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PROSPECTUS
1,620,100 SHARES
SERVICO, INC.
COMMON STOCK
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This Prospectus relates to the proposed sale from time to time by
Energy Management Corporation, a Colorado corporation (the "Selling
Shareholder"), or by pledgees, donees, permitted transferees or other successors
in interest of the Selling Shareholder (each a "Successor") of an aggregate of
up to 1,620,100 shares (the "Shares") of Common Stock, par value $0.01 per share
(the "Common Stock"), of Servico, Inc., a Florida corporation, in the amount and
in the manner and on terms and conditions described herein. An aggregate of
952,600 of the 1,620,100 shares covered by this Prospectus have already been
sold by the Selling Shareholder. Unless the context indicates otherwise,
"Servico" or the "Company" refers to Servico, Inc., its subsidiaries and
affiliated partnerships and predecessor company. The Selling Shareholder or a
Successor may sell the Shares in transactions on the New York Stock Exchange, at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices. The Selling Shareholder or a
Successor may effect such transactions by selling the Shares to or through
agents, dealers or underwriters designated from time to time and such agents,
dealers or underwriters may receive compensation in the form of discounts,
concessions or commissions from the Selling Shareholder, a Successor and/or the
purchasers of Shares for whom they may act as agent or to whom they may sell as
principals, or both. See "Plan of Distribution" and "Selling Shareholder." The
Company will not receive any of the proceeds from the sale of the Shares.
The Common Stock is traded on the New York Stock Exchange under the
symbol SER. On December 3, 1997, the closing sale price of the Common Stock on
the New York Stock Exchange was $17.125 per share.
INVESTMENT IN THE COMMON STOCK OF THE COMPANY IS SPECULATIVE AND INVOLVES
A HIGH DEGREE OF RISK. SEE "RISK FACTORS" COMMENCING ON PAGE 4.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
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NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION SHOULD NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL,
OR A SOLICITATION OF AN OFFER TO PURCHASE THE SECURITIES OFFERED BY THIS
PROSPECTUS IN ANY JURISDICTION IN WHICH, OR TO OR FROM ANY PERSON TO OR FROM
WHOM, IT IS UNLAWFUL TO MAKE SUCH AN OFFER, OR SOLICITATION OF AN OFFER. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY DISTRIBUTION OF THE SECURITIES OFFERED
PURSUANT TO THIS PROSPECTUS SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE INFORMATION SET FORTH HEREIN OR
IN THE AFFAIRS OF THE COMPANY SINCE THE DATE OF THIS PROSPECTUS OR THAT THE
INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
The date of this Prospectus is December 4, 1997.
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TABLE OF CONTENTS
PAGE
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Available Information........................................... 2
Information Incorporated by Reference........................... 3
The Company..................................................... 4
Risk Factors.................................................... 4
Selling Shareholder............................................. 9
Plan of Distribution............................................ 9
Legal Matters................................................... 10
Experts......................................................... 10
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files periodic reports, proxy and information statements
and other information, with the Securities and Exchange Commission (the "SEC")
pursuant to the Exchange Act, relating to its business, financial statements and
other matters. Such reports, proxy and information statements and other
information can be inspected and copied at the public reference facilities
maintained by the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549, and at
the SEC's regional offices at Seven World Trade Center, Suite 1300, New York,
N.Y. 10048 and Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511. Copies of such material can also be obtained from
the Public Reference Section of the SEC, 450 Fifth Street, N.W., Washington,
D.C. 20549, at prescribed rates. Such information is also available to the
public from commercial documents on the internet web site maintained by the SEC
at http:\\www.sec.gov.
The Common Stock is listed on the New York Stock Exchange ("NYSE") and
reports and proxy statements and other information concerning the Company also
can be inspected at the offices of the NYSE, 20 Broad Street, New York, New York
10005.
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INFORMATION INCORPORATED BY REFERENCE
The following documents previously filed with the SEC are hereby
incorporated by reference into this Prospectus:
(1) The Company's Annual Report on Form 10-K for the year ended
December 31, 1996, including the portions of the Company's
Proxy Statement dated April 14, 1997, incorporated by
reference in such report.
(2) The Company's Quarterly Reports on Form 10-Q for the quarters
ended March 31, 1997, June 30, 1997 and September 30, 1997.
(3) The description of the Company's Common Stock contained in the
Company's Form 8-A, dated June 12, 1997.
All documents filed by Servico pursuant to Sections 13(a), 13(c), 14
and 15(d) of the Exchange Act after the date of this Prospectus and prior to
termination of this Offering shall be deemed to be incorporated by reference
herein and made a part hereof from the date any such document is filed. Any
statements contained in a document incorporated by reference herein shall be
deemed to be modified or superseded for purposes hereof to the extent that a
statement contained herein (or in any other subsequently filed document which
also is incorporated by reference herein) modifies or supersedes such statement.
Any statement so modified or superseded shall not be deemed to constitute a part
hereof except as so modified or superseded.
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT
PRESENTED HEREIN OR DELIVERED HEREWITH. COPIES OF ANY SUCH DOCUMENTS, OTHER THAN
EXHIBITS TO SUCH DOCUMENTS, ARE AVAILABLE WITHOUT CHARGE TO ANY PERSON,
INCLUDING ANY BENEFICIAL OWNER, TO WHOM THIS PROSPECTUS IS DELIVERED UPON
WRITTEN OR ORAL REQUEST TO WARREN M. KNIGHT, VICE PRESIDENT - FINANCE, SERVICO,
INC., 1601 BELVEDERE ROAD, WEST PALM BEACH, FLORIDA 33406; TELEPHONE:
(561) 689-9970.
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THE COMPANY
The Company is one of the largest owners and operators of full-service
hotels in the United States. The Company currently operates 71 hotels containing
approximately 14,512 rooms located in 23 states and Canada. The Company's hotels
are primarily mid-sized, with an average of approximately 204 rooms per hotel,
and are primarily located in secondary metropolitan markets. The Company's
full-size hotels offer food and beverage services and meeting and banquet
facilities. The Company's hotels include 59 wholly owned hotels, 10 partially
owned hotels and two managed hotels. Eleven of the hotels are subject to
long-term ground or building leases. All of the Company's hotels are affiliated
with nationally recognized hospitality franchises, including Holiday Inn, Best
Western, Clarion, Comfort Inn, Crowne Plaza, Days Inn, Hampton Inn, Hilton,
Howard Johnson, Omni, Quality Inn, Radisson, Ramada, Sheraton and Westin. The
Company operates 44 hotels under franchise agreements with Holiday Inn, making
the Company the second largest Holiday Inn franchisee in the United States. The
Company's principal executive offices are located at 1601 Belvedere Road, West
Palm Beach, Florida 33406, and its telephone number is (561) 689-9970. For
further information about the business and operations of the Company, reference
is made to the Company's reports incorporated herein by reference. See
"Information Incorporated by Reference."
RISK FACTORS
An investment in the Common Stock involves material risks. In addition
to general investment risks and those factors set forth elsewhere in this
Prospectus or incorporated by reference herein, prospective investors should
consider, among other things, the following risks before making an investment.
Statements in this Prospectus which express "belief", "anticipation",
or "expectation", as well as other statements which are not historical fact, are
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995 and involve risks and uncertainties. Moreover,
there are important factors which include, but are not limited to, general and
local economic conditions, risks relating to the operation and acquisition of
hotels, government legislation and regulation, changes in interest rates, the
impact of rapid growth, the availability of capital to finance growth, the
historical cyclicality of the lodging industry and other factors described in
other filings of the Company with the Commission, all of which are difficult to
predict and many of which are beyond the control of the Company. Actual results
could differ materially from these forward-looking statements. In light of the
risks and uncertainties, there is no assurance that the forward-looking
statements contained in this Prospectus will in fact prove correct or occur. The
Company does not undertake any obligation to publicly release the results of any
revisions to these forward-looking statements to reflect future events or
circumstances.
RISKS ASSOCIATED WITH EXPANSION
Availability of Additional Capital to Support Growth. As part of the
Company's business strategy, the Company intends to seek to pursue growth
through the identification, acquisition, repositioning and renovation of
additional hotel properties. The Company will be required to obtain additional
capital in the future to meet its expansion plans. Capital may be raised by the
issuance of additional equity or the incurrence of indebtedness. In addition, in
appropriate situations, the Company may seek financing from other sources or
enter into joint ventures and other collaborative arrangements in connection
with the acquisition of hotel properties. The Company may not be successful in
obtaining additional capital in a timely manner, on favorable terms or at all.
Insufficient capital may cause the Company to delay, scale back or abandon some
or all of its property acquisition plans or opportunities.
Competition. The Company competes for the acquisition of hotels with
numerous entities, some of which have greater financial resources than the
Company. The Company believes that, as a result of the downturn experienced by
the lodging industry from the late 1980s through the early 1990s and the
significant number of foreclosures and bankruptcies created thereby, the prices
for many hotels during the past several years have been at historically low
levels, often well below the cost to build new hotels. The recent economic
recovery in the lodging industry and the resulting increase in funds available
for hotel acquisitions has attracted additional investors
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to enter the hotel acquisition market, which in turn has caused the cost of
hotel acquisitions to increase and the number of attractive hotel acquisition
opportunities to decrease.
Integration of Operations. To successfully implement its growth
strategy, the Company must be able to continue to successfully acquire hotels on
attractive terms and to integrate the acquired hotels into its existing
operations. The failure of the Company to consolidate the management and
operations and integrate the systems and procedures of the acquired hotels into
the Company's existing operations in a timely and profitable manner could have a
material adverse effect on the results of operations and financial condition of
the Company. There can be no assurance that the Company will be able to achieve
operating results in its newly acquired hotels comparable to the historical
performance of its hotels.
HOTEL RENOVATION RISKS
The renovation of hotels involves risks associated with construction
and renovation of real property, including the possibility of construction cost
overruns and delays due to various factors (including the inability to obtain
regulatory approvals, inclement weather, labor or material shortages and the
unavailability of construction and permanent financing) and market or site
deterioration after acquisition or renovation. Any unanticipated delays or
expenses in connection with the renovation of hotels could have an adverse
effect on the results of operations and financial condition of the Company.
RISK OF LEVERAGE
Substantially all of the Company's hotels are subject to mortgage
financing, which at September 30, 1997, totaled approximately $220 million.
Approximately $40.6 million of the mortgage financing collateralized by the
Company's hotels, and entered into by the various subsidiaries, is guaranteed by
Servico, Inc. Servico, Inc.'s guarantees of mortgage financing generally provide
for direct recourse by the lender against Servico, Inc., without requiring the
lender to seek recourse against either the applicable subsidiary or the hotel
property securing the mortgage financing. As a consequence, if payments under
mortgage financing guaranteed by Servico, Inc., are not timely made, Servico,
Inc. may be required to make payments in accordance with its guarantees.
The Company's leverage poses certain risks for the Company, including
the risks that the Company may not generate sufficient cash flow to service the
indebtedness; that the Company may be unable to obtain additional financing or
refinancing in the future; that, to the extent it is significantly more
leveraged than its competitors, it may be placed at a competitive disadvantage;
and that the Company's capacity to respond to market conditions and other
factors may be adversely affected. The Company's ability to service its debt
will depend on its future performance, which will be subject to prevailing
economic and competitive conditions and other specific factors discussed herein.
Additionally, certain of the mortgages and related loan documents evidencing the
Company's indebtedness contain provisions which, among other things, cross
collateralize and cross default each of the mortgages, prohibit prepayment
during years one through four, impose prepayment penalties during years five
through ten, restrict the Company's ability to utilize the cash generated by the
hotels if the hotels fail to meet certain financial covenants and, in certain
events upon a change in control of the Company, may cause the termination of the
Company's management of the hotels and acceleration of the payment of each of
the loans.
Neither the Company's Articles of Incorporation nor its Bylaws limit
the amount of indebtedness that the Company may incur. Subject to limitations in
its debt instruments, the Company may incur additional debt in the future to
finance acquisitions and renovations. Substantial indebtedness could increase
the Company's vulnerability to general economic and lodging industry conditions
(including increases in interest rates) and could impair the Company's ability
to obtain additional financing in the future and to take advantage of
significant business opportunities that may arise. The Company's indebtedness
is, and will likely continue to be, secured by mortgages on all, or
substantially all, of the hotels, and by the equity of certain subsidiaries of
the Company. There can be no assurance that the Company will in the future be
able to meet its debt service obligations and, to the extent that it cannot, the
Company risks the loss of some or all of its assets, including hotels, to
foreclosure. Further, adverse economic conditions could cause the terms on which
borrowings become available to be unfavorable. In such circumstances, if the
Company requires additional capital to repay indebtedness in accordance with its
terms or
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otherwise, it could be required to liquidate one or more investments in hotels
at times which may not permit realization of the maximum return on such
investments.
At September 30, 1997, approximately 70% of the Company's current
outstanding indebtedness bore interest at a fixed rate. However, to the extent
that the Company has or incurs additional debt bearing interest at variable
rates, economic conditions could result in increased debt service requirements
and could reduce the amount of cash available for various corporate purposes.
RISKS ASSOCIATED WITH OWNING OR LEASING REAL ESTATE
The Company will be subject to varying degrees of risk generally
incident to the ownership of real estate. These risks include, among other
things, changes in national, regional and local economic conditions, changes in
local real estate market conditions, changes in interest rates and in the
availability, cost and terms of financing, the potential for uninsured casualty
and other losses, the impact of present or future environmental legislation and
adverse changes in zoning laws and other regulations. Many of these risks are
beyond the control of the Company. In addition, real estate investments are
relatively illiquid, resulting in a limited ability of the Company to vary its
portfolio of hotels in response to changes in economic and other conditions.
Ten of the owned hotels are owned in partnerships with other parties.
The Company does not have sole control over decisions regarding sale and
refinancing of these hotels. In addition, the Company's investments in these
joint ventures may, under certain circumstances, involve risks not otherwise
present in property ownership, including (i) the risk that the Company's partner
in a joint venture may become bankrupt, (ii) buy/sell rights that exist with
respect to certain of such hotels and (iii) the risk that the Company's partner
in a joint venture might at any time have economic or other business interests
or goals that are inconsistent with the business interests or goals of the
Company, and that such partner(s) may be in a position to veto actions which may
be inconsistent with the Company's objectives or policies.
LODGING INDUSTRY RISKS
Risks generally inherent in investments in hotel facilities may cause
operating results for hotels to vary more than for investments in other types of
properties. These factors include the following:
Operating Risks. The Company is subject to risks generally incident to
the lodging industry. These risks include, among other things, the uncertainty
of cash flow due to seasonal fluctuations, changes in general and local economic
conditions, periodic over-building in the hotel industry or a specific market,
varying competition from other hotels, motels and recreational properties,
changes in levels of tourism or business-related travel due to energy costs or
other factors, changes in travel patterns, labor unavailability and disruptions,
the recurring need for renovation, refurbishment and improvement of hotel
properties (including furniture, fixtures and equipment), the availability of
financing for operating or capital requirements, adverse weather conditions and
travel disruptions, taxes and governmental regulations which influence or
determine wages, prices, interest rates, construction procedures and costs,
losses due to personal injuries, fire, earthquake, collapse or structural
defects, the application of health and beverage laws and other factors, many of
which are beyond the control of the Company. In addition, due to the level of
fixed costs required to operate full-service hotels, certain significant
expenditures necessary for the operation of hotels generally cannot be reduced
when circumstances cause a reduction in revenue.
Competition. The hotel industry is highly competitive in nature. While
there is no single competitor or small number of competitors that are dominant
in the industry, competition within the industry has recently resulted in
consolidations and other ownership changes among major hotel companies. The
Company's hotels generally operate in areas that contain numerous other
competitive lodging facilities, some of which have greater financial resources
than the Company. The Company competes with such facilities on various bases,
including room rates and quality, brand name recognition, location and other
services and amenities offered. New or existing competitors could significantly
lower rates or offer greater conveniences, services or amenities or
significantly expand, improve or introduce new facilities in markets in which
the Company's hotels compete, thereby adversely effecting the Company's
operations.
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Maintenance and Refurbishment. For hotels to remain competitive, they
must be maintained and refurbished on an ongoing basis. Such renovations and
refurbishments will increase the need for funds for capital improvements
(whether from reserves, current cash flow or financing). Moreover, operating
revenues may decrease as facilities are removed from service from time to time
during such renovations. See "Hotel Renovation Risks"above.
Insurance Risks. Hotels have extensive assets, require more employees,
rely more on suppliers and serve more customers than certain other types of real
estate properties. Hotels are also subject in certain states to dram shop
statutes which may give an injured person the right to recover damages from any
establishment which wrongfully served alcoholic beverages to the person who,
while intoxicated, caused the injury. As a result, hotels may have greater
exposure to liability for, among other things, theft of property and other
casualty and property loss, labor difficulties and personal injuries. In this
respect, many businesses, including those in the lodging industry, have
experienced recent increases in the cost of, and contraction in the availability
of, insurance, resulting in cost escalation and reductions in amounts of
coverage available. The continuation of this trend could render certain types of
desired coverage unavailable with the attendant possibility that certain claims
may exceed coverage.
Seasonality. The hotel industry is seasonal in nature. Generally, hotel
revenues are greater in the second and third quarters than in the first and
fourth quarters. This seasonality can be expected to cause quarterly
fluctuations in the revenues of the Company. Quarterly earnings also may be
adversely affected by events beyond the Company's control, such as extreme
weather conditions, economic factors and other considerations affecting travel.
Inflation. Inflationary pressures could have the effect of increasing
operating expenses, including labor and energy costs (and, indirectly, property
taxes) above expected levels at a time when it may not be possible to increase
room rates to offset such higher operating expenses. In addition, inflation
could have a secondary effect upon occupancy rates by increasing the expense or
decreasing the availability of travel by potential guests. Although the
inflation rate has been low recently, there is no assurance that it will not
increase in the future.
RISKS ASSOCIATED WITH FRANCHISE AGREEMENTS
The Company's hotels are all operated pursuant to franchise agreements
with major hotel chains. The franchise agreements generally contain specific
standards for, and restrictions and limitations on, the operation and
maintenance of a hotel in order to maintain uniformity within the franchisor
system. Those limitations may conflict with the Company's business plans.
Further, such standards are often subject to change over time, in some cases at
the discretion of the franchisor, and may restrict a franchisee's ability to
make improvements or modifications to a hotel without the consent of the
franchisor. In addition, compliance with such standards could require a
franchisee to incur significant expenses or capital expenditures. In connection
with changing the franchise affiliation of a hotel, the Company may be required
to incur additional expenses or capital expenditures. Franchise agreements are
typically terminable by the franchisor for failure of the franchisee to maintain
specified operating standards or to make payments due under the applicable
agreements in a timely fashion. In addition, such agreements may be subject to
termination at the end of their stated term. The termination of a franchise
agreement relating to a hotel may have an adverse impact on the operations or
underlying value of such hotel because of the loss of associated name
recognition, marketing support and centralized reservation systems provided by
the franchisor. A majority of the Company's hotels are affiliated with Holiday
Inn and any deterioration in the relationship with or the benefits associated
with being a franchisee of Holiday Inn could have a material adverse impact on
the Company.
ENVIRONMENTAL RISKS
Under various federal, state, and local environmental laws, ordinances
and regulations, a current or previous owner or operator of real property may be
liable for the costs of removal or remediation of hazardous or toxic substances
on, under or in such property. Such laws often impose liability whether or not
the owner or operator knew of, or was responsible for, the presence of such
hazardous or toxic substances. Furthermore, a person that arranges for the
disposal of a hazardous substance at another property or transports a hazardous
substance for
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disposal or treatment at another property may be liable for the costs of removal
or remediation of hazardous substances at that property, regardless whether that
person owns or operates that property. The costs of any such remediation or
removal may be substantial, and the presence of any such substance, or the
failure promptly to remediate any such substance, may adversely affect the
property owner's ability to sell or lease the property, to use the property for
its intended purpose, or to borrow using the property as collateral. Other
federal, state and local laws, ordinances and regulations require abatement or
removal of certain asbestos-containing materials in connection with demolition
or certain renovations or remodeling, impose certain worker protection and
notification requirements, and govern emissions of and exposure to asbestos
fibers in the air. Additionally, federal, state and local laws, ordinances and
regulations and the common law impose on owners and operators certain
requirements regarding conditions and activities that may affect human health or
the environment. These conditions and activities include, for example, the
presence of lead in drinking water, the presence of lead-containing paint in
occupied structures, and the ownership or operation of underground storage
tanks. Failure to comply with applicable requirements could result in difficulty
in the lease or sale of any affected property or the imposition of monetary
penalties, in addition to the costs required to achieve compliance and potential
liability to third parties. Any liability resulting from non-compliance or other
claims relating to environmental matters could have a material adverse effect on
the Company's results of operations and financial condition.
GOVERNMENTAL REGULATION
A number of states regulate the licensing of hotels and restaurants,
including liquor license grants, by requiring registration, disclosure
statements and compliance with specific standards of conduct. The Company
believes that it is substantially in compliance with these requirements.
Managers of hotels are also subject to laws governing their relationship with
hotel employees, including minimum wage requirements, overtime, working
conditions and work permit requirements. Compliance with, or changes in, these
laws could reduce the revenue and profitability of the Company's hotels and
could otherwise adversely affect the Company's results of operations and
financial condition.
Under the Americans with Disabilities Act (the "ADA"), all public
accommodations are required to meet certain requirements related to access and
use by disabled persons. These requirements became effective in 1992. Although
significant amounts have been and continue to be invested in ADA required
upgrades to the Company's hotels, a determination that the Company is not in
compliance with the ADA could result in a judicial order requiring compliance,
imposition of fines or an award of damages to private litigants. The Company is
likely to incur additional costs of complying with the ADA; however, such costs
are not expected to have a material adverse effect on the Company's results of
operations and financial condition.
SUBSTANTIAL RELIANCE ON KEY PERSONNEL
The Company will place substantial reliance on the hotel industry
knowledge and experience and the continued services of its senior management,
led by Mr. David Buddemeyer, the Company's President and Chief Executive
Officer. The Company's future success and its ability to manage future growth
depend in large part upon the efforts of these persons and on the Company's
ability to attract and retain other highly qualified personnel. Competition for
such personnel is intense, and there can be no assurance that the Company will
be successful in attracting and retaining such personnel. The loss of the
services of Mr. Buddemeyer or the Company's inability to attract and retain
other highly qualified personnel may adversely affect the results of operations
and financial condition of the Company.
ANTI-TAKEOVER PROVISIONS
The Company's Articles of Incorporation provide that certain
transactions must be approved by the holders of at least 80% of the outstanding
Common Stock, unless approved by the Company's Board of Directors. The Company's
Bylaws divide the Company's Board of Directors into three classes of directors
serving staggered three-year terms, with one class of directors to be elected at
each annual meeting of shareholders. Additionally, as a Florida corporation, the
Company is also governed by the provisions of Florida corporate law regarding
affiliated transactions and control share acquisitions, which impose
restrictions and require specific procedures to be followed
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with respect to certain takeover offers and business combinations, including,
but not limited to, combinations with interested shareholders and affiliates of
the Company. The provisions in the Company's Articles of Incorporation, the
classification of the Company's Board of Directors and the anti-takeover
provisions of the Florida corporate law will tend to assist the Board of
Directors and management of the Company in retaining their existing positions
and will render more difficult or discourage unsolicited takeover attempts, even
if such actions were desired by all shareholders of the Company other than
directors and management shareholders.
SELLING SHAREHOLDER
As of December 3, 1997, the Selling Shareholder beneficially owned
667,500 shares of Common Stock. One million of the shares of Common Stock
owned by the Selling Shareholder were acquired from the Company on April 15,
1994 in connection with a merger between wholly-owned subsidiaries of each of
the Selling Shareholder and the Company (collectively, the "Merger
Subsidiaries"), pursuant to that certain Stock Acquisition and Standstill
Agreement (the "Acquisition Agreement") and the related Agreement and Plan of
Merger, each dated April 14, 1994, among the Company, the Selling Shareholder
and the Merger Subsidiaries. The remaining shares of Common Stock owned by the
Selling Shareholder were acquired in open market transactions. The shares of
Common Stock issued to the Selling Shareholder under the Acquisition Agreement
were not registered under the Securities Act of 1933, as amended (the
"Securities Act"), in reliance on an exemption offered by Section 4(2) of the
Securities Act.
Because the Selling Shareholder or a pledgee, donee, permitted
transferee or other successor in interest of the Selling Shareholder (each a
"Successor") may offer all, a portion or none of the Shares pursuant to this
Prospectus, no estimate can be given as to the number of shares of Common Stock
that will be held by the Selling Shareholder upon termination of such offering.
This Prospectus constitutes part of the Registration Statement filed by
the Company pursuant to certain registration rights granted to the Selling
Shareholder with respect to the Shares in accordance with the terms of the
Acquisition Agreement and that certain Registration Rights Agreement (the
"Registration Rights Agreement") entered into on April 14, 1994 among the
Company and the Selling Shareholder in connection with the Acquisition
Agreement. Pursuant to the Registration Rights Agreement, the Selling
Shareholder has agreed to pay all fees and expenses incident to the registration
of the Shares owned by the Selling Shareholder under the Securities Act,
including all registration and filing fees, all fees and expenses of complying
with state blue sky or securities laws, all costs of preparation of the
Registration Statement, reasonable fees and disbursements of counsel for the
Company and its independent public accountants, and the cost of any special
audit.
PLAN OF DISTRIBUTION
The Selling Shareholder or a Successor may sell the Shares in
transactions on the NYSE, at market prices prevailing at the time of sale, at
prices related to such prevailing market prices or at negotiated prices. The
Selling Shareholder or a Successor may effect such transactions by selling the
Shares to or through agents, dealers or underwriters designated from time to
time, and such agents, dealers or underwriters may receive compensation in the
form of underwriting discounts, concessions or commissions from the Selling
Shareholder, a Successor and/or the purchasers of Shares for whom they may act
as agent or to whom they sell as principals, or both. The Selling Shareholder, a
Successor and/or any agents, dealers or underwriters that act in connection with
the sale of Shares might be deemed to be "underwriters" within the meaning of
Section 2(11) of the Securities Act, and any discount or commission received by
them and any profit on the resale of Shares as principal might be deemed to be
underwriting discounts or commissions under the Securities Act.
To the extent required, the number of Shares to be sold, the purchase
price and public offering price, the name or names of any agent, dealer or
underwriter, and any applicable commissions or discounts with respect to a
particular offering will be set forth in a supplement to this Prospectus to be
filed with the SEC pursuant to Rule 424 under the Securities Act.
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The Company will receive no portion of the proceeds from the sale of
the Shares. The Selling Shareholder and each person who controls the Selling
Shareholder, within the meaning of the Securities Act and the Exchange Act, will
be indemnified by the Company against certain civil liabilities, including
certain liabilities which may arise under the Securities Act.
LEGAL MATTERS
The validity of the shares of Common Stock offered in this Prospectus
will be passed upon for the Company by Stearns Weaver Miller Weissler Alhadeff &
Sitterson, P.A., 150 West Flagler Street, Suite 2200, Miami, Florida 33130-1557.
EXPERTS
The consolidated financial statements of Servico, Inc. appearing in
Servico, Inc.'s Annual Report (Form 10-K) for the year ended December 31, 1996
have been audited by Ernst & Young LLP, independent certified public
accountants, as set forth in their report thereon included therein and
incorporated herein by reference. Such consolidated financial statements are
incorporated herein by reference in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
With respect to the unaudited condensed consolidated interim financial
information for the three and nine month periods ended September 30, 1997 and
1996, the three and six month periods ended June 30, 1997 and 1996 and the three
month periods ended March 31, 1997 and 1996, incorporated by reference in this
Prospectus, Ernst & Young LLP have reported that they have applied limited
procedures in accordance with professional standards for a review of such
information. However, their separate reports, included in Servico, Inc.'s
Quarterly Reports on Form 10-Q for the quarters ended September 30, 1997, June
30, 1997 and March 31, 1997, and incorporated herein by reference, state that
they did not audit and they do not express an opinion on that interim financial
information. Accordingly, the degree of reliance on their reports on such
information should be restricted considering the limited nature of the review
procedures applied. The independent certified public accountants are not subject
to the liability provisions of Section 11 of the Securities Act for their
reports on the unaudited interim financial information because these reports are
not "reports" or a "part" of the Registration Statement prepared or certified by
the independent certified public accountants within the meaning of Sections 7
and 11 of the Securities Act.
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