[22020-0007/SB950280.008]
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________________
FORM 10-K/A (Amendment No. 1)
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended: December 31, 1993
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ____________ to ____________
Commission file number: 0-23466
SHURGARD STORAGE CENTERS, INC.
(Exact name of registrant as specified in its charter)
Delaware 91-1080141
(State or other jurisdiction of (IRS
incorporation or organization) Employer
Identificat
ion No.)
1201 Third Avenue, Suite 2200
Seattle, Washington 98101
(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code: (206) 624-8100
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Class A Common Stock, par value $.001 per share (registered February 28, 1994)
(Title of class)
Preferred Share Purchase Rights (registered March 28, 1994)
(Title of class)
Indicate by check market whether the registrant: (1) has
filed all reports required to be filed by Section 13 or 15(d)
of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes No X
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained
herein, and will not be contained, to the best of registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
Aggregate market value of voting stock held by non-
affiliates of the registrant as of December 31, 1993: None.
Number of shares of Class A Common Stock outstanding as
of December 31, 1993: 5 shares.
<PAGE>
PART I
Item 1. Business
The Company was incorporated in Delaware on July 23, 1993 to
serve as the vehicle for investments in, and ownership of, a
professionally managed real estate portfolio consisting primarily of
self storage properties which provide month to month leases for
business and personal use. The Company's only business during the
fiscal year ended December 31, 1993 was to file with the Securities
and Exchange Commission and various state entities as the registrant
on a Registration Statement on Form S-4 and the related
Prospectus/Consent Solicitation Statement/Offer to Purchase for the
consolidation (the "Consolidation") of 17 publicly-held limited
partnerships administered by Shurgard Incorporated ("Shurgard") as a
means for assembling an initial portfolio of real estate investments.
The Consolidation was completed on March 1, 1994.
Item 2.Properties
The Company owned no properties during the fiscal year ended
December 31, 1993.
Item 3.Legal Proceedings
A partial description of legal proceedings involving the Company
is incorporated by reference to the discussion captioned "LITIGATION"
on pages 41-47 of Amendment No. 8 to the Company's Registration
Statement on Form S-4 (File No. 33-57794), filed on February 2, 1994.
In addition, Russell Coney v. Shurgard Storage Centers, Inc.,
Shurgard Incorporated and Charles K. Barbo, was filed in Superior
Court in King County, Washington on February 24, 1994, alleging the
Consolidation would cause irreparable damage to plaintiff, violation
of fiduciary duties in connection with the Consolidation, and
violation of fiduciary duties in not refinancing the properties prior
to the Consolidation. Coney v. Shurgard Incorporated et al., Case No.
94-2-048961, King County, Washington Superior Court.
Subsequent to December 31, 1993, all litigation relating to the
Consolidation was either dismissed or was settled.
Item 4.Submission of Matters to Vote of Security Holders
On July 24, 1993, by written consent in lieu of a special
meeting, the sole shareholder of the Company voted all 5 shares he
held in favor of proposals to adopt the 1993 Stock Option Plan and the
Company's Stock Option Plan for Nonemployee Directors, and to
indemnify directors of the Company pursuant to Section 145 of the
Delaware General Corporation Law, as set forth in Section 11 of the
Company's By-Laws.
On September 21, 1993, by written consent in lieu of a special
meeting, the sole shareholder of the Company voted all 5 shares he
held in favor of a proposal to amend Article 4 of the Company's
Certificate of Incorporation.
On September 22, 1993, by written consent in lieu of a special
meeting, the sole shareholder of the Company voted all 5 shares he
held in favor of a proposal to amend Section 1 and Section 12.7 of the
Company's By-Laws, and to restate the By-Laws.
On November 15, 1993, by written consent in lieu of special
meeting, the sole shareholder of the Company voted all 5 shares he
held in favor of a proposal to amend Section 4.4(e) of Article 4 and
Article 16 of the Company's Certificate of Incorporation, and a
proposal to ratify any and all amendments in the Company's Restated By-
Laws, including Section 11 regarding indemnification, adopted by the
Board of Directors on November 9, 1993.
Item 5.Market for Registrant's Common Equity and Related
Stockholder Matters
During the fiscal year ended December 31, 1993, there was no
market for the Company's securities, and no dividends were paid. At
December 31, 1993, 5 shares of Class A Common Stock were outstanding,
all of which were held by the Company's original stockholder.
Item 6.Selected Financial Data
Shurgard Storage Centers, Inc.
Selected Financial Data
December 31, 1993
Revenue 0
Loss 66
Loss per common share 13.20
Outstanding common shares 5
Total assets 1,442
Total debt 0
Dividends per share 0
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
The Company was incorporated in Delaware on July 23, 1993 to
serve as the vehicle for investments in, and ownership of, a
professionally managed real estate portfolio consisting primarily of
self storage properties which provide month to month leases for
business and personal use. The Company's only business during the
fiscal year ended December 31, 1993 was to file with the Securities
and Exchange Commission and various state entities as the registrant
on a Registration Statement on Form S-4 and the related
Prospectus/Consent Solicitation Statement/Offer to Purchase for the
Consolidation of 17 publicly-held limited partnerships administered by
Shurgard as a means for assembling an initial portfolio of real estate
investments. The Consolidation was completed on March 1, 1994.
Item 8.Financial Statements and Supplementary Data
No change from the Company's Annual Report on Form 10-K for the
year ended December 31, 1993, as filed on [December 20, 1994].
Item 9.Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
The following table sets forth the names, ages and titles of the
Company's executive officers and its sole director as of December 31, 1993.
Name Age Title
- - - - --------------- --- ----------------------------------------------------------
Harrell Beck 36 Director, President, Treasurer and Chief Financial Officer
Michael Rowe 36 Executive Vice President
David K. Grant 40 Executive Vice President
Kristin H. Stred 34 Secretary and General Counsel
Harrell Beck serves as the President, Treasurer and Chief
Financial Officer of the Company and is a member of the Board of
Directors as well. Mr. Beck is also the Treasurer and Chief Financial
Officer of Shurgard. He joined Shurgard in April 1986 as the Eastern
Regional Vice President and, in 1990, became its Chief Financial
Officer and, in 1992, its Treasurer. His responsibilities include
supervision of all accounting and overseeing the financial and banking
relationships for the Company, Shurgard, the partnerships included in
the Consolidation (the "Partnerships") and other Shurgard programs.
Mr. Beck was previously a manager with Touche Ross & Co., where he was
employed for approximately six years providing services primarily to
clients in the real estate and aerospace industries. His clients
included Shurgard, the Partnerships and other Shurgard programs. He
has a Bachelor of Arts degree in Business Administration from
Washington State University and is a member of the American Institute
of Certified Public Accountants and the Washington Society of
Certified Public Accountants.
Michael Rowe is an Executive Vice President and the Director of
Storage Operations of the Company. He is also currently the Executive
Vice President and Director of Storage Operations of Shurgard. He
came to Shurgard from Touche Ross & Co., where he participated in
independent audits of major real estate syndication, development and
management companies in the Pacific Northwest. His clients included
Shurgard, the Partnerships and other Shurgard programs. He became
Controller of Shurgard in 1982 and Vice President and Treasurer in
1983. In 1987, Mr. Rowe was named Director of Operations of Shurgard.
He also was the first Regional Vice President for Shurgard's Southwest
Region. Mr. Rowe's responsibilities include supervision of Shurgard's
property management services. Mr. Rowe holds a Bachelor of Arts
degree in Business Administration from Washington State University.
David K. Grant is an Executive Vice President and the Director of
Real Estate Investment of the Company. Mr. Grant joined Shurgard in
November 1985 as Director of Real Estate Investment and continues to
serve in that capacity. He is also an Executive Vice President of
Shurgard. He is responsible for overseeing the acquisition,
development and disposition of real estate investments for the
Company, Shurgard, the Partnerships and other Shurgard programs. He
is a licensed securities principal and salesperson. Mr. Grant was
previously a manager with Touche Ross & Co., where he was employed for
approximately ten years providing financial consulting, accounting and
auditing services primarily to clients in the real estate,
construction and engineering industries. His clients included
Shurgard, the Partnerships and other Shurgard programs. He has a
Bachelor of Arts degree in Business Administration and a Bachelor of
Science degree in Accounting, both from Washington State University.
Kristin H. Stred serves as Secretary and General Counsel of the
Company. Ms. Stred joined Shurgard in July 1992 as Secretary and
General Counsel. Ms. Stred was previously an attorney with The Boeing
Company from October 1991 to July 1992 and Assistant General Counsel
with King Broadcasting Company from July 1987 to September 1991.
Ms. Stred received an A.B. with honors in general studies from Harvard
University in 1980 and a J.D. from Harvard Law School in 1984. She is
a member of the Washington State Bar Association, is a former
president of Washington Women Lawyers and is a member of the Executive
Committee of the Corporate Counsel Section of the Washington State Bar
Association.
Item 11. Executive Compensation
No compensation was paid by the Company to any executive officer
or director in 1993. All officers and the sole director were employed
by Shurgard during 1993.
Item 12. Security Ownership of Certain Beneficial Owners and
Management
As of December 31, 1993, 5 shares of Class A Common Stock, the
only shares outstanding, were held by Harrell Beck, Director,
President, Treasurer and Chief Financial Officer of the Company.
Item 13. Certain Relationships and Related Transactions
None.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K
a. Exhibits
Number Description
- - - - ------ ------------------------------------------------------------
3.1 Restated Certificate of Incorporation (incorporated by
reference to Exhibit 3.12 to Registrant's Registration
Statement on Form S-4 (File No. 33-57794), Amendment No. 8
(Post-Effective Amendment No. 4) filed with the Securities
and Exchange Commission on February 2, 1994)
3.2 Restated By-Laws (incorporated by reference to Exhibit 3.2 to
Registrant's Registration Statement on Form S-4 (File No. 33-
57794), Amendment No. 8 (Post-Effective Amendment No. 4)
filed with the Securities and Exchange Commission on
February 2, 1994)
99.1 Section captioned "Litigation" from pages 41-47 of
Registrant's Registration Statement on Form S-4 (File No. 33-
57794), Amendment No. 8 (Post-Effective Amendment No. 4)
filed with the Securities and Exchange Commission on
February 2, 1994)
b. Financial Statement Schedules
None.
c. Reports on Form 8-K.
None.
SIGNATURE
Pursuant to the requirements of Section 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
SHURGARD STORAGE CENTERS, INC.
Dated: January 30, 1995
By /s/ Harrell Beck
Harrell Beck, Chief Financial Officer
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT
TO SECTION 15(d) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED
SECURITIES PURSUANT TO SECTION 12 OF THE ACT.
No annual report or proxy materials were sent to security holders of
the Registrant during the year ended December 31, 1993. Copies of a
Prospectus/Consent Solicitation Statement/Offer to Purchase, which
constituted part of the Registrant's Registration Statement on Form S-
4 (File No. 33-57794), were distributed in connection with the
Consolidation.
EXHIBIT INDEX
Exhibit Description
No.
3.1 Restated Certificate of Incorporation
(incorporated by reference to Exhibit 3.12 to
Registrant's Registration Statement on Form S-4
(File No. 33-57794), Amendment No. 8 (Post-
Effective Amendment No. 4) filed with the
Securities and Exchange Commission on
February 2, 1994)
3.2 Restated By-Laws (incorporated by reference to
Exhibit 3.2 to Registrant's Registration
Statement on Form S-4 (File No. 33-57794),
Amendment No. 8 (Post-Effective Amendment No. 4)
filed with the Securities and Exchange
Commission on February 2, 1994)
99.1 Section captioned "Litigation" from pages 41-47
of Registrant's Registration Statement on
Form S-4 (File No. 33-57794), Amendment No. 8
(Post-Effective Amendment No. 4) filed with the
Securities and Exchange Commission on
February 2, 1994)
-8-
EXHIBIT 99.1
LITIGATION
On December 3, 1993, U-H Acquisition Company, U-Haul
International, Inc. and Donald W. Marney instituted litigation in the
Delaware Court of Chancery for New Castle County. The defendants
named in the action are the General Partners and the Partnerships. U-
H Acquisition Company, et al. v. Charles K. Barbo, et al., Delaware
Chancery, Civil Action No. 13279 (filed December 3, 1993) (the
"U-Haul Delaware Litigation"). The complaint alleges generally that
the consolidation is unfair, that certain amendments to the
Partnership Agreements are invalid and that the General Partners have
breached their fiduciary duties in structuring the consolidation.
The amendments, adopted in April 1993, relate to procedures for
soliciting consents from Limited Partners. The General Partners are
entitled to amend the Partnership Agreements to cure ambiguities or
correct or supplement inconsistent provisions to effectuate the
intent of the parties, provided, among other things, that the
amendments are for the benefit of and not adverse to the interests of
the Limited Partners. The complaint alleges that in response to the
February 1993 expression of interest by Public Storage, Inc. in
making a competing offer to the consolidation, the General Partners
unilaterally amended the Partnership Agreements to provide that
actions by written consent may be initiated by Limited Partners
holding not less than 10% of the Units of a particular Partnership,
and that upon receipt of written evidence of such interest, the
General Partners must fix a record date to determine the identity of
Limited Partners entitled to vote on such proposal, followed by a
further consent solicitation. The plaintiffs further allege that the
amendments are designed to entrench the General Partners and permit
them to delay the consent solicitation process. The complaint seeks,
among other things, declaratory and injunctive relief against the
possible use of the amendments. Expedited discovery was conducted in
this action in conjunction with the Russell and McGregor actions,
described below. On December 20, 1993, defendants moved to dismiss,
or in the alternative, to stay this action and the Russell action, on
the grounds that the Court lacks jurisdiction over certain of the
Partnerships, the plaintiffs lack standing to sue, Delaware is an
inconvenient forum and such disputes should be determined in
Washington, and the issues raised by the plaintiffs were not ripe for
decision. On January 28, 1994, the Court granted defendants' motion
to dismiss the U-Haul Delaware litigation on standing and
jurisdictional grounds.
On December 31, 1993, the Partnerships and the Company
instituted litigation in the United States District Court for the
Western District of Washington alleging claims for relief arising out
of the U-Haul tender offers. The complaint names as defendants U-H
Acquisition Company, U-Haul International, Inc. and AMERCO. Shurgard
Mini-Storage Limited Partnership I, et al. v U-Haul International,
Inc. et al., Western District of Washington, No. C93-1739C (filed
December 13, 1993). The complaint alleges that defendants have
violated Sections 14(a), (d) and (e) of the Exchange Act. The
Section 14(d) and (e) claims arise out of U-Haul's December 3, 1993
tender offers (the "Offers") and the Offer to Purchase distributed to
Unit holders in connection with the Offers. The complaint alleges
that the Offers fail to disclose certain information relating to the
prices offered by U-Haul to Unit holders, including (a) the Net Asset
Values of the Partnerships, which are calculated at $387.4 million
and are the customary measure of value of the Partnerships, (b) any
other valuation of the assets of the Partnerships based on acceptable
measures of value, (c) the relationship between the prices offered
and the respective Net Asset Values of the Partnerships, (d) the fact
the Offers represent only approximately 70% to 87% of the Net Asset
Values of the Partnerships, (e) the fact that the stock of most
publicly traded REITs, including REITs in the self-storage industry,
sometimes trades at prices substantially above Net Asset Values, thus
falsely implying that the U-Haul Offers are fair or not materially
inadequate, and (f) the relationship between the prices offered and
public market premiums for REIT stocks.
The complaint also alleges that if the Offers are accepted by
Unit holders, then the non-tendering Unit holders will be limited
partners of limited partnerships with U-Haul nominees as the general
partners until U-Haul consummates second-step mergers to acquire non-
tendering Unit holder interests. Because of this, the Offers are
allegedly materially misleading in failing to disclose improper
actions by certain members of the Shoen family (including family
members that are executive officers of AMERCO and U-Haul
International, Inc.), including the following facts: (a) management
of AMERCO has been plagued by bitter and intense disputes among
members of the Shoen family; (b) in light of the disputes among
members of the Shoen family, there can be no assurance that U-Haul's
current management will remain in place or that any change in control
will not threaten U-Haul's ability to consummate second-step mergers;
(c) a former employee asserted in litigation that AMERCO sold
unregistered securities in violation of state and federal law and
bilked investors out of substantial sums through backdated contracts,
kickbacks, and inflated charges; (d) a complaint has been filed by
members of the Shoen family against the current management of AMERCO
alleging that it has oppressed minority shareholders by refusing to
allow the transfer of their shares and by agreeing to acquire such
shares only for inadequate consideration; (e) AMERCO's president,
Edward J. Shoen, allegedly has engaged in self-dealing transactions
and criminal tax fraud; and (f) allegations have been made that
Edward J. Shoen has arranged transactions to frustrate the will of a
majority of AMERCO's shareholders and to perpetuate his control,
continue his self-dealing, and harm his blood relative shareholders.
The foregoing allegations have been made in lawsuits that either have
been settled or are pending. Accordingly, no final determination as
to the merits of these allegations has been made.
The complaint further alleges that statements made in a
December 6, 1993 U-Haul brochure (the "Brochure") falsely imply that
abuses of the first generation of partnership roll-ups are applicable
to the proposed consolidation, that Unit holders will suffer
substantial losses in the proposed consolidation, that the proposed
consolidation is an abusive roll-up, and that the proposed
consolidation is not in full compliance with federal legislation
recently adopted to regulate limited partnership roll-ups.
The Section 14(a) claims in the complaint also arise out of the
Offers and Brochure. The complaint alleges that the Offers and
Brochure constitute communications to Unit holders calculated to
influence their response to U-Haul's consent solicitation, and
therefore constitute the dissemination of a proxy statement without
the required pre-filing with the Commission, and without disclosing
the information required by Section 14(a) and the rules and
regulations promulgated thereunder, including Rule 14a-9. The
complaint also alleges that, since materials in the Offers constitute
a proxy solicitation, the misstatements and omissions described in
the plaintiffs' Section 14(d) and (e) claims also establish a
violation of Section 14(a) and Rule 14a-9.
On December 16, 1993, the plaintiffs filed a motion to
preliminarily enjoin U-Haul from proceeding with its Offers based
upon the foregoing violations. On January 3, 1994, the court denied
the plaintiffs' motion. On January 21, 1994, the plaintiffs filed a
first amended complaint alleging, among other things, that the
Offers, as revised, (a) fail to state the per Unit cost to be paid by
U-Haul for the proposed group annuity contracts, (b) fail to state
the rate of return offered by the annuity options which tendering
Unit holders may receive as compensation, (c) fail to state the
amount and calculations of the reduction in lump sum payments that
will be suffered by Unit holders who select annuity options but die
prior to their maturity, (d) fail to describe any surrender charges,
loan rights, policy fees or other basic terms of the annuity options,
(e) fail to provide basic information concerning the history and
financial health of Transamerica Occidental Life Insurance Company
("Transamerica"), the company issuing the annuity options, (f) fail
to identify the Missouri bank that will hold the group annuity
contracts in trust, or to describe the terms and conditions of the
trust, (g) fail to disclose the uncertain status of the group annuity
contracts as insurance products under California law, and the
resulting risk that holders of the annuity options will receive no
recovery in the event of Transamerica's insolvency, and
(h) misleadingly state that the annuity options will offer Unit
holders an opportunity to receive the full amount of their original
investment. The complaint seeks injunctive relief against defendants
continuing the Offers. On January 28, 1994, plaintiffs filed a
motion for preliminary injunction requesting an order enjoining U-
Haul from, among other things, continuing its Offers until ten
business days after U-Haul makes full disclosure in compliance with
federal securities laws concerning the annuities, alleged misconduct
by members of U-Haul's management, the potential for a change of
control as a result of the Shoen family's ongoing feuds, and a
misleading press release issued by U-Haul on January 21, 1994.
On December 13, 1993, a purported class action was filed in the
Delaware Court of Chancery for New Castle County on behalf of Limited
Partners alleging causes of action arising out of the proposed
consolidation. The defendants in the action are the General Partners
and the Partnerships, Stephen T. Russell, et al. v. Charles K. Barbo,
et al., Delaware Chancery, Civil Action No. 13289 (filed December 13,
1993). The complaint alleges that the consolidation is unfair for
the same reasons alleged in the U-Haul Delaware Litigation. The
complaint further alleges that, although the General Partners have a
financial interest in the consolidation (for the same reasons alleged
in the U-Haul Delaware Litigation) and, thus, conflicts of interest,
the General Partners obtained no independent review to determine if
consolidation is in the best interests of the Limited Partners,
failed to adequately respond to or pursue negotiations with Public
Storage, Inc. or U-Haul or solicit competing bids or any other
alternative transaction to maximize the value received by the Limited
Partners, and, in response to Public Storage, Inc.'s expression of
interest, enacted the amendments to the Partnership Agreements
described in the U-Haul Delaware Litigation to provide a timing
advantage to the General Partners and prevent the Limited Partners
from analyzing or considering competing offers. The complaint seeks,
among other things, certification of a class of Limited Partners,
declaratory and injunctive relief against the possible use of the
amendments to the Partnership Agreements and the consummation of the
consolidation transactions, and unspecified compensatory damages. As
described above, on January 20, 1994, the defendants moved to dismiss
or stay this action and the U-Haul Delaware Litigation on essentially
the same grounds and to stay this action on the additional ground
that the McGregor action, described below, a purported class action
which includes claims essentially similar to this action, was already
proceeding in the United States District Court of Washington. The
Court did not rule on defendants' motion to dismiss or stay the
Russell action in light of the settlement contemplated by the
Memorandum of Understanding described below.
On December 13, 1993, a purported class action was filed in the
United States District Court for the Western District of Washington
on behalf of Limited Partners of the Partnerships alleging claims for
relief arising out of the proposed consolidation. The complaint
names as defendants Shurgard Storage Centers, Inc., Shurgard
Incorporated and the General Partners, Jack McGregor, et al. v.
Shurgard Storage Centers, Inc., et al., Western District of
Washington, No. C93-1747WD (filed December 13, 1993). The complaint
alleges, among other things, that the General Partners have breached
their fiduciary duties and the Partnership Agreements in structuring
the consolidation and that the consolidation prospectus contains
false or misleading statements in violation of applicable securities
laws. The complaint seeks, among other things, certification of a
class of Limited Partners, declaratory and injunctive relief against
the consummation of the consolidation, and unspecified compensatory
damages.
On December 14, 16 and 20, 1993, three separate purported class
actions were filed in the United States District Court for the
Western District of Washington on behalf of the Limited Partners of
the Partnerships alleging claims for relief arising out of the
proposed consolidation. Nelson Carlo v. Shurgard Storage Centers,
Inc., et al., Western District of Washington, No. C93-1750R (filed
December 14, 1993), Sosa v. Shurgard Storage Centers, Inc., et al.,
Western District of Washington, No. C93-1767C (filed December 16,
1993) and Louis W. Levitt v. Shurgard Storage Centers, Inc., et al.,
Western District of Washington, No. C93-1779WD (filed December 20,
1993). The complaints name as defendants the Company, Shurgard
Incorporated and the General Partners. Such complaints allege, among
other things, that the General Partners have breached their fiduciary
duties and the Partnership Agreements in structuring the
consolidation and that the consolidation prospectus contains false
and misleading statements in violation of applicable securities laws.
The complaints seek, among other things, certification of a class of
Limited Partners, declaratory and injunctive relief against the
consummation of the consolidation, and unspecified compensatory
damages.
On December 30, 1993, the plaintiffs in the McGregor action
filed a motion for summary judgment or, in the alternative,
preliminary injunction, with respect to the second and fifth claims
for relief in their first amended complaint. These claims allege
respectively that the proposed consolidation must be approved by a
75% supermajority of the Unit holders of the Delaware limited
partnerships, rather than a simple majority, and that the proposed
consolidation must afford dissenters' rights to dissenting Unit
holders in the Washington limited partnerships. The plaintiffs'
motion also asserted that the defendants had violated Section 14(a)
of the Securities Exchange Act of 1934, as amended, and the rules
promulgated thereunder by failing to disclose these matters, as well
as the allegedly poor performance of prior "roll-up" transactions.
On January 10, 1994, the plaintiffs filed a supplemental memorandum
in support of their motion, asserting that discovery had provided
additional support for the motion and also had revealed failures to
disclose allegedly material information concerning Green Street and
the anticipated trading prices of the Company's Shares following the
consummation of the proposed consolidation.
In connection with the decision to amend the proposed
consolidation, as provided in this Second Supplement, the Company,
Shurgard, the General Partners and the Partnerships have entered into
a Memorandum of Understanding with counsel for plaintiffs in the
Russell, McGregor, Carlo, Sosa and Levit actions (the "Class
Actions") regarding a tentative settlement agreement in the Class
Actions. The settlement contemplated by the Memorandum of
Understanding is conditioned, among other things, on the successful
completion of the consolidation. If consummated, the settlement will
result in the dismissal of the Class Actions with prejudice and the
release of all claims that were or could have been raised in the
Class Actions. Accordingly, the parties have delayed the hearing on
the motion for summary judgment or, in the alternative, preliminary
injunction previously filed in the McGregor case, pending final
settlement. Under the terms of the Memorandum of Understanding, the
Company agreed: (a) subject to certain conditions (including the
amount of cash available in the Company's modified offer), to offer a
cash alternative to the Limited Partners in connection with the
modified offer in a net amount per Unit at least equal in value to
the greater of (i) 95% of the aggregate cash consideration offered in
the highest bona fide competing tender offer bids, with no material
conditions, for all of the Limited Partners' Units in all of the
Partnerships, or bona fide offer, with no material conditions, for
all of the Partnerships' assets (allocable to all Limited Partner
Units), or (ii) 100% of the Net Asset Value of such Partnerships'
assets (allocable to all Limited Partner Units); (b) to include
certain disclosure language in the Prospectus; and (c) to require
that, if Shurgard is sought to be merged or consolidated with the
Company at any time over the course of the next three years, the
Board of Directors of the Company shall agree to retain Green Street
or some other recognized independent expert to provide a fairness
opinion, based on independent financial analysis, in connection with
the proposed merger or consolidation and that the Company shall not
be obligated to pay any termination fee to Shurgard in connection
with any such merger or consolidation.
On January 10, 1994, U-H Acquisition Company and U-Haul
International, Inc. instituted litigation in the United States
District Court for the Western District of Washington alleging claims
for relief arising out of the Company's proposed consolidation. The
complaint names as defendants the Company and the General Partners.
U-H Acquisition Company, et al. v. Charles K. Barbo, et al., Western
District of Washington, No. C94-0039 (filed January 10, 1994). The
complaint alleges, among other things, that certain materials
relating to the consolidation fail to disclose material information
and contain false or misleading statements, in violation of
applicable securities laws. The complaint alleges that the
defendants have falsely and misleadingly stated that (a) Green Street
opined that the shares to be issued in the proposed consolidation
should trade at a 4% premium to Net Asset Values, without disclosing
that Green Street allegedly stated that the shares would trade at
lower levels for perhaps up to a year, (b) in light of the fact that
Green Street's assumption that the Company would be internally
advised was no longer valid, it is not known whether an updated
analysis by Green Street of the proposed consolidation would yield a
valuation that is lower than the valuation reported in the draft
evaluation described in the Prospectus, when the General Partners
allegedly knew that such an updated analysis would yield lower values
because it is generally well known that the stock market dislikes
externally advised REITs and discounts them by about 15% and that
Green Street allegedly had an agreement with the General Partners
requiring disclosure that if Green Street's prior analysis of the
Shares was updated, it would result in a lower valuation, (c) Green
Street was not asked to update its analysis because of the time and
expense associated with obtaining such a report, when the General
Partners allegedly never asked Green Street how much an updated
analysis would cost and never asked Green Street to update its
analysis, (d) Merrill Lynch has opined that U-Haul's offer is
inadequate and not fair from a financial point of view to Limited
Partners, without also disclosing the allegedly substantial financial
incentive provided to Merrill Lynch by the General Partners to reach
this conclusion and that Merrill Lynch has not been asked by the
General Partners to opine that the consideration offered Limited
Partners in the proposed consolidation is adequate or fair from a
financial point of view to Limited Partners, thus allegedly creating
the false impression that Merrill Lynch believes that the Company's
proposed consolidation is fair, (e) the current REIT market is
favorable and that REITs are currently one of the hottest products on
the market and real estate values are in an upswing and therefore
REITs are prime candidates for increasing values, when allegedly
(i) the REIT market declined 15-20% during the last three to four
months of 1993, (ii) many REIT offerings had to be canceled or
postponed in late 1993 because of the declining market for REIT
stocks, (iii) concern about rising interest rates has investors
concerned about REIT stocks, (iv) Green Street has stated that the
current REIT market is not being friendly to REIT issuers, and has
recognized that other markets are becoming attractive alternatives to
REIT offerings, and (v) the only miniwarehouse REITs traded on the
public markets are followed by one analyst and have no significant
institutional ownership, (f) the General Partners expect the Shares
to trade at prices well above the Net Asset Values of the
Partnerships, when allegedly the General Partners have no reasonable
basis for this belief and have stated that it is likely that the
Shares may initially trade at a substantial discount to the
liquidation value of the Partnerships and that there is substantial
uncertainty as to where the Shares will trade if the proposed
consolidation is consummated, (g) the proposed consolidation is
entirely different from other roll-up transactions that have preceded
it, when allegedly the proposed consolidation is not entirely
different from other roll-up transactions because it was proposed by
self-interested General Partners acting without any representation on
behalf of Limited Partners and does not comply with the standards
established by the Limited Partnership Roll-Up Reform Act of 1993 by
(i) failing to disclose why the General Partners concluded that a
fairness opinion with respect to the Company's proposed consolidation
was not necessary in order to permit the Limited Partners to make an
informed decision on the consolidation proposal, (ii) failing to have
the Company's proposed consolidation approved by 75% of the Limited
Partners or by an independent committee of Limited Partners and
failing to offer dissenting Limited Partners appraisal and
compensation and (iii) requiring the Partnership to bear the costs of
the transaction if the Company's proposed consolidation is rejected,
(h) U-Haul's offer will not be successful, notwithstanding the fact
that the securities laws allegedly prohibit claims made prior to a
meeting regarding the results of a solicitation and (i) in large type
representations in various letters and brochures sent to Unit
holders, the Shares to be issued in the proposed consolidation will
trade within a specific dollar range representing a 38% to 72%
premium over U-Haul's offers and that Limited Partners who elect to
receive Shares pursuant to the proposed consolidation will have
immediate liquidity and will be able to benefit from potential
increases in the value of the Shares, in violation of the Commission
policy which cautions against predicting specific market values, and
without also disclosing (1) the risk factors and conflicts of
interest set forth in smaller print in the Prospectus and (2) that
the cited dollar range is higher than the range of values predicted
in the Prospectus.
The complaint further alleges that the General Partners have
failed to disclose (a) the existence of allegedly illegally adopted
amendments to certain of the partnership agreements of the
Partnerships, including amendments which clarify the procedures for
action by written consents of the Limited Partners to require that
such action take place at a meeting scheduled by the General Partners
only following a written request for such a meeting by Limited
Partners holding in excess of 10% of the outstanding Units, (b) that
allegedly these amendments were adopted as defensive measures
following Public Storage's criticism of the consolidation proposal
and expression of interest in making and making a competing offer to
Limited Partners for their Units in order to prevent other parties
from making a competing offer to Limited Partners for their Units in
order to prevent other parties from proposing alternative
transactions or commencing consent solicitations opposing the
proposed consolidation, (c) that while the General Partners were
managing the Partnerships, the Net Asset Value of the Partnerships'
assets has allegedly declined by over $100 million and (d) the
existence of a December 22, 1993 letter from Green Street to the
General Partners allegedly advising the General Partners that
statements in the Prospectus regarding Green Street's analysis
constitute a misleading representation to investors and a violation
of Green Street's agreement regarding what investors would be told.
The complaint seeks, among other things, injunctive relief
(a) against the defendants requiring them to halt any further
solicitations until curative disclosures are made, (b) requiring the
commencement of a new 60-day solicitation period after curative
disclosures are made, (c) requiring the General Partners to provide
U-Haul with a copy of the General Partners' Units holder list (or
agree to mail U-Haul's materials to Unit holders) and (d) requiring
the General Partners to resolicit Unit holders who have previously
cast their votes in favor of the consolidation proposal based on the
allegedly false and misleading statements. The General Partners
dispute the merits of the foregoing allegations and intend to
vigorously defend against the action. On January 18, 1994, the
plaintiffs filed a motion to preliminarily enjoin defendants from
proceeding with the Consolidation Offer based upon the foregoing
allegations.
