plan shall be
determined by the Plan Administrator. The address of the Plan Administrator is:
Plan Administrator
Host Marriott Services Corporation Change in Control
Host Marriott Services Corporation
6600 Rockledge Drive
Bethesda, MD 20817
A final decision of the Plan Administrator may be appealed to the
Compensation Policy Committee of the Host Marriott Services Corporation Board of
Directors. All appeals must be in writing; clearly state the date and decision
of the Plan Administrator from which the appeal is taken; and be post marked not
more than ten (10) days after the final decision of the Plan Administrator. The
address of the Compensation Policy Committee is:
Compensation Policy Committee
Host Marriott Services Corporation Change in Control
Secretary of the Committee
Host Marriott Services Corporation
6600 Rockledge Drive
Bethesda, MD 20817
12. Termination of the Plan.
The Plan shall terminate, unless extended by the Compensation Policy
Committee, on December 31, 2005. The Plan may be terminated earlier by the
Compensation Policy Committee, or the Company's Board of Directors, provided
that each Participant shall consent to the early termination of the Plan.
<PAGE> 4
13. Beneficiaries of Participants.
In the event of the death of a Participant receiving payments under the
Plan, the then remaining payments due to the Participant shall be paid in a lump
sum, less applicable federal, state and local income and social security taxes,
to the designated beneficiary of the Participant. No payments, benefits, or
rights of any kind apply to a beneficiary in the event the Participant is
deceased prior to the commencement of severance payments to the Participant.
14. Successor to the Company.
This Plan shall be binding on any successor to the Company, and any
subsequent successor to the successor to the Company. A successor shall mean any
person, without regard to whether the person is an individual, or partnership,
corporation, Trustee, or any other form of business or administrative
organization.
15. ERISA Qualification.
The Plan Administrator shall take all necessary steps to qualify the Plan
under ERISA. The Plan shall be effective at all times without regard to whether
the Plan shall eventually become ERISA qualified.
16. Plan Amendment.
The Plan may be amended from time to time by the Compensation Policy
Committee. Any such amendment shall not reduce or otherwise diminish the rights
and benefits of any Plan Participant without the Participant's consent.
17. Gross-Up.
(a) In the event it shall be determined that any payment, benefit or
distribution (or combination or acceleration of rights thereof) provided
(directly or indirectly) by the Company to or for the benefit of any
Participant, whether paid or payable or distributed or distributable pursuant to
the terms of this Plan, or under the terms of any other plan, program, agreement
or arrangement (a "Payment") would be subject to the excise tax imposed by
Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code") or
any interest or penalties are incurred by the Executive with respect to such
excise tax (such excise tax, together with any such interest and penalties,
hereinafter collectively referred to as the "Excise Tax"), the Participant shall
be entitled to receive an additional payment (a "Gross-Up Payment") in an amount
such that after payment by the Executive of all taxes (including any interest or
penalties imposed with respect to such taxes, and the excise tax imposed upon
the Gross-Up Payment), the Executive retains an amount of the Gross-Up Payment
equal to the Excise Tax imposed upon the Payments.
(b) All determinations required to be made under paragraph (a), including
whether and when a Gross-Up Payment is required and the amount of such Gross-Up
Payment and the assumptions to be utilized in arriving at such determination,
shall be made by the Company's independent public accountants, which shall
provide detailed supporting calculations both to the Company and to the
applicable Participant within fifteen (15) business days of the receipt of
notice from the Participant that a payment has been or will be made, or such
earlier time as is requested by the Company. The calculations prepared by such
accounting firm may be reviewed on behalf of the Participant by a reputable
certified accounting firm designated by the Participant. In the event of a
dispute between the Company's accountants and the Participant's accountants,
such firms shall jointly select a third nationally recognized certified public
<PAGE> 5
accounting firm to resolve the dispute and the decision of such third firm shall
be final, binding and conclusive upon the Participant and the Company. The
reasonable fees and expenses of the accounting firms referenced above shall be
borne by the Company. Any Gross-Up Payment with respect to a Payment shall be
paid by the Company to the Participant at the time the Participant is entitled
to receive the Payment.
<PAGE> 6
SCHEDULE 1
The following are approved Participants, at the designated levels, in the
Host Marriott Services Corporation Change in Control Plan ("Plan"):
Level 1: William W. McCarten
Level 2: Brian W. Bethers
James A. Boragno
Michelle M. Green
Joe P. Martin
John J. McCarthy
Thomas G. O'Hare
Level 3: Lori A. Cramp
John M. Green
I certify that the above persons are approved Participants in the Plan.
-------------------------------
Joe P. Martin
Secretary of the Board
Date: May 17, 1999
<PAGE> 7
SCHEDULE 2
CHANGE IN CONTROL
A change in control shall have the following meaning:
1. The acquisition of at least twenty percent (20%) of the common stock of
Host Marriott Services Corporation ("HMS"), or its successor entity, sufficient
to allow a person or persons acting in concert to elect a majority of the Board
of Directors or otherwise effectively control the management of HMS; or
2. A merger, dissolution, or other corporate transaction in which HMS or
its successor-in-interest is not the surviving entity, or HMS or its
successor-in-interest becomes a subsidiary or affiliate or any other corporation
or other entity; or
3. A determination by the Board of Directors of HMS, or a court or
administrative agency with jurisdiction over the matter, that a change of
control has occurred in HMS, or its successor entity; but
4. A change of control shall not occur if Richard E. Marriott or J.W.
Marriott, Jr., shall increase their ownership of HMS common stock.
<PAGE> 1
EXHIBIT 3
HOST MARRIOTT SERVICES CORPORATION
COMPREHENSIVE STOCK PLAN
ARTICLE 1.
ESTABLISHMENT, PURPOSE AND DURATION
1.1 Establishment of the Plan. Host Marriott Services Corporation, a
Delaware corporation (the "Company"), hereby establishes an incentive
compensation plan to be known as the "Host Marriott Services Corporation
Comprehensive Stock Plan" (the "Plan"), as set forth in this document. The Plan
permits the granting of Nonqualified Stock Options, Incentive Stock Options,
Deferred Stock and Restricted Stock.
Upon the consent of Host Marriott Corporation, as sole shareholder of the
Company, such consent to be evidenced by a vote of the majority of Directors of
Host Marriott Corporation in favor of the Plan. the Plan shall become effective
as of the date of such consent (the "Effective Date"), and shall remain in
effect as provided in Section 1.3 herein. The Company shall take such actions
with respect to the Plan as may be necessary to satisfy the requirements of Rule
16b-3(b) under the Exchange Act.
1.2 Purpose of the Plan. The purpose of the Plan is to promote and enhance
the long-term growth, development and financial success of the Company by
aligning the personal interests of key management employees to those of the
Company's shareholders and allowing such employees to participate in the growth,
development and financial success of the Company.
The Plan is further intended to provide flexibility to the Company in its
ability to motivate, attract, and retain the services of key employees who have
been or will be given management responsibilities.
1.3 Duration of the Plan. The Plan shall commence on the Effective Date,
as described in Section 1.1 hereof, and shall remain in effect, subject to the
right of the Board of Directors of the Company to terminate the Plan at any time
pursuant to Article 9 hereof, until all Shares subject to it (including any
additional Shares approved by the shareholders of the Company after the
Effective Date) shall have been purchased or acquired according to the Plan's
provisions.
ARTICLE 2.
DEFINITIONS AND CONSTRUCTION
2.1 Definitions. Whenever used in the Plan, the following terms shall have
the meanings set forth below and, when the meaning is intended, the initial
letter of the word is capitalized:
(a) "Allocation Agreement" means the Employee Benefits Allocation and
Other Employment Matters Agreement between the Company and Host Marriott
Corporation.
(b) "Award" means, individually or collectively, a grant under this
Plan of Nonqualified Stock Options, Incentive Stock Options, Restricted
Stock or Deferred Stock.
(c) "Beneficial Owner" shall have the meaning ascribed to such term in
Rule 13d-3, as amended, as promulgated by the SEC under the Exchange Act.
<PAGE> 2
(d) "Board" or "Board of Directors" means the Board of Directors of
the Company, unless the context indicates otherwise.
(e) "Bonus Award" or "Deferred Stock Bonus Award" means a grant of
Shares, on a deferred basis, pursuant to Article 8 hereof.
(f) "Code" means the Internal Revenue Code of 1986, as amended from
time to time.
(g) "Committee" has the meaning set forth in Section 3.1
(h) "Company" means Host Marriott Services Corporation, a Delaware
corporation (including any Subsidiaries), or any successor thereto as
provided in Article 12 hereof.
(i) "Compete" means to engage, individually or as an employee,
consultant or owner (more than 5%) of any entity, in any business engaged
in significant competition with any business operated by the Company.
(j) "Conversion Award" means an Award made pursuant to the Allocation
Agreement to reflect the effect of the Distribution on outstanding, awards
made under the Predecessor Plan and held by the grantee immediately before
the Distribution.
(k) "Current Award" means a Bonus Award granted under the terms and
conditions described in Section 8.2(c) hereof.
(l) "Deferred Award" means a Bonus Award granted under the terms and
conditions described in Section 8.2(b) hereof.
(m) "Deferred Stock" means Shares subject to a Deferred Award, or to
an Award of a Deferred Stock Agreement granted under the terms and
conditions described in Section 8.3.
(n) "Director" means any individual who is a member of the Board of
Directors of the Company.
(o) "Disability" means a permanent and total disability, within the
meaning of Code Section 22(e)(3), as determined by the Committee in good
faith, upon receipt of sufficient competent medical advice from one or more
individuals, selected by or satisfactory to the Committee, who are
qualified to give professional medical advice.
(p) "Distribution" means the distribution to the holders of
outstanding shares of common stock of Host Marriott Corporation, par value
$1.00 per share, on a one-for-five share basis of all outstanding shares of
common stock, no par value per share (the "Host Marriott Services Common
Stock"), of the Company (prior to the Distribution, a wholly-owned
subsidiary of Host Marriott Corporation) and the related arrangements
between the Company and Host Marriott Corporation, and the policies to be
adopted by such companies, in connection therewith.
2
<PAGE> 3
(q) "Distribution Date" means a date to be established by the Board of
Directors of Host Marriott Corporation, upon which Host Marriott
Corporation will deliver shares of the Host Marriott Services Common Stock
to a distribution agent, who will disburse stock certificates representing
those shares in a manner consistent with the terms of the Distribution.
(r) "Distribution Record Date" means a date to be established by the
Board of Directors of Host Marriott Corporation to determine those
shareholders of Host Marriott Corporation who will participate in the
Distribution and, as such, be entitled to receive shares of Host Marriott
Services Common Stock.
(s) "Employee" means an employee not subject to a collective
bargaining agreement who is a salaried employee of the Company who, during
the thirteen four-week accounting periods prior to any date of
determination, worked at least 2,080 hours for the Company.
(t) "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, or any successor Act thereto.
(u) ("Fair Market Value" means the average of the highest and lowest
quoted selling prices for the Shares on the relevant date, or (if there
were no sales on such date) the average so computed on the nearest day
before and the nearest day after the relevant date, as prescribed by
Treasury Regulation 20.2031-2(b)(2), as reported in the Wall Street Journal
or a similar publication selected by the Committee.
(v) "Host Marriott Corporation" means Host Marriott Corporation, a
Delaware corporation.
(w) "Incentive Stock Option" or "ISO" means an Award of an option to
purchase Shares, granted under Article 6 hereof, which is designated as an
Incentive Stock Option and is intended to meet the requirements of Section
422 of the Code.
(x) "Nonqualified Stock Option" or "NQSO" means an Award of an option
to purchase Shares, granted under Article 6 hereof, which is not intended
to be an Incentive Stock Option.
(y) "Officers" shall have the meaning as that term is defined in Rule
16a-l(f), as the same may be amended from time to time, under the Exchange
Act.
(z) "Option" means an Award of an Incentive Stock Option or of a
Nonqualified Stock Option.
(aa) "Option Price" means the price at which a Share may be purchased
by a Participant pursuant to an Option.
(bb) "Participant" means an Employee of the Company with regard to
whom an Award -ranted under the Plan is outstanding.
(cc) "Period of Restriction" means the period during which the
transfer of Shares of Restricted Stock is restricted in some way (based on
the passage of time, the
3
<PAGE> 4
achievement of performance goals, or upon the occurrence of other events as
determined by the Committee, at its discretion), and is subject to a
substantial risk of forfeiture, as provided in Article 7 hereof.
(dd) "Person" shall have the meaning ascribed to such term in Section
3(a)(9) of the Exchange Act and shall include a "croup," as defined in
Section 13(d)(3) thereof.
(ee) "Predecessor Plan" means the Host Marriott Corporation 1993
Comprehensive Stock Incentive Plan.
(ff) "President" means the chief executive officer of the Company,
however such person may be titled.
(gg) "Restricted Stock" means an Award granted to a Participant
pursuant to Article 7 hereof.
(hh) "Rule 16b-3" means Rule 16b-3 or any successor or amended rule
promulgated by the SEC under the Exchange Act.
(ii) "SEC" means the Securities and Exchange Commission.
(jj) "Shares" means shares of common stock of the Company, or of any
successor corporation adopting this Plan.
(kk) "Subsidiary" means any corporation more than fifty percent of the
number of share of common stock of which is beneficially owned by the
Company, or by any of its subsidiaries.
2.2 Gender and Number. Except where otherwise indicated by the context,
any masculine term used herein also shall include the feminine, the plural shall
include the singular and the singular shall include the plural.
2.3 Severability. In the event any provision of the Plan shall be held
illegal or invalid for any reason, the illegality or invalidity shall not affect
the remaining parts of the Plan, and the Plan shall be construed and enforced as
if the illegal or invalid provision had not been included.
ARTICLE 3.
ADMINISTRATION
3.1 The Committee. The Plan shall be administered by a committee (the
"Committee") comprised (i) to the extent required by Rule 16b-3, by an
administrator or administrators in compliance with Rule 16b-3. and (ii) in all
other cases, by such administrator or administrators as the Board of Directors
may designate.
3.2 Authority of the Committee. The Committee shall have sole power to
select Employees to whom Awards are granted, except that Bonus Awards authorized
by Article 8 hereof may be granted by the President in the case of any
recipients who are not Officers. The Committee, with the exception described in
the previous sentence, shall have sole power to determine the size and types of
Awards and to determine the terms and conditions (e.g., vesting, term, manner of
exercise, distribution, etc.) of such Awards in a manner consistent with the
Plan. The Committee shall have full power to
4
<PAGE> 5
construe and interpret the Plan and any agreement or instrument entered into
under the Plan; to establish, amend, or waive rules and regulations for the
Plan's administration; and (subject to the provisions of Article 9 herein) to
amend the terms and conditions of any outstanding Award to the extent such terms
and conditions are within the discretion of the Committee as provided in the
Plan. Further, the Committee shall have the full power to make all other
determinations which may be necessary or advisable for the administration of the
Plan. The Committee may correct any defect or supply any omission or reconcile
any inconsistency in the terms of any Award or in the terms of the Plan, in the
manner and to the extent it shall deem expedient. The Committee shall be the
sole and final judge of such expediency, and its determinations shall be
conclusive. Notwithstanding the foregoing, with respect to persons subject to
Section 16 of the Exchange Act, transactions under the Plan are intended to
comply with all applicable conditions of Rule 16b-3. To the extent any
provisions of the Plan or action by the Committee fails to so comply, it shall
be deemed null and void. to the extent permitted by law and deemed advisable by
the Committee in its sole discretion.
3.3 Decisions Binding. All determinations and decisions made by the
Committee pursuant to the provisions of the Plan and all related orders or
resolutions of the Board of Directors shall be final. conclusive, and binding on
all Persons, including the Company, its stockholders. Employees, Participants,
and their estates, beneficiaries or other representatives.
3.4 Unanimous Consent in Lieu of Meeting. A memorandum signed by all
members of the Committee shall constitute the act of the Committee without the
necessity, in such extent, to hold a meeting.
3.5 Administration of Conversion Awards. The Company shall satisfy all
obligations of Host Marriott Corporation with respect to Conversion Awards to
the extent denominated in Shares of the Company pursuant to the Allocation
Agreement. The Committee shall administer all such Conversion Awards under this
Plan, and shall give credit for service with the party employing the grantee as
of the Distribution Date (Host Marriott Corporation or the Company) with respect
to any continuing employment provisions under the terms of any such Conversion
Award for purposes of determining eligibility, vesting, or similar requirements.
Solely with respect to such Conversion Awards (and not with respect to any other
Awards made on or after the Distribution Date), for purposes of determining
whether a termination of employment has occurred under the terms of any
provision requiring continued employment, termination of employment through
December 31, 1996, shall not be deemed to occur if a grantee leaves the service
of Host Marriott Corporation to immediately be-in employment with the Company.
Except as otherwise expressly provided in Section 6.2(a) or in this Section 3.5,
the terms of such Conversion Awards shall take precedence over the terms of this
Plan in the event of any conflict.
3.6 Performance Based Awards. In making Awards, the Committee shall give
due consideration to the requirements of 162(m) of the Code. The Committee is
expressly authorized to make performance based awards that comply with the
applicable provisions of 162(m) and any subsequent provisions of the Code or
securities laws relating to performance based compensation. Any specific
requirements of 162(m) required by law to be incorporated into the Plan shall be
so included so as to obtain deductibility.
ARTICLE 4.
SHARES SUBJECT TO THE PLAN
4.1 Number of Shares. Subject to adjustment as provided in Section 4.3
herein, Awards for no more than 6,500,000 Shares may be granted under the Plan;
provided, however. that in no
5
<PAGE> 6
event shall the number of Shares subject to. and issued upon the exercise of,
Options that qualify as Incentive Stock Options exceed 6,500,000 in the in the
aggregate; and provided further, that the maximum number of Shares that may be
issued to any Employee in any one year shall not exceed 6,500,000 in the
aggregate. These 6,500,000 Shares may be either authorized but unissued,
treasury, or reacquired Shares. Included in this number are Shares of the
Company attributable to shares of Host Marriott Corporation common stock
previously reserved for awards under the Predecessor Plan and redenominated as
of the Effective Date as possible Awards of Shares under this Plan to reflect an
equitable adjustment pursuant to the terms of the Allocation Agreement (or under
the terms of any corporate transactions otherwise affecting such previously
available Shares), which shall after the Distribution become available only
under this Plan, and all future administration of any such Shares, with the
exception described in the following sentence shall be under this Plan. To the
extent the terms of this Plan are inconsistent with any notices of award, award
agreements or award grants issued pursuant to the Predecessor Plan, such
documents issued under the Predecessor Plan shall govern, except to the extent
such documents have been revised with the consent of the recipients thereof. The
total number of Shares available under the Plan is subject to adjustment upon
the occurrence of any of the events and in the manner hereinafter specified.
4.2 Lapsed Awards. If any Award granted under this Plan terminates,
expires, or lapses for any reason, any Shares subject to such Award again shall
be available for the grant of an Award under the Plan.
4.3 Adjustments in Authorized Shares. (a) In the event of any mercer,
reorganization, consolidation, recapitalization. separation, liquidation, stock
dividend. spin-off. split-up, share combination. or other change in the
corporate structure of the Company affecting the Shares, such adjustment may be
made in the number and class of Shares which may be delivered under the Plan.
and in the number and class of and/or price of Shares subject to outstanding
Options, Restricted Stock, and Deferred Stock granted under the Plan, as may be
determined to be appropriate and equitable by the Committee, in its sole
discretion, to prevent dilution or enlargement of existing Awards; provided that
the number of Shares subject to any Award shall always be a whole number. No
adjustments shall be made for cash dividends nor with respect to Shares that
have been distributed.
(b) In the case the Company is merged or consolidated with another
corporation and the Company is not the surviving corporation, or in the case the
property or stock of the Company is acquired by another corporation, or in the
case of a separation, reorganization, spin-off or liquidation of the Company,
the Company's Board or the Board of Directors of any other corporation assuming
the obligations of the Company hereunder shall either (i) make appropriate
provision for the protection of any outstanding by the substitution on an
equitable basis of appropriate stock of the Company, or of the merged,
consolidated or otherwise reorganized corporation or corporations which will be
issuable in respect to the Shares of common stock of the Company, provided only
that the excess of the aggregate fair market value of the Shares subject to the
Options immediately after such substitution or substitutions over the purchase
price thereof is not more than the excess of the aggregate Fair Market Value of
the Shares subject to such Options immediately before such substitution over the
purchase price thereof, and provided that the new option or the assumption of
the old Option does not give an optionee additional benefits which the optionee
did not have under the old Option, or (ii) upon written notice to the Employee
provide that the Option must be exercised within sixty (60) days of the date of
such notice or it will be terminated. In any such case, the Committee may, at
its discretion, waive the exercise period. Any adjustment of an Incentive Stock
Option under this Section 4.3 shall be made in such a manner so as not to
constitute a '.modification" within the meaning of Section 424(h)(3) of the
Code.
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<PAGE> 7
ARTICLE 5.
ELIGIBILITY AND PARTICIPATION
5.1 Eligibility. Persons eligible to participate in this Plan include all
full-time Employees of the Company including Employees who are members of the
Board, but excluding Directors who are not Employees.
5.2 Actual Participation. Subject to the provisions of the Plan, and with
the exception that Bonus Awards (other than those to Officers) shall be approved
by the President, the Committee, in its sole and absolute discretion. may, from
time to time, select from all eligible Employees, those key Employees to whom
Awards shall be granted and shall determine the nature and amount of each Award.
No Employee otherwise eligible under Section 5.1 shall have any right to be
- -ranted an Award under this Plan.
5.3 Employment. Nothing in the Plan or in any Award Option Agreement,
Deferred Stock Agreement or Restricted Stock Agreement shall interfere with or
limit in any way the right of the Company to terminate any Employee's employment
at any time with or without cause, or to increase or decrease the Employee's
compensation from the rate in existence at the time an Award is granted, and
nothing in the Plan shall confer upon any Employee any right to continue in the
employ of the Company.
ARTICLE 6.
STOCK OPTIONS
6.1 Award of Options. Subject to the terms and provisions of the Plan,
Options may be awarded to Employees at any time and from time to time as shall
be determined by the Committee. The Committee shall have complete discretion in
determining the number of Shares subject to Options awarded to each Participant.
The Committee may award Incentive Stock Options, Nonqualified Stock Options, or
a combination thereof. No person shall be eligible to receive Incentive Stock
Options who owns, directly or indirectly (as ownership is defined in Section
424(d) of the Code), more than ten percent (10%) of the voting stock of the
Company or any of its subsidiaries. Nothing in this Article 6 shall be deemed to
prevent the grant of Nonqualified Stock Options in excess of the maximum
established by Section 422 of the Code.
6.2 Options. Options (whether NQSOs or ISOS) awarded under the Plan shall
be evidenced by stock option agreements prepared by the General Counsel of the
Company in a form consistent with the Plan as the Committee shall approve from
time to time. Such agreements need not be identical, but shall contain in
substance the following terms and conditions and, if providing for the grant of
an ISO, shall also contain the provisions set forth in Sections 6.3 with respect
to ISOS.
(a) Price. The purchase price for each Share deliverable upon the
exercise of an Option shall be not less than its Fair Market Value as determined
by the Committee on the day the award of the Option is approved by the
Committee, which shall be deemed to be the date the Option is awarded. In the
case of Conversion Awards of Options, the purchase price for each Share
deliverable upon the exercise of an Option shall be the amount determined in
accordance with Section 2.5(c)(iv) of the Allocation Agreement.
(b) Number of Shares. The Option Agreement shall specify the number
of shares to which it pertains, in the case of Conversion Awards, the number of
Shares to which the Option pertains may be adjusted in accordance with Section
2.5(c)(v) of the Allocation Agreement.
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(c) Waiting Period and Exercise Dates. Each Option shall be
exercisable by the optionee in accordance with the exercise provisions the
Committee may include, in its sole discretion, in the Option Agreement;
provided, however, that no NQSO shall be exercisable after the expiration of
fifteen (15) years from the date such NQSO is granted and no ISO shall be
exercisable after the expiration of ten (10) years from the date such ISO is
- -ranted (or such shorter period of time as determined by the Committee upon the
award of such NQSO or ISO). The Committee, in its sole discretion, may extend
the time that an Option is exercisable notwithstanding anything in the preceding
sentence to the contrary.
(d) Medium and Time of Payment. Shares purchased pursuant to an
Option Agreement shall be paid for in full at the time of purchase, payment to
be made either in cash or, if requested by the optionee and approved by the
Committee, by delivery of Shares having an aggregate Fair Market Value equal to
the purchase price. Upon receipt of payment the Company shall, without transfer
or issue tax to the optionee or other Person entitled to exercise the Option,
deliver to the optionee or such other Person either a certificate or
certificates for such Shares or confirmation from the transfer agent for the
Shares that said transfer agent is holding Shares for the account of the
optionee or such other Person in a certificateless account.
(e) Rights as a Shareholder. The optionee shall have no rights as a
shareholder with respect to any Shares covered by an Option until the date of
issuance of a stock certificate or confirmation for such Shares. Except as
otherwise expressly provided in the Plan. no adjustment shall be made for
dividends or other rights for which the record date is prior to the date of
issuance.
(f) Non-Assignability of Option Rights. No Option shall be assignable
or transferable by the optionee except by (i) will or by the laws of descent and
distribution, or (ii) pursuant to a qualified domestic relations order as
defined in the Code or Title I of the Employee Retirement Income Security Act or
the rules thereunder or (iii) as otherwise provided by the Committee as
permitted by applicable laws and consistent with the best interest of the
Company.
(g) General Restriction. Each Option shall be subject to the
requirement that, if at any time the Committee shall determine, in its
discretion, that the listing, registration or qualification of the Shares
subject to such Option upon any securities exchange or under any state or
federal law, or the consent or approval of any Government regulatory body, is
necessary or desirable as, for example, a condition of, or in connection with.
the issue or purchase of Shares thereunder, such Option may not be exercised in
whole or in part unless such listing, registration, qualification, consent or
approval shall have been effected or obtained free of any conditions not
acceptable to the Committee.
(h) Holding Period. An optionee who is subject to Section 16 of the
Exchange Act may not dispose of any Shares acquired as a result of an exercise
of an Option until six (6) months after the date of the -rant of such Option as
determined in accordance with Rule 16b-3 and only with the prior written
approval of the General Counsel of the Company.
(i) Designation of Option. Each Option issued under the Plan shall be
clearly identified as an incentive Stock Option or as a Non-Qualified Stock
Option.
(j) Additional Terms. Each Option shall be subject to such additional
terms and conditions and provisions as the Committee may deem advisable, in its
sole discretion, which are not inconsistent with the Plan, including, without
limitation. restrictions upon the transfer of the Shares received upon exercise
of the Option.
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6.3 Incentive Stock Options. The Committee may designate that any Options
granted pursuant to the Plan shall be Incentive Stock Options, any such
designation to be subject to the following additional terms and conditions:
(a) Exercised Options. No Option which has been exercised may
retroactively be designated as an Incentive Stock Option.
(b) Date of Grant. No Incentive Stock Option shall be granted later
than ten (10) years from the earlier of (i) the date this Plan is adopted by the
Board of Directors of the Company, or (ii) the date this Plan is approved by the
stockholders of the Company pursuant to Section 1. 1 herein.
(c) Limitation on Annual Exercise. In the case of all Incentive Stock
Options -ranted hereunder, the aggregate Fair Market Value (determined at the
time the Incentive Stock Options are granted) of the Shares for which Incentive
Stock Options are exercisable for the first time by an Employee during any
calendar year (under all plans of the Company and its Subsidiaries) shall not
exceed $100,000.
(d) Duration of ISOS. Subject to earlier termination as provided in
Section 6.3(e) and (f) hereunder, each ISO shall expire on the date specified by
the Committee, but not more than ten (10) years from the date of its grant.
(e) Effect of Termination of Employment on ISOS. If an optionee
ceases to be employed by the Company other than by reason of death or
disability, any ISO granted to such optionee within the six-month period
immediately preceding, such termination shall be cancelled forthwith. With
respect to any ISO, granted to such optionee more than six months prior to such
termination, no further installments of such ISO shall become exercisable and
his ISO shall terminate after the passage of sixty (60) days from the date of
termination of his employment, but in no event later than on their specified
expiration dates. except to the extent that such ISO (or unexercised
installments thereof) have been converted into NQSOs pursuant to Section 6.3(i)
below. Leave of absence with the written approval of the Committee shall not be
considered an interruption of employment under the Plan, provided that such
written approval contractually obligates the Company to continue the employment
of the Employee after the approved period of absence. Employment shall also be
considered as continuing uninterrupted during any other bona fide leave of
absence (such as those attributable to illness, military obligations or
governmental service), provided that the period of such leave does not exceed
ninety (90) days or, if longer, any period during, which such optionee's right
to reemployment is guaranteed by statute. ISOs granted under the Plan shall not
be affected by any chance of employment within or among the Company and any of
its Subsidiaries, so Ion- as the optionee continues to be an Employee of the
Company or any of its Subsidiaries.
(f) Effect of Death or Disability on ISOs. If an optionee ceases to
be employed by the Company by reason of his death, any ISO of his ma be
exercised, to the extent of the number of Shares with respect to which he could
have exercised it on the date of his death, by his estate, personal
representative or beneficiary who has acquired the ISO by will or by the laws of
descent and distribution, at any time prior to the earlier of the date specified
in the ISO agreement, the ISO's specified expiration date or one year after the
death of the optionee.
If an optionee ceases to be employed by the Company by reason of his
Disability, he shall have the right to exercise any ISO held by him on the date
of termination of employment, to the extent of the number of shares with respect
to which he could have exercised it on that date, at any time
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prior to the earlier of the date specified in the ISO agreement, the ISO's
specified expiration date or one year from the date of the termination of the
optionee's employment.
(g) Adjustments. Any adjustment made pursuant to Section 4.3 with
respect to ISOs shall be made only after the Committee, after consulting with
the General Counsel of the Company, determines whether such adjustments would
constitute a "modification" of such ISO (as that term is defined in Section 425
of the Code) or would cause any adverse tax consequences for the holders of such
ISO. If the Committee determines that such adjustments made with respect to ISOs
would constitute a modification of such ISOS. it may refrain from making such
adjustments.
(h) Notice to Company of Disqualifying Dispositions. Each Employee
who receives an ISO must agree to notify the Company in writing, immediately
after the Employee makes a "disqualifying disposition" of any Shares acquired
pursuant to the exercise of an ISO. A "disqualifying disposition" is any
disposition (including any sale) of such Shares before the later of (a) two
years after the date the Employee was -ranted the ISO, or (b) one year after the
date the Employee acquired Shares by exercising the ISO. If the Employee has
died before such Shares are sold, these holding period requirements do not apply
and no disqualifying disposition can occur thereafter.
(i) Conversion of ISOs into NQSOS; Termination of ISOS. The
Committee, at the written request of any optionee, may in its discretion take
such actions as may be necessary to convert such optionee's ISOs (or any
installments or portions of installments thereof) that have not been exercised
on the date of conversion into NQSOs at any time prior to the expiration of such
ISOS, regardless of whether the optionee is an Employee of the Company at the
time of such conversion. Such actions may include, but not be limited to,
extending the exercise period or reducing the exercise price of the appropriate
installments of such ISOS. At the time of such conversion, the Committee (with
the consent of the optionee) may impose such conditions on the exercise of the
resulting NQSOs as the Committee in its discretion may determine, provided that
such conditions shall not be inconsistent with the provisions of Section 6.2 or
any other applicable Section of the Plan. Nothing in the Plan shall be deemed to
give any optionee the right to have such optionee's ISOs converted into NQSOS,
and no such conversion shall occur until and unless the Committee takes
appropriate action. The Committee, with the consent of the optionee, may also
terminate any portion of any ISO that has not been exercised at the time of such
termination.
(j) Compliance with Code. Any designation of an Option as an ISO and
any related Option agreement shall be subject to and contain such further terms
and conditions as shall be necessary to comply with all provisions of the Code
(including any regulations thereunder or interpretations thereof) which apply to
ISOs (as defined in Section 422(b) of the Code). In addition, the Committee may,
with respect to any Option (and any related Option agreement) -ranted hereunder
which is designated as an Incentive Stock Option, adopt any amendment thereto
which it may deem necessary or advisable to comply with the provisions of
Section 422 of the Code.
ARTICLE 7.
RESTRICTED STOCK
7.1 Award of Restricted Stock. Subject to the terms and provisions of the
Plan, the Committee. at any time and from time to time, may award Shares of
Restricted Stock to Employees in such amounts, and bearing such restrictions as
the Committee shall determine.
7.2 Restricted Stock Agreement. Each Restricted Stock Award shall be
evidenced by a Restricted Stock Agreement prepared by the General Counsel of the
Company that shall specify the
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Period of Restriction. or Periods, the number of Shares of Restricted Stock
awarded, and such other provisions as the Committee shall determine.
7.3 Nature of Restrictions. The restrictions to be imposed on the Shares
of Restricted Stock to be awarded to eligible key Employees shall be removed in
phases over a period of years depending, upon the fulfillment of conditions to
be determined by the Committee such as: (a) continued employment with the
Company over a prescribed period of time, (b) the Employee's refraining from
Competing with the Company or otherwise en-a-in- in activities which are
inimical to the Company's best interests. and (c) satisfaction of such
performance conditions as the Committee may establish. The conditions set forth
in Section 7.3(a) and (b) are illustrative and not exhaustive of the conditions
the Committee may establish.
It is intended that the restrictions imposed by the Committee will, until
released, constitute a "substantial risk of forfeiture" of the Shares of
Restricted Stock within the meaning of Section 83(c)(1) of the Code and Section
1.83-3 of the Federal Income Tax Regulations and are to be construed
accordingly. If the conditions are not met, then any Shares that otherwise would
be freed from the restrictions will be returned to the Company for cancellation.
Each Conversion Award of Restricted Stock denominated in Shares of the Company
shall be released from restrictions at the same time and on the same schedule as
the corresponding restricted shares of Host Marriott Corporation common stock
retained in connection with such Conversion Award as of the Distribution, under
the terms of the restrictions to which the grantee's award under the Predecessor
Plan or under an individual restricted stock contract with Host Marriott
Corporation were subject, except that: (a) release of such Shares of Restricted
Stock shall be contingent upon a finding, by the President (or other equivalent
or higher officer) of Host Marriott Corporation that a grantee who is an
employee of Host Marriott Corporation has satisfied conditions for such
release-, or (b) release of such Shares of Restricted Stock shall be contingent
upon a finding by the President (or other equivalent or higher officer) of the
Company that a grantee who is an Employee has satisfied conditions for such
release.
7.4 Nontransferability of Restricted Stock. Except as provided in this
Article 7, the Shares of Restricted Stock granted herein may not be sold,
transferred, pledged, assigned, or otherwise alienated or hypothecated until the
end of the applicable period of restriction established by the Committee and
specified in the Restricted Stock agreement, or upon earlier satisfaction of any
other conditions, as specified by the Committee in its sole discretion and set
forth in the Restricted Stock Agreement. All rights with respect to the Shares
of Restricted Stock granted to a Participant under the Plan shall be available
during his or her lifetime only to such Participant. The Shares of Restricted
Stock -ranted hereunder shall bear a legend reflecting the non-transferability
of such Shares for so long, as such Shares remain non-transferrable. Nothing in
this Article precludes the Committee, in its sole discretion, from permitting a
transfer prior to the end of the Period of Restriction so long as the waiver or
modification of transferability is set forth in the Restricted Stock Agreement.
7.5 Removal of Restrictions. Except as otherwise provided in this Article
7, Shares of Restricted Stock covered by each Restricted Stock Award made under
the Plan shall become freely transferable by the Participant after the last day
of the Period of Restriction; provided, however, that in no event shall a
Participant who is subject to Section 16 of the Exchange Act dispose of any
Shares of Restricted Stock until six (6) months after the date of the grant of
such Restricted Stock as determined in accordance with Rule 16b-3 and only with
the prior written approval of the General Counsel of the Company.
7.6 Voting Rights. During the Period of Restriction, Participants holding
Shares of Restricted Stock granted hereunder may exercise full voting rights
with respect to those Shares.
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7.7 Dividends and Other Distributions. During the Period of Restriction,
Participants holding Shares of Restricted Stock granted hereunder shall be
entitled to receive all dividends and other distributions paid with respect to
those Shares while they are so held. If any such dividends or distributions are
paid in shares, the Shares shall be subject to the same restrictions on
transferability and forfeitability as the Shares of Restricted Stock with
respect to which they were paid.
7.8 Termination of Employment. In the event an Employee's employment with
the Company is terminated because of (i) his or her death, or (ii) mental or
physical disability of such a nature as to render him or her incapable of
performing his or her normally assigned duties, the release of the Shares
pursuant to this Article 7 shall nevertheless continue in the same manner as
though his or her active employment with the Company were continuing on a
satisfactory performance basis; and the Employee's rights thereunder in case of
death or mental incapacity shall inure to the benefit of his or her
beneficiaries or, in the absence of such beneficiaries, to the Employee's
estate.
ARTICLE 8.
DEFERRED STOCK
8.1 Award of Deferred Stock. Subject to the terms and provisions of the
Plan, the President may grant Bonus Awards to Employees who are not Officers and
the Committee may grant Bonus Awards and Deferred Stock Agreements to Officers
or Employees who are not Officers.
8.2 Bonus Awards. Bonus Awards may be used as a part of a management
incentive pro-ram under which part of the annual performance bonus awarded to
managers and other key Employees is made in Deferred Stock. Bonus Award Shares
are reserved for the benefit of the Employee who may elect to take either a
Current Award or a Deferred Award, unless the Employee is classified by the
Company as below a salary level determined by the Committee, in which case only
a Current Award will be available. Bonus Awards will be dated the second day of
January closest to the end of the fiscal year for which the Bonus Award is
- -ranted.
(a) Method of Election. Each eligible Employee classified by the
Company in, at or above a certain salary level may indicate in writing, on a
form to be furnished by the Company, whether the Employee wants a Current Award
or a Deferred Award. Each eligible Employee who does not elect to take a
Deferred Award within the time designated by the Company will be granted a
Current Award.
(b) Deferred Award.
(i) Vesting. The Shares contingently vest pro rata in annual
installments commencing one year after the date of the Bonus Award and
continuing on each January 2 thereafter until the expiration of a ten (10) year
period from this commencement date. All Shares subject to the Award vest upon
(a) termination of employment after reaching age fifty-five (55) with ten (10)
years of service with the Company, (b) termination of employment after twenty
(20) years of Company service with retirement approval from the Committee (or
its designee, in the case of Employees who are not Officers), (c) permanent
disability or (d) death. Vesting s tops when employment terminates for any other
reason.
(ii) Distribution of Shares. Vested Shares will be
distributed to the Employee in two (2) to ten (10) consecutive annual
installments, or over such shorter period as the Committee (or its designee, in
the case of Employees who are not Officers) may direct, commencing in the month
of January following the date the Employee terminates employment-, provided,
however, that
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the Employee may elect to receive his or her vested Shares in a single payment
which shall take place in the month of January following his or her termination.
All such elections, as well as elections to receive payment in two (2) to ten
(10) installments made pursuant to the preceding sentence, shall be made at the
time the Bonus Award is granted. Upon the Employee's death, all undistributed
vested Shares will be distributed in one distribution to the Employee's
designated beneficiaries or, in absence of such beneficiaries, to the Employee's
estate.
(c) Current Award.
(i) Distribution of Shares. Shares subject to a Current Award
will be distributed in ten (10) consecutive annual installments, commencing one
(1) year after the date of the Bonus Award. If an Employee dies prior to
distribution of all Shares to which the Employee is entitled, the remaining
Shares will be distributed in one distribution to the Employee's designated
beneficiaries or, in absence of such beneficiaries, to the Employee's estate.
(ii) Forfeiture of Shares. Any undistributed Shares subject to a
Current Award will be forfeited and the Bonus Award relating thereto terminated
if the Employee's employment with the Company is terminated for any reason other
than (a) termination of employment at or beyond age fifty-five with ten (10)
years of service, (b) termination after twenty (20) years of service with
retirement approval from the Committee (or its designee, in the case of
Employees who are not Officers), (c) permanent disability or (d) death. Any
undistributed Shares not subject to forfeiture shall continue to be distributed
to the Employee (or, in the event of the Employee's death. to his or her
designated beneficiary or, if none, to the Employee's estate,) under the
distribution schedule which would have applied to those Shares if the Employee
had not terminated employment. or over such shorter period as may be directed by
the Committee (or its designee, in the case of Employees who are not Officers).
(d) Conditions. Distribution of Shares under Current Awards and
Deferred Awards is conditioned upon:
(i) The Employee not committing any criminal offense or
malicious tort relating to or against the Company, and
(ii) The Employee having provided the Committee or its designee
with a current address where the Bonus Award may be distributed. If said
conditions are not met, all undistributed Shares will be forfeited and the Bonus
Award terminated.
(e) Conversion Awards. In the case of Conversion Awards of Deferred
Stock denominated in Shares of the Company pursuant to the Allocation Agreement,
each such Share will be subject to conditions identical to those applicable to
the underlying deferred share of Host Marriott Corporation common stock, except
that in the case of grantees who are employees of Host Marriott Corporation. all
conditions pertaining to or for the benefit of Host Marriott Corporation shall
be interpreted as conditions pertaining to or for the benefit of the Company.
Each Conversion Award of Deferred Stock denominated in Shares of the Company
shall be distributed at the same time and on the same schedule as the
corresponding, shares of Host Marriott Corporation common stock awarded under
the Predecessor Plan would have been distributed, and at the same time and on
the same schedule (subject to the effect of Section 8.2(a) herein) as the
corresponding deferred shares of Host Marriott Corporation common stock retained
in connection with such Conversion Award as of the Distribution, if
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any, under the terms and conditions to which the grantee's award under the
Predecessor Plan or under an individual deferred stock contract with Host
Marriott Corporation were subject. except that: (i) distribution of such Shares
of Deferred Stock shall be contingent upon a finding, by the President (or other
equivalent or higher Officer) of Host Marriott Corporation, if required, that a
grantee who is an Employee of Host Marriott Corporation has satisfied conditions
for such distribution-, or (ii) distribution of such Shares of Deferred Stock
shall be contingent upon a finding by the President (or other equivalent or
higher Officer) of the Company, if required, that a grantee who is an Employee
has satisfied conditions for such distribution.
(f) Cash Distribution in Lieu of Shares. Any Officer may request,
with respect to any pending distribution of Shares under a Current Award that,
in lieu of receiving such Shares. a distribution may be made in cash in an
amount equivalent to the Fair Market Value of such Shares on the date of
distribution. The Company may -rant or deny such request in its sole discretion.
(g) Lump Sum Payments. Notwithstanding anything in the Plan to the
contrary, any Employee entitled upon termination of employment to receive a
distribution of Shares pursuant to this Article 8 whose total Fair Market Value
at the time of such termination is $3,000.00 or less shall receive such
distribution in one lump sum as soon as possible following termination of
employment.
8.3 Deferred Stock Agreement. Deferred Stock Agreements reserve Shares for
the benefit of the Employee subject to the following conditions:
(a) Vesting. Shares contingently vest in pro rata annual installments
until age sixty-five (65) or over specified number of years. If the Employee's
employment with the Company is terminated for any reason, including death,
permanent disability or retirement, all reserved Shares not vested before such
termination will be forfeited and the Deferred Stock Agreement terminated.
(b) Distribution of Shares. Vested Shares will be distributed to the
Employee in ten (10) consecutive annual installments, or over such shorter
period as the Committee (or its designee, in the case of Employees who are not
Officers) may direct, commencing on January 2 following the date the Employee
retires, becomes permanently disabled. or attains at least age sixty-five (65)
and is no longer employed by the Company. Upon the Employee's death, all
undistributed vested Shares will be distributed in one distribution to the
deceased Employee's designated beneficiaries or, in absence of such
beneficiaries. to the Employee's estate.
(c) Conditions. Distribution of Shares subject to Deferred Stock
Agreements is conditioned upon:
(i) The Employee not competing with the Company, without
obtaining the Company's written consent, at any time before all Shares reserved
for the Employee's benefit under the Deferred Stock Agreement have been
distributed or forfeited,
(ii) The Employee not committing any criminal offense or
malicious tort relating to or against the Company, and
(iii) The Employee having provided the Company with a current
address where the Bonus Award may be distributed.
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If said conditions are not met, all undistributed Shares will be forfeited
and the Deferred Stock Agreement terminated.
8.4 Assignment. An Employee's rights under a Deferred Stock Agreement or
Bonus Award may not, without the Company's written consent, be assigned or
otherwise transferred, nor shall they be subject to any right or claim of an
Employee's creditors, provided that the Company may offset any amounts owing to
or Guaranteed by the Company, or owing to any credit union related to the
Company against the value of Shares to be distributed under Deferred Stock
Agreements and Bonus Awards.
ARTICLE 9.
AMENDMENT, MODIFICATION, AND TERMINATION
9.1 Amendment, Modification and Termination. With the approval of the
Board, at any time and from time to time, the Committee may terminate, amend, or
modify the Plan. The termination, amendment, or modification of the Plan may be
in response to changes in the Code, Exchange Act, national securities
regulations, or for other reasons deemed appropriate by the Committee. However,
without the approval of the stockholders of the Company, no such termination,
amendment, or modification may become effective if such approval of the
stockholders is required under (i) Rule 16b-3, (ii) provisions of the Code and
regulations promulgated thereunder with respect to ISOS, or (iii) otherwise.
9.2 Awards Previously Granted. No termination, amendment, or modification
of the Plan shall in any manner adversely affect any Award previously granted
under the Plan, without the written consent of the Participant. With the consent
of the Employee affected, the Committee may amend an outstanding Award agreement
in a manner consistent with the Plan.
ARTICLE 10.
TAX WITHHOLDING
The Company shall have the power and the right to deduct or withhold, or
require a Participant to remit to the Company, an amount sufficient to satisfy
Federal, state, and local taxes (including the Participant's FICA obligation)
required by law to be withheld with respect to any grant, exercise, or payment
made under or as a result of this Plan.
ARTICLE 11.
INDEMNIFICATION
Each Person who is or shall have been a member of the Committee, or of the
Board, shall be indemnified and held harmless by the Company against and from
any loss, cost, liability, or expense that may be imposed upon or reasonably
incurred by him or her in connection with or resulting from any claim, action,
suit, or proceeding to which he or she may be a party or in which he or she may
be involved by reason of any action taken or failure to act under the Plan and
against and from any and all amounts paid by him or her in settlement thereof,
with the Company's approval, or paid by him or her in satisfaction of any
judgment in any such action, suit, or proceeding against him or her, provided he
or she shall give the Company an opportunity, at its own expense, to handle and
defend the same before he or she undertakes to handle and defend it on his or
her own behalf. The foregoing right of indemnification shall not be exclusive of
any other rights of indemnification to which such Persons may be entitled under
the Company's Certificate of Incorporation or Bylaws, as a matter of law, or
otherwise, or any power that the Company may have to indemnify them or hold them
harmless.
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ARTICLE 12.
SUCCESSORS
All obligations of the Company under the Plan, with respect to Awards
granted hereunder, shall be binding on any successor to the Company, whether the
existence of such successor is the result of a direct or indirect purchase,
merger, consolidation, or otherwise, of all or substantially all of the business
and/or assets of the Company.
ARTICLE 13.
REQUIREMENTS OF LAW
13.1 Requirements of Law. The granting of Awards and the issuance of Shares
under this Plan shall be subject to all applicable laws, rules, and regulations,
and to such approvals by any governmental agencies or national securities
exchanges as may be required.
13.2 Governing Law. To the extent not preempted or otherwise governed by
Federal law, the Plan, and all agreements hereunder, shall be construed in
accordance with and governed by the laws of the State of Delaware.
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CERTIFICATE
I, _____________ certify that I am the duly elected and qualified Secretary
of HOST MARRIOTT SERVICES CORPORATION, a Delaware corporation, and, as such,
have access to the records of the corporation.
I also certify that the attached copy of the Host Marriott Services
Corporation 1995 Comprehensive Stock Plan is a true and correct copy and that
there have been no changes to said Plan that are not reflected in this copy.
IN WITNESS WHEREOF, I have affixed my official signature and seal of the
Corporation this day of 1995.
HOST MARRIOTT SERVICES CORPORATION
[SEAL]
Secretary
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EXHIBIT 4
HOST MARRIOTT SERVICES CORPORATION
EMPLOYEE STOCK PURCHASE PLAN
Host Marriott Services Corporation (herein called the "Corporation") has
adopted this Employee Stock Purchase Plan (herein called the "Plan") to enable
eligible employees, through payroll savings, to purchase stock of the
Corporation and thus to benefit the Corporation by increasing the employees'
interest in the Corporation's growth and success. It is intended that the Plan
meet the requirements for an "employee stock purchase plan" under Section 423 of
the Internal Revenue Code of 1986, and any amendments thereto, and is to be so
applied and interpreted. The provisions of the Plan are as follows:
1. Stock Offered and Price. An option to purchase shares will be -ranted
to eligible employees in the manner stated below. The Purchase Price of each
share of stock will be the lesser of (i) 10017c of its fair market value on the
date the option is granted, or (ii) 100% of the fair market value on the day the
option is exercised. In the event that the Corporation should declare a stock
dividend or a stock split or reclassify its stock, the purchase price and the
number of shares reserved for the Plan will be adjusted proportionately.
2. Eligible Employees. All employees of the Corporation or any subsidiary
of the Corporation who are employed on the first business day of January of each
year of the Plan, are eligible to participate in the Plan during the following
year, except the following, who are ineligible to participate: (a) employees
whose customary employment is for not more than five months in any calendar
year; (b) employees whose customary employment is 20 hours or less per week, and
(c) any employee, who after grant of an option under the Plan, would own stock
(including, stock which may be acquired under any outstanding options)
possessing five per cent (5%) or more of the total combined voting power or
value of all classes of stock of the Corporation, or a subsidiary thereof.
Notwithstanding the foregoing and with respect to subsidiary corporations, the
Board of Directors of the Corporation must first approve participation in the
Plan of the employees of each such subsidiary. Furthermore, the Board of
Directors may at any time in its sole discretion and if it deems it advisable to
do so, withdraw participation from the employees of a particular subsidiary or
subsidiaries.
3. Participation in the Plan. An eligible employee may become a
participant in the Plan by completing an election to participate in the Plan on
a form provided by the Corporation and filing that form with his Payroll Office
between the 2nd day of January and 15th day of March, or such other time as the
Plan Administrator shall specify, inclusive, in each year in which such employee
is to participate in the Plan. Such form and participation shall be effective
only if the employee is still employed by the Corporation on January 31 of the
following year.
4. Payroll Deductions. At the time a participant files his election to
participate in the Plan (as provided above), the employee shall elect to have
deductions made from his pay, or in the alternative, elect to make
contributions, on each pay day, starting on or after February 1 immediately
following, such election, and ending before the next February 1, as long as he
shall participate in the Plan, of, or equal to, 5%, 6%, 7%, 8%, 9% or 10% of the
base compensation which the employee is entitled to receive on such pay day.
These deductions, or contributions, will be credited to the employee's account
under the Plan. The participating employee may not during any then current year
of the Plan change his rate of payroll deduction or contribution. Once an
employee elects either authorization of payroll deductions or contributions, the
election may not be chanced during, that year of the Plan.
<PAGE> 2
An employee electing to make contributions may miss making the full
contribution once, and may make it up within thirty (30) days. If the employee
misses more than one contribution, or fails to make it up within 30 days. the
employee will be deemed to have elected to terminate his participation for the
year in question (as provided in Section 8). At any time a participating
employee may elect voluntarily to terminate, in total only, his participation in
the Plan for the year in question (as provided in Section 8). Once participation
is terminated, it may not be reinstated during that year of the Plan.
Upon retirement a participant shall have no further obligation nor will he
be permitted to make further contributions to the Plan. All amounts theretofore
contributed by a retired participant shall be retained in his account for the
balance of the Plan year and applied as set forth in Section 5.
5. Exercise of the Option to Purchase Shares. Unless a participating
employee has given prior written notice terminating such employee's
participation in the Plan, for the year in question, or his participation in the
Plan has otherwise been terminated as provided in Section 8, or if he has
retired, the option of such participating employee to purchase stock will be
automatically exercised for him on January 31 of the year following the year in
which he elected to participate in the Plan, for the purchase of the number of
full shares of stock (subject to the participation adjustment provided in
Section 6) which the accumulated funds in the participating employee's account
at that time will purchase at the Purchase Price. The option may not be
exercised at any other time. Any funds remaining in the participating employee's
account insufficient to purchase a full share of stock will be refunded to the
employee. Effective with exercise of the option the employee shall become a
stockholder and shall have all the rights incident thereto, including the right
to such future dividends as may be declared from time to time by the Board of
Directors.
6. Participation Adjustment. If in any year the payroll deductions exceed
the number of unsold reserved shares, a participation adjustment will be made
and the number of shares purchasable by participating employees will be reduced
proportionately. Any funds remaining in the participating employee's account not
used to purchase shares will be refunded to the employee.
7. Issuance of Stock Certificates. As soon after the option is exercised
as is reasonably possible, the participating employee -will be issued a stock
certificate for the number of shares purchased under the Plan.
8. Termination of Participation. The employee will be refunded all monies
in his account and his participation in the Plan terminated, if: (a) the
employee elects in writing to terminate participation, (b) the employee's
employment with the Corporation or its subsidiaries is terminated for any reason
other than retirement; (c) the Board of Directors of the Corporation elects to
terminate the Plan as provided by Section 13; (d) participation is terminated
for failure to make contributions as more fully set forth in Section 4; or (e)
the employee dies. Once terminated, participation may not be reinstated for the
then current year but, if otherwise eligible, the employee may elect to
participate in any subsequent year of the Plan. For purposes of this Section 8,
the term "retirement" shall mean either (i) termination of employment at or
beyond age 55 with at least 10 years of service; or (ii) termination of
employment as a result of total and permanent disability. An employee shall be
considered totally and permanently disabled for purposes of this Section 8 if
the employee is permanently unable to engage in any occupation for which he or
she is reasonably qualified by education, training or experience as certified by
a competent medical authority designated by the Plan Administrator to make such
determination. An employee's termination of employment shall be considered a
"retirement" for purposes of this Section 8 only if such termination occurs not
more than three months prior to January 31 of the year following the year in
which the employee has filed his or her most recent valid election to
participate in the Plan.
2
<PAGE> 3
9. Assignment. No employee may assign his rights under the Plan
(including his rights in the option). Any payment of cash or issuance of stock
hereunder may be made only to the employee (or, in the event of his death, to
his estate). After the stock certificate has been issued, such certificate may,
of course, be assigned the same as any other stock certificate.
10. Administration. The Compensation Policy Committee of the Board of
Directors shall administer the Plan and may prescribe rules as to the
administration of the Plan, including, without limitation, rules relating to the
definition of "base compensation" as used herein. The determination of the
Committee as to any questions which may arise with respect to the interpretation
of the provisions of this Plan shall be final. Payroll deduction authorizations
and elections to terminate participation shall be exercised only on forms
provided by the Corporation for that purpose.
11. Application of Funds. All funds received or held by the Corporation
under this Plan may be used for any corporate purpose until applied to the
purchase of stock and/or refunded to participating employees, and participating
employee's accounts will not be segregated, nor will interest be paid thereon.
12. Amendment of Plan. The Board of Directors may, at any time, amend this
Plan, in any respect, except that without approval of the stockholders of the
Corporation no amendment shall be made (a) changing the number of shares subject
to this Plan (except as provided in Section 1); (b) decreasing the Purchase
Price (except as provided in Section 1); or (c) changing administration of the
Plan from the Executive Committee or changing the classification of employees
eligible to participate in the Plan.
13. Term and Termination of the Plan. This Plan shall continue in effect
on a year-to-year basis unless terminated by the Board of Directors of the
Corporation. The Board of Directors may terminate the Plan at any time and for
any reason. In any event the Plan shall, without further action of the Board of
Directors, terminate at such time as the total number of shares reserved for
purchase under the Plan has been distributed.
14. Governmental Regulation. The Corporation's obligation to issue, sell
and deliver its stock under this Plan is subject to the approval of any
governmental authority required in connection with the authorization, issuance
or sale of such stock.
15. Other Provisions. (a) Notwithstanding any other provisions of this
Plan. no employee may purchase in any one calendar year, under this Plan, shares
of stock which exceed $25,000.00 of fair market value determined as of the date
the option is granted. (b) "Fair Market Value" means the average of the high and
low prices per share of the Corporation's stock as reflected by composite
transactions on the various national securities exchanges on which such stock
has been listed and reported by the National Association of Securities Dealers
on the day named, or if there are no transactions on that date, then the closing
price for the preceding day upon which transactions occurred. (c) A "subsidiary
of the Corporation" is any corporation where the Corporation owns 50% or more of
the total combined voting, power of all classes of stock, (d) Temporary
disability or an approved leave of absence shall not result in termination of
employment within the meaning of the Plan, (e) All employees granted options
shall have the same rights and privileges. The Plan shall be effective for the
1996 plan year commencing on or about February 1, 1996.
3
<PAGE> 4
CERTIFICATE OF SECRETARY
I, the undersigned Assistant Secretary of Host Marriott Services
Corporation (the "Corporation") do hereby certify the foregoing to be a true
copy of the Host Marriott Services Corporation Employee Stock Purchase Plan (the
"Plan") and that there have been no amendments or modifications to the Plan that
are not reflected in this copy.
IN WITNESS WHEREOF, I have hereunto set my hand and seal of Host Marriott
Services Corporation this day of 1995.
------------------------
Assistant Secretary
4
<PAGE> 1
Exhibit 6
AGREEMENT AND PLAN OF MERGER
DATED AS OF JULY 26, 1999
AMONG
AUTOGRILL, S.p.A.
AUTOGRILL ACQUISITION CO.,
AND
HOST MARRIOTT SERVICES CORPORATION
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I. THE TENDER OFFER....................................................................1
1.1. THE OFFER.................................................................................1
1.2. SEC FILINGS...............................................................................3
1.3. COMPANY ACTION............................................................................4
1.4. COMPOSITION OF THE COMPANY BOARD..........................................................4
ARTICLE II. THE MERGER.........................................................................6
2.1. THE MERGER................................................................................6
2.2. CLOSING...................................................................................6
2.3. EFFECTIVE TIME............................................................................6
2.4. EFFECTS OF THE MERGER.....................................................................6
2.5. CERTIFICATE OF INCORPORATION..............................................................6
2.6. BYLAWS....................................................................................6
2.7. OFFICERS AND DIRECTORS OF SURVIVING CORPORATION...........................................7
2.8. EFFECT ON CAPITAL STOCK...................................................................7
2.9. SURRENDER AND PAYMENT.....................................................................7
ARTICLE III. REPRESENTATIONS AND WARRANTIES...................................................10
3.1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY............................................10
3.2. REPRESENTATIONS AND WARRANTIES OF PARENT.................................................19
3.3. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB..................................21
ARTICLE IV. COVENANTS RELATING TO CONDUCT OF BUSINESS.........................................22
4.1. COVENANTS OF THE COMPANY.................................................................22
4.2. COVENANTS OF PARENT AND MERGER SUB.......................................................24
4.3. ADVICE OF CHANGES; GOVERNMENT FILINGS....................................................24
ARTICLE V. ADDITIONAL AGREEMENTS..............................................................25
5.1. PREPARATION OF PROXY STATEMENT; THE COMPANY STOCKHOLDERS MEETING.........................25
5.2. ACCESS TO INFORMATION....................................................................25
5.3. APPROVALS AND CONSENTS; COOPERATION......................................................26
5.4. ACQUISITION PROPOSALS....................................................................27
5.5. EMPLOYEE BENEFITS........................................................................28
5.6. FEES AND EXPENSES........................................................................28
5.7. INDEMNIFICATION; DIRECTORS' AND OFFICERS' INSURANCE......................................29
5.8. PUBLIC ANNOUNCEMENTS.....................................................................29
5.9. TAKEOVER STATUTES........................................................................30
5.10. EMPLOYEE STOCK OPTIONS..................................................................30
5.11. RIGHTS AGREEMENT........................................................................30
5.12. CREDIT AGREEMENT........................................................................30
5.13. DEBT TENDER.............................................................................30
5.14. LICENSE AGREEMENT.......................................................................30
5.15. FURTHER ASSURANCES......................................................................31
ARTICLE VI. CONDITIONS PRECEDENT..............................................................31
6.1. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER...............................31
ARTICLE VII. TERMINATION AND AMENDMENT........................................................31
7.1. TERMINATION..............................................................................31
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
7.2. EFFECT OF TERMINATION....................................................................33
7.3. AMENDMENT................................................................................33
7.4. EXTENSION; WAIVER........................................................................34
ARTICLE VIII. GENERAL PROVISIONS..............................................................34
8.1. NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS;
NO OTHER REPRESENTATIONS AND WARRANTIES..................................................34
8.2. NOTICES..................................................................................34
8.3. INTERPRETATION...........................................................................35
8.4. COUNTERPARTS.............................................................................35
8.5. ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES...........................................36
8.6. GOVERNING LAW; JURISDICTION; WAIVER OF JURY TRIAL........................................36
8.7. SEVERABILITY.............................................................................37
8.8. ASSIGNMENT...............................................................................37
8.9. ENFORCEMENT..............................................................................37
8.10. DEFINITIONS.............................................................................37
8.11. PERFORMANCE BY MERGER SUB...............................................................39
</TABLE>
ii
<PAGE> 4
GLOSSARY OF DEFINED TERMS
<TABLE>
<CAPTION>
LOCATION OF
DEFINITION DEFINED TERM
<S> <C>
Acquisition Proposal...............................................................Section 5.4(a)
Agreement................................................................................Preamble
Board of Directors...................................................................Section 8.10
Business Day.........................................................................Section 8.10
Certificate of Merger.................................................................Section 2.3
Certificates.......................................................................Section 2.9(b)
Closing...............................................................................Section 2.2
Closing Date..........................................................................Section 2.2
Code...............................................................................Section 3.1(h)
Company..................................................................................Preamble
Company Benefit Plans...........................................................Section 3.1(l)(i)
Company Board......................................................................Section 1.2(b)
Company Common Stock.....................................................................Recitals
Company Disclosure Schedule...........................................................Section 3.1
Company Material Contracts.........................................................Section 3.1(k)
Company Permits....................................................................Section 3.1(f)
Company Purchase Plan................................................................Section 8.10
Company Representatives............................................................Section 5.4(a)
Company Rights Agreement........................................................Section 3.1(b)(i)
Company SEC Reports.............................................................Section 3.1(d)(i)
Company Stock Plan...................................................................Section 8.10
Company Stock Purchase Plan..........................................................Section 8.10
Company Stockholders Meeting.......................................................Section 5.1(a)
Company Voting Debt...........................................................Section 3.1(b)(iii)
Confidential Information Agreement ...................................................Section 5.2
Continuing Directors...............................................................Section 1.4(c)
DGCL.....................................................................................Recitals
Dissenting Shares..................................................................Section 2.9(j)
Effective Time........................................................................Section 2.3
Employee Option......................................................................Section 5.10
Environmental Laws...................................................................Section 8.10
ERISA...........................................................................Section 3.1(l)(i)
Exchange Act..................................................................Section 3.1(c)(iii)
Exchange Agent.....................................................................Section 2.9(a)
Expenses..............................................................................Section 5.6
GAAP............................................................................Section 3.1(d)(i)
Governmental Entity...........................................................Section 3.1(c)(iii)
HSR Act.......................................................................Section 3.1(c)(iii)
Indemnified Party.....................................................................Section 5.7
</TABLE>
iii
<PAGE> 5
<TABLE>
<S> <C>
Injunction................................................................................Annex A
Intellectual Property................................................................Section 8.10
Interim Financial Statements.......................................................Section 3.1(d)
Liens..........................................................................Section 3.1(b)(ii)
Material Adverse Effect..............................................................Section 8.10
Material Subsidiaries................................................................Section 8.10
Merger...................................................................................Recitals
Merger Consideration...............................................................Section 2.8(c)
Merger Sub...............................................................................Preamble
Minimum Condition..................................................................Section 1.1(a)
Minimum Shares.....................................................................Section 1.1(a)
Offer....................................................................................Recitals
Offer Documents....................................................................Section 1.2(a)
Operational Contracts................................................................Section 8.10
Order.....................................................................................Annex A
Organizational Documents.............................................................Section 8.10
Outside Date.......................................................................Section 7.1(b)
Parent...................................................................................Preamble
Parent Disclosure Schedule............................................................Section 3.2
Parent Representatives................................................................Section 5.2
Payment Fund.......................................................................Section 2.9(a)
Person...............................................................................Section 8.10
Price Per Share..........................................................................Recitals
Proxy Statement.................................................................Section 3.1(e)(i)
Required Company Votes.............................................................Section 3.1(j)
Schedule 14D-1.....................................................................Section 1.2(a)
Schedule 14D-9.....................................................................Section 1.2(b)
SEC................................................................................Section 1.2(a)
Securities Act................................................................Section 3.1(c)(iii)
Subsidiary...........................................................................Section 8.10
Superior Proposal..................................................................Section 5.4(b)
Surviving Corporation.................................................................Section 2.1
Takeover Statute......................................................................Section 5.9
Tax..................................................................................Section 8.10
Taxable..............................................................................Section 8.10
Taxes................................................................................Section 8.10
Tax Return...........................................................................Section 8.10
Violation..................................................................... Section 3.1(c)(ii)
</TABLE>
iv
<PAGE> 6
This AGREEMENT AND PLAN OF MERGER, dated as of July 26, 1999 (this
"Agreement"), by and among Autogrill, S.p.A., a corporation organized under the
laws of the Republic of Italy ("Parent"), Autogrill Acquisition Co., a Delaware
corporation and a wholly owned subsidiary of Parent ("Merger Sub"), and Host
Marriott Services Corporation, a Delaware corporation (the "Company").
W I T N E S S E T H :
WHEREAS, the respective Boards of Directors of Parent, Merger Sub and the
Company have each approved the acquisition of the Company by Parent upon the
terms and subject to the conditions of this Agreement;
WHEREAS, in furtherance of such acquisition, Parent proposes to cause
Merger Sub to make a tender offer (as it may be amended from time to time as
permitted under this Agreement, the "Offer") to purchase all of the issued and
outstanding shares of the Common Stock, no par value, of the Company ("Company
Common Stock") at a price per share of Company Common Stock of $15.75 net to the
seller in cash (such price, as it may be increased in accordance with the terms
of this Agreement, the "Price Per Share") upon the terms and conditions set
forth in his Agreement, including Annex A hereto;
WHEREAS, in order to complete such acquisition, the respective Boards of
Directors of Parent, Merger Sub and the Company have approved the merger of
Merger Sub with and into the Company (the "Merger"), upon the terms and subject
to the conditions of this Agreement and in accordance with the Delaware General
Corporation Law (the "DGCL"), whereby each issued and outstanding share of
Company Common Stock not owned directly or indirectly by Parent or the Company
will be converted into the right to receive the Price Per Share in cash;
WHEREAS, the Board of Directors of the Company has unanimously approved
this Agreement, the Offer and the Merger, has determined that the Offer and the
Merger are fair and in the best interests of the Company's stockholders and is
recommending that the Company's stockholders accept the Offer, tender their
shares of Company Common Stock thereunder and adopt and approve the Merger and
this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, and
intending to be legally bound hereby, the parties hereto agree as follows:
ARTICLE I.
THE TENDER OFFER
1.1. THE OFFER.
(a) Provided that this Agreement shall not have been terminated in
accordance with Article VII, Merger Sub shall, and Parent shall cause Merger Sub
to, as soon as practicable, but in no event later than the fifth Business Day
after the date the execution of this Agreement is announced, commence (within
the meaning of Rule 14d-2(a) of the Exchange Act)
1
<PAGE> 7
the Offer to purchase all of the outstanding shares of Company Common Stock at
the Price Per Share net to the seller in cash. The initial expiration date of
the Offer shall be the twentieth Business Day from and after the date the Offer
is commenced, including the date of commencement as the first Business Day in
accordance with Rule 14d-2 under the Exchange Act. The Offer shall be made
pursuant to an Offer to Purchase and related Letter of Transmittal in form
reasonably satisfactory to the Company and containing the terms and conditions
set forth in this Agreement. The obligation of Merger Sub to accept for payment,
purchase and pay for shares of Company Common Stock tendered pursuant to the
Offer shall be subject only to the satisfaction of the conditions set forth in
Annex A hereto, including the condition that a number of shares of Company
Common Stock representing not less than two-thirds of the total issued and
outstanding shares of Company Common Stock on a fully diluted basis on the date
such shares are purchased pursuant to the Offer (the "Minimum Shares") have been
validly tendered and not withdrawn prior to the expiration of the Offer (the
"Minimum Condition"), any of which conditions may be waived by Merger Sub in its
sole discretion; provided, however, that Merger Sub shall not waive the Minimum
Condition without the prior written consent of the Company. The Company agrees
that no shares of Company Common Stock held by the Company or any of its
Subsidiaries will be tendered to Merger Sub pursuant to the Offer.
(b) Without the prior written consent of the Company, neither
Parent nor Merger Sub will (i) decrease the Price Per Share payable in the
Offer, (ii) decrease the number of shares of Company Common Stock sought
pursuant to the Offer or change the form of consideration payable in the Offer,
(iii) change or amend the conditions to the Offer or impose additional
conditions to the Offer, (iv) change the expiration date of the Offer or (v)
otherwise amend, add or waive any term or condition of the Offer in any manner
adverse to the holders of shares of Company Common Stock; provided, however,
that if on any scheduled expiration date of the Offer the conditions set forth
in Annex A hereto have not been satisfied or waived, Merger Sub may (and at the
request of the Company Merger Sub shall), from time to time, extend the
expiration date of the Offer for up to ten additional Business Days (but in no
event shall Merger Sub be required to extend the expiration date of the Offer
beyond the Outside Date); and provided further that (x) Merger Sub may, without
the consent of the Company, extend the Offer for any period required by any
rule, regulation, interpretation or position of the SEC applicable to the Offer
and (y) if (i) all conditions to the Offer are satisfied or waived and (ii) the
shares of Company Common Stock validly tendered and not withdrawn pursuant to
the Offer represent more than two thirds but less than 90% of the total issued
and outstanding shares of Company Common Stock on a fully diluted basis, Merger
Sub may extend the Offer for a period not to exceed 10 business days. Assuming
the prior satisfaction or waiver (which is restricted as set forth above) of all
the conditions to the Offer set forth in Annex A as of any expiration date, and
subject to the terms and conditions of this Agreement, Merger Sub shall, and
Parent shall cause Merger Sub to, accept for payment, purchase and pay for, in
accordance with the terms of the Offer, all shares of Company Common Stock
validly tendered and not withdrawn pursuant to the Offer as soon as possible
after such expiration date of the Offer. Parent shall provide, or cause to be
provided, to Merger Sub, on a timely basis, the funds necessary to purchase any
shares of Company Common Stock that Merger Sub becomes obligated to purchase
pursuant to the Offer.
2
<PAGE> 8
1.2. SEC FILINGS.
(a) As soon as reasonably practicable on the commencement date of
the Offer, Parent and Merger Sub shall file with the Securities and Exchange
Commission (the "SEC"), with respect to the Offer, a Tender Offer Statement on
Schedule 14D-1 (the "Schedule 14D-1"). The Schedule 14D-1 will comply as to form
and content in all material respects with the applicable provisions of the
federal securities laws and will contain or incorporate by reference the Offer
to Purchase, the related Letter of Transmittal and other ancillary documents and
agreements pursuant to which the Offer will be made (the Schedule 14D-1, the
Offer to Purchase, the Letter of Transmittal and such other documents being
collectively referred to herein as the "Offer Documents"). The Company and its
counsel shall be given an opportunity to review and comment upon the Offer
Documents and any amendment or supplement thereto prior to the filing thereof
with the SEC, and Parent and Merger Sub shall consider such comments in good
faith. Parent and Merger Sub agree to provide to the Company and its counsel any
comments which Parent, Merger Sub or their counsel may receive from the Staff of
the SEC with respect to the Offer Documents promptly after receipt thereof.
Parent, Merger Sub and the Company agree to correct promptly any information
provided by any of them for use in the Offer Documents which shall have become
false or misleading in any material respect, and Parent and Merger Sub further
agree to take all steps necessary to cause the Schedule 14D-1 as so corrected to
be filed with the SEC and disseminated to the Company's stockholders, in each
case as and to the extent required by the applicable provisions of the federal
and state securities laws.
(b) The Company shall promptly file with the SEC and mail to its
stockholders a Solicitation/Recommendation Statement on Schedule 14D-9 (as
amended from time to time, the "Schedule 14D-9") which will comply as to form
and content in all material respects with the applicable provisions of the
federal and state securities laws. The Schedule 14D-9 will set forth, and the
Company hereby represents, that the Board of Directors of the Company (the
"Company Board"), at a meeting duly called and held, has unanimously (i)
determined that the Offer and the Merger, taken together, are fair to and in the
best interests of the Company's stockholders, (ii) approved and declared
advisable this Agreement and the transactions contemplated hereby, and such
approval constitutes approval for purposes of Section 203 of the DGCL and
Article 15 of the Company's Certificate of Incorporation, and (iii) recommends
that the Company's stockholders accept the Offer, tender their shares of Company
Common Stock thereunder and approve and adopt the Merger and this Agreement;
provided, however, that, subject to Section 7.1(e), such recommendation may be
withdrawn, modified or amended to the extent that the Company Board determines
to do so in the exercise of its fiduciary duties, and such withdrawal,
modification or amendment shall not constitute a breach of this Agreement. The
Company further represents that it has received the written opinion of Deutsche
Bank Securities Inc., the Company's independent financial advisor, dated the
date hereof, to the effect that, as of the date hereof, the consideration to be
received by the Company's stockholders pursuant to the Offer and the Merger,
taken together, is fair from a financial point of view to the holders of shares
of Company Common Stock, a true and complete copy of which opinion has been
delivered to Parent prior to the execution of this Agreement. The Company will
use its reasonable efforts to cause the Schedule 14D-9 to be filed on the same
date that the Schedule 14D-1 is filed; provided, however, that in any event the
Schedule 14D-9 will be filed no later than ten Business Days following the
commencement date of the Offer. The Company will cooperate
3
<PAGE> 9
with Parent and Merger Sub in mailing or otherwise disseminating the Schedule
14D-9 with the appropriate Offer Documents to the stockholders of the Company as
and to the extent required by the applicable provisions of the federal and state
securities laws. Parent and its counsel shall be given an opportunity to review
and comment upon the Schedule 14D-9 and any amendment or supplement thereto
prior to the filing thereof with the SEC, and the Company shall consider such
comments in good faith. The Company agrees to provide to Parent and Merger Sub
and their counsel any comments which the Company or its counsel may receive from
the Staff of the SEC with respect to the Schedule 14D-9 promptly after receipt
thereof. The Company, Parent and Merger Sub agree to correct promptly any
information provided by any of them for use in the Schedule 14D-9 which shall
have become false or misleading in any material respect, and the Company further
agrees to take all steps necessary to cause such Schedule 14D-9 as so corrected
to be filed with the SEC and disseminated to the Company's stockholders, in each
case as and to the extent required by the applicable provisions of the federal
and state securities laws. Parent, Merger Sub and the Company each hereby agree
to provide promptly such information necessary to the preparation of the
exhibits and schedules to the Schedule 14D-9 and the Offer Documents which the
respective party responsible therefor shall reasonably request. The Company has
been advised by each of its directors and by each executive officer who as of
the date hereof is actually aware (to the knowledge of the Company) of the
transaction contemplated hereby, that they intend either to tender all shares of
Company Common Stock beneficially owned by them to Merger Sub pursuant to the
Offer or to vote such shares of Company Common Stock in favor of the approval
and adoption of the Merger, unless the recommendation of the Company Board shall
have been withdrawn or materially modified as permitted by Section 5.4.
1.3. COMPANY ACTION. Promptly upon execution of this Agreement and in connection
with the Offer, the Company shall furnish Merger Sub with such information
(including a list of the stockholders of the Company, mailing labels and a list
of securities positions, each as of a recent date), and shall thereafter render
such other assistance, as Parent, Merger Sub or its agents may reasonably
request in communicating the Offer to the Company's stockholders. Subject to the
requirements of applicable law and except for such steps as are necessary to
disseminate the Offer Documents and any other documents necessary to consummate
the Offer or the Merger, Parent and Merger Sub and each of their respective
affiliates and associates shall (a) hold in confidence the information contained
in any of such labels and lists, (b) use such information only in connection
with the Offer and the Merger and (c) if this Agreement is terminated, promptly
deliver to the Company upon its request all copies of such information then in
their possession.
1.4. COMPOSITION OF THE COMPANY BOARD.
(a) Promptly upon the acceptance for payment of, and payment by
Merger Sub in accordance with the Offer for, not less than two-thirds of the
outstanding shares of Company Common Stock on a fully diluted basis pursuant to
the Offer, Merger Sub shall be entitled to designate such number of members of
the Company Board, rounded up to the next whole number, equal to that number of
directors which equals the product of the total number of directors on the
Company's Board (giving effect to the directors elected pursuant to this
sentence) multiplied by the percentage that such number of shares of Company
Common Stock owned in the aggregate by Merger Sub or Parent, upon such
acceptance for payment, bears to the number of shares of Company Common Stock
outstanding; provided, however, that until the
4
<PAGE> 10
Effective Time there shall be at least three Continuing Directors. Upon the
written request of Merger Sub, the Company shall, on the date of such request
take all actions necessary to (i) either increase the size of the Company Board
or secure the resignations of such number of its incumbent directors as is
necessary to enable Merger Sub's designees to be so elected to the Company Board
and (ii) cause Merger Sub's designees to be so elected, in each case as may be
necessary to comply with the foregoing provisions of this Section 1.4(a). At
such time, the Company shall also use its reasonable best efforts to cause
Merger Sub's designees to constitute no less than the same percentage as persons
designated by Merger Sub shall constitute of the Company Board of each committee
of the Company Board, each board of directors of each Subsidiary and each
committee of each such board, in each case only to the extent permitted by
applicable law. Notwithstanding the foregoing, until the earlier of the time
Merger Sub acquires two-thirds of the then outstanding shares of Company Common
Stock and the Effective Time, the Company shall use its reasonable best efforts
to ensure that all the members of the Company Board as of the date hereof who
are not employees of the Company shall remain members of the Company Board.
(b) The Company's obligation to cause designees of Merger Sub to
be elected or appointed to the Company's Board shall be subject to Section 14(f)
of the Exchange Act and Rule l4f-1 promulgated thereunder. The Company shall
promptly take all actions required pursuant to Section 14(f) and Rule l4f-1 in
order to fulfill its obligations under this Section 1.4, and shall include in
the Schedule 14D-9 such information with respect to the Company and its officers
and directors as is required under Section 14(f) and Rule 14f-1. Parent and
Merger Sub will supply to the Company in writing and be solely responsible for
any information with respect to any of them and their nominees, officers,
directors and affiliates required by Section 14(f) and Rule l4f-1 and applicable
rules and regulations.
(c) After the time that Merger Sub's designees constitute at least
a majority of the Company Board and until the Effective Time, any (i) amendment
or termination of this Agreement, (ii) amendment to the Certificate of
Incorporation or material amendment to the bylaws of the Company, (iii)
extension of time for the performance or waiver of the obligations or other acts
of Parent or Merger Sub or waiver of the Company's rights hereunder, or (iv)
action by the Company with respect to this Agreement and the transactions
contemplated hereby which materially and adversely affects the interests of the
stockholders of the Company, shall require, in addition to any other affirmative
vote required under the DGCL, the approval of a majority of the then serving
directors who are directors as of the date hereof (the "Continuing Directors");
provided, however, that if the foregoing provisions of this subsection (c)
relating to the concurrence of a majority of Continuing Directors are invalid or
incapable of being enforced under applicable law, then neither Parent nor Merger
Sub shall approve (either in its capacity as a stockholder or as a party to this
Agreement, as applicable), and Parent and Merger Sub shall use their reasonable
best efforts to prevent the occurrence of, any of the actions referred to in
clauses (i) to (iv) above unless such actions shall have received the unanimous
approval of the entire Company Board. If there is more than one Continuing
Director and, prior to the Effective Time, the number of Continuing Directors is
reduced for any reason, the remaining Continuing Director or Directors shall be
entitled to designate persons to fill such vacancies who shall be deemed
Continuing Directors for purposes of this Agreement. In the event there is only
one Continuing Director and he or she resigns or is removed or if all Continuing
Directors resign or are removed,
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<PAGE> 11
he, she or they, as applicable, shall be entitled to designate his, her or their
successors, as the case may be, each of whom shall be deemed a Continuing
Director for purposes of this Agreement. The Company Board shall not delegate
any matter set forth in this Section 1.4 to any committee of the Company Board.
ARTICLE II.
THE MERGER
2.1. THE MERGER. Upon the terms and subject to the conditions set forth in this
Agreement, and in accordance with the DGCL, at the Effective Time, Merger Sub
shall be merged with and into the Company. Following the Merger, the separate
corporate existence of Merger Sub shall cease and the Company shall continue as
the surviving corporation (the "Surviving Corporation") in accordance with the
DGCL.
2.2. CLOSING. The closing of the Merger (the "Closing") will take place as soon
as practicable after satisfaction or waiver (as permitted by this Agreement and
applicable law) of the conditions (excluding conditions that, by their terms,
cannot be satisfied until the Closing Date) set forth in Article VI (the
"Closing Date"), unless another time or date is agreed to in writing by the
parties hereto. The Closing shall be held at the offices of Rogers & Wells LLP,
200 Park Avenue, New York, NY 10166-0153, unless another place is agreed to in
writing by the parties hereto.
2.3. EFFECTIVE TIME. At the Closing, the parties shall file with the Secretary
of State of the State of Delaware either (i) a certificate of merger, in form
and substance satisfactory to the Company and Parent, or (ii) in the event
Merger Sub shall have acquired 90% or more of the outstanding shares of Company
Common Stock, a certificate of ownership and merger (in either such case, the
"Certificate of Merger") executed in accordance with the relevant provisions of
the DGCL and shall make all other filings, recordings or publications required
under the DGCL in connection with the Merger. The Merger shall become effective
at such time as the Certificate of Merger is duly filed with the Delaware
Secretary of State, or at such other time as the parties may agree and specify
in the Certificate of Merger (the time the Merger becomes effective being the
"Effective Time").
2.4. EFFECTS OF THE MERGER. At and after the Effective Time, the Merger will
have the effects set forth in Section 259 of the DGCL.
2.5. CERTIFICATE OF INCORPORATION. At the Effective Time and without any
further action on the part of the Company and Merger Sub, the certificate of
incorporation of the Company shall be the certificate of incorporation of the
Surviving Corporation until thereafter changed or amended as provided therein or
by applicable law.
2.6. BYLAWS. At the Effective Time, the bylaws of the Company shall be amended
in their entirety to read as the bylaws of Merger Sub read as in effect at the
Effective Time and, as so amended, shall be the bylaws of the Surviving
Corporation until thereafter changed or amended as provided therein or by
applicable law.
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2.7. OFFICERS AND DIRECTORS OF SURVIVING CORPORATION. The directors of Merger
Sub immediately prior to the Effective Time shall be the initial directors of
the Surviving Corporation, until the earlier of their resignation or removal or
otherwise ceasing to be a director or until their respective successors are duly
elected and qualified, as the case may be. The officers of the Company
immediately prior to the Effective Time shall be the initial officers of the
Surviving Corporation, until the earlier of their resignation or removal or
otherwise ceasing to be an officer or until their respective successors are duly
elected and qualified, as the case may be.
2.8. EFFECT ON CAPITAL STOCK. As of the Effective Time, by virtue of the Merger
and without any action on the part of Parent, Merger Sub, the Company or the
holder of any shares of Company Common Stock or any shares of capital stock of
Merger Sub:
(a) Capital Stock of Merger Sub. Each issued and outstanding share
of capital stock of Merger Sub shall be converted into and become one fully paid
and nonassessable share of common stock, no par value, of the Surviving
Corporation, which shall constitute the only issued and outstanding shares of
capital stock of the Surviving Corporation.
(b) Cancellation of Treasury Stock and Parent-Owned Stock. Each
share of Company Common Stock that is owned by the Company or by a wholly owned
Subsidiary of the Company and each share of Company Common Stock that is owned
by Parent, Merger Sub or any other wholly owned Subsidiary of Parent shall
automatically be canceled and retired and shall cease to exist, and no Merger
Consideration shall be delivered in exchange therefor.
(c) Conversion of Company Common Stock. Subject to Section 2.9(h),
each issued and outstanding share of Company Common stock (other than shares to
be canceled in accordance with Section 2.8(b)) shall be converted into the right
to receive the Price Per Share in cash, without interest (the "Merger
Consideration"). As of the Effective Time, all such shares of Company Common
Stock shall no longer be outstanding and shall automatically be canceled and
retired and shall cease to exist, and each holder of a certificate representing
any such shares of Company Common Stock shall cease to have any rights with
respect thereto, except the right to receive, upon the surrender of such
certificates, the Merger Consideration.
2.9. SURRENDER AND PAYMENT.
(a) Exchange Agent. Prior to the Effective Time, Parent shall
designate a bank or trust company reasonably acceptable to the Company to act as
agent for the holders of shares of Company Common Stock in connection with the
Merger (the "Exchange Agent") to receive the Merger Consideration to which
holders of shares of Company Common Stock shall become entitled pursuant to
Section 2.8. Upon the filing of the Certificate of Merger with the Secretary of
State of the State of Delaware, Parent or Merger Sub shall deposit with the
Exchange Agent cash in an aggregate amount equal to the product of (i) the
number of shares of Company Common Stock outstanding (and not to be canceled
pursuant to Section 2.8(b)) immediately prior to the Effective Time, multiplied
by (ii) the Price Per Share. The deposit made by Parent or Merger Sub pursuant
to the preceding sentence is hereinafter referred to as the "Payment Fund." For
purposes of determining the Payment Fund, Parent shall assume that no
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<PAGE> 13
holder of shares of Company Common Stock will perfect its right to appraisal of
its shares. The Paying Agent shall cause the Payment Fund to be (i) held for the
benefit of the holders of Company Common Stock, and (ii) promptly applied to
making the payments provided or in Section 2.8(c). The Payment Fund shall not be
used for any purpose that is not provided for herein.
(b) Exchange Procedures. As soon as reasonably practicable after
the Effective Time, the Exchange Agent shall mail to each holder of record of a
certificate or certificates (the "Certificates") which immediately prior to the
Effective Time represented outstanding shares of Company Common Stock, other
than shares to be canceled or retired in accordance with Section 2.8(b), (i) a
letter of transmittal (which shall specify that delivery shall be effected, and
risk of loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent) and (ii) instructions for use in effecting
the surrender of the Certificates in exchange for the Merger Consideration. Upon
surrender of a Certificate to the Exchange Agent, together with such letter of
transmittal, duly executed, and such other documents as may reasonably be
required by the Exchange Agent, the Exchange Agent shall pay the holder of such
Certificate the Merger Consideration in respect of such Certificate, and the
Certificate so surrendered shall forthwith be canceled. In no event shall the
holder of any Certificate be entitled to receive interest on any Merger
Consideration received. If any portion of the Merger Consideration is to paid to
a Person other than the registered holder of the shares represented by the
Certificate or Certificates surrendered in exchange therefor, it shall be a
condition to such payment that the Certificate or Certificates so surrendered
shall be properly endorsed or otherwise be in proper form for transfer and that
the Person requesting such payment shall pay to the Exchange Agent any transfer
or other taxes required as a result of such payment to a Person other than the
registered holder of such shares or establish to the satisfaction of the
Exchange Agent that such tax has been paid or is not payable. Until surrendered
as contemplated by this Section 2.9, each Certificate (other than Certificates
representing Dissenting Shares or shares of Company Common Stock to be canceled
pursuant to Section 2.8(b)) shall be deemed at any time after the Effective Time
to represent only the right to receive, upon the surrender of such Certificate,
the Merger Consideration.
(c) No Further Ownership Rights in Company Common Stock. All
Merger Consideration paid upon the surrender for exchange of Certificates in
accordance with the terms of this Article II shall be deemed to have been paid
in full satisfaction of all rights pertaining to the shares of Company Common
Stock theretofore represented by such Certificates. At the Effective Time, the
stock transfer books of the Company shall be closed and there shall be no
further registration of transfers on the stock transfer books of the Surviving
Corporation of the shares of Company Common Stock which were outstanding
immediately prior to the Effective Time. From and after the Effective Time, the
holders of Certificates evidencing ownership of the shares of Company Common
Stock outstanding immediately prior to the Effective time shall cease to have
rights with respect to such shares, except as otherwise provided for herein or
by applicable law. If, after the Effective Time, Certificates are presented to
the Surviving Corporation or the Exchange Agent for any reason, they shall be
canceled and exchanged for the Merger Consideration as provided in this Article
II, except as otherwise provided by law.
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<PAGE> 14
(d) Unclaimed Funds. Subject to applicable escheat, abandoned
property or similar laws, any portion of the Payment Fund made available to the
Exchange Agent pursuant to Section 2.9(a) that remains unclaimed by holders of
the Certificates for six months after the Effective Time of the Merger shall be
delivered to Parent, upon demand, and any holders of Certificates who have not
theretofore complied with this Article II shall thereafter look only to Parent
for payment of their claim for Merger Consideration.
(e) No Liability. None of Parent, Merger Sub, the Company or the
Exchange Agent shall be liable to any Person in respect of any Merger
Consideration delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
(f) Withholding Taxes. Parent and Merger Sub shall be entitled to
deduct and withhold and pay to the applicable taxing authority, or cause the
Exchange Agent to deduct and withhold and pay to the applicable taxing
authority, from the Merger Consideration payable to a holder of shares of
Company Common Stock pursuant to the Offer or the Merger any amounts as are
required to be withheld therefrom under the Code or any applicable provision of
state, local or foreign tax law; provided, however, that (x) Merger Sub shall
take appropriate steps to minimize such withholding and (y) Merger Sub shall pay
(and not withhold) any applicable transfer taxes, except to the extent provided
in Section 2.9(b). To the extent that amounts are properly withheld by Parent or
Merger Sub and paid to the applicable taxing authority, such withheld amounts
shall be treated for all purposes of this Agreement as having been paid to the
holder of the shares of Company Common Stock in respect of which such
withholding was made by Parent or Merger Sub.
(g) Investment of Funds. The Payment Fund shall be invested by the
Exchange Agent as directed by Parent in obligations of, or guaranteed by, the
United States of America, in commercial paper obligations rated A-1 or P-1 or
better by Moody's Investor Services or Standard & Poor's Corporation,
respectively, in each case with maturities not exceeding seven days. All
earnings thereon shall inure to the benefit of Parent.
(h) Lost Certificates. In the event that any Certificate shall
have been lost, stolen or destroyed, upon the making of an affidavit of that
fact by the Person claiming such Certificate to be lost, stolen or destroyed
and, if required by Parent, the posting by such Person of a bond in such
reasonable amount as Parent may direct as indemnity against any claim that may
be made against it with respect to such Certificate, the Exchange Agent will pay
in exchange for such lost, stolen or destroyed Certificate the Merger
Consideration with respect to such Certificate.
(i) Return of Funds Relating to Dissenting Shares. Any portion of
the Merger Consideration made available to the Exchange Agent to pay for shares
of outstanding Company Common Stock for which appraisal rights have been
perfected shall be returned to the Parent, upon demand.
(j) Dissenting Shares. Notwithstanding anything in this Agreement
to the contrary, shares of Company Common Stock outstanding immediately prior to
the Effective Time and held by a holder who has not voted in favor of the Merger
or consented thereto in writing and who has demanded appraisal for such shares
in accordance with the DGCL
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<PAGE> 15
("Dissenting Shares") shall not be converted into a right to receive the Merger
Consideration, unless such holder fails to perfect or withdraws or otherwise
loses its right to appraisal. If after the Effective Time such holder fails to
perfect or withdraws or loses its right to appraisal, such shares shall be
treated as if they had been converted as of the Effective Time into a right to
receive the Merger Consideration, without any interest thereon. The Company
shall give Parent prompt notice of any demands received by the Company for
appraisal of shares of Company Common Stock, attempted withdrawals of such
demands and any other instruments served pursuant to applicable law and received
by the Company relating to stockholders' rights of appraisal, and Parent shall
have the right to direct all negotiations and proceedings with respect to such
demands. The Company shall not, except with the prior written consent of Parent,
make any payment with respect to, or settle or offer to settle, any such
demands.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
3.1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. Except as otherwise set
forth in the Company Disclosure Schedule delivered by the Company to Parent at
or prior to the execution of this Agreement (the "Company Disclosure Schedule")
or the Company SEC Reports (as defined below), the Company represents and
warrants to Parent and Merger Sub as follows:
(a) Organization, Standing and Power. Each of the Company and its
Subsidiaries has been duly organized and is validly existing and in good
standing under the laws of its jurisdiction of incorporation and has full
corporate power and authority to conduct its business as and to the extent now
conducted and to own, use and lease its assets and properties, except (in the
case of any Subsidiary of the Company) for such failures to be in good standing
which, individually or in the aggregate, would not reasonably be expected to
have a Material Adverse Effect on the Company. Each of the Company and its
Subsidiaries is qualified and in good standing or otherwise authorized to do
business in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification necessary,
except where the failure to so qualify would not, individually or in the
aggregate, have a Material Adverse Effect on the Company. The copies of the
Organizational Documents of the Company which were previously furnished or made
available to Parent are true, complete and correct copies of such documents as
in effect on the date of this Agreement.
(b) Capital Structure.
(i) As of the date of this Agreement, the authorized capital
stock of the Company consists of (A) 100,000,000 shares of Company
Common Stock, of which 35,886,200 shares are outstanding or held in
treasury, and (B) 1,000,000 shares of preferred stock, no par value, of
which no shares are outstanding. All issued and outstanding shares of
the capital stock of the Company are duly authorized, validly issued,
fully paid and nonassessable, and no class of capital stock is entitled
to preemptive rights. As of the date of this Agreement, there are no
outstanding options, warrants or other rights to acquire capital stock
from the Company other than (x) options representing in the aggregate
the right to purchase 4,089,631 shares of Company Common Stock under the
Company Stock Plan and (y) rights issued pursuant to the Rights
Agreement dated as of
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<PAGE> 16
December 22, 1995 between the Company and First Chicago Trust Company of
New York (the "Company Rights Agreement"). Section 3.1(b)(i) of the
Company Disclosure Schedule sets forth information regarding the
exercise price, date of grant and number granted of stock options for
each holder thereof.
(ii) All of the issued and outstanding shares of capital stock
of each of the Material Subsidiaries of the Company are duly authorized,
validly issued, fully paid and nonassessable and are owned by the
Company, free and clear of any liens, claims, encumbrances,
restrictions, preemptive rights or any other claims of any third party
("Liens").
(iii) As of the date of this Agreement, no bonds, debentures,
notes or other indebtedness of the Company having the right to vote on
any matters on which stockholders may vote ("Company Voting Debt") are
issued or outstanding.
(iv) Except as otherwise set forth in this Section 3.1(b), as of
the date of this Agreement, there are no securities, options, warrants,
calls, rights, commitments, agreements, arrangements or undertakings of
any kind to which the Company or its Subsidiaries is a party or by which
any of them is bound obligating the Company or any Subsidiary to issue,
deliver or sell, or cause to be issued, delivered or sold, additional
shares of capital stock or other voting securities of the Company or any
Subsidiary or obligating the Company or any Subsidiary to issue, grant,
extend or enter into any such security, option, warrant, call, right,
commitment, agreement, arrangement or undertaking. As of the date of
this Agreement, there are no outstanding obligations of the Company or
any Subsidiary to repurchase, redeem or otherwise acquire any shares of
capital stock of the Company or any Subsidiary.
(v) Except as otherwise set forth in this Section 3.1(b), as of
the date of this Agreement, there are no stockholder agreements, voting
trusts, proxies or other commitments, understandings, restrictions or
arrangements in favor of any person other than the Company or a
Subsidiary of the Company with respect to the voting of or the right to
participate in dividends or other earnings on any capital stock of any
Subsidiary of the Company.
(c) Authority; No Conflicts.
(i) The Company has all requisite corporate power and corporate
authority to enter into this Agreement and to consummate the
transactions contemplated hereby, subject, in the case of the Merger, to
the adoption of this Agreement and approval of the Merger by the holders
of shares representing not less than two-thirds of the voting power of
the outstanding Company Common Stock. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby
have been duly authorized by all necessary corporate action on the part
of the Company, subject in the case of the consummation of the Merger to
the adoption of this Agreement and approval of the Merger by the holders
of shares representing not less than two-thirds of the voting power of
the outstanding Company Common Stock. The Company Board
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<PAGE> 17
has unanimously duly and validly authorized the execution and delivery
of this Agreement and approved the consummation of the transactions
contemplated hereby, including the Offer and the Merger, and has
unanimously (i) determined that the Offer and the Merger, taken
together, are fair to and in the best interest of the Company's
stockholders, (ii) approved and declared advisable this Agreement and
the transactions contemplated hereby, and (iii) recommended that the
Company's stockholders accept the Offer, tender their shares of Company
Common Stock pursuant to the Offer and approve and adopt the Merger and
this Agreement. This Agreement has been duly executed and delivered by
the Company and constitutes a valid and binding agreement of the
Company, enforceable against it in accordance with its terms, except as
such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and similar laws relating to or affecting
creditors generally and by general equity principles (regardless of
whether such enforceability is considered in a proceeding in equity or
at law).
(ii) The execution and delivery of this Agreement does not, and
the consummation of the transactions contemplated hereby will not,
conflict with, or result in any violation of, or constitute a default
(with or without notice or lapse of time, or both) under, or give rise
to a right of termination, amendment, cancellation or acceleration of
any right or obligation or the loss of a material benefit under, or the
creation of a lien, pledge, security interest, charge or other
encumbrance on any assets (any such conflict, violation, default, right
of termination, amendment, cancellation or acceleration, loss or
creation, a "Violation") pursuant to: (A) any provision of the
Organizational Documents of the Company, (B) any provision of the
Organizational Documents of any Subsidiary or (C) subject to obtaining
or making the consents, approvals, orders, authorizations,
registrations, declarations and filings referred to in paragraph (iii)
below, any loan or credit agreement, note, mortgage, bond, indenture,
lease, benefit plan or other agreement, obligation, instrument, permit,
concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to the Company, the
Subsidiaries or their respective properties or assets, except, in the
case of the representations set forth in clauses (B) and (C) above, any
Violation that would not, individually or in the aggregate, have a
Material Adverse Effect on the Company.
(iii) No consent, approval, order or authorization of, or
registration, declaration or filing with, any supranational, national,
state, municipal or local government, any instrumentality, subdivision,
court, administrative agency or commission or other authority thereof,
or any quasi-governmental or private body exercising any regulatory,
taxing, or other governmental or quasi-governmental authority (a
"Governmental Entity"), is required by or with respect to the Company or
any Subsidiary in connection with the execution and delivery of this
Agreement by the Company or the consummation by the Company of the
transactions contemplated hereby, except for (x) those required under or
in relation to (A) the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act"), (B) the Securities Exchange Act of
1934, as amended (the "Exchange Act"), (C) the DGCL with respect to the
filing and recordation of appropriate merger or other documents, (D)
antitrust or other competition laws of United States and foreign
jurisdictions, (E) the Operational Contracts and (y) such consents,
approvals, orders, authorizations, registrations, declarations and
filings the
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<PAGE> 18
failure of which to make or obtain would not, individually or in the
aggregate, have a Material Adverse Effect on the Company.
(d) Reports and Financial Statements.
(i) The Company has filed all required reports, schedules,
forms, statements and other documents required to be filed by it with
the SEC since January 1, 1998 (collectively, including all exhibits
thereto, the "Company SEC Reports"). None of the Company SEC Reports, as
of their respective dates (and, if amended or superseded by a filing
prior to the date of this Agreement, then on the date of such filing),
contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under
which they were made, not misleading. The financial statements
(including the related notes) included in the Company SEC Reports and
the unaudited interim financial statements as of and for the twenty four
weeks ended June 18, 1999 previously provided to Parent (the "Interim
Financial Statements") present fairly, in all material respects, the
consolidated financial position and consolidated results of operations
and cash flows of the Company and its Subsidiaries as of the respective
dates or for the respective periods set forth therein, all in conformity
with U.S. generally accepted accounting principles ("GAAP") consistently
applied during the periods involved except as otherwise noted therein,
and subject, in the case of the unaudited interim financial statements,
to normal year-end adjustments that have not been and are not expected
to be material in amount and the absence of notes thereto. Such Company
SEC Reports, as of their respective dates (and as of the date of any
amendment to the respective Company SEC Report), complied as to form in
all material respects with the applicable requirements of the Securities
Act and the Exchange Act and the rules and regulations promulgated
thereunder.
(ii) Except as set forth in the Company SEC Reports filed prior
to the date of this Agreement or in the Interim Financial Statements,
and except for liabilities and obligations incurred in the ordinary
course of the Company's business since June 18, 1999, the Company does
not have any liabilities or obligations required by GAAP to be set forth
on a consolidated balance sheet of the Company which would, individually
or in the aggregate, have a Material Adverse Effect on the Company.
(e) Information Supplied.
(i) None of the information supplied or to be supplied by the
Company for inclusion or incorporation by reference in (A) the proxy
statement related to the Company Stockholders Meeting (the "Proxy
Statement"), (B) the Schedule 14D-9 or (C) the Offer Documents will, at
the respective times such documents are filed, and, with respect to the
Offer Documents and the Proxy Statement, if any, when first published,
sent or given to the stockholders of the Company, contain an untrue
statement of material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements therein,
in light of the circumstances under which they are made, not false or
misleading or, in the case of the Offer Documents and the Proxy
Statement, if any, or
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any amendment thereof or supplement thereto, at the time of the Company
Stockholders Meeting (as defined below), if any, and at the Effective
Time, contain an untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to
make the statements made therein, in light of the circumstances under
which they are made, not false or misleading or necessary to correct any
statement in any earlier communication with respect to the offer or the
solicitation of proxies for the Company Stockholders Meeting, if any,
which shall have become false or misleading. The Proxy Statement and
Schedule 14D-9 will comply as to form in all material respects with the
requirements of the Exchange Act and the Securities Act and the rules
and regulations of the SEC thereunder.
(ii) Notwithstanding the foregoing provisions of this Section
3.1(e), no representation or warranty is made by the Company with
respect to statements made or incorporated by reference in the Proxy
Statement and Schedule 14D-9 based on information supplied in writing by
Parent or Merger Sub for inclusion or incorporation by reference
therein.
(f) Compliance with Applicable Laws; Regulatory Matters. The
Company and its Subsidiaries hold all permits, licenses, certificates,
franchises, registrations, variances, exemptions, orders and approvals of all
Governmental Entities which are necessary to the operation of the Company's
businesses (the "Company Permits"), except for any Company Permits the failure
of which to obtain or hold would not, individually or in the aggregate, have a
Material Adverse Effect on the Company. The Company and its Subsidiaries are in
compliance with the terms of the Company Permits, except where the failure so
to comply would not, individually or in the aggregate, have a Material Adverse
Effect on the Company. Except as disclosed in the Company SEC Reports, the
businesses of the Company and its Subsidiaries are not being and have not been
conducted in violation of any law, ordinance, regulation, judgment, decree,
injunction, rule or order of any Governmental Entity, except for violations
which would not, individually or in the aggregate, have a Material Adverse
Effect on the Company. As of the date of this Agreement, to the knowledge of
the Company, no investigation by any Governmental Entity with respect to the
Company or any of its Subsidiaries is pending or threatened, other than
investigations which would not, individually or in the aggregate, have a
Material Adverse Effect on the Company.
(g) Litigation. There is no litigation, arbitration, claim, suit,
action, investigation or proceeding pending or, to the knowledge of the Company,
threatened, against or affecting the Company or any of its Subsidiaries which,
individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect on the Company, nor is there any judgment, award,
decree, injunction, rule or order of any Governmental Entity or arbitrator
outstanding against the Company or any Material Subsidiary which would
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on the Company.
(h) Taxes. (i) The Company and the Material Subsidiaries have duly
and timely filed (taking into account any extension of time within which to
file) all Tax Returns required to be filed by them and all such filed Tax
Returns are complete and accurate in all material respects; (ii) the Company and
the Subsidiaries have paid all Taxes that are shown as due
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on such filed Tax Returns or that the Company or any Subsidiary is obligated to
withhold from amounts owing to any employee, creditor or third party, except
with respect to matters contested in good faith or for such amounts that would
not, individually or in the aggregate, have a Material Adverse Effect on the
Company; (iii) as of the date of this Agreement, there are no pending or, to the
knowledge of the Company, threatened audits, examinations, investigations or
other proceedings in respect of Taxes or Tax matters relating to the Company or
any Subsidiary which, if determined adversely to the Company or such Subsidiary,
would, individually or in the aggregate, have a Material Adverse Effect on the
Company; (iv) there are no deficiencies or claims for any Taxes that have been
proposed, asserted or assessed against the Company or any Subsidiary which, if
such deficiencies or claims were finally resolved against the Company or such
Subsidiary, would, individually or in the aggregate, have a Material Adverse
Effect on the Company; (v) there are no material Liens for Taxes upon the assets
of the Company or any Subsidiary, other than Liens for current Taxes not yet due
and payable and Liens for Taxes that are being contested in good faith by
appropriate proceedings; (vi) neither of the Company nor any Subsidiary has made
an election under Section 341(f) of the Internal Revenue Code of 1986, as
amended (the "Code"); and (vii) neither the Company nor any of its Subsidiaries
has waived any statute of limitations or agreed to any extension of time with
respect to a material Tax assessment or deficiency.
(i) Absence of Certain Changes or Events. Since December 31, 1998
through the date of this Agreement, (A) the Company and its Subsidiaries have
conducted their business in the ordinary course and have not incurred any
material liability, except in the ordinary course of their respective
businesses, and (B) there has not been:
(1) any declaration or setting aside for payment of any
dividend or other distribution with respect to any shares of capital stock of
the Company, or any repurchase, redemption or other acquisition by the Company
or any of its Subsidiaries of any outstanding shares of capital stock or other
equity securities of, or other ownership interests in, the Company;
(2) any amendment of any term of any outstanding security of the
Company or any of its Subsidiaries that would materially increase the
obligations of the Company or such Subsidiary under such security;
(3) any incurrence, assumption or guarantee by the Company or
any its Subsidiaries of any indebtedness for borrowed money other than in the
ordinary course of business consistent with past practices;
(4) any creation or assumption by the Company or any of its
Subsidiaries of any Lien on any asset material to the Company and its
Subsidiaries, taken together, other than in the ordinary course of business
consistent with past practices;
(5) the making of any (i) material loan, advance or capital
contribution to or investment in any Person (other than a Subsidiary of the
Company) by the Company or any of its Subsidiaries or (ii) material loans or
advances to
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employees of the Company or any of its Subsidiaries, in each case, other than
have been made in the ordinary course of business consistent with past
practices;
(6) any contract or agreement entered into by the Company or any
of its Subsidiaries relating to any acquisition or disposition of any assets
material to the Company and its Subsidiaries, taken together, or any material
portion of the Company's business, other than transactions, commitments,
contracts or agreements in the ordinary course of business consistent with past
practices and those contemplated by this Agreement;
(7) any material change in any method of accounting or
accounting practices by the Company or any of its Subsidiaries, except for any
such change required by reason of a change in GAAP;
(8) any (i) employment, deferred compensation, severance,
retirement or other similar agreement entered into with any director or officer
of the Company (or any amendment to any such existing agreement), (ii) grant of
any severance or termination pay to any director or officer of the Company, or
(iii) material change in benefits payable to any director, officer or employee
of the Company pursuant to any severance, retirement or welfare plans or
policies thereof, in each case other than in the ordinary course of business
consistent with past practices; or
(9) any agreement or commitment by the Company or its
Subsidiaries to do any of its foregoing.
(j) Vote Required. The affirmative vote of the holders of shares
representing no less than two-thirds of the voting power of the outstanding
shares of Company Common Stock (the "Required Company Votes") is the only vote
of the holders of any class or series of the Company capital stock necessary to
approve the Merger.
(k) Certain Agreements. Each of (i) the contracts listed as an
exhibit to the Company's Annual Report on Form 10-K for the fiscal year ended
January 1, 1999 under the rules and regulations of the SEC relating to the
business of the Company and its Subsidiaries and (ii) the Operational Agreements
(x) to which the Company or any of its Subsidiaries is a party and that is
material to the Company's business and (y) that are the 40 largest in terms of
revenues recorded by the Company and its Subsidiaries for the most recent fiscal
year of the Company (the "Company Material Contracts") are valid and in full
force and effect except to the extent they have previously been terminated or
expired in accordance with their terms, and neither the Company nor its
Subsidiaries has violated any provision of, or committed or failed to perform
any act which, with or without notice, lapse of time, or both, would constitute
a default under the provisions of any such Company Material Contract, except for
such defaults which would not, individually or in the aggregate, have a Material
Adverse Effect on the Company. To the knowledge of the Company, no counterparty
to any such Company Material Contract has violated any provision of, or
committed or failed to perform any act which, with or without notice, lapse of
time, or both, would constitute a default under the provisions of such Company
Material
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Contract, except for defaults which would not, individually or in the aggregate,
have a Material Adverse Effect on the Company.
(l) Employee Benefit Plans; Labor Matters.
(i) With respect to each employee benefit plan, program,
arrangement and contract (including, without limitation, any "employee
benefit plan," as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA") and any bonus, deferred
compensation, stock bonus, stock purchase, restricted stock, stock
option, employment, termination, change in control and severance plan,
program, arrangement and contract) to which the Company or any Material
Subsidiary is a party, which is maintained or contributed to by the
Company or any Material Subsidiary, or with respect to which the Company
or any Material Subsidiary could incur material liability under ERISA
(the "Company Benefit Plans"), the Company has made available to Parent
and Merger Sub a true and complete copy of such Company Benefit Plan.
(ii) Each of the Company Benefit Plans that is an "employee
pension benefit plan" within the meaning of Section 3(2) of ERISA and
that is intended to be qualified under Section 401(a) of the Code has
received a favorable determination letter from the IRS, and the Company
is not aware of any circumstances which would reasonably be expected to
result in the revocation of any such favorable determination letter.
(iii) With respect to the Company Benefit Plans, no event has
occurred and, to the knowledge of the Company, there exists no condition
or set of circumstances in connection with which the Company or any
Material Subsidiary would be subject to any liability under the terms of
such Company Benefit Plans, ERISA, the Code or any other applicable law
(but giving no effect to the actions contemplated by this Agreement)
which would, individually or in the aggregate, have a Material Adverse
Effect on the Company.
(m) There is no pending labor dispute, strike or work stoppage
against the Company or any Material Subsidiary which would, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect on the
Company. There is no pending charge or complaint against the Company or any
Material Subsidiary by the National Labor Relations Board or any comparable
state agency, except where such unfair labor practice, charge or complaint would
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on the Company.
(n) Environmental Matters. Except to the extent that failure to
satisfy the following representations would not, individually or in the
aggregate, have a Material Adverse Effect on the Company, the Company and each
of its Subsidiaries: (i) have obtained all permits, licenses and other
authorizations which are required to be obtained under all applicable
Environmental Laws by the Company or the Subsidiaries; (ii) are in substantial
compliance with the terms and conditions of such required permits, licenses and
authorizations, and also are in
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substantial compliance with all other limitations, restrictions, conditions,
standards, prohibitions, requirements and obligations contained in applicable
Environmental Laws; (iii) have not received any Order or complaint, or notice of
any assessed penalty or investigation or review pending or threatened by any
Governmental Entity, with respect to any alleged failure by the Company or any
of its Subsidiaries to have any license, permit, authorization, approval or
consent from Governmental Entities required under any applicable Environmental
Law in connection with the conduct of the business or operations of the Company
or any of its Subsidiaries and (iv) have not received notice of any past or
present violations of Environmental Laws, or of any event, incident or action
which is reasonably likely to prevent continued substantial compliance with such
Environmental Laws, or which would give rise to any common law environmental
liability, or which would otherwise form the basis of any claim, action, suit or
proceeding against the Company or any Subsidiary based on, or resulting from,
the manufacture, processing, use, treatment, storage, disposal, transport, or
handling, or the emission, discharge or release into the environment, of any
toxic or hazardous substance or waste.
(o) Intellectual Property. Except as would not, individually or in
the aggregate, have a Material Adverse Effect on the Company, (i) the Company
and each Subsidiary owns, has the right to acquire or is licensed or otherwise
has the right to use (in each case, clear of any liens or encumbrances of any
kind), all Intellectual Property, (ii) no claims are pending or, to the
knowledge of the Company, threatened that the Company or any Subsidiary is
infringing on or otherwise violating the rights of any person with regard to any
Intellectual Property and (iii) to the knowledge of the Company, no person is
infringing on or otherwise violating any right of the Company or any of its
Subsidiaries with respect to any Intellectual Property owned by and/or licensed
to the Company or any of its Subsidiaries.
(p) Insurance. The Company has made available to Parent prior to the
execution of this Agreement a true and complete list of all liability, property,
workers' compensation, directors' and officers' liability and other insurance
policies currently in effect that insure the business, operations, properties,
assets or employees of the Company or any of its Subsidiaries. Such insurance
policies are placed with financially sound and reputable insurers and, in light
of the respective business, operations, assets and properties of the Company and
its Subsidiaries, are in amounts and have coverages that are reasonable and
customary for persons engaged in such businesses and operations and having such
assets and properties.
(q) Brokers or Finders. No agent, broker, investment banker,
financial advisor or other firm or Person is or will be entitled to any broker's
or finder's fee or any other similar commission or fee in connection with any of
the transactions contemplated by this Agreement based upon arrangements made by
or on behalf of the Company, except fees payable to Deutsche Bank Securities
Inc. and Donaldson, Lufkin & Jenrette Securities Corporation.
(r) Opinion of Financial Advisor. The Company has received the
written opinion of Deutsche Bank Securities Inc., the Company's independent
financial advisor, dated the date hereof, to the effect that, as of the date
hereof, the consideration to be received by the Company's stockholders pursuant
to the Offer and the Merger, taken together, is fair, from a financial point of
view, to the holders of Company Common Stock.
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(s) Inapplicability of Certain Provisions. The Company Board has
approved the Merger and this Agreement, and assuming that Parent's
representation set forth in Section 3.2(f) below is true and correct, taken all
other actions necessary to render inapplicable to the Merger, this Agreement and
the transactions contemplated by this Agreement, the provisions of Section 203
of the DGCL or Article 15 of the Company's certificate of incorporation.
(t) Real Property. Except as would not, individually or in the
aggregate, have a Material Adverse Effect on the Company, (i) the Company has
not received notice of any pending or threatened annexation or condemnation
proceedings affecting any of the Company's properties, and (ii) the personal
property fixtures and equipment material to the conduct of the operations of the
business of the Company are owned free and clear of all Liens.
(u) Year 2000. The Company has reviewed the areas within its
businesses and operations which could be adversely affected by the "Year 2000
Problem" (that is, the risk that computer applications used by the Company and
its Subsidiaries may be unable to recognize and perform properly date-sensitive
functions on and after December 31, 1999). The Company's current assessment of
the potential effect on the Company of the Year 2000 Problem set forth in the
Company SEC Reports is accurate in all material respects.
(v) Debt Tender. Except customary transaction expenses incurred in
connection with the debt tender offer referred to in the Offer to Purchase and
Consent Solicitation Statement of the Company dated July 2, 1999, as amended,
the Company has not incurred any other costs in connection with such debt tender
offer and, to the knowledge of the Company, there is no litigation, arbitration,
claim, suit, action, investigation or proceeding threatened against or affecting
the Company or any of its Subsidiaries in respect of a proposed withdrawal or
termination of such debt tender offer that, individually or in the aggregate,
would reasonably be expected to have a Material Adverse Effect on the Company.
3.2. REPRESENTATIONS AND WARRANTIES OF PARENT. Except as otherwise set forth in
the Parent Disclosure Schedule delivered by Parent to the Company at or prior to
the execution of this Agreement (the "Parent Disclosure Schedule"), Parent
represents and warrants to the Company as follows:
(a) Organization, Standing and Power. Parent is a corporation duly
organized, validly existing and in good standing under the law of the Republic
of Italy, is duly qualified and in good standing to do business in each
jurisdiction in which the nature of its business or the ownership or leasing of
its properties makes such qualification necessary, except where the failure so
to qualify would not, individually or in the aggregate, have a Material Adverse
Effect on Parent.
(b) Authority; No Conflicts.
(i) Parent has all requisite corporate power and corporate
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate
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<PAGE> 25
action on the part of Parent. This Agreement has been duly executed and
delivered by Parent and constitutes a valid and binding agreement of
Parent, enforceable against it in accordance with its terms, except as
such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and other similar laws relating to or
affecting creditors generally, or by general equity principles
(regardless of whether such enforceability is considered in a proceeding
in equity or at law).
(ii) The execution and delivery of this Agreement does not, and
the consummation of the transactions contemplated hereby will not, result
in any Violation of: (A) any provision of the Organizational Documents of
Parent or any of its Subsidiaries or (B) except as would not,
individually or in the aggregate, have a Material Adverse Effect on
Parent or impair or delay the ability of Parent to consummate the
transactions contemplated hereby, and subject to obtaining or making the
consents, approvals, orders, authorizations, registrations, declarations
and filings referred to in paragraph (iii) below, any loan or credit
agreement, note, mortgage, bond, indenture, lease, benefit plan or other
agreement, obligation, instrument, permit, concession, franchise,
license, judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to Parent, any of its Subsidiaries or their
respective properties or assets.
(iii) No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity is
required by or with respect to Parent in connection with the execution
and delivery of this Agreement by Parent or the consummation by Parent of
the transactions contemplated hereby, except for (A) the consents,
approvals, orders, authorizations, registrations, declarations and
filings required under or in relation to clause (x) of Section
3.1(c)(iii) and (B) such consents, approvals, orders, authorizations,
registrations, declarations and filings the failure of which to make or
obtain would not, individually or in the aggregate, have a Material
Adverse Effect on Parent or impair or delay the ability of Parent to
consummate the transactions contemplated hereby and (C) any consents,
approvals, orders, authorizations, registrations, declarations or filings
not required to be obtained or made until after the Effective Time.
(c) Information Supplied.
(i) None of (A) the Offer Documents, (B) the Schedule 14D-1 or
(C) the information supplied or to be supplied by Parent or Merger Sub
for inclusion or incorporation by reference in the Proxy Statement, the
Schedule 14D-9 and any other documents to be filed with the SEC in
connection with the transactions contemplated hereby, including any
amendment or supplement to such documents, will, at the respective times
such documents are filed, and, with respect to the Proxy Statement and
the Offer Documents, when first published, sent or given to stockholders
of the Company, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in
order to make the statements made therein, in light of the circumstances
under which they are made, not false or misleading or, in the case of the
Proxy Statement, or any amendment thereof or supplement thereto, at the
time of the Company Stockholders Meeting, and at the Effective Time,
contain any untrue statement
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of a material fact, or omit to state any material fact required to be
stated therein or necessary in order to made the statements made therein,
in light of the circumstances under which they are made, not false or
misleading or necessary to correct any statement in any earlier
communication with respect to the Offer or the solicitation of proxies
for the Company Stockholders Meeting, which shall have become false or
misleading.
(ii) Notwithstanding the foregoing provisions of this Section
3.2(e), no representation or warranty is made by Parent or Merger Sub
with respect to statements made or incorporated by reference in the Offer
Documents or Schedule 14D-1 based on information supplied by the Company
for inclusion or incorporation by reference therein.
(d) Financing. Parent has available, and will make available to
Merger Sub, the funds necessary to consummate the Offer and the Merger and the
transactions contemplated hereby on a timely basis and to otherwise satisfy the
obligations of the Company and to conduct the Company's business.
(e) Brokers or Finders. No agent, broker, investment banker,
financial advisor or other firm or Person is or will be entitled to any broker's
or finder's fee or any other similar commission or fee in connection with any of
the transactions contemplated by this Agreement based upon arrangements made by
or on behalf of Parent on Merger Sub, except Goldman Sachs & Co. or certain of
its affiliated entities.
(f) Ownership of Company Capital Stock. As of the date of this
Agreement, neither Parent nor any of its affiliates or associates (as such terms
are defined under Section 203 of the DGCL and the Exchange Act) (x) beneficially
owns, directly or indirectly or (y) is party to any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or disposing of, in
case of either clause (x) or (y), shares of capital stock of the Company.
(g) No Vote Required. No vote of the holders of any securities of
Parent is necessary to approve this Agreement or the transactions contemplated
hereby.
3.3. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB. Parent and Merger
Sub represent and warrant to the Company as follows:
(a) Organization and Corporate Power. Merger Sub is a wholly owned
Subsidiary of Parent and a corporation duly incorporated, validly existing and
in good standing under the laws of Delaware. The copies of the Organizational
Documents of Merger Sub which were previously furnished or made available to the
Company are true, complete and correct copies of such documents as in effect on
the date of this Agreement.
(b) Corporate Authorization. Merger Sub has all requisite corporate
power and corporate authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and performance by
Merger Sub of this Agreement and the consummation by Merger Sub of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Merger Sub. This Agreement has been
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<PAGE> 27
duly executed and delivered by Merger Sub and constitutes a valid and binding
agreement of Merger Sub, enforceable against it in accordance with its terms,
except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and other similar laws relating to or affecting
creditors generally, or by general equity principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
(c) Non-Contravention. The execution, delivery and performance by
Merger Sub of this Agreement and the consummation by Merger Sub of the
transactions contemplated hereby do not and will not contravene or conflict with
the Organizational Documents of Merger Sub or any agreements by which Merger Sub
is bound.
(d) No Business Activities. Merger Sub is not a party to any
material agreements (other than this Agreement) and has not conducted any
activities other than in connection with its organization, the negotiation and
execution of this Agreement and the consummation of the transactions
contemplated hereby. Merger Sub has no Subsidiaries.
ARTICLE IV.
COVENANTS RELATING TO CONDUCT OF BUSINESS
4.1. COVENANTS OF THE COMPANY. During the period from the date of this
Agreement and continuing until the Effective Time, except as expressly
contemplated or permitted by this Agreement or to the extent that Parent shall
otherwise consent in writing, which consent shall not be unreasonably withheld
or delayed:
(a) Ordinary Course. The Company and its Subsidiaries shall carry on
their respective businesses in the usual, regular and ordinary course consistent
with past practice, and shall use their reasonable best efforts to preserve
intact their present business organizations and preserve their relationships
with customers, suppliers and others having business dealings with them.
(b) Dividends; Changes in Share Capital. The Company shall not, and
shall not propose to, (i) declare or pay any dividends on or make other
distributions in respect of any of its capital stock, (ii) split, combine or
reclassify any of its capital stock or issue or authorize or propose the
issuance of any other securities in respect of, in lieu of or in substitution
for, shares of its capital stock, (iii) repurchase, redeem or otherwise acquire
any shares of its capital stock or any securities convertible into or
exercisable for any shares of its capital stock, except as otherwise permitted
under certain option agreements to effect cashless option exercises or (iv)
adopt a plan of complete or partial liquidation or resolutions providing for or
authorizing such liquidation or a dissolution, or (except as permitted under
Section 5.4) any merger, consolidation, restructuring, recapitalization or other
reorganization.
(c) Issuance of Securities. The Company shall not and shall cause
its Material Subsidiaries not to issue, deliver or sell, or authorize or propose
the issuance, delivery or sale of, any shares of its capital stock of any class,
any Company Voting Debt or any securities convertible into or exercisable for,
or any rights, warrants or options to acquire, any such shares or Company Voting
Debt, or enter into any agreement with respect to any of the foregoing, other
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than the issuance of Company Common Stock upon the exercise of stock options
pursuant to the Company Stock Plan, and the issuance of shares pursuant to the
Company Stock Plan and the Company Purchase Plan, in each case as in effect on
the date of this Agreement.
(d) Organizational Documents. Except to the extent required to
comply with their respective obligations hereunder or required by law, the
Company and its Material Subsidiaries shall not amend or propose to amend their
respective Organizational Documents.
(e) Indebtedness; Investments. The Company shall not, and shall
cause its Subsidiaries not to, directly or indirectly, except pursuant to the
Company's Refinancing Plan set forth on Schedule 4.1(e) to this Agreement, (i)
incur or assume any long-term or short-term debt or issue any debt securities,
except for borrowings under existing lines of credit in the ordinary and usual
course of business consistent with past practice and borrowings in amounts not
material to the Company and its Subsidiaries taken as a whole; (ii) pledge or
otherwise encumber shares of capital stock of the Company or its Subsidiaries,
or mortgage or pledge any of their material assets, tangible or intangible,
except to secure existing debt and except for such of the foregoing as is not
material to the Company and its Subsidiaries taken as a whole; or (iii) except
in an aggregate amount not to exceed $8 million, (A) assume, guarantee, endorse
or otherwise become liable or responsible (whether directly, contingently or
otherwise) for the obligations of any other Person, except in the ordinary and
usual course of business consistent with past practice and guarantees in amounts
not material to the Company and its Subsidiaries, taken as a whole, and except
for obligations of the wholly owned Subsidiaries of the Company; or (B) make any
loans, advances or capital contributions to, or investments in, any other Person
(other than Subsidiaries of the Company, or customary loans or advances to
employees in the ordinary and usual course of business consistent with past
practice and in amounts not material to the Company and its Subsidiaries taken
as a whole).
(f) Benefit Plans. The Company shall not, and shall not permit the
Material Subsidiaries to, (i) increase the compensation payable or to become
payable to any of its executive officers or employees or (ii) take any action
with respect to the grant of any severance or termination pay, or stay, bonus or
other incentive arrangement (other than pursuant to benefit plans and policies
in effect on the date of this Agreement), except (A) any such increases or
grants made in the ordinary and usual course of business consistent with past
practice or (B) as provided in Section 5.5; provided, however, that nothing in
this Section 4.1(f) shall reduce, modify, change or diminish the rights of any
executive officer or employee of the Company to receive, now or in the future,
stock, cash compensation or other benefits pursuant to any existing Company
Benefit Plan.
(g) Accounting and Tax Practice or Policy. Except to the extent
required by applicable law or GAAP, the Company will not, and will not permit
any of its Subsidiaries to (i) make any material change in any method of
accounting or accounting practice or policy, or (ii) make any material Tax
election or settle or compromise any material income Tax liability with any
Governmental Entity.
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(h) Capital Expenditures. The Company will not, and will not permit
any of its Subsidiaries to, make, in the aggregate, any capital expenditures in
excess of $40 million.
(i) Line of Business. The Company and its Subsidiaries will not make
any material change in the lines of business in which they participate or are
engaged.
(j) Operational Contracts; Company Permits. The Company will not,
and will not permit any of the Subsidiaries to, amend or modify any Company
Permit or any Operational Contract for which revenues were recorded during the
Company's most recent fiscal year in excess of $15 million (other than the
entering into, amendment or modification of any Operational Contract in respect
of the New Jersey Turnpike, which shall not be prohibited), except for any
extensions or renewals thereof or otherwise in the ordinary and usual course of
business, consistent with past practice.
(k) Other Actions. The Company shall not, and shall not permit its
Subsidiaries to, take any action that would reasonably be expected to result in
(i) any of the representations or warranties of the Company becoming untrue in
any material respect or (ii) except as otherwise permitted by Section 5.4, any
of the conditions to the Merger set forth in Article VI not being satisfied.
4.2. COVENANTS OF PARENT AND MERGER SUB. During the period from the date of
this Agreement and continuing until the Effective Time, except as expressly
contemplated or permitted by this Agreement or to the extent that the Company
shall otherwise consent in writing, which consent shall not be unreasonably
withheld or delayed; Parent shall not, and shall not permit any of its
Subsidiaries to, take any action that would reasonably be expected to result in
(i) any of the representations or warranties of Parent becoming untrue in any
material respect or (ii) any of the conditions to the Merger set forth in
Article VI not being satisfied.
4.3. ADVICE OF CHANGES; GOVERNMENT FILINGS. Each party shall promptly advise
the other orally and in writing of (i) any representation or warranty becoming
inaccurate, (ii) the failure by it to comply with or satisfy in any material
respect any covenant, condition or agreement required to be complied with or
satisfied by it under this Agreement or (iii) any change, event or circumstance
that, individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect on such party or materially adversely affect its ability
to consummate the transactions contemplated hereby in a timely manner; provided,
however, that no such notification shall affect the representations, warranties,
covenants or agreements of the parties or the conditions to the obligations of
the parties under this Agreement or constitute a waiver thereunder. Each party
agrees that, to the extent practicable, it will consult with the other party
with respect to the obtaining of all permits, consents, approvals and
authorizations of all third parties and Governmental Entities necessary or
advisable to consummate the transactions contemplated by this Agreement and each
party will keep the other party apprised of the status of matters relating to
completion of the transactions contemplated hereby.
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ARTICLE V.
ADDITIONAL AGREEMENTS
5.1. PREPARATION OF PROXY STATEMENT; THE COMPANY STOCKHOLDERS MEETING.
(a) If required by the DGCL or the Company's Organizational
Documents in order to consummate the Merger, the Company shall, as soon as
practicable following the acquisition by Merger Sub of shares of Company Common
Stock pursuant to the Offer, duly call, give notice of, convene and hold a
meeting of its stockholders (the "Company Stockholders Meeting") for the purpose
of obtaining the Required Company Votes, and, the Company shall, through its
Board of Directors, recommend to its stockholders that they vote in favor of the
approval of the Merger and the adoption of this Agreement; provided, however,
that the Company Board may withdraw, modify or change such recommendation to the
extent that the Company Board, after consultation with and based upon the advice
of independent legal counsel, determines in good faith that such action is
necessary for the Company Board to comply with its fiduciary duties under
applicable law. Parent and Merger Sub shall vote or cause to be voted all the
shares of Company Common Stock owned of record by Parent, Merger Sub or any of
Parent's other Subsidiaries in favor of the approval of the Merger and the
adoption of the Agreement. After the date hereof and prior to the expiration of
the Offer, Parent shall not purchase, offer to purchase, or enter into any
contract, agreement or understanding regarding the purchase of shares of Company
Common Stock, except pursuant to the terms of the Offer and the Merger.
(b) Notwithstanding the preceding paragraph or any other provision
of this Agreement, in the event Parent, Merger Sub or any other Subsidiary of
Parent shall beneficially own, in the aggregate, at least 90% of the outstanding
shares of the Company Common Stock, the Company shall not be required to call
the Company Stockholders Meeting or to file or mail the Proxy Statement, and the
parties hereto shall take all necessary and appropriate action to cause the
Merger to become effective as soon as practicable after the acceptance for
payment of and payment for shares of Company Common Stock by Merger Sub pursuant
to the Offer without a meeting of stockholders of the Company, in accordance
with Section 253 of the DGCL.
(c) In connection with any stockholder meeting, the Company shall
promptly prepare and file with the SEC the Proxy Statement. The Company shall
use reasonable best efforts to cause the Proxy Statement to be cleared with the
SEC and mailed to the Company's stockholders, as promptly as practicable, and,
thereafter, to obtain approval of the Merger by its stockholders.
5.2. ACCESS TO INFORMATION. Subject to the Confidential Information Agreement
dated March 15, 1999 between Parent and the Company (the "Confidential
Information Agreement"), from the date hereof until the earlier of the Effective
Time or the termination of this Agreement, upon reasonable notice, the Company
shall, and shall cause its Subsidiaries to, (a) afford to the officers,
employees, accountants, counsel, financial advisors and other representatives of
Parent ("Parent Representatives") reasonable access during normal business hours
to all of its and its Subsidiaries' properties, books, contracts, commitments
and records and its officers, management employees,
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accountants and representatives and (b) furnish promptly to such persons upon
request (i) a copy of each report, statement, schedule and other document filed
or received by the Company or any of the Subsidiaries pursuant to the
requirements of federal or state securities laws, and (ii) all other information
and data (including, without limitation, copies of Operational Contracts,
Company Benefit Plans and other books and records) concerning the business and
operations of the Company and its Subsidiaries as Parent or any of such other
Persons reasonably may request (subject, however, to confidentiality and similar
non-disclosure obligations and the preservation of attorney client and work
product privileges). Notwithstanding the foregoing, neither Parent nor any
Parent Representatives shall perform any environmental testing at any of the
Company's or its Subsidiaries' properties or facilities.
5.3. APPROVALS AND CONSENTS; COOPERATION
(a) Each of the Company and Parent shall cooperate with each other
and use (and shall cause their respective Subsidiaries to use) its reasonable
best efforts to take or cause to be taken all actions, and do or cause to be
done all things, necessary, proper or advisable on their part under this
Agreement and applicable laws to consummate and make effective the Merger and
the other transactions contemplated by this Agreement as soon as practicable,
including (i) preparing and filing as promptly as practicable all documentation
to effect all applications, notices, petitions, filings, tax ruling requests and
other documents and to obtain as promptly as practicable all consents, waivers,
licenses, orders, registrations, approvals, permits, tax rulings and
authorizations as are necessary or advisable to be obtained from any third party
and/or any Governmental Entity in connection with the Merger or any of the other
transactions contemplated by this Agreement and (ii) taking all reasonable steps
as may be necessary to obtain all such consents, waivers, licenses,
registrations, permits, authorizations, tax rulings, orders and approvals.
(b) In furtherance and not in limitation of the foregoing, each of
the Company and Parent shall use its reasonable best efforts to resolve such
objections, if any, as may be asserted with respect to the transactions
contemplated by this Agreement under any antitrust, competition or trade
regulatory laws, rules or regulations of any United States or foreign
Governmental Entity. Any party hereto shall promptly inform the others of any
material communication from the United States Federal Trade Commission, the
Department of Justice or any other United States or foreign Governmental Entity
regarding the transactions contemplated by this Agreement. If any party or any
affiliate thereof receives a request for additional information from any such
Governmental Entity with respect to the Transactions contemplated by this
Agreement, then such party will endeavor in good faith to make, or cause to be
made, as soon as reasonably practicable and after consultation with the other
party, an appropriate response in compliance with such request (a copy of such
response to be provided to the other party hereto).
(c) The Company and Parent each shall, upon request by the other,
furnish the other with all information concerning itself, its Subsidiaries,
directors, officers and stockholders and such other matters as may reasonably be
necessary or advisable in connection with the Offer Documents, Schedule 14D-9,
Proxy Statement or any other statement, filing, tax ruling request, notice or
application made by or on behalf of the Company, Parent or any of their
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respective Subsidiaries to any third party and/or any Governmental Entity in
connection with the Merger or the other transactions contemplated by this
Agreement.
5.4. ACQUISITION PROPOSALS.
(a) The Company shall, and shall cause its Subsidiaries to, cause
their respective officers, directors, employees and representatives and agents
(the "Company Representatives") to immediately cease any existing discussions or
negotiations, if any, with any Person conducted heretofore with respect to an
Acquisition Proposal or any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to, any Acquisition Proposal.
Unless and until this Agreement shall have been terminated pursuant to Article
VII hereof, except as otherwise expressly provided in Section 5.4(b), neither
the Company nor the Company Representatives shall (i) solicit or initiate the
making of any Acquisition Proposal, (ii) participate in negotiations with any
person or group (other than Parent, Merger Sub and their respective designees)
concerning an Acquisition Proposal, or (iii) disclose or furnish, in connection
with an Acquisition Proposal, any material non-public information or provide
access to its properties, books or records, or otherwise take action that would
facilitate or lead to any Acquisition Proposal, except as required by law or
pursuant to a governmental request for information. As used herein "Acquisition
Proposal" shall mean any proposal to acquire in any manner, directly or
indirectly, in one or a series of transactions, all or more than 20% of the
Company's business, assets or capital shares whether by merger, consolidation,
other business combination, purchase of assets, tender or exchange offer or
otherwise.
(b) Notwithstanding anything to the contrary contained in Section
5.4(a) or elsewhere in this Agreement, prior to acceptance for payment of, and
payment by Merger Sub for, shares of Company Common Stock pursuant to the Offer,
the Company and the Company Representatives may, to the extent the Company
Board, after consultation with and based upon the advice of independent legal
counsel, determines in good faith that such action is necessary for the Company
Board to comply with its fiduciary duties under applicable law, participate in
discussions or negotiations with, and furnish non-public information to, and
afford access to the properties, books, records, officers, employees and
representatives of the Company to any Person, entity or group after such Person,
entity or group has delivered to the Company, in writing, an Acquisition
Proposal not solicited after the date hereof which the Company Board determines
in good faith is, if accepted, reasonably likely to be consummated (taking into
account all legal, financial, regulatory and other aspects of the proposal and
the Person making the proposal) and believes in good faith, after consultation
with its financial advisors, if consummated would be more favorable to the
Company or its stockholders from a financial point of view than the transactions
contemplated by this Agreement (a "Superior Proposal"); provided, however, that
prior to taking such action, the Company shall (to the extent practicable)
provide notice to Parent to the effect that it is taking such action. Subject to
Section 7.2(b), in the event the Company receives a Superior Proposal, nothing
contained in this Agreement shall prevent the Board of Directors of the Company
from executing or entering into an agreement relating to such Superior Proposal
and recommending such Superior Proposal to its stockholders, if the Board
determines in good faith that it is appropriate to do so; in such case, the
Board of Directors of the Company may withdraw, modify or refrain from making
its recommendation of the Offer, the Merger and this Agreement; provided however
that the Company shall (i) provide Parent at least
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24 hours prior written notice of the Company's intention to execute or enter
into an agreement relating to such Superior Proposal to enable Parent to match
such Superior Proposal, in which case, the Company Board shall recommend to the
Company's stockholders to accept the proposal of Parent; and (ii) where Parent
does not match such Superior Proposal, terminate this Agreement by written
notice to Parent given no sooner than 48 hours after Parent's receipt of a copy
of such Superior Proposal (or a description of the significant terms and
conditions thereof). Notwithstanding anything to the contrary contained in
Section 5.4 or elsewhere in this Agreement, prior to the acceptance for payment
of, and payment by Merger Sub for, shares of Company Common Stock pursuant to
the Offer, the Company may, in connection with a possible Acquisition Proposal,
refer any Person to this Section 5.4 and Article VII and make a copy of this
Section 5.4 and Article VII available to any Person. Nothing contained in this
Section 5.4 shall prohibit the Company Board from complying with Rule 14e-2
promulgated under the Exchange Act with regard to a tender or exchange offer.
5.5. EMPLOYEE BENEFITS.
(a) Subject to subparagraph 5.5(c) below, for the period from the
Closing Date until two years from the January 1 next following the Closing Date,
Parent shall or shall cause the Surviving Corporation to maintain in effect
benefit plans which in the aggregate provide benefits that are at least as
favorable to employees as the arrangements (other than equity-related benefit
plans) currently provided by the Company Benefit Plans.
(b) For purposes of determining eligibility to participate, vesting
and accrual or entitlement to benefits where length of service is relevant under
any employee benefit plan or arrangement of Parent, the Surviving Corporation or
any of their respective Subsidiaries, employees of the Company and its
Subsidiaries as of the Effective Time shall receive service credit for service
with the Company and its Subsidiaries and their respective predecessors to the
same extent such service credit was granted under the Company Benefit Plans,
subject to offsets for previously accrued benefits and without duplication of
benefits.
(c) Except as any employee may otherwise agree, Parent shall cause
the Surviving Corporation to assume and honor in accordance with their terms all
written employment, change in control, severance and termination plans and
agreements of employees of the Company and its Subsidiaries and the severance
pay policies identified in Section 5.5(c) of the Company Disclosure Schedule.
5.6. FEES AND EXPENSES. Whether or not the transactions contemplated hereby are
consummated, all Expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such
Expenses, except as provided in Section 7.2. As used in this Agreement,
"Expenses" includes all out-of-pocket expenses (including, without limitation,
all fees and expenses of counsel, accountants, investment bankers, experts and
consultants to a party hereto and its affiliates) incurred by a party or on its
behalf in connection with or related to the authorization, preparation,
negotiation, execution and performance of this Agreement and the transactions
contemplated hereby, including the preparation, printing, filing and mailing of
the Offer Documents and the Proxy Statement and the solicitation of stockholder
approvals and all other matters related to the transactions contemplated
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hereby. Without limiting the generality of the foregoing, in connection with the
consummation of the Offer and the Merger, the parties will take all actions
necessary to ensure prompt payment of all expenses incurred in connection with
this Agreement and the transactions contemplated hereby.
5.7. INDEMNIFICATION; DIRECTORS' AND OFFICERS' INSURANCE. Surviving Corporation
shall, and Parent shall cause Surviving Corporation to, maintain in effect (i)
for a period of six years after the Effective Time, the current provisions
regarding indemnification of current or former officers or directors (each an
"Indemnified Party") contained in the Organizational Documents of the Company
and its Subsidiaries and in any agreements between an Indemnified Party and the
Company or any of its Subsidiaries, provided that in the event any claim or
claims are asserted or made within such six year period, all rights to
indemnification in respect of any claim or claims shall continue until final
disposition of any and all such claims, and (ii) for a period of six years, the
current policies of directors' and officers' liability insurance and fiduciary
liability insurance maintained by the Company (provided that Parent or the
Surviving Corporation may substitute therefor policies of at least the same
coverage and amounts containing terms and conditions which are, in the
aggregate, no less advantageous to the insured and provided that such
substitution shall not result in any gaps or lapses in coverage with respect to
matters occurring at or prior to the Effective Time) with respect to claims
arising from facts or events that occurred at or before the Effective Time;
provided, that if such insurance cannot be so maintained or obtained at a
premium not greater than 150% of the premium for the Company's current
directors' and officers' liability insurance, Parent may maintain or obtain as
much of such insurance as can be maintained or obtained at a cost equal to 150%
of the current annual premiums of the Company for such insurance. Without
limitation of the foregoing, in the event any such Indemnified Party is or
becomes involved in any action, proceeding or investigation in connection with
any matter occurring prior to or at the Effective Time, including (without
limitation) the transactions contemplated hereby, the Surviving Corporation will
pay as incurred the reasonable fees and expenses of counsel selected by the
Indemnified Party and reasonably acceptable to the Surviving Corporation
(including the cost of any investigation and preparation and the cost of any
appeal) incurred in connection therewith. In the event a claim is asserted
against an Indemnified Party more than six years after the Effective Date, and
if such claim is not barred by the applicable statute of limitations, the
Surviving Corporation shall defend, indemnify and hold harmless the Indemnified
Party in accordance with the foregoing. This covenant shall survive the closing
of the transactions contemplated hereby and is intended to be for the benefit
of, and shall be enforceable by, each of the Indemnified Parties and their
respective heirs and legal representatives.
5.8. PUBLIC ANNOUNCEMENTS. So long as this Agreement is in effect, the Company
and Parent shall use all reasonable efforts to develop a joint communications
plan and each party shall use all reasonable efforts (i) to ensure that all
press releases and other public statements with respect to the transactions
contemplated hereby shall be consistent with such joint communications plan, and
(ii) unless otherwise required by applicable law or by obligations pursuant to
any listing agreement with or rules of any United States national securities
exchange or the Milan Stock Exchange, to consult with each other before issuing
any press release or otherwise making any public statement with respect to this
Agreement or the transactions contemplated hereby.
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5.9. TAKEOVER STATUTES. If Section 203 of the DGCL or any other takeover
statute ("Takeover Statute") shall become applicable to the transactions
contemplated hereby, the Company and the members of the Board of Directors of
the Company, shall grant such approvals and take such actions as are necessary
so that the transactions contemplated hereby may be consummated as promptly as
practicable on the terms contemplated hereby and otherwise act to eliminate or
minimize the effects of such Takeover Statute on the transactions contemplated
hereby.
5.10. EMPLOYEE STOCK OPTIONS.
The holder of each employee stock option outstanding immediately
prior to the Effective Time (an "Employee Option") which is unexercised and
vested or which would vest on or prior to January 2, 2000 pursuant to the
applicable vesting schedule in effect as of the date hereof which is terminated
immediately prior to the Effective Time, shall be entitled to receive at the
Effective Time from the Company or as soon as practicable thereafter from the
Surviving Corporation, in consideration for such termination, an amount in cash
equal to (i) the product of (A) the number of shares of Company Common Stock
subject to such Employee Option (whether or not vested or exercisable) and (B)
the excess, if any, of the Price Per Share over the exercise price per share of
Company Common Stock subject to such Employee Option, (ii) less any required
withholding taxes. The Company shall take any action reasonably requested by
Parent in connection with the foregoing.
5.11. RIGHTS AGREEMENT. The Company shall take all action necessary to cause
the provisions of the Company Rights Agreement to be inapplicable to the
transactions contemplated by this Agreement, without any payment to holders of
rights issued pursuant to such rights agreement.
5.12. CREDIT AGREEMENT. The Company shall use its reasonable best efforts to
obtain all necessary waivers and consents prior to the consummation of the Offer
so that the transactions contemplated hereby will not result in or constitute a
default under that certain Amended and Restated Credit Agreement dated as of
April 18, 1997 by and among the Company, the Lenders named therein and the First
Bank of Chicago, as Agent.
5.13. DEBT TENDER. Promptly upon execution of this Agreement, the Company will
withdraw and terminate the debt tender offer referred to in the Offer to
Purchase and Consent Solicitation Statement of the Company dated July 2, 1999,
as amended.
5.14. LICENSE AGREEMENT. The Company will use its reasonable best efforts to
ensure that the license to use the name "Marriott" granted in the License
Agreement dated December 29, 1995, between the Company and Marriott
International, Inc. shall be extended for a period equivalent to the period
Marriott International has granted to Sodexho Marriott a license to use the name
"Marriott" in the agreement dated March 1998, and that such license to the
Company, shall, at its option, be further extended for a period equivalent to
any subsequent extension granted to Sodexho Marriott or any of its successors or
assigns.
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5.15. FURTHER ASSURANCES. In case at any time after the Effective Time any
further action is reasonably necessary to carry out the purposes of this
Agreement, the proper officers of the Company, Parent and Merger Sub shall take
any such reasonably necessary action.
ARTICLE VI.
CONDITIONS PRECEDENT
6.1. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The
obligations of the Company, Parent and Merger Sub to effect the Merger are
subject solely to the satisfaction or waiver (subject to Section 1.4(c) and
where legally permissible) on or prior to the Effective Time of the following
conditions:
(a) Stockholder Approval. The Company shall have obtained all
approvals of holders of shares of capital stock of the Company necessary to
approve the Merger, to the extent required by law.
(b) HSR Act. The waiting period (and any extension thereof)
applicable to the Merger under the HSR Act shall have been terminated or shall
have expired.
(c) No Injunctions or Restraints, Illegality. No temporary
restraining order, preliminary or permanent injunction or other order issued by
a court or other Governmental Entity of competent jurisdiction shall be in
effect and have the effect of making the Merger illegal or otherwise prohibiting
consummation of the Merger.
(d) Purchase of Shares. Merger Sub shall have commenced the Offer
pursuant to Article I hereof and purchased, pursuant to the terms and conditions
of such Offer, all shares of Company Common Stock duly tendered and not
withdrawn.
ARTICLE VII.
TERMINATION AND AMENDMENT
7.1. TERMINATION. This Agreement may be terminated at any time prior to the
Effective Time, by action taken or authorized by the Board of Directors of the
terminating party or parties, whether before or after approval of this Agreement
and the matters contemplated herein, including the Merger, by the stockholders
of the Company:
(a) By mutual written consent of Parent and the Company, by action
of their respective Boards of Directors;
(b) By the Company, if it is not in material breach of its
obligations hereunder and (i) Merger Sub fails to commence the Offer as provided
in Section 1.01 hereof, (ii) Merger Sub shall not have accepted for payment and
paid for all shares of Company Common Stock tendered pursuant to the Offer in
accordance with the terms thereof on or before October 30, 1999 (the "Outside
Date") or (iii) Merger Sub fails to purchase validly tendered shares of Company
Common Stock in violation of the terms of the Offer or this Agreement;
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(c) By the Company or Parent if the Offer is terminated or withdrawn
pursuant to its terms without any shares of Company Common Stock being purchased
thereunder; provided that Parent may terminate this Agreement pursuant to this
Section 7.1(c) only if Parent's or Merger Sub's termination or withdrawal of the
Offer is not in violation of the terms of this Agreement or the Offer;
(d) By the Company or Parent if any Governmental Entity of competent
jurisdiction shall have issued, entered, enacted, promulgated or enforced any
order, decree, judgment, statute, regulation or ruling or taken any other action
permanently restraining, enjoining or otherwise prohibiting the transactions
contemplated by this Agreement, and such order, decree, judgment, statute,
regulation, ruling or other action shall have become final and nonappealable;
(e) By Parent, prior to purchase by Merger Sub of shares of Company
Common Stock pursuant to the Offer, if (i) the Company Board shall have
withdrawn or materially and adversely modified its recommendation of the Offer,
the Merger or this Agreement (it being understood, however, that for all
purposes of this Agreement, the fact that the Company has supplied any Person
with information regarding the Company or has entered into discussions or
negotiations with such Person as permitted by this Agreement, or the disclosure
of such facts, shall not be deemed a withdrawal or modification of the Company
Board's recommendation of the Offer, the Merger or this Agreement); (ii) the
Company Board shall have recommended to the stockholders of the Company that
they approve a Superior Proposal other than that contemplated by this Agreement
and at least two Business Days have elapsed since the recommendation; or (iii) a
tender offer or exchange offer that, if successful, would result in any Person
or "group" becoming a "beneficial owner" (such terms having the meaning in this
Agreement as is ascribed under Regulation 13D under the Exchange Act) of 20% or
more of the issued and outstanding shares of Company Common Stock on a fully
diluted basis is commenced (other than by Parent or an affiliate of Parent) and
the Company Board recommends that the stockholders of the Company tender their
shares in such tender or exchange offer or the Company Board announces a neutral
position or fails to make a recommendation with respect to such offer within the
shorter of the ten Business Days after such tender offer or exchange offer is
commenced or the period remaining until the Outside Date;
(f) By the Company, prior to the purchase by Merger Sub of shares of
Company Common Stock pursuant to the Offer, if the Company enters into a
definitive agreement with respect to a Superior Proposal;
(g) By Parent, prior to the purchase by Merger Sub of shares of
Company Common Stock pursuant to the Offer, upon a material breach of any
covenant or agreement on the part of the Company set forth in this Agreement, or
if any representation or warranty of the Company in this Agreement shall at such
time be inaccurate and such inaccuracy would be reasonably likely to have a
Material Adverse Effect on the Company, in either case which breach or
inaccuracy is not reasonably capable of being cured without expenditures in
excess of $6 million by the Company or, if capable of such cure, has not been
cured without expenditures in excess of $6 million by the Company within ten
Business Days after the Company has knowledge thereof;
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(h) By the Company, prior to the purchase by Merger Sub of any
shares of Company Common Stock pursuant to the Offer, upon a material breach of
any covenant or agreement on the part of Parent or Merger Sub set forth in this
Agreement, or if any representation or warranty of Parent or Merger Sub shall,
at such time, be inaccurate and such inaccuracy would be reasonably likely to
materially and adversely affect the ability of Parent and Merger Sub to perform
their obligations hereunder, in either case which breach or inaccuracy is not
reasonably capable of being cured by Parent or Merger Sub or, if capable of
cure, has not been cured within ten Business Days after either Parent or Merger
Sub has knowledge thereof; or
(i) By Parent, if it is not in material breach of its obligations
hereunder or under the Offer and no shares of Company Common Stock shall have
been purchased pursuant to the Offer by the Outside Date.
7.2. EFFECT OF TERMINATION.
(a) In the event of termination of this Agreement by either the
Company or Parent as provided in Section 7.1, this Agreement shall forthwith
become void and there shall be no liability or obligation on the part of any
party hereto or their respective officers, directors, employees or stockholders
except (i) pursuant to the last sentence of Section 5.2, Section 5.6, this
Section 7.2 and Article VIII, (ii) with respect to any liabilities or damages
incurred or suffered by a party hereto as a result of the willful breach by
another party hereto of any of its covenants or other agreements set forth in
this Agreement and (iii) with respect to any liabilities or damages incurred or
suffered by the Company as a result of the failure of Parent or Merger Sub to
consummate the Offer or the Merger as required under the terms of this
Agreement, including, without limitation, by reason of an inability to obtain
the requisite financing to do so. Any damages or liabilities referenced in
clauses (ii) and (iii) above shall be recoverable in full from the party or
parties whose breach or failure to consummate caused such damages or liabilities
to be incurred.
(b) In the event that this Agreement is terminated pursuant to
Section 7.1(e) or 7.1(f), then the Company shall pay to Parent a cash fee of $20
million, which amount shall be payable by wire transfer of immediately available
funds no later than two Business Days after such termination. The Company
acknowledges that the agreements contained in this Section 7.2(b) are an
integral part of the transactions contemplated in this Agreement, and that,
without these agreements, the Parent and Merger Sub would not enter into this
Agreement.
7.3. AMENDMENT. Subject to Section 1.4(c), this Agreement may be amended by the
parties hereto, by action taken or authorized by their respective Boards of
Directors, at any time before or after approval of the matters presented in
connection with the Merger by the stockholders of the Company, but, after any
such approval, no amendment shall be made which by law or in accordance with the
rules of the New York Stock Exchange requires further approval by such
stockholders without such further approval. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties
hereto which expressly states that the parties intend to amend this Agreement.
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7.4. EXTENSION; WAIVER. Subject to Section 1.4(c), at any time prior to the
Effective Time, the parties hereto, by action taken or authorized by their
respective Boards of Directors, may, to the extent legally allowed, (i) extend
the time for the performance of any of the obligations or other acts of the
other parties hereto, (ii) waive any inaccuracies in the representations and
warranties contained herein or in any document delivered pursuant hereto and
(iii) waive compliance with any of the agreements of any other party or with any
condition to its own obligations. Any agreement on the part of a party hereto to
any such extension or waiver shall be valid only if set forth in a written
instrument signed on behalf of such party. No delay on the part of any party
hereto in exercising any right, power or privilege hereunder shall operate as a
waiver thereof, nor shall any waiver on the part of any party hereto of any
right, power or privilege hereunder operate as a waiver of any other right,
power or privilege hereunder, nor shall any single or partial exercise of any
right, power or privilege hereunder preclude any other or further exercise
thereof or the exercise of any other right, power or privilege hereunder. Unless
otherwise provided, the rights and remedies herein provided are cumulative and
are not exclusive of any rights or remedies which the parties hereto may
otherwise have at law or in equity. The failure of any party to this Agreement
to assert any of its rights under this Agreement or otherwise shall not
constitute a waiver of those rights.
ARTICLE VIII.
GENERAL PROVISIONS
8.1. NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS; NO OTHER
REPRESENTATIONS AND WARRANTIES. None of the representations, warranties,
covenants and other agreements in this Agreement or in any instrument delivered
pursuant to this Agreement, including any rights arising out of any breach of
such representations, warranties, covenants and other agreements, shall survive
the Effective Time, except for those covenants and agreements contained herein
and therein that by their terms apply or are to be performed in whole or in part
after the Effective Time and this Article VIII. Each party hereto agrees that,
except for the representations and warranties contained in this Agreement, (i)
none of the Company, Parent or Merger Sub or any of their respective officers,
directors, employees, affiliates, agents, financial or legal advisors or other
representatives makes any other representations or warranties, whatsoever, oral
or written, express or implied, and each hereby disclaims any other
representations and warranties made by itself or any of its officers, directors,
employees, affiliates, agents, financial and legal advisors or other
representatives, with respect to the execution and delivery of this Agreement,
the documents and the instruments referred to herein, or the transactions
contemplated hereby or thereby, notwithstanding the delivery or disclosure to
the other party or the other party's representatives of any documentation or
other information with respect to any one or more of the foregoing, and (ii)
none of the parties hereto is relying on any disclosure, statement,
representation or warranty, oral or written, express or implied, made by any
other party hereto or such party's officers, directors, employees, affiliates,
agents, financial or legal advisors or other representatives.
8.2. NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed duly given (a) on the date of delivery if delivered
personally, (b) on the first Business Day following the date of dispatch if
delivered by a nationally recognized next-day courier service, (c) on the fifth
Business Day following the date of mailing if delivered by registered or
certified mail,
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return receipt requested, postage prepaid or (d) if sent by facsimile
transmission, with a copy mailed on the same day in the manner provided in (a)
or (b) above, when transmitted (receipt confirmed). All notices hereunder shall
be delivered as set forth below, or pursuant to such other instructions as may
be designated in writing by the party to receive such notice in the manner set
forth above:
(a) if to Parent or Merger Sub, to Autogrill S.p.A. Via Caldera, 21
20153 Milan, Italy (Attention: Carmine Meoli) Facsimile: +39-02-4826-3557) with
copies to with copies to Rogers & Wells LLP, City Tower, 40 Basinghall Street,
London EC2V 5DE, United Kingdom (Attention: Michael S. Immordino), Facsimile
+44-171-628-6111, and to Bonelli Erede Pappalardo, Via Serbelloni, 12, 20122
Milan, Italy (Attention: Sergio Erede), Facsimile +39-02-77-11-32-60
(b) if to the Company, to Host Marriott Services Corporation, 6600
Rockledge Drive, Bethesda, Maryland 20817, Facsimile (301) 380-7626, Attention:
Joe P. Martin, General Counsel, with a copy to Latham & Watkins, 1001
Pennsylvania Avenue, N.W., Suite 1300, Facsimile (202) 637-2201, Attention:
Bruce E. Rosenblum.
8.3. INTERPRETATION. When a reference is made in this Agreement to Sections,
Exhibits or Schedules, such reference shall be to a Section of or Exhibit or
Schedule to this Agreement unless otherwise indicated. The table of contents,
glossary of defined terms and headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include", "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation." The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties and no presumption or burden or proof shall
arise favoring or disfavoring any party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local or
foreign statue or law shall be deemed also to refer to all rules and regulations
promulgated thereunder, unless the content requires otherwise. It is understood
and agreed that neither the specifications of any dollar amount in this
Agreement nor the inclusion of any specific item in the Schedules or Exhibits is
intended to imply that such amounts or higher or lower amounts, or the items so
included or other items, are or are not material, and neither party shall use
the fact or setting or such amounts or the fact of the inclusion of such item in
the Schedules or Exhibits in any dispute or controversy between the parties as
to whether any obligation, item or matter is or is not material for purposes
hereof. References in this Agreement to the "knowledge" of a party shall mean
the actual knowledge of the executive officers of such party after due inquiry.
8.4. COUNTERPARTS. This Agreement may be executed in one or more counterparts,
all of which shall be considered one and the same agreement and shall become
effective when one or more counterparts have been signed by each of the parties
and delivered to the other party, it being understood that both parties need not
sign the same counterpart.
35
<PAGE> 41
8.5. ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES.
(a) This Agreement (including the Schedules and Exhibits)
constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof, other than the Confidential Information Agreement, which
shall survive the execution and delivery of this Agreement.
(b) This Agreement shall be binding upon and inure solely to the
benefit of each party hereto, and nothing in this Agreement, express or implied,
is intended to or shall confer upon any other Person any right, benefit or
remedy of any nature whatsoever under or by reason of this Agreement, other than
Article II and Sections 1.4(c), 5.5, 5.7 and 8.1 (which are intended to be for
the benefit of the Persons covered thereby and may be enforced by such Persons).
8.6. GOVERNING LAW; JURISDICTION; WAIVER OF JURY TRIAL.
(a) This Agreement shall be governed and construed in accordance
with the laws of the State of Delaware, without regard to the laws that might be
applicable under conflicts of laws principles.
(b) Each of the parties hereto hereby irrevocably and
unconditionally submits, for itself and its property, to the exclusive
jurisdiction of any Delaware State court, or Federal court of the United States
of America sitting in Delaware, and any appellate court from any thereof, in any
action or proceeding arising out of or relating to this Agreement or the
agreements delivered in connection herewith or the transactions contemplated
hereby or thereby or for recognition or enforcement of any judgment relating
thereto, and each of the parties hereby irrevocably and unconditionally (i)
agrees not to commence any such action or proceeding except in such courts, (ii)
agrees that any claim in respect of any such action or proceeding may be heard
and determined in such Delaware State court or, to the extent permitted by law,
in such Federal court, (iii) waives, to the fullest extent it may legally and
effectively do so, any objection which it may now or hereafter have to the
laying of venue of any such action or proceeding in any such Delaware State or
Federal court, and (iv) waives, to the fullest extent permitted by law, the
defense of an inconvenient forum to the maintenance of such action or proceeding
in any such Delaware State or Federal court. Each of the parties hereto agrees
that a final judgment in any such action or proceeding shall be conclusive and
may be enforced in other jurisdictions by suit on the judgment or in any other
manner provided by law. Each party to this Agreement irrevocably consents to
service of process in the manner provided for notices in Section 8.2. Nothing in
this Agreement will affect the right of any party to this Agreement to serve
process in any other manner permitted by law.
(c) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH
MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT
ISSUES, AND THEREFORE IT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT
IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR
INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT AND ANY OF THE
36
<PAGE> 42
AGREEMENTS DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (i) NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK
TO ENFORCE EITHER OF SUCH WAIVERS, (ii) IT UNDERSTANDS AND HAS CONSIDERED THE
IMPLICATIONS OF SUCH WAIVERS, (iii) IT MAKES SUCH WAIVERS VOLUNTARILY, AND (iv)
IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE
MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 8.6(c).
8.7. SEVERABILITY. If any term or other provision of this Agreement is invalid,
illegal or incapable of being enforced by any law or public policy, all other
terms and provisions of this Agreement shall nevertheless remain in full force
and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner materially adverse to any
party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner in order that the
transactions contemplated hereby are consummated as originally contemplated to
the greatest extent possible. Any provision of this Agreement held invalid or
unenforceable only in part, degree or certain jurisdictions will remain in full
force and effect to the extent not held invalid or unenforceable. To the extent
permitted by applicable law, each party waives any provision of law which
renders any provision of this Agreement invalid, illegal or unenforceable in any
respect.
8.8. ASSIGNMENT. Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the parties hereto, in whole
or in part (whether by operation of law or otherwise), without the prior written
consent of the other parties, and any attempt to make any such assignment
without such consent shall be null and void. Subject to the preceding sentence,
this Agreement will be binding upon, inure to the benefit of and be enforceable
by the parties and their respective permitted successors and assigns.
8.9. ENFORCEMENT. The parties agree that irreparable damage would occur in the
event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or otherwise breached. It is accordingly
agreed that the parties shall be entitled to an injunction or injunctions to
prevent such breaches and specific performance of the terms hereof, this being
in addition to any other remedy to which they are entitled at law or in equity.
8.10. DEFINITIONS. As used in this Agreement:
"Board of Directors" means the Board of Directors of any specified
Person and any properly serving and acting committees thereof.
"Business Day" means any day on which banks are not required or
authorized to close in the City of New York or Milan, Italy.
37
<PAGE> 43
"Company Stock Plan" means the Host Marriott Services Corporation
Comprehensive Stock Plan.
"Company Stock Purchase Plan" means the Host Marriott Services
Corporation Stock Purchase Plan.
"Environmental Laws" shall mean any federal, state or local law,
statute, ordinance, order, decree, rule or regulation relating to releases,
discharges, emissions or disposals to air, water, land or groundwater of toxic
or hazardous substance or waste; to the use, handling or disposal or any toxic
or hazardous substance or waste; to the treatment, storage, disposal or
management of toxic or hazardous substance or waste; to exposure to toxic or
hazardous substance or waste; and to the transportation, release or other
movement of toxic or hazardous substance or waste.
"Intellectual Property" shall mean patents and patent rights,
trademarks and trademark rights, trade names and trade name rights, service
marks and service mark rights, service names and service name rights, copyrights
and copyright rights and other proprietary intellectual property rights, and all
pending applications for and registrations of any of the foregoing, that are
material to the business of the Company and its subsidiaries (taken as a whole).
"Material Adverse Effect" means with respect to any Person a
material adverse effect on the business, assets, financial condition or results
of operation of such Person and its Subsidiaries taken as a whole, provided,
however, that with respect to the Company the term Material Adverse Effect shall
not include (i) any change, circumstance, event or effect that relates to or
results primarily from the announcement or other disclosure or consummation of
the transactions contemplated by this Agreement, (ii) changes in general
economic conditions, financial markets (including fluctuations in the price of
shares of Company Common Stock or shares of capital stock of Parent) or
conditions in the business sectors in which the Company and its Subsidiaries
operate not disproportionately affecting the Company and its Subsidiaries, or
(iii) the failure to obtain any consents or approvals under any Operational
Contracts in connection with the transactions contemplated hereby.
"Material Subsidiaries" shall mean Host International, Inc. and any
other subsidiary of the Company which constitutes a "significant subsidiary" as
defined under Regulation S-X promulgated by the SEC.
"Operational Contracts" means agreements pertaining to the conduct
of the business operations of the Company and its Subsidiaries, including
(without limitation) leases, operating agreements, concession agreements,
franchise agreements, licensing agreements, joint venture agreements,
noncompetition agreements and other agreements or contractual arrangements.
"Organizational Documents" means, with respect to any entity, the
certificate of incorporation, bylaws or other governing documents of such
entity.
38
<PAGE> 44
"Person" means an individual, corporation, partnership, limited
liability company association, trust, unincorporated organization, entity or
group (as defined in the Exchange Act).
"Subsidiary" when used with respect to any Person means any
corporation or other organization, whether incorporated or unincorporated, (i)
of which such Person or any other Subsidiary of such Person is a general partner
(excluding partnerships, the general partnership interests of which held by such
Person or any Subsidiary of such Person do not have a majority of the voting and
economic interests in such partnership) or (ii) at least a majority of the
securities or other interests of which having by their terms ordinary voting
power to elect a majority of the Board of Directors or others performing similar
functions with respect to such corporation or other organization is directly or
indirectly owned or controlled by such Person or by any one or more of its
Subsidiaries, or by such Person and one or more of its Subsidiaries.
(i) "Tax" (including, with correlative meaning, the terms "Taxes"
and "Taxable") means all federal, state, local and foreign income, profits,
franchise, gross receipts, environmental, customs duty, capital stock,
severance, stamp, payroll, sales, employment, unemployment disability, use,
property, withholding, excise, production, value added, occupancy and other
taxes, duties or assessments of any nature whatsoever, together with all
interest, penalties, fines and additions to tax imposed with respect to such
amounts and any interest in respect of such penalties and additions to tax, and
(ii) "Tax Return" means all returns and reports (including elections, claims,
declarations, disclosures, schedules, estimates, computations and information
returns) required to be supplied to a Tax authority in any jurisdiction relating
to Taxes.
8.11. PERFORMANCE BY MERGER SUB. Parent hereby agrees to cause Merger Sub to
comply with its obligations hereunder and under the Offer and to cause Merger
Sub to consummate the Merger as contemplated herein, and whenever this Agreement
requires Merger Sub to take any action, such requirement shall be deemed to
include an undertaking of Parent to cause Merger Sub to take such action.
39
<PAGE> 45
IN WITNESS WHEREOF, Parent, the Company and Merger Sub have caused
this Agreement to be signed by their respective officers thereunto duly
authorized, all as of the date first set forth above.
AUTOGRILL S.p.A.,
a corporation organized under the laws of the
Republic of Italy
By: /s/ Paolo Prota Giurleo
--------------------------------
Name: Paolo Prota Giurleo
Title: Chief Executive Officer
AUTOGRILL ACQUISITION CO.,
a Delaware corporation
By: /s/ Paolo Prota Giurleo
--------------------------------
Name: Paolo Prota Giurleo
Title: President
HOST MARRIOTT SERVICES CORPORATION,
a Delaware corporation
By: /s/ William W. McCarten
--------------------------------
Name: William W. McCarten
Title: President and Chief Executive Officer
40
<PAGE> 46
ANNEX A
Conditions To The Offer
The Offer shall be conditioned upon the Minimum Shares being validly
tendered and not withdrawn prior to the date which is 20 Business Days following
the commencement of the Offer or such later expiration date to which the Offer
has been extended in accordance with the provisions of the Agreement. Moreover,
notwithstanding any other provision of the Offer, and subject to the terms and
conditions of the Agreement, Merger Sub shall not be obligated to accept for
payment any shares of Company Common Stock until expiration of all applicable
waiting periods (and extensions thereof) under the HSR Act, and Merger Sub shall
not be required to accept for payment, purchase or pay for, and may delay the
acceptance for payment of or payment for, any shares of Company Common Stock
tendered in the Offer, or if the Minimum Shares shall not have been validly
tendered pursuant to the Offer and not withdrawn, may terminate or amend the
Offer, subject to the terms and conditions of the Agreement and Merger Sub's
obligation to extend the Offer pursuant to Section 1.1(b), if, prior to the time
of acceptance for payment of any such shares of Company Common Stock, any of the
following shall occur and remain in effect:
(a) an order shall have been entered in any action or proceeding
before any United States federal or state Governmental Entity (an "Order"), or a
preliminary or permanent injunction by a United States federal or state court of
competent jurisdiction shall have been issued and remain in effect (an
"Injunction"), which (1) prohibits, or imposes any material limitations on,
Parent's or Merger Sub's ownership or operation of all or a material portion of
their or the Company's businesses or assets, or compels Parent or Merger Sub (or
their respective Subsidiaries and affiliates) to dispose of or hold separate any
material portion of the business or assets of the Company or Parent and their
respective Subsidiaries, in each case taken as a whole, (2) prohibits or makes
illegal the acceptance for payment, payment for or purchase of shares of Company
Common Stock pursuant to the Offer or the consummation of the Offer or the
Merger, (3) results in a material delay in or materially restricts the ability
of Merger Sub, or renders Merger Sub unable, to accept for payment, pay for or
purchase any significant portion of the shares of Company Common Stock tendered
pursuant to the Offer, (4) imposes or confirms material limitations on the
ability of Merger Sub or Parent (or any of their respective Subsidiaries or
affiliates) effectively to exercise full rights of ownership of the shares of
Company Common Stock purchased pursuant to the Offer, including, without
limitation, the right to vote such shares of Company Common Stock on all matters
properly presented to the Company's stockholders, or (5) otherwise results in a
Material Adverse Effect with respect to the Company; provided, however, that in
order to invoke this condition, Parent and Merger Sub shall in good faith have
used their reasonable best efforts to prevent such Order or Injunction or
ameliorate the effects thereof; and provided, further, that, if the Order or
Injunction is a temporary restraining order or preliminary injunction of a court
of competent jurisdiction, Merger Sub may not, by virtue of this condition
alone, amend or terminate the Offer, but may only extend the Offer and thereby
postpone acceptance for payment or purchase of Shares; or
(b) there shall be instituted or pending any action, proceeding or
counterclaim brought by a Governmental Entity that would reasonably be expected
to result,
<PAGE> 47
directly or indirectly, in any of the consequences referred to in clauses (1)
through (5) of paragraph (a) above;
(c) Parent shall be entitled to terminate the Agreement pursuant to
Section 7.1(e) or Section 7.1(g) thereof; or
(d) any consents, registrations, approvals, permits, authorizations,
notices, reports or other filings required to be obtained or made by the
Company, Parent or Merger Sub with or from any Governmental Entity in connection
with the execution, delivery and performance of the Agreement, the Offer and the
consummation of the transactions contemplated by the Agreement (other than any
consent or approval required under Operational Contracts) shall not have been
made or obtained and such failure would reasonably be expected to have a Company
Material Adverse Effect with respect to the Company; or
(e) the Agreement shall have been terminated by the Company or
Parent pursuant to its terms.
The foregoing conditions are for the sole benefit of Parent and
Merger Sub and may be asserted by Parent and Merger Sub in their sole discretion
regardless of the circumstances giving rise to such condition or, except for the
Minimum Condition (which may not be waived without the written consent of the
Company), may be waived by Parent and Merger Sub in whole or in part at any time
and from time to time. The failure by Parent or Merger Sub at any time to
exercise any of the foregoing rights shall not be deemed a waiver of any such
right, the waiver of any such right with respect to particular facts and other
circumstances shall not be deemed a waiver with respect to any other facts and
circumstances, and each such right shall be deemed an ongoing right that may be
asserted at any time and from time to time.
The capitalized terms used in this Annex A shall have the meanings
set forth in the Agreement to which it is annexed, except that the term
Agreement shall be deemed to refer to the Agreement to which this Annex A is
appended.
<PAGE> 1
EXHIBIT 7
[BT WOLFENSOHN LETTERHEAD]
March 15, 1999
Mr. Paolo Prota Giurleo
Autogrill SpA
Via Caldera 21
20153 Milano
Italy
Dear Mr. Prota Giurleo:
We understand that you may be interested in pursuing a transaction
with Host Marriott Services Corporation (the "Company") on a mutually agreeable
basis. BT Wolfensohn has been engaged by the Company to act as financial advisor
in connection with a potential transaction. In connection with your possible
interest in a transaction with the Company, we propose to furnish you with
certain information related to the Company (herein referred to as the
"Confidential Information"). Confidential Information includes not only written
information but also information transferred orally, visually, electronically or
by any other means. The fact that such information has been delivered to you,
that such a transaction is under consideration by the Company, that discussions
or negotiations have occurred or are occurring regarding a possible transaction
involving the Company and you, and the status of any such discussions or
negotiations, are considered Confidential Information for purposes of this
Agreement. In consideration of our furnishing you with the Confidential
Information, and as a condition to such disclosure, you agree as follows:
1. The Confidential Information will be used by you solely for the
purpose of your evaluation of the desirability of your entering
into a transaction with the Company, and for no other purpose.
2. You shall keep all Confidential Information secret and
confidential and shall not, without the prior written consent of
the Company, disclose it to anyone except to a limited group of
your own employees, directors, officers, agents and outside
advisors ("Representatives") who are actually engaged in, and need
to know such Confidential Information to perform the evaluation
referred to above, each of whom must be advised of the
confidential nature of the Confidential Information and of the
terms of this Agreement and must agree to abide by such terms. You
shall be responsible for any breach of this Agreement by any of
your Representatives.
3. Upon any termination of your evaluation of pursuing a transaction
with the Company or upon notice from the Company to you (i) you
will return to the Company the Confidential Information which is
in tangible form, including any copies which you may have made,
and you will destroy all abstracts, summaries thereof or
references thereto in your documents, and certify to us that you
have done so, and (ii) neither you nor your Representatives will
use any of the Confidential Information with
<PAGE> 2
Mr. Paolo Prota Giurleo
July 29, 1999
Page 2
respect to, or in furtherance of, your business, any of their
respective businesses, or in the business of anyone else, whether
or not in competition with the Company, or for any other purpose
whatsoever.
4. Confidential information includes all analyses, compilations,
forecasts, studies or other documents prepared by you or your
Representatives in connection with your evaluation of pursuing a
transaction with the Company. Confidential Information does not
include any information which was publicly available prior to your
receipt of such information or thereafter became publicly
available (other than as a result of disclosure by you or any of
your Representatives). Information shall be deemed "publicly
available" if it becomes a matter of public knowledge or is
contained in materials available to the public or is obtained from
any source other than the Company (or its directors, officers,
employees, agents or outside advisors, including, without
limitation BT Wolfensohn), provided that such source is not to
your knowledge prohibited from disclosing such information by a
legal, contractual or fiduciary obligation to the Company and did
not obtain the information from an entity or person prohibited
from disclosing such information by a legal, contractual or
fiduciary obligation to the Company.
5. You understand that we have endeavored to include in the
Confidential Information those materials which we believe to be
reliable and relevant for the purpose of your evaluation, but you
acknowledge that neither the Company nor BT Wolfensohn nor any of
their respective directors, officers, employees, agents or outside
advisors makes any representation or warranty as to the accuracy
or completeness of the Confidential Information and you agree that
such persons shall have no liability to you or any of your
Representatives resulting from any use of the Confidential
Information. You understand that the Confidential Information is
not being furnished for use in an offer or sale of securities of
the Company and is not designed to satisfy the requirements of
federal or state securities laws in connection with any offer or
sale of such securities to you.
6. In the event that you or any of your Representatives is requested
in any proceeding to disclose any of the Confidential Information,
you will provide the Company with prompt prior notice so that the
Company may seek a protective order or other appropriate remedy
and/or waive compliance with the provisions of this Agreement. In
the event that the Company is unable to obtain such protective
order or other appropriate remedy, you will furnish only that
portion of the Confidential Information which you are advised by a
written opinion of counsel is legally required, you will give the
Company written notice of the information to be disclosed as far
in advance as practicable, and you will exercise your best efforts
to obtain a protective order or other reliable assurance that
confidential treatment will be accorded the Confidential
Information so disclosed.
7. Without the prior written consent of the Company, you will not,
and will not encourage or assist others to, for a period of three
years (i) propose or disclose an intent to propose any form of
business combination, acquisition, restructuring, recapitalization
or other similar transaction relating to the Company, (ii) acquire
or
<PAGE> 3
Mr. Paolo Prota Giurleo
July 29, 1999
Page 3
offer, seek, propose or agree to acquire, directly or indirectly,
by purchase or otherwise, any voting securities or assets of the
Company, (iii) make, or in any way participate, directly or
indirectly, in any "solicitation" of any "proxy" to vote (as such
terms are used in the proxy rules of the Securities and Exchange
Commission) or seek to advise or influence any person or entity
with respect to the voting of any voting securities of the
Company, (iv) form, join or in any way participate, directly or
indirectly, in a "group" within the meaning of Section 13(d)(3) of
the Securities Exchange Act of 1934, as amended, with respect to
any voting securities of the Company, (v) enter into any
discussions, negotiations, arrangements or understandings with any
third party with respect to any of the foregoing, (vi) disclose
any intention, plan or arrangement inconsistent with the
foregoing, (vii) otherwise act, alone or in concert with others,
directly or indirectly, to seek control of the management, board
of directors, or policies of the Company, (viii) request the
Company, directly or indirectly, to amend or waive any provisions
of this paragraph.
8. You agree that for a period of three years, you will not, directly
or indirectly, solicit for employment or hire any employee of the
Company or any of its subsidiaries with whom you have had contact
or who became known to you in connection with your evaluation of a
possible transaction involving the Company; provided that the
foregoing provision will not prevent you from employing any such
person who contacts you on his or her own initiative without any
direct or indirect solicitation by, or encouragement (not
including a general solicitation of employment not specifically
directed towards employees of the Company) from, you.
9. Without impairing any other provision hereof, you will promptly
advise the Company of any prohibited disclosure or other breach of
this Agreement.
10. You understand and agree that money damages would not be a
sufficient remedy for any breach of this Agreement by you or your
Representatives, and that the Company, its agents and
representatives shall be entitled to specific performance and/or
injunctive relief as a remedy for any such breach. Such remedy
shall not be deemed to be the exclusive remedy for any such breach
of this Agreement but shall be in addition to all other remedies
available at law or in equity. You further agree that no failure
or delay by the Company, its directors, officers, employees,
agents or outside advisors or representatives in exercising any
right, power or privilege under this Agreement shall operate as a
waiver thereof, nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of
any right, power or privilege under this agreement.
11. Nothing in this Agreement shall impose any obligation upon you or
the Company to consummate a transaction or to enter into any
discussion or negotiations with respect thereof.
12. This Agreement shall be governed by the laws of the State of New
York.
<PAGE> 4
Mr. Paolo Prota Giurleo
July 29, 1999
Page 4
If you are in agreement with the foregoing, please sign and return
the enclosed copy of this letter which will constitute our agreement with
respect to the subject matter of this letter as of the date first above written.
Very truly yours,
BT WOLFENSOHN
/s/ Carlo Bronzini Vender
-----------------------------------------
Carlo Bronzini Vender
-----------------------------------------
Managing Director
AGREED AND ACCEPTED TO:
AUTOGRILL SpA
By: /s/Paolo Prota Giurleo
-------------------------
Its: Chief Executive Officer
<PAGE> 1
EXHIBIT 8
[DEUTSCHE BANK LETTERHEAD]
July 26, 1999
Board of Directors
Host Marriott Services Corporation
6600 Rockledge Drive
Bethesda, Maryland 20817
Gentlemen:
Deutsche Bank Securities Inc. ("Deutsche Bank") has acted as financial
advisor to Host Marriott Services Corporation ("HMS" or the "Company") in
connection with the proposed acquisition of the Company by Autogrill S.p.A., a
corporation organized under the laws of the Republic of Italy ("Autogrill"),
pursuant to the Agreement and Plan of Merger, dated July 26, 1999 among the
Company, Autogrill and Autogrill Acquisitions, Inc. ("Sub"), a wholly-owned
subsidiary of Autogrill, (the "Merger Agreement"), pursuant to which Autogrill
will commence a tender offer (the "Tender Offer") for all the outstanding shares
of the Company's Common Stock, no par value, (the "Company Common Stock"), at a
price of $15.75 per share (the "Consideration"), net to the seller in cash, and,
after the consummation of the Tender Offer, the Sub will merge with and into the
Company (the "Merger", and the Merger and the Tender Offer together, the
"Transaction"), and each outstanding share of Company Common Stock not acquired
in the Tender Offer, other than shares of Company Common Stock held in treasury
or held by Autogrill or as to which dissenters' rights have been perfected, will
be converted into the right to receive in cash, without interest, the same
consideration per share paid in the Tender Offer. The terms and conditions of
the Transaction are more fully set forth in the Merger Agreement.
You have requested Deutsche Bank's opinion, as investment bankers, as to
the fairness, from a financial point of view, to the holders of Company Common
Stock of the Consideration to be received by them in the Transaction.
In connection with Deutsche Bank's role as financial advisor to the
Company, and in arriving at its opinion, Deutsche Bank has reviewed certain
publicly available financial and other information concerning the Company and
certain internal analyses and other information furnished to it by the Company.
Deutsche Bank has also held discussions with members of the senior management of
the Company regarding the business and prospects of the Company. In addition,
Deutsche Bank has (i) reviewed the reported prices and trading activity for
Company Common Stock, (ii) compared certain financial and stock market
information for the Company with similar information for certain other relevant
companies whose securities are publicly traded, (iii) reviewed the financial
terms of certain recent business combinations which it deemed comparable, (iv)
reviewed the financial terms of the Merger Agreement and certain related
documents, and (v) performed such other studies and analyses and considered such
other factors as it deemed appropriate.
Deutsche Bank has not assumed responsibility for independent verification
of, and has not independently verified, any information, whether publicly
available or furnished to it, concerning the Company, including, without
limitation, any financial information, forecasts or projections considered in
connection with the rendering of its opinion. Accordingly, for purposes of its
opinion, Deutsche Bank has assumed and relied upon the accuracy and completeness
of all such information and Deutsche Bank has not conducted a physical
inspection of any of the properties or assets, and has not prepared or obtained
any independent evaluation or appraisal of any of the assets or liabilities, of
the Company. With respect to the financial forecasts and projections made
available to Deutsche Bank and used in its analyses, Deutsche Bank has assumed
that they
<PAGE> 2
[DEUTSCHE BANK LETTERHEAD]
have been reasonably prepared on bases reflecting the best currently available
estimates and judgments of the management of the Company as to the matters
covered thereby. In rendering its opinion, Deutsche Bank expresses no view as to
the reasonableness of such forecasts and projections or the assumptions on which
they are based. Deutsche Bank's opinion is necessarily based upon economic,
market and other conditions as in effect on, and the information made available
to it as of, the date hereof.
For purposes of rendering its opinion, Deutsche Bank has assumed that, in
all respects material to its analysis, the representations and warranties of the
Company contained in the Agreement and Plan of Merger are true and correct and
all conditions to the obligations of the Company to consummate the Transaction
will be satisfied without any waiver thereof.
This opinion is addressed to, and for the use and benefit of, the Board of
Directors of the Company and is not a recommendation to the stockholders of the
Company to accept the Tender Offer. This opinion is limited to the fairness,
from a financial point of view, to the Company of the Consideration, and
Deutsche Bank expresses no opinion as to the merits of the underlying decision
by the Company to engage in the Transaction.
Deutsche Bank will be paid a fee for its services as financial advisor to
the Company in connection with the Transaction. A significant portion of such
fee is contingent upon consummation of the Transaction. We are an affiliate of
Deutsche Bank AG (together with its affiliates, the "DB Group"). Over the past
three years we have provided financial advisory services to HMS, for which we
were paid a retainer fee. In the ordinary course of business, members of the DB
Group may actively trade in the securities and other instruments and obligations
of the Company for their own accounts and for the accounts of their customers.
Accordingly, the DB Group may at any time hold a long or short position in such
securities, instruments and obligations.
Based upon and subject to the foregoing, it is Deutsche Bank's opinion as
investment bankers that the Consideration to be paid to the holders of Company
Common Stock in connection with the Transaction is fair, from a financial point
of view, to such holders.
Very truly yours,
DEUTSCHE BANK SECURITIES INC.
<PAGE> 1
[HOST MARRIOTT LETTERHEAD]
July 30, 1999
To Our Stockholders:
We are pleased to inform you that on July 26, 1999, Host Marriott Services
Corporation (the "Company") entered into an Agreement and Plan of Merger (the
"Merger Agreement") with Autogrill, S.p.A. ("Parent") and its indirect wholly
owned subsidiary, Autogrill Acquisition Co. ("Purchaser"), which provides for
the acquisition of the Company by Parent. Under the terms of the Merger
Agreement, the Purchaser today commenced a tender offer (the "Offer") to
purchase all of the Company's outstanding shares of common stock (and, together
with the associated preferred stock purchase rights, the "Shares") at a price of
$15.75 per share in cash.
Following the successful completion of the Offer, the Purchaser will be
merged with the Company (the "Merger"), and all Shares not purchased in the
Offer will receive in the Merger the same $15.75 per share in cash. The Offer is
conditioned upon, among other things, there having been validly tendered and not
withdrawn on or prior to the expiration date of the Offer a number of Shares
constituting at least two-thirds of the outstanding Shares of the Company
(determined on a fully-diluted basis). The Offer is not subject to a financing
condition, but is subject to customary closing conditions, including the
expiration or termination of any applicable waiting periods imposed by the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.
THE COMPANY'S BOARD OF DIRECTORS HAS UNANIMOUSLY DETERMINED THAT THE OFFER
AND THE MERGER, TAKEN TOGETHER, ARE FAIR TO AND IN THE BEST INTERESTS OF THE
COMPANY'S STOCKHOLDERS AND APPROVED AND DECLARED ADVISABLE THE MERGER AGREEMENT
AND THE TRANSACTIONS CONTEMPLATED THEREBY. ACCORDINGLY, THE BOARD OF DIRECTORS
RECOMMENDS THAT YOU ACCEPT THE OFFER AND TENDER YOUR SHARES THEREINTO AND
APPROVE AND ADOPT THE MERGER AND THE MERGER AGREEMENT.
In arriving at its recommendation, the Company's Board of Directors gave
careful consideration to a number of factors which are described in the enclosed
Schedule 14D-9, including the opinion of the Company's financial advisor,
Deutsche Bank Securities, Inc. (a copy of which is included in the Schedule
14D-9) to the effect that, as of the date of such opinion, the consideration to
be paid to the Company's stockholders pursuant to the Offer and the Merger is
fair from a financial point of view.
Additional information with respect to the Offer and the Merger is
contained in the enclosed Schedule 14D-9. We urge you to read it carefully.
On behalf of the management and directors of the Company, thank you for
your continued support.
Sincerely,
/s/ WILLIAM W. MCCARTEN
William W. McCarten
President and Chief Executive Officer
<PAGE> 1
EXHIBIT 11
AMENDMENT NO.1 TO RIGHTS AGREEMENT,
DATED AS OF JULY 26, 1999,
BETWEEN THE COMPANY AND
FIRST CHICAGO TRUST COMPANY OF NEW YORK
THIS AMENDMENT NO. 1, dated as of July 26, 1999 (this "Amendment"), to the
Rights Agreement, dated as of December 22, 1999 (the "Rights Agreement"), HOST
MARRIOTT SERVICES CORPORATION, a Delaware corporation (the "Company"), and FIRST
CHICAGO TRUST COMPANY OF NEW YORK (the "Rights Agent").
The Company and the Rights Agent have heretofore executed and entered into
the Rights Agreement. Pursuant to Section 26 of the Rights Agreement, the
Company and the Rights Agent may from time to time supplement or amend the
Rights Agreement in accordance with the provisions of Section 26 thereof. All
acts and things necessary to make this Amendment a valid agreement according to
its terms have been done and performed, and the execution and delivery of this
Agreement by the Company and the Rights Agent have been in all respects
authorized by the Company and the Rights Agent.
The Company, Autogrill, S.p.A., a corporation organized under the laws of
the Republic of Italy ("Parent") and Autogrill Acquisition Co. (the
"Subsidiary") have entered into an Agreement and Plan of Merger dated as of July
26, 1999.
In consideration of the foregoing premises and mutual agreements set forth
in the Rights Agreement and this Amendment, the parties hereto agree as follows:
1. Section 1.(a) of the Rights Agreement is hereby amended by adding as the
final sentence thereto the following:
"Notwithstanding anything in this Agreement to the contrary, no Person
who or which, together with all Affiliates and Associates of such Person,
is or shall become the Beneficial Owner of 20% or more of the shares of
Common Stock then outstanding shall be an "Acquiring Person" solely as the
result of the acquisition by Parent or any Affiliate of Parent of
Beneficial Ownership of shares of Common Stock pursuant to the Offer (as
defined in the Agreement and Plan of Merger dated as of July 26, 1999 by
and among Autogrill, S.p.A., a corporation organized under the laws of the
Republic of Italy, Autogrill Acquisition Co., a Delaware corporation and
the Company (the "Plan of Merger")), or pursuant to the Merger (as defined
in the Plan of Merger), in each case in accordance with the terms of the
Plan of Merger, as the same may from time to time be amended."
2. Section 3.(a) of the Rights Agreement is hereby amended by adding as the
final sentence thereto the following:
"Notwithstanding anything in this Agreement to the contrary, a
Distribution Date shall not be deemed to have occurred solely as a result
of (i) the approval, execution or delivery of the Plan of Merger or (ii)
the making or acceptance for payment of shares of Common Stock pursuant to
the Offer or the consummation of the Merger or the other transactions
contemplated thereby, in each case in accordance with the terms of the Plan
of Merger, as the same may from time to time be amended."
3. Section 13.(a) of the Rights Agreement is hereby amended by adding as
the final sentence thereto the following:
"Notwithstanding anything in this Agreement to the contrary, a
transaction of the kind referred to in this Section 13.(a) shall not be
deemed to have occurred solely as a result of (i) the approval, execution
or delivery of the Plan of Merger or (ii) the making or acceptance for
payment of shares of Common Stock pursuant to the Offer or the consummation
of the Merger or the other transactions contemplated thereby, in each case
in accordance with the terms of the Plan of Merger, as the same may from
time to time be amended."
<PAGE> 2
4. Except as expressly amended hereby, the Rights Agreement remains in full
force and effect in accordance with its terms.
5. The Rights Agreement, as amended by this Amendment, and each Right
Certificate issued under the Rights Agreement shall be deemed to be a contract
made under the laws of the State of Delaware and for all purposes shall be
governed by and construed in accordance with the laws of such State applicable
to contracts to be made and performed entirely within such State; except that
all provisions regarding the rights, duties and obligations of the Rights Agent
shall be governed by and construed in accordance with the laws of the State of
New York applicable to contracts made and to be performed entirely within such
State.
6. This Amendment to the Rights Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware.
7. This Amendment to the Rights Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed an
original, and all such counterparts shall together constitute but one and the
same instrument.
8. Except as expressly set forth herein, this Amendment to the Rights
Agreement shall not by implication or otherwise alter, modify, amend or in any
way affect any of the terms, conditions, obligations, covenants or agreements
contained in the Rights Agreement, all of which are ratified and affirmed in all
respects and shall continue in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to the
Right Agreement to be duly executed as of the day and year first above written.
HOST MARRIOTT SERVICES CORPORATION
By: /s/ Joe P. Martin
------------------------------------
Title: Senior Vice President
FIRST CHICAGO TRUST COMPANY OF
NEW YORK
By: /s/ Charles D. Keryc
------------------------------------
Title: Vice President
