<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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Schedule TO
Tender Offer Statement under Section
14(d)(1) or 13(e)(1) of the Securities Exchange Act of 1934
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Homestead Village Incorporated
(Name of Subject Company)
--------------
HSD Acquisition Corporation
Security Capital Group Incorporated
(Name of Filing Person -- Offeror)
Common Stock, Par Value $.01 Per Share
(Including the Associated Preferred Share Purchase Rights)
(Title of Class of Securities)
437851 10 8
(CUSIP Number of Class of Securities)
Jeffrey A. Klopf, Senior Vice President and Secretary
Security Capital Group Incorporated
125 Lincoln Avenue
Santa Fe, New Mexico 87501
Telephone: (505) 982-9292
(Name, Address and Telephone Number of Person Authorized to Receive Notices
and Communications on Behalf of Filing Persons)
Copy to:
Adam O. Emmerich, Esq.
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Telephone: (212) 403-1000
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CALCULATION OF FILING FEE
<TABLE>
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<CAPTION>
Amount of Filing
Transaction Valuation* Fee
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<S> <C>
$65,100,440................................................... $13,020
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</TABLE>
* Estimated for purposes of calculating the amount of the filing fee only.
The amount assumes the purchase of 15,878,156 shares of common stock, par
value $0.01 per share (the "Shares"), at a price per Share of $4.10 in
cash. Such number of Shares includes i) all outstanding Shares as of May 2,
2000, less the number of Shares already beneficially owned by Security
Capital Group Incorporated and ii) Shares issuable pursuant to vested
options.
[_] Check box if any part of the fee is offset as provided by Rule 0-
11(a)(2) and identify the filing with which the offsetting fee was previously
paid. Identify the previous filing by registration statement number, or the
Form or Schedule and the date of its filing.
Amount Previously Paid: None.
Form or Registration No.: Not applicable.
Filing Party: Not applicable.
Date Filed: Not applicable.
[_] Check box if any part of the fee is offset as provided by Rule 0-
11(a)(2) and identify the filing with which the offsetting fee was previously
paid. Identify the previous filing by registration statement number, or the
Form or Schedule and the date of its filing.
Amount Previously Paid: None.
Form or Registration No.: Not applicable.
Filing Party: Not applicable.
Date Filed: Not applicable.
[_] Check the box if the filing relates solely to preliminary communications
made before the commencement of a tender offer.
Check the appropriate boxes below to designate any transactions to which the
statement relates:
[X]third-party tender offer subject to Rule 14d-1.
[_]issuer tender offer subject to Rule 13e-4.
[X]going-private transaction subject to Rule 13e-3.
[X]amendment to Schedule 13D under Rule 13d-2.
Check the following box if the filing is a final amendment reporting the
results of the tender offer: [_]
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<PAGE>
SCHEDULE 13D
CUSIP NO. 437851 10 8 Page 1 of 1 Page
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NAMES OF REPORTING PERSONS
1 I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (entities only).
Security Capital Group Incorporated 36-3692698
HSD Acquisition Corporation 74-2954484
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CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (See Instructions)
2 (a) [X]
(b) [_]
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SEC USE ONLY
3
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SOURCE OF FUNDS (See Instructions)
4
WC, BK, OO
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CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) [_]
5
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CITIZENSHIP OR PLACE OF ORGANIZATION
6
Maryland
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SOLE VOTING POWER
7
NUMBER OF
104,471,674
SHARES -----------------------------------------------------------
SHARED VOTING POWER
BENEFICIALLY 8
OWNED BY -0-
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EACH SOLE DISPOSITIVE POWER
9
REPORTING
104,471,674
PERSON -----------------------------------------------------------
SHARED DISPOSITIVE POWER
WITH 10
-0-
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AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
104,471,674
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CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
12
(See Instructions) [_]
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PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
87.0%
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TYPE OF REPORTING PERSON (See Instructions)
14
CO
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<PAGE>
This Tender Offer Statement on Schedule TO is filed by Security Capital
Group Incorporated, a Maryland corporation ("Security Capital"), and HSD
Acquisition Corporation, a Maryland corporation and an indirect wholly owned
subsidiary of Security Capital ("Purchaser"). The Schedule TO relates to the
offer by Purchaser to purchase all outstanding shares of common stock, par
value $0.01 per share (the "Shares"), of Homestead Village Incorporated
("Homestead"), and the associated preferred share purchase rights ("Rights")
issued pursuant to the Rights Agreement, dated as of May 16, 1996, between
Homestead and The First National Bank of Boston as Rights Agent (other than
those shares of common stock and Rights, held by Security Capital and its
subsidiaries) such common stock and Rights being referred to collectively as
the "Shares" unless the context otherwise requires, at $4.10 per Share, net to
the seller in cash (less any required withholding taxes), upon the terms and
subject to the conditions set forth in the offer to purchase (the "Offer to
Purchase") and in the related letter of transmittal (the "Letter of
Transmittal," which together with the Offer to Purchase, as amended or
supplemented from time to time, collectively constitute the "Offer"), attached
hereto as Exhibits (a)(1) and (a)(2), respectively. The information set forth
in the Offer is incorporated herein by reference with respect to Items 1-9, 11
and 13 of Schedule TO. The Agreement and Plan of Merger, by and among Security
Capital, Purchaser and Homestead, dated as of May 2, 2000 (the "Merger
Agreement"), a copy of which is attached as Exhibit (d)(1) hereto, is
incorporated herein by reference with respect to Items 5 and 11 of
Schedule TO.
Item 10. Financial Statements of Certain Bidders.
Not applicable.
Item 12. Exhibits.
<TABLE>
<C> <S>
(a)(1) Offer to Purchase dated May 2, 2000.
(a)(2) Form of Letter of Transmittal.
(a)(3) Form of Notice of Guaranteed Delivery.
(a)(4) Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies
and Other Nominees.
(a)(5) Form of Letter to Clients for use by Brokers, Dealers, Commercial
Banks, Trust Companies and Other Nominees.
(a)(6) Text of proposal letter sent by Security Capital to Homestead on March
23, 2000 (incorporated by reference to the amendment to Schedule 13D
filed by Security Capital with the Securities & Exchange Commission on
March 24).
(a)(7) Text of press release issued by Security Capital dated March 23, 2000
(incorporated by reference to the amendment to Schedule 13D filed by
Security Capital with the Securities & Exchange Commission on March
24).
(a)(8) Text of joint press release issued by Security Capital and Homestead
dated May 2, 2000 (incorporated by reference to the Schedule TO-C
filed by Security Capital and Purchaser with the Securities and
Exchange Commission on May 2, 2000).
(a)(9) Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
(a)(10) Form of summary advertisement dated May 9, 2000.
(a)(11) Notice of Merger.
(b)(1) Credit Agreement, dated as of June 5, 1998, among Security Capital and
Chase Bank of Texas, National Association, and Wells Fargo Bank,
National Association, as agents for the financial institutions
identified therein (incorporated by reference to Exhibit 10.1 to
Security Capital's registration statement on Form S-4 (File No. 333-
61401)).
(c)(1) Opinion of Stern Stewart & Co.
(c)(2) Report of Stern Stewart & Co.
(c)(3) Presentation of Chase Securities Inc. to Security Capital dated March
23, 2000.
(c)(4) Presentation of Chase Securities Inc. to Security Capital dated May 1,
2000.
</TABLE>
II-1
<PAGE>
<TABLE>
<C> <S>
(d)(1) Agreement and Plan of Merger by and among Security Capital, Purchaser
and Homestead dated as of May 2, 2000.
(f) Appraisal rights and procedures for exercising appraisal rights under
Maryland law.
(g) None.
(h) None.
</TABLE>
Item 13. Information Required by Schedule 13E-3.
(a) Financial statements
(1) Pages 32 through 53 of Homestead's Annual Report on Form 10-K for
the year ended December 31, 1999 are incorporated herein by reference.
(b) Not applicable
The financial information incorporated by reference may be read and copied
at the following locations at the SEC:
<TABLE>
<CAPTION>
<S> <C> <C>
Public Reference Room New York Regional Office Chicago Regional Office
Room 1024, Judiciary Plaza Suite 1300 Citicorp Center
450 Fifth Street, N.W. 7 World Trade Center Suite 1400
Washington, D.C. 20549 New York, New York 10048 500 West Madison Street
Chicago, Illinois 60661-2511
</TABLE>
Please call the SEC at 1-800-732-0330 for further information on the public
reference rooms. Homestead's SEC filings should also be available to the
public from commercial document retrieval services and at the Internet world
wide web site that the SEC maintains at http://www.sec.gov.
II-2
<PAGE>
SIGNATURE
After due 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.
HSD Acquisition Corporation
/s/ Jeffrey A. Klopf
By __________________________________
Name: Jeffrey A. Klopf
Title: President
Security Capital Group Incorporated
/s/ Jeffrey A. Klopf
By __________________________________
Name: Jeffrey A. Klopf
Title: Secretary
Dated: May 9, 2000
II-3
<PAGE>
EXHIBIT INDEX
<TABLE>
<C> <S>
(a)(1) Offer to Purchase dated May 2, 2000.
(a)(2) Form of Letter of Transmittal.
(a)(3) Form of Notice of Guaranteed Delivery.
(a)(4) Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies
and Other Nominees.
(a)(5) Form of Letter to Clients for use by Brokers, Dealers, Commercial
Banks, Trust Companies and Other Nominees.
(a)(6) Text of proposal letter sent by Security Capital Group Incorporated to
Homestead Village Incorporated on March 23, 2000 (incorporated by
reference to the Schedule 13D amendment filed by Security Capital with
the Securities & Exchange Commission on March 24).
(a)(7) Text of press release issued by Security Capital Group Incorporated
dated March 23, 2000 (incorporated by reference to the Schedule 13D
amendment filed by Security Capital with the Securities & Exchange
Commission on March 24).
(a)(8) Text of joint press release issued by Security Capital Group
Incorporated and Homestead Village Incorporated dated May 2, 2000
(incorporated by reference to the Schedule TO-C filed by Security
Capital and HSD Acquisition Corporation with the Securities and
Exchange Commission on May 2, 2000).
(a)(9) Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
(a)(10) Form of summary advertisement dated May 9, 2000.
(a)(11) Notice of Merger.
(b)(1) Credit Agreement, dated as of June 5, 1998, among Security Capital and
Chase Bank of Texas, National Association, and Wells Fargo Bank,
National Association, as agents for the financial institutions
identified therein (incorporated by reference to Exhibit 10.1 to
Security Capital's registration statement on Form S-4 (File No. 333-
61401)).
(c)(1) Opinion of Stern Stewart & Co.
(c)(2) Report of Stern Stewart & Co.
(c)(3) Presentation of Chase Securities Inc. to Security Capital dated March
23, 2000.
(c)(4) Presentation of Chase Securities Inc. to Security Capital dated May 1,
2000.
(d)(1) Agreement and Plan of Merger by and among Security Capital Group
Incorporated, HSD Acquisition Corporation and Homestead Village
Incorporated dated as of May 2, 2000.
(f) Appraisal rights under Maryland law.
(g) None.
(h) None.
</TABLE>
<PAGE>
EXHIBIT (a)(1)
Offer to Purchase for Cash
All Outstanding Shares of Common Stock
(Including the Associated Preferred Share Purchase Rights)
of
Homestead Village Incorporated
at
$4.10 Net Per Share
by
HSD Acquisition Corporation
an indirect wholly owned subsidiary
of
Security Capital Group Incorporated
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON TUESDAY, JUNE 6, 2000, UNLESS THE OFFER IS EXTENDED.
A summary of the principal terms of the offer appears on pages (ii) and
(iii). You should read this entire document carefully before deciding whether
to tender your shares.
Neither the SEC nor any state securities commission has: (a) approved or
disapproved of the transaction; (b) passed upon the merits or fairness of the
transaction; or (c) passed upon the adequacy or accuracy of the disclosure in
this document. Any representation to the contrary is a criminal offense.
The Dealer Manager for the Offer is:
Chase Securities Inc.
May 9, 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Summary of the Offer...................................................... ii
Introduction.............................................................. 1
Special Factors........................................................... 3
I. Background of the Tender Offer and the Merger Agreement.......... 3
II. Purpose of, Alternative to, Reasons for and Effects of the Tender
Offer and the Merger............................................ 8
III. Fairness of the Tender Offer and the Merger...................... 9
IV. Recommendation of the Special Committee and the Board............ 10
V. Reports, Opinions and Appraisals................................. 12
VI. Interests of Certain Persons..................................... 21
The Tender Offer and the Merger........................................... 27
1. Terms of the Tender Offer........................................ 27
2. Acceptance for Payment and Payment for Homestead Shares.......... 28
3. Procedures for Accepting the Offer and Tendering Shares.......... 30
4. Withdrawal Rights................................................ 32
5. Price Range of the Shares; Dividends............................. 33
6. Possible Effects of the Tender Offer on the Market for the
Homestead Shares; Stock Quotation; Securities Exchange Act
Registration; Margin Regulations................................ 33
7. Information Concerning Homestead................................. 35
8. Information Concerning Security Capital and Purchaser............ 37
9. The Merger Agreement and the Merger.............................. 39
10. Source and Amount of Funds....................................... 47
11. Dividends and Distributions...................................... 47
12. Conditions of the Offer.......................................... 47
13. Legal Matters.................................................... 49
14. Fees and Expenses................................................ 51
15. Miscellaneous.................................................... 51
</TABLE>
i
<PAGE>
SUMMARY OF THE OFFER
Principal terms
. Security Capital, through an indirect wholly owned subsidiary, is
offering to buy all outstanding shares of Homestead common stock,
together with the associated preferred share purchase rights, not
already owned by Security Capital and its subsidiaries. Security Capital
and its subsidiaries already own approximately 87% of the outstanding
Homestead shares. The tender price is $4.10 per share in cash, less any
required withholding taxes. Tendering stockholders will not have to pay
brokerage fees or commissions.
. We have entered into a merger agreement with Homestead which contains
the terms of our offer to purchase the Homestead shares.
. As provided in our merger agreement with Homestead, the tender offer is
the first step in our plan to acquire all of the outstanding Homestead
shares that we do not already own. Upon completion of the tender offer,
we will acquire any remaining Homestead shares in a later merger for
$4.10 per share in cash and Homestead will become a privately held
company. We currently own a sufficient number of Homestead shares to
ensure that the merger will be approved by Homestead stockholders. It is
likely that Homestead stockholders will not have appraisal rights in the
merger. See page 45 for further details.
. The tender offer will expire at 12:00 midnight, New York City time, on
Tuesday, June 6, 2000, unless we extend the offer.
. If we decide to extend the tender offer, we will issue a press release
giving the new expiration date no later than 9:00 a.m., New York City
time, on the first business day after the previously scheduled
expiration of the tender offer.
Recommendation of the Homestead special committee
The Homestead Board of Directors appointed a special committee consisting of
the independent directors of Homestead to consider, evaluate and negotiate the
terms of the merger agreement and to make a recommendation on the offer and the
merger to the Homestead Board of Directors.
The Homestead special committee has determined that the tender offer and the
merger are fair to, advisable and in the best interests of Homestead and its
stockholders, and has recommended to the Homestead Board of Directors that it
recommend to the Homestead stockholders acceptance of the tender offer and
approval of the merger.
Recommendation of the Homestead Board of Directors
The Homestead Board of Directors has determined that, based upon the
recommendation of the Homestead special committee and other considerations, the
tender offer and the merger are fair to, advisable and in the best interests of
Homestead and its stockholders, and has voted to recommend to the Homestead
stockholders acceptance of the tender offer and approval of the merger. The
Homestead Board of Directors recommends that Homestead stockholders tender
their Homestead shares in the tender offer and vote to approve the merger.
Conditions
This tender offer is not conditioned upon any minimum number of Homestead
shares being tendered or on Security Capital obtaining financing. The tender
offer is, however, subject to conditions which are described on pages 47
through 49.
Procedures for tendering
If you wish to accept the tender offer, you must do the following:
. If you are a record holder (i.e., a stock certificate has been issued in
your name), you must either
ii
<PAGE>
complete and sign the enclosed letter of transmittal and send it with
your stock certificate to the depositary for the tender offer,
EquiServe, or follow the procedures described in this document for book-
entry transfer. These materials must reach the depositary before the
tender offer expires. Detailed instructions are contained in the letter
of transmittal and on pages 30 through 32 of this document.
. If you are a record holder but your stock certificate is not available
or you cannot deliver it to the depositary before the tender offer
expires, you may be able to tender your Homestead shares using the
enclosed notice of guaranteed delivery. Please call our information
agent, Georgeson Shareholder Communications Inc., at 800-223-2064 for
assistance. See pages 30 and 31 for further details.
. If you hold your Homestead shares through a broker or bank, you should
instruct your broker or bank to tender your Homestead shares.
Withdrawal rights
If, after tendering your Homestead shares in the tender offer, you decide
that you do not want to accept the tender offer, you can withdraw your
Homestead shares by so instructing in writing the depositary before the tender
offer expires. If you tendered your Homestead shares by giving instructions to
a broker or bank, you must instruct the broker or bank to arrange for the
withdrawal of your Homestead shares. See pages 32 and 33 for further details.
No subsequent offering period
We will not provide a subsequent offering period during which Homestead
stockholders who do not tender in the tender offer would have another
opportunity to tender at the same price. Those stockholders will have to wait
until after the merger is completed to receive their cash consideration.
Recent Homestead trading prices; subsequent trading
. The average of the closing prices for Homestead shares over the 20
trading days immediately before we publicly announced, on March 23,
2000, the proposal to acquire Homestead was $2.37 per share.
. The closing price for Homestead shares was:
. $2.69 per share on March 23, 2000, the day we announced the proposal
to acquire Homestead, and
. $4.00 per share on May 8, 2000, the last trading day before the
printing of these materials.
. Before deciding whether to tender, you should obtain a current market
quotation for Homestead shares. If the tender offer is successful, it is
likely that the Homestead shares will continue to be traded on the NYSE
until the time of the merger, although we expect trading volume to be
below its pre-offer level; however, circumstances do exist under which
the Homestead shares could be delisted prior to the merger. See page 34.
Further information
Important information is contained in the remainder of this Offer to
Purchase and the accompanying Letter of Transmittal and we urge you to read
carefully these documents in their entirety. If you have questions about the
tender offer, you can call:
Our Information Agent:
Georgeson Shareholder Communications Inc.
Banks and Brokers Call Collect: (212) 440-9800
All Others Call Toll Free: (800) 223-2064
Our Dealer Manager:
Chase Securities Inc.
Call Collect: (212) 270-2631
iii
<PAGE>
To: All Holders of Shares of Common Stock of Homestead Village Incorporated
INTRODUCTION
HSD Acquisition Corporation ("Purchaser"), a Maryland corporation and an
indirect wholly owned subsidiary of Security Capital Group Incorporated, a
Maryland corporation ("Parent" or "Security Capital"), is offering to purchase
all outstanding shares of common stock (not owned by Security Capital or its
subsidiaries), par value $0.01 per share, of Homestead Village Incorporated
("Homestead"), a Maryland corporation, and the associated preferred share
purchase rights (the "Rights") issued pursuant to the Rights Agreement dated
as of May 16, 1996 between Homestead and The First National Bank of Boston as
Rights Agent (as the same may be amended, the "Rights Agreement"), at a
purchase price of $4.10 per share, net to the seller in cash (less any
required withholding taxes), without interest, upon the terms and subject to
the conditions set forth in this offer to purchase and in the related letter
of transmittal (which, together, constitute the tender offer). Unless the
context indicates otherwise, all references to Homestead shares shall include
the Rights.
Stockholders of record who hold Homestead shares registered in their names
and tender the Homestead shares directly to EquiServe (the "Depositary") will
not be required to pay brokerage fees or commissions or, except as described
in Instruction 6 of the letter of transmittal, stock transfer taxes on the
sale of Homestead shares in the tender offer. Stockholders who hold their
Homestead shares through a bank or broker should check with such institution
as to whether they will be charged any service fees. However, if you do not
complete and sign the Substitute Form W-9 included in the letter of
transmittal, you may be subject to a required backup United States federal
income tax withholding of 31% of the gross proceeds payable to you. See
Section 3. We will pay all charges and expenses of Chase Securities Inc., as
Dealer Manager ("Chase Securities" or the "Dealer Manager"), the Depositary
and Georgeson Shareholder Communications Inc., as Information Agent (the
"Information Agent"), incurred in connection with the tender offer. See
Section 14.
The Homestead special committee, consisting of the independent directors on
the Homestead Board of Directors, has determined that the tender offer and the
merger are fair to, advisable and in the best interests of Homestead and its
stockholders, and has recommended to the Homestead Board of Directors that it
recommend to the Homestead stockholders acceptance of the tender offer and
approval of the merger agreement.
The Homestead Board of Directors has determined, based upon the
recommendation of the Homestead special committee and other considerations,
that the tender offer and the merger are fair to, advisable and in the best
interests of Homestead and its stockholders, and has voted to recommend to the
Homestead stockholders acceptance of the tender offer and approval of the
merger. The Homestead Board of Directors recommends that stockholders tender
their Homestead shares in the tender offer and vote to approve the merger.
This tender offer is not conditioned upon any minimum number of Homestead
shares being tendered, or on Security Capital obtaining financing. The tender
offer is, however, subject to certain terms and conditions. See Sections 1, 9,
and 12.
We are making the tender offer under the Agreement and Plan of Merger, by
and among Security Capital, Purchaser and Homestead, dated as of May 2, 2000.
Following the completion of the tender offer and the satisfaction or waiver of
certain conditions, Homestead will merge with Purchaser. Homestead will
continue as the surviving corporation. In the merger, each outstanding
Homestead share that is not controlled by us (other than Homestead shares held
by stockholders with appraisal rights, if any, who perfect and do not withdraw
or otherwise lose any such appraisal rights under Maryland law) will be
converted into the right to receive the merger consideration, which will be
$4.10 net in cash or any higher price paid per Homestead share in the tender
offer. Section 9 contains a description of the merger agreement.
1
<PAGE>
Stern Stewart & Co., financial advisor to the Homestead special committee,
delivered to the Homestead special committee a written opinion that, as of the
date of the merger agreement, the consideration of $4.10 per Homestead share
to be received in the tender offer or the merger by the holders of Homestead
shares, other than Security Capital and its subsidiaries, is fair to such
holders from a financial point of view. A copy of the Stern Stewart opinion is
included with Homestead's Solicitation/Recommendation Statement on Schedule
14D-9, which is being mailed with this offer to purchase; stockholders are
urged to read the opinion in its entirety for a description of the assumptions
made, matters considered and limitations on the review undertaken by Stern
Stewart.
Under Maryland law, approval of the merger requires the affirmative vote of
the holders of at least a majority of the outstanding Homestead shares. We
currently own a sufficient number of Homestead shares to ensure that the
merger will be approved by Homestead stockholders. See Section 9.
If, pursuant to the tender offer, we acquire enough Homestead shares so
that, including the Homestead shares we already own, we control over 90% of
the outstanding Homestead shares, it will not be necessary under Maryland law
to hold a meeting of Homestead stockholders to approve the merger. Maryland
law requires that notice of the merger be given to each minority stockholder
of Homestead as of a date fixed by the Homestead Board of Directors which is
not more than 10 days before the date the notice is given. Accordingly, a
Notice of Merger (the "Notice of Merger") of Purchaser into Homestead is
included with this offer to purchase.
To our knowledge after making reasonable inquiry, all of the individuals
listed on Schedule I to this offer to purchase and all of the executive
officers, directors and affiliates of Homestead who own or hold Homestead
shares currently intend to tender their Homestead shares (other than Homestead
shares that they have the right to purchase by exercising stock options and
Homestead shares that, if tendered, would cause them to incur liability under
the short-swing-profits provisions of the Securities Exchange Act of 1934, as
amended) to Purchaser in the tender offer. To our knowledge after making
reasonable inquiry, none of the individuals listed on Schedule I to this offer
to purchase and none of the executive officers and affiliates of Homestead,
except those officers who serve on the Homestead Board of Directors, has made
a recommendation either in support of or opposed to the transaction.
Homestead has informed us that, as of April 28, 2000, there were
120,031,477 Homestead shares issued and outstanding and 3,246,103 Homestead
shares reserved for issuance upon the exercise of outstanding stock options,
15,559,803 of the Homestead shares are not owned by Security Capital or its
subsidiaries.
The tender offer is conditioned upon the fulfillment of the conditions
described in Section 12. The tender offer will expire at 12:00 midnight, New
York City time, on Tuesday, June 6, 2000, unless we extend it.
This offer to purchase and the related letter of transmittal contain
important information. You should read them carefully before you make any
decision with respect to the tender offer.
2
<PAGE>
SPECIAL FACTORS
I. Background of the Tender Offer and the Merger Agreement
On January 15, 1998, Homestead conducted a subscription rights offering of
10,426,840 Homestead shares at a price of $15 per share to raise funds for
working capital and development. There was limited investor interest in the
shares and Security Capital purchased 81% of the offering or 8,429,225
Homestead shares. These purchases were made on the same terms and at the same
time as made available to other stockholders and investors.
By June of 1998, Homestead's financing needs intensified as Homestead
sought to finance both its growth plans into new markets and its existing
commitments. Homestead was unable to obtain debt financing for these
activities from any source without a contingent commitment of long-term
capital from Security Capital. Homestead subsequently requested this
commitment from Security Capital. In response to this request, Security
Capital agreed to secure a Homestead credit facility, which had a maximum
principal amount of $200 million (the "Bridge Facility"), by entering into a
subscription agreement to purchase up to $200 million of convertible
subordinated debentures (the "Subscription Agreement") from Homestead. Under
the Subscription Agreement, the lenders had the right to require Security
Capital to purchase the debentures which would be mandatorily convertible
within 90 days after issuance into Homestead shares at the market price per
share in effect at the time of conversion.
In January of 1999, Homestead began considering ways to repay the Bridge
Facility which was originally due in March 1999. The Homestead Board sought
other alternatives to the Subscription Agreement, which if called would have
caused substantial dilution to the public shareholders of Homestead other than
Security Capital or its affiliates. The Homestead Board retained independent
financial and legal advisors who evaluated the feasibility of a placement of
either subordinated debt, preferred stock or common stock and concluded that
these options were not available on financially acceptable terms.
In April of 1999, the Homestead Board decided to proceed with a common
stock rights offering. In connection with the rights offering, the lenders
agreed to extend the due date of the Bridge Loan until June 1999. The Board
also requested Security Capital to increase its financial commitment from $200
million to $225 million because the Board determined that Homestead needed
additional financing to continue at its current level of operations and to
finance existing commitments. As part of Security Capital's agreement to
increase its financial commitment, it negotiated certain changes to the
Investor Agreement between Security Capital and Homestead. See "--Interests of
Certain Persons". Security Capital also discussed with Homestead the fact that
if Security Capital were to purchase $225 million of Homestead common stock,
it would increase its ownership interest in Homestead above 80% and thereby
lose its ability to deduct losses if Security Capital were to sell its
interest in Homestead shares. As a condition of giving up this tax advantage,
Security Capital and Homestead agreed that Security Capital would obtain
rights to utilize Homestead's net operating losses described in the tax
allocation agreement under "Interests of Certain Persons".
In April and May of 1999, Homestead conducted a rights offering of
81,818,181 Homestead shares at a price of $2.75 per share. There was limited
investor interest in the rights offering and Security Capital purchased
77,749,220 Homestead shares in the rights offering on the same terms and at
the same time as made available to other stockholders and investors. This
purchase increased Security Capital's ownership of Homestead to 87%. Homestead
used a portion of the proceeds of this rights offering to repay on May 28,
1999 all amounts owed under the Bridge Facility. The Subscription Agreement
was terminated upon the repayment of all amounts owed under the Bridge
Facility.
In April 1999, Homestead received a written offer from an unaffiliated
party to purchase all the shares of Homestead common stock. The transaction
was structured as a merger in which Homestead stockholders would receive
shares of common stock in the other company based on an exchange ratio and
subject to adjustments for working capital excesses or shortfalls. In
addition, Security Capital would have been required to purchase for cash a
portion of the Homestead undeveloped properties and shares of the acquiring
company to provide working capital, which shares would have reduced the number
of shares to be provided to other Homestead
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stockholders. Based upon the stock price of the acquiring company, the shares
to be exchanged by the acquiring company for Homestead shares, taking into
account the shares to be issued to Security Capital for working capital, had a
value of between $3.70 and $4.10 per share assuming Homestead did not complete
its rights offering. The exchange ratio was subject to further adjustment for
working capital excesses or shortfalls of Homestead through the anticipated
closing. The offer was conditioned on Homestead withdrawing its rights
offering, which, if the transaction had not been completed, would have left
Homestead with insufficient funds to repay the Bridge Facility and complete
developments underway. The parties were unable to resolve significant issues
regarding the transaction and in early May of 1999 the Homestead Board voted
to terminate negotiations.
Also, in April of 1999, Homestead received a written proposal from another
unaffiliated party for the purchase of all the shares of Homestead common
stock in exchange for the stock of the acquiring company. The offer was
subject to financing contingencies and due diligence and Security Capital
would have been required to provide financing for the combined company and
purchase undeveloped land of Homestead. The Homestead Board determined not to
pursue this transaction because of various issues, including the fact that the
combined company would have been more highly leveraged than Homestead was at
the time.
In May of 1999, Homestead determined, based on its inability to obtain
financing for development of sites beyond those already in construction, to
end its development program, reduce staff, and begin selling excess land. In
connection with these actions, Homestead recorded a special charge of $65.3
million. At that time, Homestead also changed management and C. Ronald
Blankenship, Vice Chairman, Chief Operating Officer and a Director of Security
Capital, became Interim Chairman, Chief Executive Officer and a Director of
Homestead.
Between June and early September 1999, Homestead negotiated with a
potential financial buyer for the sale of all the Homestead shares. The
parties could not reach an understanding on price and no firm written offer
was received.
Between September and December of 1999, the Security Capital board and
management discussed Security Capital's options with respect to its interest
in Homestead. These options included a sale of Homestead or some or all of its
assets, a merger, or a purchase of the remaining Homestead shares it did not
own. Security Capital decided that it was not feasible at that time to act on
any of these options, due to tax costs and certain other factors.
In September 1999, the Homestead Board also conducted an analysis of the
value of Homestead and discussed possible merger or sale of assets of
Homestead. In September 1999, Homestead retained an investment banker to
explore alternatives and to assist the Homestead Board in determining the
value of Homestead.
Between October and December, the investment banker contacted several
potential strategic purchasers with regard to a potential transaction. None of
these potential strategic purchasers were interested in pursuing a
transaction. The investment banker also contacted several potential financial
buyers with regard to a sale of Homestead or some or all of its assets. A few
potential buyers expressed interest in transactions which valued the Homestead
shares between $2.75 and $3.00. However, Homestead received no firm written
offers.
At its December 3, 1999 meeting, the Homestead Board reviewed the results
of the investment banker's activities. The investment banker advised the
Homestead Board not to proceed with any of the preliminary proposals, and the
Board decided to not take any action on any of the preliminary proposals and
instructed the investment banker not to take any further action.
During late 1999 and early 2000, Homestead received inquiries from a
potential strategic purchaser with whom Homestead had held previous
discussions previously in April of 1999 regarding the purchase of all the
Homestead shares. Management held discussions with the potential purchaser and
its financial advisor but expressed concern regarding the ability of the
potential purchaser to finance a transaction. In March 2000, shortly before
the time Security Capital presented its original offer to Homestead,
Mr. Blankenship received a call from the financial advisor for the potential
purchaser in which call the financial advisor informed Mr. Blankenship that
his client was prepared to make an all-cash offer of $3.25 per share, subject
to satisfaction of financing
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contingencies. Mr. Blankenship suggested that the potential purchaser contact
the special committee once it was formed. The proposal was discussed by Mr.
Blankenship with the Homestead Board at its March 23, 2000 meeting. On April
17, 2000, the potential purchaser submitted a non-binding, confidential,
written proposal to purchase between 51% and 100% of the Homestead shares for
$3.50 cash per share. The written proposal was not subject to a financing
contingency, but was subject to the completion by the potential purchaser of
due diligence. The Homestead Board and the special committee discussed the
proposal at their meetings on April 19, 2000. On April 25, 2000, Security
Capital delivered a letter to the special committee informing the special
committee that it was not interested in selling its Homestead shares at $3.50
per share on the terms described in the proposal.
On February 2, 2000, at a meeting of the Security Capital Board, Security
Capital management made a preliminary presentation regarding an acquisition of
all Homestead shares not owned by Security Capital and the Security Capital
Board authorized management to study the issue further and engage advisors.
Security Capital engaged the investment banking firm of Chase Securities Inc.
and the special counsel to assist Security Capital with any potential
transaction involving Homestead.
In February 2000, Homestead received a proposal from a financial advisor
for a potential purchaser for the purchase of Homestead. That financial
advisor submitted a financial model of Homestead suggesting a purchase price
of $3.00 per share. Management held discussions with the potential purchaser
but no firm written proposal was received.
On March 23, 2000, the Security Capital Board met and decided that it would
be in the best interests of Security Capital and its stockholders if Security
Capital acquired the outstanding Homestead shares it did not already own. On
the afternoon of March 23, 2000, Security Capital submitted a proposal letter
to the Homestead Board of Directors. This letter set forth Security Capital's
initial proposal to acquire all of the outstanding Homestead shares not
already controlled by Security Capital for $3.40. Security Capital issued a
press release that same day announcing that it had made the proposal.
Also on March 23, 2000 subsequent to the meeting of the Security Capital
Board, the Homestead Board held a special meeting. Mr. Blankenship reviewed
with the Homestead Board the terms of the Security Capital proposal. He also
reported on the call he had received regarding the $3.25 proposal discussed
above from the unaffiliated third party. Finally, the Homestead Board
discussed formation of a special committee and the duties to be fulfilled by
such a committee. Homestead issued a press release that same day announcing
that it had received the proposal.
On March 30, 2000, at a special meeting of the Homestead Board, the Board
determined that in view of possible conflicts of interest, it was advisable to
form a special committee of independent directors to consider and evaluate
whether Security Capital's offer was fair, advisable to and in the best
interests of Homestead's stockholders and to report its recommendation
regarding the offer to the full Board of Directors. The special committee
appointed by the Board consisted of Manuel A. Garcia, III, John C. Schweitzer
and Eugene B. Vesell, none of whom are employed by or affiliated with
Homestead (except in their capacities as directors) or Security Capital or any
of its affiliates (with the exception of Mr. Schweitzer, who serves as a
trustee for Archstone Communities Trust, of which Security Capital is a 38%
stockholder and Regency Realty Corporation (which is 61% owned by Security
Capital U.S. Realty, which in turn is 37.7% owned by Security Capital) and Mr.
Vesell who owns 844 Class A Shares of Security Capital and 52,200 Class B
Shares of Security Capital). The special committee was authorized to conduct
negotiations with Security Capital, to investigate Homestead as it deemed
appropriate, to retain legal and financial advisors to assist the special
committee in its consideration and evaluation of the Security Capital offer
and to report to the Homestead Board the recommendations and conclusions of
the special committee with respect to Security Capital's offer.
The special committee retained the law firm of King & Spalding as its legal
counsel. King & Spalding advised the special committee of the special
committee's legal responsibilities and the legal principles applicable to, and
the legal consequences of, actions taken by the special committee with respect
to the offer by Security Capital. Thereafter, the special committee and King &
Spalding discussed the procedures to be followed in analyzing the offer from
Security Capital and the need to retain a suitable financial advisor to assist
the special committee in formulating a negotiating strategy and in evaluating
the fairness of Security Capital's offer.
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At the March 30, 2000 meeting of the Homestead special committee, the
special committee discussed further the proposal, previously discussed by the
entire Homestead Board, of a cash offer of $3.50 from an unaffiliated third
party. Mr. Schweitzer related to the committee that he also had received a
call from the prospective buyer and that he had informed the prospective buyer
that it should make its offer to Homestead and to Security Capital, as
Homestead's majority stockholder, but that it was his understanding that
Security Capital would only be interested in contracting to sell its majority
interest for cash with no financing contingency.
On March 31, 2000, Homestead received an outline of a proposal to purchase
29 Homestead properties located in the Southwest for approximately $91.5
million, or approximately $65 million below the current book value for those
properties. The proposal was discussed by the Board at its April 19, 2000
meeting, and the Board instructed management to discuss the proposal further
with the potential purchaser.
During the first week of April, the special committee met three times to
consider proposals from four financial advisors to serve as financial advisor
to the special committee. On April 8, 2000, the special committee engaged
Stern Stewart to serve as financial advisor to the special committee.
From April 8, 2000 through May 2, 2000, the Homestead special committee and
its advisors reviewed certain public and non-public information with respect
to Homestead. During this time, Stern Stewart and the special committee held
discussions with the management of Homestead and with a representative of
Homestead's independent auditor, Arthur Andersen L.L.P., concerning the
business, financial condition and prospects of Homestead. They also obtained
from Homestead three year earnings projections prepared by Homestead's
management. In addition, the special committee and Stern Stewart met by
telephone on April 10, 2000, to discuss the methodologies and assumptions
Stern Stewart intended to use in its financial valuation of Homestead and the
principles it would apply in developing a range of values for Homestead's
shares to be used by the special committee in negotiations with Security
Capital.
At a meeting on April 19, 2000, the Homestead special committee and
representatives of King & Spalding and Stern Stewart met to discuss Stern
Stewart's preliminary findings in connection with its investigation of
Homestead and its preliminary assessment of a range of values of Homestead's
shares that the special committee could utilize to formulate a strategy to
develop a counter offer to Security Capital's offer of $3.40 per share in
future negotiations with Security Capital. Also, at the meeting King &
Spalding presented members of the special committee with a draft merger
agreement delivered to King & Spalding by special counsel to Security Capital.
Members of the special committee and King & Spalding discussed the provisions
of the draft agreement and proposed revisions.
At the April 19, 2000 meeting, the Homestead special committee also was
presented with a confidential non-binding offer to acquire between 51% and
100% of the shares of Homestead for $3.50 per share in cash from the
prospective strategic buyer who previously had contacted Homestead. The
special committee viewed the $3.50 per share price from an unaffiliated third
party to be a strong and independent indication of the realizable value of
Homestead's shares. Because consideration of the third-party offer was outside
the mandate of the special committee, the special committee determined to
communicate the offer to the Homestead Board of Directors at a meeting of the
Board later that day.
At the meeting of the Homestead Board on April 19, 2000 the special
committee reported to the Board that they had received the $3.50 offer from an
unaffiliated third party. In addition, Homestead's management presented the
Board with a proposal received by Homestead from another unaffiliated party to
acquire 29 of Homestead's properties. Members of the Homestead special
committee attending the Board meeting questioned C. Ronald Blankenship,
Interim Chairman and Chief Executive Officer of Homestead and Vice-Chairman
and Chief Operating Officer of Security Capital, about the effects on Security
Capital's $3.40 per share offer price if Homestead proceeded with the
divestiture of the 29 properties. Mr. Blankenship indicated that, assuming
that Homestead was able to sell the properties as outlined in the third-party
proposal, Security Capital might be willing to increase its offer price above
$3.40 by $.10 to $.25 in cash per share but that any such price increase would
be subject to approval of the full Board of Directors of Security Capital.
Security Capital informed the special committee by letter on April 25,
2000, that it was not interested in selling its stock in Homestead at $3.50
per share as outlined in the third-party offer. This message subsequently was
conveyed to the third-party's representative.
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On April 27, 2000, the special committee met telephonically with Stern
Stewart and King & Spalding to determine an appropriate price with which to
counter Security Capital's offer price of $3.40 per share. After consultation
with its advisors, the special committee determined that a price per share in
excess of $4.00 would be fair to and in the best interests of Homestead's
stockholders. Factors influencing the special committee's determination
included the advice of Stern Stewart, together with, among other things, the
following principal factors: (i) the recent third-party offer price of $3.50
per share for a controlling block of Homestead's common stock from an
unaffiliated third-party; and (ii) the historical operations of Homestead,
lack of development opportunities because of the unavailability of capital and
the absence of viable strategic alternatives, in spite of efforts made on
behalf of Homestead to seek such alternatives. See "-- Recommendation of the
special committee and the Board of Directors; Fairness of the Offer and the
Merger".
The special committee concluded its meeting by authorizing Mr. Vesell to
contact the appropriate representative at Security Capital and to negotiate a
final price of no less than $4.00 per share.
Subsequent to the Homestead special committee meeting on April 27, Mr.
Vesell contacted Mr. Blankenship and explained that the special committee
could not recommend a transaction at a price of $3.40. After negotiations, Mr.
Blankenship and Mr. Vesell agreed to a price of $4.10 per share in cash. Mr.
Vesell agreed to communicate this offer to the Homestead special committee.
Mr. Blankenship communicated the results of the negotiation to a special
committee established by the Security Capital Board to evaluate and approve
any modification to Security Capital's initial offer, and upon the
recommendation of Mr. Blankenship, Security Capital's special committee
approved the final offer price of $4.10 per share in cash on April 27.
From April 27, 2000 to May 2, 2000, King & Spalding and special counsel to
Security Capital finalized the specific terms and conditions of a merger
agreement at the direction of their respective clients.
On May 2, 2000, the Homestead special committee, together with
representatives of Stern Stewart and King & Spalding held a telephonic meeting
to discuss the $4.10 per share cash offer. A copy of the final version of the
merger agreement, the Stern Stewart fairness opinion and related analyses and
other materials had been delivered to the special committee prior the meeting.
The special committee discussed with its advisors the terms of the proposed
final draft of the merger agreement. Then Stern Stewart presented an analysis,
outlined in materials distributed to the special committee, of the $4.10 per
share cash offer and delivered an opinion that such consideration was fair,
from a financial point of view, to the holders of Homestead shares other than
Security Capital and its subsidiaries. The special committee discussed the
$4.10 per share cash offer in detail and questioned Stern Stewart regarding
certain aspects of its valuation methodology and analysis. Based upon the
opinion delivered to the special committee by Stern Stewart at the May 2
meeting, and the other factors described below in "-- Recommendation of the
special committee and the Board of Directors," the Homestead special committee
unanimously determined (i) that the tender offer, the merger, the merger
agreement and the transactions contemplated thereby were advisable, fair to
and in the best interests of Homestead and its stockholders and (ii) to
recommend to the full Homestead Board that the Board recommend to Homestead's
stockholders acceptance of the tender offer and approval of the merger.
Immediately after the Homestead special committee meeting on May 2, 2000,
all of the members of the Homestead Board of Directors met to receive the
recommendations of the special committee. At this meeting, Mr. Vesell,
Chairman of the Homestead special committee, gave the report of the special
committee in which the special committee found the tender offer, the merger,
the merger agreement and the transactions contemplated thereby to be
advisable, fair, and in the best interests of Homestead and its stockholders
and unanimously recommended to the Board of Directors that the Board approve,
accept and declare advisable the tender offer, the merger, the merger
agreement and the transactions contemplated thereby. At the Board meeting,
King & Spalding summarized the terms of the merger agreement and the
negotiations regarding certain significant terms. King & Spalding also advised
the Board of its legal duties in evaluating and approving Security Capital's
offer. In addition, Stern Stewart summarized its presentation given to the
Homestead special committee on May 2, 2000 for the Homestead Board of
Directors, and advised the Board that it had rendered an opinion that the
$4.10 per share cash offer was fair, from a financial point of view, to the
holders of Homestead shares other than Security
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Capital and its affiliates. After hearing the recommendations of the special
committee, each member of the Board of Directors (other than Messrs.
Blankenship and Frazee who abstained because of their positions with Security
Capital) (i) determined that the tender offer, the merger, the merger
agreement and the transactions contemplated thereby were advisable, fair to
and in the best interests of Homestead and its stockholders and (ii)
recommended that Homestead's stockholders accept the tender offer and approve
the merger.
On May 2, 2000, Security Capital, Purchaser and Homestead entered into the
merger agreement. Security Capital and Homestead also issued a joint press
release during business hours announcing the transactions, including the
execution of the merger agreement. A copy of this press release is included as
Exhibit (a)(8) to the Schedule TO and is incorporated herein by reference.
II. Purpose of, Alternative to, Reasons for and Effects of the Tender Offer
and the Merger
Purpose, Alternative and Reasons. The purpose of the tender offer and the
merger is to enable Security Capital to acquire control of the entire equity
interest in Homestead. Security Capital's current intention is to retain the
Homestead shares that it acquires in the tender offer and the merger. If the
tender offer is completed, Homestead will merge with Purchaser. Homestead will
continue as the surviving corporation. Security Capital will own, indirectly,
100% of Homestead. Other than as described herein, Security Capital has no
current plans to sell the Homestead shares or the assets of Homestead that it
acquires in the tender offer or merger; however, from time to time, as
conditions warrant, Security Capital may dispose of all or any portion of the
Homestead shares or the assets of Homestead. See "THE MERGER AGREEMENT AND THE
MERGER --Plans for Homestead".
The two-step tender offer-and-merger structure has been used in lieu of the
alternative one-step merger structure because Security Capital believes that
the two-step structure can be completed more quickly than a one-step merger
transaction. Security Capital believes that the acquisition of Homestead is
appropriate at this time because it will best position Homestead to pursue
future business and growth opportunities, maximize the value of Homestead and
best serve the interests of Homestead and its stockholders.
Effects. When the merger is completed, Homestead will be an indirect wholly
owned subsidiary of Security Capital. It is Security Capital's intention that
Homestead's existing Board of Directors will continue to serve as Homestead's
Board of Directors.
Following completion of the tender offer and the merger, Security Capital's
and its subsidiaries' combined interest in Homestead's net book value and net
earnings or loss will increase from approximately 87% to 100%. According to
Homestead's Form 10-K for the year ended December 31, 1999, 100% of
Homestead's net book value as of December 31, 1999, was approximately $608
million (which means that 87% was approximately $529 million), and 100% of
Homestead's net loss for the year ended December 31, 1999 was approximately
$72 million (which means that 87% was approximately $62 million). In addition,
on May 2, 2000 Homestead issued a press release announcing its earnings for
the first quarter of 2000 (the "First Quarter Press Release") and according to
this release, 100% of Homestead's net book value as of March 31, 2000, was
approximately $617 million (which means that 87% was approximately $537
million), and 100% of Homestead's net earnings for the quarter ended March 31,
2000 was approximately $8.5 million (which means that 87% was approximately
$7.4 million). Security Capital and its subsidiaries will be entitled to all
of the benefits of owning 100% of Homestead, including all income generated by
Homestead's operations, any future increase in Homestead's value and the right
to elect all members of the Homestead Board of Directors. Similarly, Security
Capital will also bear the risk of losses resulting from Homestead's
operations and from any decline in the value of Homestead after the merger.
Under Homestead's amended and restated bank credit facility Homestead is
permitted to pay dividends based upon a definition of free cash flow. Security
Capital intends to cause Homestead to begin payment of dividends after closing
of the merger.
Following completion of the tender offer and the merger, Security Capital
will cause the Homestead shares to be delisted from the NYSE and Homestead
will be a privately held corporation. Accordingly, current Homestead
stockholders who are not affiliated with Security Capital will not have the
opportunity to participate
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in the earnings and growth of Homestead and will not have any right to vote on
corporate matters. Similarly, after completion of the merger, former
stockholders will not face the risk of losses resulting from Homestead's
operations or from any decline in the value of Homestead.
Material United States Federal Income Tax Effects. Your receipt of cash for
Homestead shares in the tender offer or the merger will be a taxable
transaction for United States federal income tax purposes and may also be a
taxable transaction under applicable state, local, foreign and other tax laws.
For United States federal income tax purposes, if you sell or exchange your
Homestead shares in the tender offer or the merger, you would generally
recognize gain or loss equal to the difference between the amount of cash
received and your tax basis for the Homestead shares that you sold or
exchanged. That gain or loss will be capital gain or loss (assuming you hold
your Homestead shares as a capital asset), and any such capital gain or loss
will be long term if, as of the date of sale or exchange, you have held the
Homestead shares for more than one year or will be short term if, as of such
date, you have held the Homestead shares for one year or less.
The discussion above may not be applicable to certain types of
stockholders, including stockholders who acquired Homestead shares through the
exercise of employee stock options or otherwise as compensation, individuals
who are not citizens or residents of the United States, foreign corporations,
or entities that are otherwise subject to special tax treatment under the
Internal Revenue Code of 1986, as amended (such as insurance companies, tax-
exempt entities and regulated investment companies).
The United States federal income tax discussion set forth above is included
for general information only. You are urged to consult your tax advisor with
respect to the specific tax consequences to you of the tender offer and
merger, including United States federal, state and local and foreign tax
consequences.
III. Fairness of the Tender Offer and the Merger
Security Capital and Purchaser believe that the consideration to be
received in the tender offer and the merger by the Homestead stockholders that
are unaffiliated with Security Capital is fair (both in terms of price and
procedure) to those stockholders. All of the members of the Security Capital
board have voted in favor of the transaction, other than C. Ronald
Blankenship, John P. Frazee, Jr., Hermann Buerger, Peter S. Willmot and
William D. Sanders who abstained because of either their positions as officers
or directors of Homestead or their ownership interests in Homestead shares or
in Mr. Buerger's case because of his affiliation with a lender to Homestead.
Security Capital and Purchaser base their belief on the following:
. after a thorough review with independent financial and legal advisors,
the Homestead special committee concluded that the tender offer and the
merger are fair to, advisable and in the best interests of Homestead and
its stockholders, and approved the tender offer and the merger
agreement;
. based upon the recommendation of the Homestead special committee and
other considerations, the Homestead Board of Directors, other than those
directors who abstained because of their positions with Security
Capital, determined that the tender offer and the merger are fair to,
advisable and in the best interests of Homestead stockholders, and
unanimously approved the tender offer and the merger agreement;
. on May 2, 2000, the Homestead special committee received a written
fairness opinion from Stern Stewart that, subject to the various
assumptions and limitations set forth in that opinion, as of the date
thereof, the $4.10 per Homestead share in cash to be received by
Homestead stockholders (other than Security Capital, Purchaser, or
Homestead and their respective wholly owned subsidiaries) in the tender
offer and the merger was fair to Homestead stockholders from a financial
point of view;
. for over two weeks, the merger agreement was negotiated at arm's length
with the Homestead special committee, which acted independently, with
the assistance of financial and legal advisors and on behalf of
Homestead stockholders unaffiliated with Security Capital;
. Homestead's historical financial performance;
. Homestead stockholders will receive $4.10 per Homestead share;
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. the cash consideration of $4.10 per share to be paid in the tender offer
and the merger represents a premium of approximately 52.4% above the
closing price of Homestead shares on the day Security Capital announced
its initial proposal to acquire Homestead and a premium of approximately
69.5% above the average of the closing prices of Homestead shares over
the 20 trading days immediately before Security Capital publicly
announced the proposal to acquire Homestead;
. the consideration to be paid to Homestead stockholders is entirely in
cash; and
. Security Capital's internal financial analysis, which included a review
of management projections (as described on pages 36 and 37) and a review
of Chase Securities' analysis (as described on pages 18 through 21) of
comparable public companies, analysis of historical prices of Homestead
shares, historical comparable transaction prices, net asset values of
Homestead's peer group, as well as a discounted cash flow analysis to
determine the value of Homestead shares. Security Capital views the
estimated valuation ranges on pages through as supporting the
fairness of the tender offer and the merger to stockholders that are
unaffiliated with Security Capital, even though Chase Securities was not
asked to, and did not, express any opinion as to the fairness of the
consideration from a financial point of view to Security Capital or
Homestead.
Security Capital and Purchaser did not find it practicable to assign, nor
did they assign, relative weights to the individual factors considered in
reaching their conclusion as to fairness. In light of market valuation
measures and the nature of Homestead's business and assets, Security Capital
and Purchaser did not deem net book value or liquidation value to be relevant
indicators of the value of Homestead shares. The merger can be completed
without the approval of any of the Homestead stockholders that are
unaffiliated with Security Capital.
IV. Recommendation of the Special Committee and the Board
On May 2, 2000, the Homestead special committee unanimously determined that
each of the tender offer, the merger, the merger agreement and the
transactions contemplated thereby is advisable, fair to and in the best
interest of Homestead and its stockholders, and unanimously determined to
recommend to Homestead's Board of Directors that the Board approve, accept and
declare advisable the tender offer, the merger, the merger agreement and the
transactions contemplated thereby. At a meeting held on May 2, 2000, each
member of the Board (other than Messrs. Blankenship and Frazee who abstained
because of their positions with Security Capital) determined (i) to accept the
special committee's recommendation, (ii) that each of the tender offer, the
merger, the merger agreement and the transactions contemplated thereby is
advisable, fair to and in the best interests of Homestead and its
stockholders, (iii) to accept and approve the tender offer, the merger, the
merger agreement and the transactions contemplated thereby, and (iv) to
recommend that Homestead's stockholders (other than Security Capital and its
affiliates) accept the tender offer and tender their Homestead shares and that
Homestead's stockholders approve and adopt the merger and the merger
agreement.
The Special Committee. In reaching the conclusions described above, the
Homestead special committee considered a number of factors, including but not
limited to the following:
. the opinion of Stern Stewart that, based upon and subject to the
assumptions and limitations set forth therein, the $4.10 per share cash
consideration to be received by the holders of Homestead shares other
than Security Capital and its affiliates in the tender offer and the
merger is fair from a financial point of view to such stockholders, see
"-- Reports, Opinions and Appraisals";
. various valuation analyses employed by Stern Stewart in making its
determination as to the fairness of the $4.10 per share cash
consideration including the historical stock trading and premium
analysis, the discounted EVA(R) and cash flow valuations, peer companies
analysis, selected transactions analysis, industry sale and leaseback
analysis and Homestead sale and leaseback analysis, see "--Background of
the Tender Offer and the Merger Agreement" and "-- Reports, Opinions and
Appraisals";
. the fact that the terms of the tender offer and the merger were
determined through arm's-length negotiations between Security Capital
and the independent special committee and its financial and legal
advisors, and the judgment of the special committee that, based upon the
negotiations that had transpired, it was unlikely that a price higher
than $4.10 per share could be obtained;
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. Homestead's business, financial condition, results of operations,
prospects, current business strategy, competitive position in its
industry and general economic and stock market conditions and a review
of the projections prepared by Homestead management, as extended by
Stern Stewart (as described on page 17;
. the historical market prices of Homestead's common stock and recent
trading activity of Homestead's common stock, including the fact that
the $4.10 per share cash price represents a premium in excess of 52%
over the closing sale price on the NYSE on March 23, 2000, the last full
trading day prior to the announcement by Security Capital and Homestead
of Security Capital's offer to purchase the remaining Homestead shares
not held by Security Capital or its affiliates;
. Security Capital's ownership of approximately 87% of the currently
outstanding common stock of Homestead and the effects of such ownership
on the alternatives available to Homestead;
. the relatively thin trading market and the lack of liquidity of
Homestead's shares and the lack of success, due to the relatively small
market capitalization, in attracting institutional investors to invest
in, or research analysts to report on, Homestead;
. the fact that there was no financing contingency to the tender offer or
the merger and the fact that Security Capital has the financial
resources to consummate the tender offer and the merger expeditiously;
. the fact that, although the merger agreement does not permit the special
committee to solicit competing proposals, the merger agreement permits
Homestead's Board of Directors and the special committee, in the
exercise of their fiduciary duties, to withdraw their recommendation of
the tender offer and the merger, and to terminate the merger agreement
upon the receipt of a superior proposal, provided that Homestead pays
Security Capital's reasonable fees and expenses incurred in connection
with the merger agreement;
. the fact that the consideration to be paid in the tender offer and the
merger to holders of Homestead's common stock is all cash;
. the fact that the transaction has been structured to include a first-
step cash tender offer for all of the outstanding Homestead shares,
thereby enabling stockholders who tender their shares of common stock to
promptly receive $4.10 per share in cash, and the fact that any public
stockholders who do not tender their shares will receive the same cash
price per share in the subsequent merger;
. Homestead's prior unsuccessful efforts to solicit bids for Homestead
from strategic or financial buyers at a price of between $2.75 and $3.00
per share;
. the conditional third-party offer price of $3.50 per share for 51%-100%
of Homestead's common stock;
. the value of Homestead's pre-consolidation net operating losses to
Homestead's stockholders;
. the lack of meaningful participation by the stockholders of Homestead
other than Security Capital in Homestead's 1999 rights offering at a
price of $2.75 per share;
. the lack of dissenter's rights with respect to the merger for holders of
Homestead shares unless Homestead's shares are delisted from the NYSE
prior to the merger; and
. the possible conflicts of interest of certain directors and members of
management of both Homestead and Security Capital discussed below under
"-- Interests of Certain Persons."
Homestead Board. In reaching its determinations referred to above, the
Homestead Board of Directors considered the following factors, each of which,
in the view of the Board, supported such determinations: (i) the conclusions
and recommendations of the Homestead special committee; (ii) the factors
referred to above as having been taken into account by the special committee,
including the receipt by the special committee of the opinion of Stern Stewart
that, based upon and subject to the assumptions stated therein, the $4.10 per
share cash price to be received by the holders of Homestead shares (other than
Security Capital and its subsidiaries) in the tender offer and the merger is
fair from a financial point of view to such holders, and the analysis
presented by Stern Stewart to the Homestead Board; and (iii) the fact that the
$4.10 per share price and the terms and conditions of the merger agreement
were the result of arm's-length negotiations between the independent special
committee and Security Capital.
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<PAGE>
The members of the Homestead Board of Directors, including the members of
the special committee, evaluated the tender offer and the merger in light of
their knowledge of the business, financial condition and prospects of
Homestead, and based upon the advice of financial and legal advisors.
Homestead's Board, including the members of the special committee, believes
that the tender offer and merger are procedurally fair because, among other
things: (i) the Homestead special committee consisted of independent directors
appointed to represent the interests of Homestead's stockholders; (ii) the
special committee retained and was advised by its own independent legal
counsel; (iii) the special committee retained and was advised by Stern
Stewart, as its independent financial advisor, to assist it in evaluating a
potential transaction with Security Capital and Purchaser; (iv) the nature of
the deliberations pursuant to which the special committee evaluated the tender
offer and the merger; and (v) the fact that the $4.10 per share cash price
resulted from active arm's-length bargaining between representatives of the
special committee, on the one hand, and representatives of Security Capital,
on the other.
The Homestead Board of Directors and special committee recognized that the
merger is not structured to require the approval of a majority of the
stockholders of Homestead other than Security Capital, and that Security
Capital currently has sufficient voting power to approve the merger without
the affirmative vote of any other stockholder of Homestead.
The Homestead special committee and Board also recognized that, while
consummation of the tender offer and the merger will result in all
stockholders (other than Security Capital and its subsidiaries) being entitled
to receive $4.10 in cash for each of their shares, it will eliminate the
opportunity for current stockholders (other than Security Capital and its
subsidiaries) to participate in the benefit of increases, if any, in the value
of Homestead's business following the Merger. Nevertheless, the special
committee and the Board concluded that this fact did not justify foregoing the
receipt of the immediate cash premium represented by the $4.10 per share cash
price.
Neither the special committee nor the Board considered the liquidation of
Homestead's assets and neither considered liquidation to be a viable course of
action based on Security Capital's desire for Homestead to continue to conduct
its business as a subsidiary of Security Capital. Therefore, no appraisal of
liquidation values was sought for purposes of evaluating the tender offer and
the merger.
In view of the wide variety of factors considered in connection with their
evaluation of the tender offer and the merger, neither the Homestead special
committee nor the Homestead Board found it practicable to, and did not,
qualify or otherwise attempt to assign relative weights to the specific
factors they considered in reaching their determinations.
The foregoing discussion of the information and factors considered and
given weight by the Homestead special committee and Board is not intended to
be exhaustive, but is believed to include all material factors considered by
the special committee and Board.
Homestead's Board of Directors, based upon the unanimous recommendation of
the special committee, (a) determined that each of the offer, the merger, the
merger agreement and the transactions contemplated thereby is advisable, fair
to and in the best interests of Homestead's stockholders, and (b) recommends
that Homestead's stockholders accept the offer and approve the merger.
V. Reports, Opinions and Appraisals
Opinion of Stern Stewart
Stern Stewart was retained to act as financial advisor to the Homestead
special committee in connection with the acquisition by Security Capital of
the outstanding Homestead shares owned by stockholders of Homestead other than
Security Capital and its subsidiaries. Pursuant to Stern Stewart's engagement
letter with the independent directors of Homestead, dated April 8, 2000, Stern
Stewart rendered an oral opinion to the
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<PAGE>
special committee on May 2, 2000, which opinion was confirmed in writing on
May 2, 2000, to the effect that, based upon and subject to the considerations
and limitations set forth in the opinion, its work described below and other
factors it deemed relevant, as of that date, the consideration to be paid to
the holders of Homestead shares (other than Security Capital and its
subsidiaries) in the tender offer and merger was fair, from a financial point
of view, to such holders.
The full text of the Stern Stewart opinion, which sets forth the
assumptions made, general procedures followed, matters considered, and
limitations on the review by Stern Stewart is included as exhibit (C)(1) to
the Schedule TO and also as Annex A to Homestead's Solicitation/Recommendation
Statement on Schedule 14D-9, which is being mailed with this Offer to
Purchase. A copy of the Stern Stewart opinion also is available for inspection
and copying by any holder of Homestead shares or any representative of such
holder who has been so designated in writing, at the principal executive
offices of Homestead during normal business hours. Stern Stewart's written
opinion is addressed to the special committee, is directed only to the
fairness, from a financial point of view, of the cash consideration to be paid
to holders of Homestead shares other than Security Capital and its
subsidiaries, and does not constitute a recommendation to any Homestead
stockholder as to whether such stockholder should tender its shares in the
tender offer. The summary of Stern Stewart's opinion set forth below is
qualified in its entirety by reference to the full text of the opinion.
Stockholders are urged to read Stern Stewart's opinion carefully and in its
entirety.
In connection with its opinion, Stern Stewart: (i) reviewed financial and
other information that was publicly available or furnished by Homestead,
including information provided during discussions with management; (ii)
studied and analyzed forward looking projections provided by Homestead; (iii)
reviewed Homestead's assumptions and projections and, based on information
provided by management, made certain assumptions to reflect positive variances
from budget in Homestead's performance in the first quarter of 2000 and
revised these forward-looking projections; (iv) incorporated discounted EVA(R)
and discounted cash flow valuation analyses and methodologies; (v) became
familiar to the extent appropriate and feasible with the financial and
operating performance, current financial condition, business, and prospects of
Homestead and reviewed other company-specific and industry-related
information; (vi) compared certain financial data of Homestead with various
industry reports and conducted such other reviews and evaluations of industry
data and reports deemed appropriate for the purposes of this opinion; (vii)
discussed the past and current operations, financial condition and prospects
of Homestead with management of Homestead; (viii) prepared sensitivity
analyses of the financial impact that changes in the assumptions used in
financial forecasts have on the value of Homestead; (ix) reviewed publicly
available information regarding the financial terms of certain comparable
transactions, in whole or in part, to the merger; (x) reviewed the reported
stock prices and historical trading activity of Homestead common stock; (xi)
compared the financial performance and condition of Homestead and the reported
prices and trading activity of Homestead's common stock with those of certain
other comparable publicly traded companies; and (xii) performed such other
analyses as Stern Stewart deemed appropriate for purposes of arriving at and
preparing the Stern Stewart opinion.
Stern Stewart relied, without independent verification, upon the accuracy
and completeness of all of the financial and other information that was
reviewed by Stern Stewart for the purposes of the opinion. With respect to
financial projections and assumptions provided by Homestead, Stern Stewart
assumed that such financial projections were reasonably prepared on bases
reflecting the best currently available estimates and good faith judgment of
Homestead's management. Stern Stewart expresses no view as to, and assumes no
responsibility for, such projections or the assumptions on which they are
based. Stern Stewart further assumed that obtaining any necessary regulatory
or third-party approvals for the transactions contemplated by the merger
agreement will not have an adverse effect on Homestead. Stern Stewart did not
make an independent evaluation or appraisal of the assets and liabilities of
Homestead and Stern Stewart was not furnished with any such evaluation or
appraisal. The Stern Stewart opinion was necessarily prepared and delivered
based on economic, market and other conditions as in effect prior to, and the
information made available to Stern Stewart as of, May 2, 2000. Although
subsequent developments may affect the Stern Stewart opinion, Stern Stewart
does not have any obligation to update, revise, or reaffirm its opinion.
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<PAGE>
The following is a summary of certain of the financial analyses used by
Stern Stewart believed by it tobe material in connection with providing its
oral opinion (subsequently confirmed in writing) to the special committee on
May 2, 2000.
Historical Stock Trading and Premium Analysis. Stern Stewart reviewed the
trading history of Homestead's shares over the 52-week period preceding the
date of execution of the merger agreement. Homestead's 52-week low stock price
was $1.88 and the 52-week high was $5.13. The 52-week high was reached on May
3, 1999, the same date as the announcement by Homestead management that they
were in discussions regarding a potential business combination with an
unaffiliated third party. The 52-week stock price high is an outlier and not a
reasonable estimate of Homestead's 52-week trading range. The range would be
significantly lower if the stock prices surrounding management's announcement
of a potential business combination were removed from the analysis.
Stern Stewart reviewed the historical trading prices for Homestead shares
and the relationship between movements of Homestead's common stock and
movements in the common stock of selected peers in the extended stay lodging
industry, the S&P Hotel Index, and in the S&P 500 Index. The peer companies
used in the analysis were Candlewood Hotel Company, Inc., Extended Stay
America, and Suburban Lodges of America, Inc. The peer companies were selected
because they are publicly traded extended stay lodging companies. For the
prior twelve months, thirty-six months, and forty-three months ended April 30,
2000, the total return to Homestead's stockholders underperformed both the
portfolio of peer companies and the S&P 500 and underperformed the S&P Hotel
Index for the prior thirty-six months and forty-three months. The total return
to Homestead's stockholders for the prior twelve months through April 30, 2000
was -18.8%, whereas the total return for peer companies including dividends
was -17.2%, the S&P Hotel Index total return including dividends was -36.9%,
and the S&P 500 appreciated 7.3% including dividends. The compound annual
return to Homestead's stockholders for the prior thirty-six months through
April 30, 2000 was -43.3%, whereas the compound annual returns of the peer
companies, the S&P Hotel Index and the S&P 500 were -22.6%, -13.6%, and 20.9%,
respectively. The compound annual return to Homestead's stockholders, for the
prior forty-three months through April 30, 2000 (representing the period since
Homestead's common stock began publicly trading) was -37.9%, whereas the
compound annual returns of the peer companies, the S&P Hotel Index, and the
S&P 500 were -25.8%, -10.4%, and 23.0%, respectively.
Stern Stewart also compared the consideration of $4.10 per share in cash to
be paid pursuant to the merger agreement with the closing stock price of
Homestead shares of $2.69 on March 23, 2000 (the last trading day before the
public announcement of Security Capital's offer of $3.40 per share). The $4.10
per share price to be paid pursuant to the merger agreement represented a
52.6% premium to the closing price of Homestead's common stock on March 23,
2000. This premium compares to a range of premiums from 17.7% to 35.9% in
comparable lodging transactions in 1998 and 1999.
Discounted EVA and Discounted Cash Flow Valuations. EVA is calculated as
the net operating profit after tax ("NOPAT") of an enterprise minus an
appropriate charge for the opportunity cost of all capital invested in such
enterprise. As such, EVA is an estimate of the "economic" profit, or the
amount by which earnings exceed or fall short of the required minimum rate of
return that equityholders and lenders could get by investing in other
securities of comparable risk. By taking all capital costs into account,
including the cost of equity, EVA is designed to reflect profit from an
equityholder's perspective. For instance, if the equityholders expect a 10%
return on their investment, their investment will be profitable only if their
share of after-tax operating profits exceeds 10% of their invested equity
capital. Adding the present value of future EVA to the capital invested in a
company determines a company's fair market value.
Stern Stewart used its proprietary EVA framework in performing discounted
EVA and discounted EVA improvement valuations of Homestead shares based on
projections developed by Homestead and extended by Stern Stewart with certain
adjustments by Stern Stewart. See"--Projections." Stern Stewart also performed
a discounted cash flow valuation of Homestead common stock. In performing its
discounted EVA and discounted cash flow analyses, Stern Stewart evaluated
various assumptions that it deemed appropriate based on a review
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<PAGE>
with Homestead management. Stern Stewart used weighted average cost of capital
discount rates ranging from 7.8% to 8.7% to determine the net present value
per share of Homestead. Stern Stewart estimated these weighted average cost of
capital discount rates based on a comparison of other peer companies, adjusted
to reflect an estimate of Homestead's weighted average interest rate on
outstanding debt and the amount of such outstanding debt. Stern Stewart
calculated terminal values at the end of year 2009 based on 2009 projected
free cash flow and EVA and using inflationary growth.
Stern Stewart analyzed Homestead's historical financial performance for the
years 1996 through 1999, and compared historical performance to management's
projections for the years 2000 through 2002. Stern Stewart analyzed net
operating income and EBITDA margins, occupancy rates, and capital expenditures
of Homestead historically from years 1996 through 1999, and compared them with
Homestead's projections for the years 2000 through 2002. Stern Stewart
extended management's projections from 2003 through 2009 based on trends in
years 2000 through 2002. Based on the foregoing, in Stern Stewart's judgment,
this analysis yielded a range of net present values of $3.76 to $4.85 per
share for Homestead.
In its EVA valuation, Stern Stewart calculated current operations value
(defined as (i) current EVA divided by the cost of capital plus (ii) total EVA
capital) and the present value of the future growth in EVA of Homestead based
on Homestead's management projections. At the $4.10 merger consideration,
Homestead's growth value as a percentage of total market value is 48.6%,
implying that almost half of the total value of Homestead is dependent upon
future improvements in EVA over and above the current level. Stern Stewart
then analyzed the growth value as a percentage of total market value for the
peer companies, and compared it to Homestead's percentage growth value implied
in the pre-offer price per share of $2.69. The percentage growth value for the
peer companies ranged from -42.9% to 27.8% with a median of 10.4%, as compared
to Homestead's implied percentage growth value of 37.6% at the pre-offer price
of $2.69. The 48.6% percentage growth value for Homestead implicit in the
$4.10 price is significantly above the peer companies' median of 10.4%. The
implied price per share based on the Discounted Cash Flow and Discounted EVA
valuations ranged from $3.76 to $5.45.
Peer Companies Analysis. Stern Stewart reviewed certain actual and
estimated financial information relating to Homestead and compared such
information to corresponding financial information, ratios, and public market
multiples for the peer companies. Stern Stewart calculated and compared
various financial multiples and ratios for Homestead and each of the peer
companies. The multiples and ratios of the peer companies were calculated
using closing market prices on April 30, 2000, publicly reported financial
results, and publicly available information and estimates.
Stern Stewart calculated for the peer companies the total enterprise value
(defined as equity value (share price times latest reported total shares
outstanding), plus the value of outstanding warrants, plus debt including the
present value of operating leases, plus preferred stock and minority
interests, less non-operating assets) as a multiple of last twelve months
sales, last twelve months earnings before interest, taxes, depreciation, and
amortization ("EBITDA"), and last reported book value (defined as book value
of equity plus book value of debt plus book value of minority interests plus
book value of preferred equity). Stern Stewart's analysis for the peer
companies indicated multiples of total enterprise value to sales which ranged
from 1.8 to 4.7, with a median of 4.1, compared to 3.6 for Homestead at a pre-
offer price of $2.69; multiples of total enterprise value to latest twelve
months EBITDA which ranged from 4.4 to 11.8, with a median of 8.2, compared to
8.7 for Homestead; multiples of total enterprise value to book value which
ranged from 0.60 to 1.01, with a median of 0.96, compared to 0.75 for
Homestead. In determining Homestead's trading multiples, excess cash,
marketable securities, present value of the net operating loss tax savings and
the estimated proceeds of the land sales have been included in the
determination of the multiple.
Stern Stewart applied the median multiples of the peer companies to the
Homestead actual 1999 results and to the financial forecast prepared by
management for 2000 to arrive at a range of imputed equity values per share.
The implied price per share based on peer multiples analysis ranged from $2.69
using median peer enterprise value to EBITDA of 8.2x and Homestead 1999 EBITDA
to $3.94 using peer median enterprise value to sales of
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<PAGE>
4.1x and Homestead 1999 sales. Stern Stewart also calculated the
aforementioned multiples based upon the $4.10 price and determined that the
multiples implied by such price for sales and EBITDA were meaningfully above
the median of peer companies and the multiple for book value slightly below
the median of peer companies.
Selected Transactions Analysis. Stern Stewart analyzed certain information
relating to five comparable merger and acquisition transactions in the lodging
industry from January 1998 to September 1999. The analyses indicated, among
other things, that the multiples of transaction value to last twelve months
sales ranged from 2.1 to 6.3, with a median of 3.9; and the multiples of
transaction value to latest twelve months EBITDA ranged from 6.2 to 13.7, with
a median of 9.0. Using the $4.10 price, the implied multiples of the
transaction value to 1999 sales and 1999 EBITDA of Homestead were above the
median for the comparable transactions. The implied price per share based on
the comparable transactions median multiple of 9.03x enterprise value of
EBITDA ranged from $3.37 using Homestead 1999 EBITDA to $4.63 using Homestead
projected 2000 EBITDA. The implied price per share based on the comparable
transactions median multiple of 3.94x enterprise value to sales ranged from
$3.65 using Homestead 1999 sales to $4.17 using Homestead projected 2000
sales. The implied price per share based on the comparable transactions median
multiple of 1.34x enterprise value to total book value ranged from $7.93 using
the Homestead projected 2000 year-end total book value to $8.51 using
Homestead 1999 year-end total book value.
Enterprise value to total book value ratios compare a firm's total market
value to its accounting book value. Book value is measured at historical cost,
net of accumulated depreciation, with assets being depreciated over their
useful lives. In the real estate industry, book value is neither an accurate
measure of liquidation value nor replacement value as real estate assets can
appreciate rather than depreciate. In the case of Homestead, most assets are
new and thus not as highly depreciated as other assets in the industry.
Additionally, comparing enterprise value to total book value ratios across
companies in recent transactions is not very useful, as the profitability of
hotels in different segments of the lodging industry vary. Book value ratios
do not differentiate for the differences in the profitability or the magnitude
of the cash flows of a company's underlying assets. In contrast, determining
the value of Homestead using the selected multiples of enterprise value to
sales and EBITDA provides a better estimate of the value. Sales and EBITDA are
better measures of value because sales differentiates for the total level of
income generated by the underlying assets and EBITDA differentiates for the
level of profitability and the magnitude of the cash flows generated by the
underlying assets.
Stern Stewart also compared premiums paid over closing prices of target
companies five trading days prior to announcement of the comparable
transactions to the 52.6% premium implicit in the $4.10 price. The 52.6%
premium implicit in the $4.10 price is substantially above the premiums
implicit in the comparable transactions.
Industry Sale and Leaseback Analysis. Stern Stewart conducted an analysis
of six sale and leaseback transactions in the extended stay lodging industry
between January 1998 and February 1999. Stern Stewart used publicly available
data to determine total transaction value and the number of rooms sold in each
transaction. A sale price per room was calculated for each of the transactions
and for the entire portfolio of transactions to arrive at a weighted mean
sales price per room of $57,811. The purchase price of $145 million for the
Homestead properties sold in the February 1999 sale and leaseback arrangement
("S&L Properties") with Hospitality Properties Trust ("HPT") and the estimated
proceeds from a separate sale of 29 Homestead properties ("29 Properties") was
added to the implied value of the properties excluding the S&L Properties and
the 29 Properties. The value of the properties excluding the S&L Properties
and 29 Properties was calculated using the weighted mean sales price per room
multiplied by the number of rooms. It was noted by Stern Stewart that the
$4.10 price is above the value implied by the industry sale and leaseback
analysis. The implied price per share based on industry S&L transactions
ranged from $4.06 using the baseline valuation for the 29 Properties to $4.20
using a valuation of 120% of the baseline valuation for the 29 Properties.
Homestead Sale and Leaseback Analysis. Stern Stewart also analyzed the
valuation of properties implied by the HPT sale and leaseback transaction in
February 1999. The purchase price of $145 million for the Homestead S&L
Properties sold in the 1999 sale and leaseback arrangement to HPT and the
estimated proceeds from the sale of the 29 Properties was added to the implied
value of the properties excluding the S&L Properties
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and 29 Properties. The value of the properties excluding the 29 Properties and
S&L portfolios was calculated using the HPT sales price per room of $60,091,
multiplied by the number of rooms in the remaining portfolio. It was noted by
Stern Stewart that the $4.10 price is slightly below the value implied by the
HPT sale and leaseback analysis. The implied price per share based on the
Homestead S&L transaction ranged from $4.29 using the baseline valuation for
the 29 Properties to $4.20 using a valuation of 120% of the baseline valuation
for the 29 Properties.
Projections
Stern Stewart reviewed three-year projections prepared by Homestead's
management as part of its engagement. Stern Stewart used these projections to
extrapolate a 10 year projection of operating performance (the "Initial
Extended Forecast"). As it became available, management provided Stern Stewart
with information concerning the improvement of its first quarter operating
results over projected results. Stern Stewart used this information, revised
its forecast and generated a revised extended forecast (the "Revised Extended
Forecast"). In addition, to account for Homestead's net operating losses,
Stern Stewart modified management's assumptions as they relate to the payment
of taxes, which affected net income. The charts below set forth the Initial
Extended Forecast and Revised Extended Forecast of Homestead's total revenue,
operating profit and net income.
Homestead Village Incorporated
Initial Extended Forecast
<TABLE>
<CAPTION>
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
-------- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total Revenue........... $241,490 248,514 236,074 261,734 267,520 273,434 279,480 285,660 291,978 298,437
Operating Profit........ 65,933 68,220 72,061 74,069 76,142 78,261 80,428 82,642 84,906 87,220
Net Income.............. 14,432 16,676 19,033 20,254 21,519 22,812 24,133 25,484 26,865 28,277
</TABLE>
Revised Extended Forecast
<TABLE>
<CAPTION>
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
-------- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total Revenue........... $244,649 254,186 261,646 269,226 277,015 283,140 289,402 295,803 302,346 309,035
Operating Profit........ 68,619 73,036 76,800 80,440 84,199 86,476 88,803 91,183 93,615 96,101
Net Income.............. 16,070 19,613 21,924 24,141 26,434 27,823 29,242 30,694 32,177 33,694
</TABLE>
Management's three-year projections used by Stern Stewart to generate the
Initial Extended Forecast and the Revised Extended Forecast were regularly
prepared projections of Homestead's operating performance prepared by
management in the course of budgeting. Homestead did not prepare these
projections with a view to public disclosure or compliance with published
guidelines of the SEC or the guidelines established by the American Institute
of Certified Public Accountants regarding projections. Although presented with
numerical specificity, Homestead's projections are based upon a variety of
assumptions relating to the business of Homestead which may not be realized
and are subject to significant uncertainties and contingencies, many of which
are beyond the control of us and Homestead. There can be no assurance that
Homestead's projections will be realized, and actual results may vary
materially from those shown.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. Selecting
portions of the analyses or of the summary set forth above, without
considering the analyses as a whole, could create an incomplete view of the
processes underlying the Stern Stewart opinion. In arriving at its fairness
determination, Stern Stewart considered the results of all such analyses,
taken as a whole. Furthermore, in arriving at its fairness opinion, Stern
Stewart did not attribute any particular weight to any analysis or factor
considered by it; rather, Stern Stewart made its determination as to fairness
on the basis of qualitative judgments as to the significance and relevance of
the financial and comparative analyses
17
<PAGE>
and factors described above, taken as a whole. No company or transaction used
in the above analyses as a comparison is identical to Homestead or the
contemplated transaction. The analyses were prepared solely for purposes of
Stern Stewart's providing its opinion to the special committee as to the
fairness, from a financial point of view, of the consideration to be paid to
the holders of Homestead shares (other than Security Capital and its
affiliates) and do not purport to be appraisals or necessarily reflect the
prices at which businesses or securities actually may be bought or sold.
Analyses based upon forecasts of future results are not necessarily indicative
of actual future results, which may be significantly more or less favorable
than suggested by such analyses. Because such analyses are inherently subject
to uncertainty, being based upon numerous factors or events beyond the control
of the parties or their respective advisors, none of Homestead, Security
Capital, Stern Stewart or any other person assumes responsibility if future
results are materially different from those forecast.
As described above, the Stern Stewart opinion delivered to the special
committee and the Board of Directors of Homestead was one of many factors
taken into consideration by Homestead's Board in making its determination to
approve the merger and recommend the tender offer. Although Stern Stewart
evaluated the fairness to holders of Homestead shares (other than Security
Capital and its affiliates) of the consideration to be paid by Security
Capital in the tender offer and the merger, the specific consideration was
determined by the special committee and Security Capital in arm's-length
negotiations. The foregoing summary does not purport to be a complete
description of the analyses performed by Stern Stewart and is qualified by
reference to the written opinion of Stern Stewart set forth in Exhibit (c)(1)
to the Schedule TO and also as Annex A to Homestead's
solicitation/recommendation statement on Schedule 14D-9.
As part of its financial advisory consulting practice, Stern Stewart is
regularly engaged in the evaluation of businesses and their securities in
connection with mergers and acquisitions, edivestitures, valuations,
restructurings and recapitalizations. Stern Stewart was selected by the
special committee as its financial advisor based on its reputation,
experience, and expertise.
Pursuant to the terms of a letter agreement dated April 8, 2000, Stern
Stewart was retained by the special committee to serve as its financial
advisor and to render an opinion to the special committee and the Homestead
Board with respect to the fairness, from a financial point of view, of the
consideration to be paid to holders of Homestead shares (other than Security
Capital and its affiliates). Under the Stern Stewart engagement letter, the
special committee agreed to pay Stern Stewart a fee of $100,000 plus 10% of
the consideration above the original offer of $3.40 if the consideration to be
paid pursuant to the terms of the merger agreement was between $3.40 and
$3.70, plus 15% of the consideration above $3.70 if the consideration payable
pursuant to the merger agreement was above $3.70, payable upon the closing of
the transactions contemplated by the merger agreement. In the event that the
merger agreement had not been executed, the special committee would have been
obligated to pay Stern Stewart a fee of $100,000, payable at such time as the
negotiations between the special committee and Security Capital to effect the
transaction were terminated. The fee payable to Stern Stewart in connection
with its engagement calculated based on the $4.10 per share price is
approximately $1.5 million. In addition, the special committee has agreed to
reimburse Stern Stewart for its reasonable out-of-pocket expenses incurred in
connection with the engagement and to indemnify Stern Stewart and certain
related persons and entities for certain losses, claims, damages or
liabilities relating to or arising out of, among other things, its engagement
as financial advisor. In addition to Stern Stewart's engagement by the special
committee, Stern Stewart and Mr. Vesell have engaged in preliminary
discussions relating to the formation of an investment fund. No written
agreements have been reached between Stern Stewart and Mr. Vesell regarding
such a fund. Although the special committee believed this relationship between
Mr. Vesell and Stern Stewart to be immaterial to its consideration of Stern
Stewart's engagement, the special committee considered this relationship
between Mr. Vesell and Stern Stewart in evaluating the engagement of Stern
Stewart.
Report of Chase Securities Inc.
Security Capital engaged Chase Securities Inc. to act as its financial
advisor in connection with the possible acquisition by Security Capital of the
Homestead shares that were not already owned by Security Capital and to serve
as Dealer Manager. Representatives of Security Capital and the members of
Homestead's special committee determined the amount and the form of
consideration through arm's-length negotiations and did not base this
determination on any recommendation by Chase Securities, although Chase
Securities provided advice to Security Capital from time to time during the
course of the negotiations. Chase Securities was not asked to, and
18
<PAGE>
did not, express any opinion as to the fairness of the consideration to be
paid by Security Capital in the Offer and the merger. Security Capital engaged
Chase Securities as financial advisor to Security Capital and Chase Securities
did not act as advisor to, or agent of, any other person.
On March 23, 2000, Chase Securities made a presentation to the Board of
Directors of Security Capital in respect of the pricing analysis for the
tender offer and merger. The following is a brief summary of the material
financial and comparative analyses performed by Chase Securities in connection
with its preliminary valuation analysis presented to the Board of Directors of
Security Capital on March 23, 2000.
Comparable Public Companies Analysis. Using publicly available information,
Chase Securities compared certain financial and operating information and
ratios for Homestead with the corresponding financial and operating
information and ratios for companies in lines of business believed to be
generally comparable to Homestead, as follows:
. Candlewood Hotel Company, Inc.
. Extended Stay America Inc.
. Prime Hospitality Corp.
. Suburban Lodges of America, Inc.
. Sunburst Hospitality Corporation
In examining the comparable companies, Chase Securities calculated the
enterprise value, defined as the total market value of equity on a diluted
basis plus outstanding debt, preferred stock and minority interest less cash
and cash equivalents, of each company as a multiple of its respective
estimated calendar year 2000 earnings before interest, taxes, depreciation and
amortization, which is referred to as EBITDA, in each case based upon selected
public research equity analyst estimates. In conducting this analysis, Chase
Securities used closing share prices on March 20, 2000. This analysis yielded
the following multiples:
<TABLE>
<CAPTION>
Medium Mean
------ ----
<S> <C> <C>
Enterprise value as a multiple of 2000 estimated EBITDA............. 5.8x 6.3x
</TABLE>
Based on this analysis, Chase Securities estimated a value per Homestead
share ranging from approximately $2.00 to $3.90.
Premiums Paid Analysis. Chase Securities reviewed 48 minority buy-in
transactions announced between January 1, 1997 and March 20, 2000 where the
equity value of the minority stake was greater than $20 million prior to the
announcement of the proposed transactions. In examining these transactions,
Chase Securities calculated the premia implied by the initial offer price and
the final offer price to the price per common share of each company for the 1-
day, 1-week and 4-week periods prior to announcement of the offer. This
analysis showed the following:
Summary of Median Premia Paid
<TABLE>
<CAPTION>
Share Price Prior
to Announcement Initial Offer Price Final Offer Price
----------------- ------------------- -----------------
<S> <C> <C>
1-day 11.5% 22.3%
1-week 18.0% 25.3%
4-weeks 24.5% 30.9%
</TABLE>
Based on this analysis, Chase Securities estimated a value per Homestead
share ranging from approximately $3.00 to $3.40.
Discounted Cash Flow Analysis. Chase Securities performed a discounted cash
flow analysis, which is referred to as DCF, of Homestead using financial
forecasts for the fiscal years ending December 31, 2000 through December 31,
2002 provided by Homestead's management to Security Capital, and for fiscal
years ending
19
<PAGE>
December 31, 2003 through December 31, 2004 that were extrapolated from the
earlier period assuming revenues growing at an inflationary rate of 3.0% and
margins remaining constant. Utilizing such information, Chase Securities
calculated a range of values for the Homestead shares based upon the
discounted present value as of June 30, 2000 of the sum of the projected
stream of unlevered free cash flows to Homestead from December 31, 1999
through December 31, 2004, and the projected terminal value of Homestead at
December 31, 2004 based upon a range of multiples applied to projected EBITDA
in the fiscal year 2005. The DCF was calculated for Homestead assuming
discount rates ranging from 13.5% to 15.5%, and terminal multiples of EBITDA
in the fiscal year 2005 ranging from 6.0x to 8.0x. Based on this analysis,
Chase Securities estimated a value per share ranging from approximately $2.60
to $4.20.
Net Asset Value Analysis. Using estimates provided by Homestead's
management of Homestead's projected property net operating income, defined as
property revenues minus property expenses, for the period ending December 31,
2000, Chase Securities estimated Homestead's net asset value per Homestead
share. In so doing, Chase Securities arrived at a net asset value by:
1. calculating estimated value of real estate operations by applying a
range of capitalization rates from 13.0% to 14.0% to net operating income,
after providing for an assumed level of maintenance capital expenditures of
4.0% of revenues and property management expenses of 5.0% of revenues, as
estimated by Chase Securities;
2. adding the estimated book value of Homestead's land inventory, as of
June 30, 2000, as projected by Homestead's management; and
3. subtracting total outstanding debt including Homestead's capital
lease obligations as of December 31, 2000, as projected by Homestead's
management.
The net asset value per Homestead share was then calculated by dividing the
net asset value by the number of fully diluted shares outstanding calculated
by adding the number of common shares based on Homestead's management
disclosure plus options calculated using the treasury stock method. Based on
this analysis, Chase Securities estimated a value per Homestead share ranging
from approximately $3.50 to $4.02.
Stock Price Analysis. Among other analyses performed, Chase Securities also
reviewed the trading prices and volume of the Homestead shares for the 1-year
period ending March 20, 2000, and observed that the low and high closing
prices during that period were $1.94 per share on August 10, 1999 and $4.38
per share on May 3, 1999, and that the closing price per share on March 20,
2000 was $2.63. Chase Securities also observed that, excluding the closing
prices for the Homestead shares during the period from April 27, 1999 through
May 3, 1999, when Homestead had publicly announced that it was in discussions
with an unidentified party regarding a potential business combination, the
high trading price for the Homestead shares for the 1-year period ending March
20, 2000 was $3.06.
Summary Preliminary Valuation Range. Based on the analyses described above,
the implied value per share ranged from approximately $3.00 to $3.50, compared
to the closing price per share on March 20, 2000 of $2.63.
On May 1, 2000, Chase Securities updated the Comparable Public Companies
and Net Asset Valuation analyses described above taking into account
Homestead's actual first quarter financial results rather than projected first
quarter financial results. Using methodologies similar to those described
above, the implied value per share ranged from approximately $2.12 to $4.00 in
the comparable public company analysis and from approximately $3.57 to $4.10
in the net asset valuation analysis.
In addition, on May 1, 2000, Security Capital identified potential synergy
and cost savings in the amount of $700,000 per year projected to be realized
if Homestead were no longer a public reporting company. Chase Securities then
valued this cost savings by applying a range of capitalization rates of 10.0%
to 14.0% resulting in a range of present values from cost saving and synergies
of $5.0 million to $7.0 million. Chase Securities then divided the range of
values by the amount of shares expected to be purchased in the transaction and
determined that a range of $0.32 to $0.45 would be the break-even additional
price per share that could be paid to shareholders.
20
<PAGE>
The matters considered by Chase Securities in its analyses were based on
numerous macroeconomic, operating and financial assumptions with respect to
industry performance, general business and economic conditions and other
matters, many of which are beyond Security Capital's and Homestead's control
and involve the application of complex methodologies and educated judgment.
Any estimates incorporated in the analyses performed by Chase Securities are
not necessarily indicative of actual past or future results or values, which
may be significantly more or less favorable than such estimates. Estimated
values do not purport to be appraisals and do not necessarily reflect the
prices at which businesses or companies may be sold in the future, and such
estimates are inherently subject to uncertainty. None of the comparable
companies used in the Comparable Public Companies Analysis described above is
identical to Homestead. Accordingly, an analysis of publicly traded comparable
companies is not mathematical; rather it involves complex considerations and
judgments concerning differences in financial and operating characteristics of
the comparable companies and other factors that could affect the public
trading value of the comparable companies or company to which they are being
compared.
Security Capital selected Chase Securities to act as its financial advisor
on the basis of the reputation of Chase Securities as an internationally
recognized investment banking firm with substantial expertise in transactions
similar to the tender offer and merger and because it is familiar with
Security Capital and its business. As part of its financial advisory business,
Chase Securities is continually engaged in the valuation of businesses and
their securities in connection with mergers and acquisitions and valuations
for estate, corporate and other purposes. Chase Securities has acted as
financial advisor to Security Capital in connection with the transactions and
for which Security Capital has agreed to pay a fee upon execution of the
merger agreement. The Chase Manhattan Corporation and its affiliates,
including Chase Securities, in the ordinary course of business, have provided
investment banking and commercial banking services to Security Capital and
commercial banking services to Homestead and may continue to provide such
services. During the past two years, The Chase Manhattan Corporation and its
affiliates have received aggregate fees in the amount of approximately $1.4
million for these services provided to Security Capital and approximately
$282,000 for these services provided to Homestead. In the ordinary course of
business, Chase Securities or its affiliates may trade in the debt and equity
securities of Security Capital and Homestead for its own accounts and for the
accounts of its customers and, accordingly, may at anytime hold a long or
short position in such securities.
The terms of the engagement of Chase Securities by Security Capital are set
forth in a letter dated as of March 16, 2000. Pursuant to the terms of this
letter agreement, Security Capital agreed to pay to Chase Securities a fee of
$250,000 upon execution of the merger agreement. In addition, Security Capital
has also agreed to reimburse Chase Securities for its reasonable out-of-pocket
expenses (including the reasonable fees of its legal counsel), subject to
certain limitations, and to indemnify Chase Securities and certain related
persons from and against certain liabilities in connection with its
engagement, including certain liabilities under the federal securities laws,
arising out of its engagement. The full text of Chase Securities'
presentations to Security Capital dated March 23, 2000 and May 1, 2000 have
been included as Exhibits (c)(3) and (c)(4) to the Schedule TO, and the
foregoing summary is qualified in its entirety by reference to these exhibits.
VI. Interests of Certain Persons
In considering the recommendations of the Homestead Board and the special
committee with respect to the Offer and the Merger and the fairness of the
consideration to be received in the Offer and the Merger, stockholders should
be aware that certain officers and directors of Homestead have interests in
the Offer and the Merger which are described below and which may be in
addition to their interests as stockholders of Homestead. These officers and
directors include C. Ronald Blankenship, Vice Chairman, Chief Operating
Officer and a Director of Security Capital, who is also serving as Interim
Chairman and Chief Executive of Homestead, and A. Richard Moore, Jr., who is
Managing Director of the Capital Division of Security Capital and Managing
Director of Security Capital European Realty Management Limited and Security
Capital (UK) Management Limited and who is also serving as Interim Chief
Financial Officer for Homestead. In addition, certain directors and officers
of Security Capital own Homestead shares and certain directors and officers of
Homestead own Security Capital shares. See "-- Beneficial Ownership of
Homestead shares". Stockholders also should be aware that Security Capital and
Purchaser have certain interests that present actual or potential conflicts of
interest in
21
<PAGE>
connection with the Offer and the Merger. As a result of Security Capital's
current indirect ownership of approximately 87.0% of the outstanding Homestead
shares and the terms of the Investor Agreement described below, Security
Capital may be deemed to control Homestead. See "-- Security Capital Investor
Agreement". The special committee and the Homestead Board were each aware of
these actual and potential conflicts of interest and considered them along
with the other matters.
Directors and Officers. Homestead has advised Purchaser that, to its
knowledge, all of Homestead's executive officers and directors intend to
tender all Homestead shares that they own of record or beneficially in the
Offer (other than Homestead shares that they have the right to purchase by
exercising stock options and Homestead shares, if any, that if tendered would
cause them to incur liability under the short-swing profits provisions of the
Exchange Act). In addition, the director of Purchaser will, immediately prior
to the Effective Time (as defined below), resign and the current directors of
Homestead will be elected the directors of Homestead.
Indemnification. Under the merger agreement, the directors and officers of
Homestead are entitled to certain rights of indemnification and to be insured
by Homestead or Security Capital with respect to certain matters from and
after completion of the Merger. See "THE MERGER AGREEMENT AND THE MERGER --
Indemnification; Directors' and Officers' Insurance".
Option Holders and Replacement Awards. Prior to the completion of the
tender offer, the Homestead Board of Directors (or, if appropriate, any
committee thereof) will take all actions necessary to provide for the
adjustment, at the Effective Time, of all outstanding stock options (the
"Stock Options"), that have been granted under any stock option plan of
Homestead (the "Stock Plans").
In connection with the adjustment of the Stock Options, holders of Stock
Options will not receive any payment. The adjustments will be consistent with
the terms of the Stock Plans, and all Stock Options granted as of the
Effective Time will no longer be exercisable for shares of Homestead, but
rather will be exercisable for a cash payment equal to the appraised value of
the Homestead shares.
Administrative Services Agreement. Homestead and Security Capital are
parties to an administrative services agreement (the "Administrative Services
Agreement"), under which Security Capital provides Homestead with
administrative services for certain aspects of Homestead's business. These
services include, but are not limited to, insurance administration, accounts
payable administration, internal audit, cash management, human resources,
management information systems, tax administration, shareholder communications
and investor relations. The fees payable to Security Capital are fixed fees
for particular services provided. Any arrangements under the Administrative
Service Agreement for the provision of services are required to be
commercially reasonable and on terms not less favorable than those which could
be obtained from unaffiliated third parties. Homestead has incurred fees of
$4,213,000 during 1998, $5,201,000 during 1999, and $1,214,877 during 2000
under the Administrative Services Agreement, which expires on December 31,
2000 and is renewable for a one-year term, subject to approval by a majority
of the independent directors of Homestead. Additionally, Security Capital
provides legal administration services under a separate agreement which
expires on December 31, 2000.
Tax Allocation Agreement. As a result of Security Capital's ownership in
Homestead exceeding 80% after the closing of the May 1999 common stock rights
offering, Homestead's results after May 1999 are included in the federal
income tax return of Security Capital. Security Capital may utilize tax
operating losses generated by Homestead subsequent to May 1999. In order for
Security Capital to utilize the net operating loss carryforwards generated by
Homestead through May 1999, Homestead must generate future taxable income. To
the extent Homestead's net operating loss carryforwards are so utilized on
Security Capital's federal tax return, such loss carryforwards will not be
available to Homestead in the future. Homestead and Security Capital have
entered into a tax allocation agreement which provides for tax liability or
refund payments between the entities as determined by a defined calculation of
Homestead's proportionate share of taxable income versus the total of taxable
income for all entities filing as part of Security Capital's federal tax
return. The agreement also provides
22
<PAGE>
that if a capital transaction were to occur where Security Capital owned less
than 50% of Homestead after the transaction, all net operating loss
carryforwards generated by Homestead through May 1999 would inure to Security
Capital. No amounts were paid or due under the agreement for 1999.
Security Capital Investor Agreement. Homestead and Security Capital are
parties to an Investor Agreement, dated as of October 17, 1996, and amended as
of April 5, 1999 (the "Security Capital Investor Agreement"), which provides
Security Capital with a variety of rights regarding the management of
Homestead. The amendment to the Security Capital Investor Agreement was a
condition to Security Capital's increasing its funding commitment from $200
million to $225 million in connection with Homestead's May 1999 common stock
rights offering. Under the Security Capital Investor Agreement, for so long as
Security Capital beneficially owns at least 50.1% of Homestead's outstanding
shares, Security Capital has the right to approve, among other things: (i)
Homestead's annual budget; (ii) the incurrence of expenses in any year
exceeding (A) any line item in the annual budget by $500,000 or 10% and (B)
the total expenses set forth in the annual budget by 5%; (iii) the offer or
sale of any shares or any securities convertible into or exchangeable for
shares other than pursuant to (A) an employee benefit plan approved by
Homestead's shareholders, (B) previously issued warrants, options or rights,
(C) a dividend reinvestment plan or share purchase plan approved by the Board
or (D) an issuance of rights, options, or warrants for shares issued to all
shareholders; (iv) the issuance or sale of securities that are subject to
mandatory redemption or redemption at the option of the holder; (v) the
adoption of any employee benefit plan pursuant to which shares may be issued
and any action with respect to senior officers' compensation; (vi) the
incurrence, restructuring, renegotiation or repayment of indebtedness in which
the aggregate amount involved exceeds $1,000,000; (vii) the declaration or
payment of any dividend or other distribution; (viii) the acquisition or
disposition in a single transaction or group of related transactions where the
purchase price exceeds $1 million; (ix) the entering into of service contracts
(A) for property management, investment management or leasing services, or (B)
that contemplate annual payments in excess of $500,000; (x) the entering into
of any new contract, including for construction, development, or other capital
expenditure, for which the total cost is reasonably expected to exceed
$1,000,000 for any contract or $5,000,000 in the aggregate; (xi) the entering
into of any joint venture for the development of any properties owned by
Homestead in which the book value of any property to be contributed by
Homestead exceeds $1,000,000 individually or $5,000,000 in the aggregate;
(xii) the entering into of any franchising or licensing agreements; (xiii) the
amendment of the articles of incorporation or bylaws of Homestead; and (xiv)
the waiver of anti-takeover provisions of Maryland law or Homestead's articles
of incorporation.
The Security Capital Investor Agreement also provides that, so long as
Security Capital owns at least 10% of the outstanding shares, Homestead may
not increase the number of directors on the Board to more than seven without
the approval of Security Capital. Security Capital also is entitled to
designate one or more persons as directors of Homestead, as follows: (i) so
long as Security Capital owns at least 10% but less than 25% of the
outstanding shares, it is entitled to nominate one person; and (ii) so long as
Security Capital owns at least 25% of the outstanding shares, it is entitled
to nominate that number of persons as shall bear approximately the same ratio
to the total number of members of the Board as the number of shares
beneficially owned by Security Capital bears to the total number of
outstanding shares, provided that Security Capital shall be entitled to
designate no more than two persons so long as the Homestead Board consists of
no more than seven members. Security Capital currently has one designee on the
Board, C. Ronald Blankenship, who is also Vice Chairman, Chief Operating
Officer and a Director of Security Capital.
Beneficial Ownership of Shares.
Ownership of Homestead Shares By Security Capital and Purchaser
The following table sets forth information, as of May 2, 2000, concerning
the beneficial ownership of shares of Homestead Common Stock for (i) Security
Capital, Purchaser and their affiliates and (ii) the Directors and Executive
Officers of Security Capital. Unless otherwise indicated, all such shares are
owned directly, and the
23
<PAGE>
indicated person or entity has sole voting and investment power. Except as
indicated below, the Directors and Executive Officers of Security Capital,
Purchaser, and their affiliates do not own any Homestead shares or options to
purchase Homestead shares.
<TABLE>
<CAPTION>
Number of Percent of All
Homestead Shares Homestead
Person Beneficially Owned(1) shares(2)
- ------ --------------------- --------------
<S> <C> <C>
Security Capital Group Incorporated...... 125,662,936(3) 89.0%
Archstone Communities Trust.............. 21,191,262(2) 15.0
Purchaser................................ 0 *
William D. Sanders....................... 3,500(4) *
C. Ronald Blankenship.................... 7,311(5) *
Samuel W. Bodman......................... 0 *
Hermann Buerger.......................... 0 *
John P. Frazee, Jr....................... 79,358(6) *
Cyrus F. Freidheim, Jr................... 0 *
H. Laurance Fuller....................... 216(7) *
Ray L. Hunt.............................. 0 *
John T. Kelley, III...................... 2,739(8) *
Peter S. Willmott........................ 97,709 *
Thomas G. Wattles........................ 0 *
Thomas B. Allin.......................... 0 *
A. Richard Moore, Jr..................... 0 *
Constance B. Moore....................... 0 *
All Directors and executive officers of
Security Capital as a group
(26 persons)............................ 196,776 *
</TABLE>
- --------
* Less than 1%
(1) Includes for Archstone all Homestead shares that may be issued upon
conversion of all Convertible Notes (as defined below).
(2) Assumes (i) in the case of Archstone, that Archstone has converted all
Convertible Notes and that no other person has converted any outstanding
convertible securities and (ii) in the case of Security Capital, that
Archstone has converted all Convertible Notes and that no other person has
converted any outstanding convertible securities.
(3) Includes 21,191,251 Homestead shares beneficially owned by Archstone. As a
result of its ownership of 38.1% of Archstone's outstanding common shares
and Security Capital's contractual arrangements with Archstone, Security
Capital may be deemed to beneficially own all Homestead shares owned by
Archstone. SC Realty Incorporated, a wholly owned subsidiary of Security
Capital, owns 104,471,674 Homestead shares.
(4) Homestead shares are held by a family limited partnership with respect to
which Mr. Sanders shares voting and dispositive power.
(5) Includes 2,895 Homestead shares held by a corporation in which Mr.
Blankenship owns the controlling interest.
(6) Includes 22,758 Homestead shares held in an IRA account, 600 shares owned
by Mr. Frazee's children, 50,000 Homestead shares held by a corporation
for which Mr. Frazee is an officer and options to acquire 6,000 Homestead
shares.
(7) Includes 108 Homestead shares held by Mr. Fuller's wife.
(8) Mr. Kelley's Homestead shares are held in a trust account.
Ownership of Homestead Shares By Homestead Directors and Officers
The following table sets forth, as of May 2, 2000, information concerning
the beneficial ownership of shares of Homestead Common Stock for each Director
and Executive Officer of Homestead not listed in the preceding
24
<PAGE>
chart. Unless otherwise indicated, all such shares are owned directly, and the
indicated person or entity has sole voting and investment power. Except as
indicated below, the directors and executive officers of Homestead do not own
any Homestead shares or options to purchase Homestead shares.
<TABLE>
<CAPTION>
Number of
Shares Percent
Beneficially of
Name and Address of Beneficial Owner Owned Shares
- ------------------------------------ ------------ -------
<S> <C> <C>
Manuel A. Garcia, III..................................... 29,000(1) *
John C. Schweitzer........................................ 105,062(2) *
Eugene B. Vesell.......................................... 87,546(3) *
James C. Potts............................................ 15,916(4) *
Gary A. DeLapp............................................ 41,864(5) *
All Directors and executive officers as a group (11
persons) (includes Directors and Officers of Homestead
listed in preceding chart)............................... 410,484 *
</TABLE>
- --------
* Less than 1%
(1) Includes 15,000 shares held by a trust of which Mr. Garcia is trustee,
10,000 shares held by a family limited partnership, and options to acquire
4,000 shares.
(2) Includes 5,000 shares held by a partnership of which Mr. Schweitzer is a
general partner, 2,000 shares held by a corporation that Mr. Schweitzer
owns, options to acquire 4,000 shares, and 1,062 shares held by Mr.
Schweitzer's wife.
(3) Includes 393 shares held by Mr. Vesell's wife and 45,675 shares held by a
trust for which Mr. Vesell is a trustee.
(4) Includes options to acquire 9,487 shares.
(5) Includes options to acquire 31,864 shares.
Ownership of Security Capital Class A Shares and Class B Shares by Homestead
Directors and Executive Officers
The following table sets forth, as of May 2, 2000, information concerning
the beneficial ownership of Class A Shares and Class B Shares of Security
Capital for (i) each Director of Homestead, (ii) each Named Executive Officer,
and (iii) the Directors and executive officers as a group. Unless otherwise
indicated, all such shares are owned directly, and the indicated person has
sole voting and investment power.
<TABLE>
<CAPTION>
Number Of Security Number Of Security
Capital Class A Capital Class B
Shares Shares
Beneficially Beneficially
Name Of Beneficial Owner Owned(1) %(2) Owned(3)(4) %(2)(5)
- ------------------------ ------------------ ---- ------------------ -------
<S> <C> <C> <C> <C>
C. Ronald Blankenship(6).. 8,968 * 543,407 1.06%
John P. Frazee, Jr.(7).... 6,067 * 318,366 *
Manuel A. Garcia, III..... 0 * 0 *
John C. Schweitzer........ 0 * 0 *
Eugene B. Vesell(8)....... 844 * 52,200 *
James C. Potts............ 3,862 * 193,090 *
A. Richard Moore, Jr...... 0 * 14,092 *
Gary A. DeLapp............ 65 * 3,285 *
All Directors and
executive officers as a
group (11 persons)....... 20,796 1.77% 1,200,105 2.39%
</TABLE>
- --------
* Less than 1%
(1) Includes Class A Shares which may be acquired upon the exercise of options
within 60 days for Messrs. Blankenship (8,582), Frazee (2,549), Potts
(3,472), and DeLapp (65), and all Directors and executive officers as a
group (15,596).
25
<PAGE>
(2) For each person who owns restricted stock units which vest within 60 days,
or options or convertible securities which are exercisable within 60 days,
the calculation of the percentage ownership assumes that only that person
has exercised all of his options and converted all of his convertible
securities and that no other person has restricted stock units which have
vested, has exercised any outstanding options or has converted any
convertible securities.
(3) Each Class A Share may be converted at any time into 50 Class B Shares.
Includes Class B Shares which may be acquired upon conversion of Class A
Shares, including Class A Shares which may be acquired upon the exercise
of options for Class A Shares as described in footnote 1 above.
(4) Includes Class B Shares which may be acquired upon the exercise of options
or vesting of restricted stock units within 60 days for Messrs.
Blankenship (91,207), Frazee (15,000), Moore (12,500), and all Directors
and executive officers as a group (128,791).
(5) For each person who owns Class A Shares, the calculation of the percentage
ownership assumes that only that person has converted all of his Class A
Shares into Class B Shares and that no other person has converted any
Class A Shares.
(6) Includes 2,000 Class B Shares held by a corporation in which Mr.
Blankenship is the controlling shareholder.
(7) Includes eleven Class A Shares held by Mr. Frazee's children and three
Class A Shares held by his wife.
(8) Includes 422 Class A Shares held by a family trust for which Mr. Vesell is
trustee and 115 Class A Shares held in an IRA account.
26
<PAGE>
THE TENDER OFFER AND THE MERGER
1. Terms of the Tender Offer
Upon the terms and subject to the conditions of the tender offer
(including, if the tender offer is extended or amended, the terms and
conditions of any extension or amendment), we will purchase all Homestead
shares validly tendered and not withdrawn in accordance with the procedures
set forth in Section 4 on or prior to the Expiration Date. The term
"Expiration Date" means 12:00 midnight, New York City time, on Tuesday, June
6, 2000, unless we extend the period of time for which the initial offering
period of the tender offer is open, in which case the term "Expiration Date"
will mean the time and date at which the initial offering period of the tender
offer, as so extended, will expire.
Upon the terms and subject to the conditions of the tender offer, we will
purchase, as soon as permitted under the terms of the tender offer, all
Homestead shares validly tendered and not withdrawn prior to the Expiration
Date, including such Homestead shares held by officers and directors of
Homestead. If, at the Expiration Date the conditions to the tender offer
described in Section 12 have not been satisfied or earlier waived, then we
may, in our sole discretion, extend the Expiration Date for a period or
periods of time, not to exceed 20 business days, by giving oral or written
notice of the extension to the Depositary and by publicly announcing the new
Expiration Date. So long as the merger agreement is in effect, the tender
offer has been commenced, and the conditions to the tender offer have not been
satisfied or waived, Purchaser is obligated to cause the tender offer not to
expire, subject to Purchaser's and Security Capital's rights of termination
under the merger agreement. During any extension of the offering period, all
Homestead shares previously tendered and not withdrawn will remain subject to
the tender offer and subject to your right to withdraw. See Section 4.
Subject to the applicable regulations of the SEC and the terms of the
merger agreement, we also reserve the right, in our sole discretion, at any
time or from time to time, to (a) terminate the tender offer (whether or not
any Homestead shares have previously been purchased pursuant to the tender
offer) if any condition referred to in Section 12 has not been satisfied or
earlier waived or upon the occurrence of any event specified in Section 12;
and (b) waive any condition or (except as set forth in the merger agreement as
summarized below) otherwise amend the tender offer in any respect, in each
case, by giving oral or written notice of the termination, waiver or amendment
to the Depositary and, other than, in the case of any waiver, by making a
public announcement thereof. We acknowledge that (a) Rule 14e-1(c) under the
Securities Exchange Act requires us to pay the consideration offered or return
the Homestead shares tendered promptly after the termination of the tender
offer and (b) we may not delay purchase of, or payment for, any Homestead
shares upon the occurrence of any event specified in Section 12 without
extending the period of time during which the tender offer is open.
The rights we reserve in the preceding paragraph are in addition to our
rights pursuant to Section 12. Any extension, termination or amendment of the
tender offer will be followed as promptly as practicable by a public
announcement. An announcement in the case of an extension will be made no
later than 9:00 a.m., New York City time, on the next business day after the
previously scheduled Expiration Date. Without limiting the manner in which we
may choose to make any public announcement, subject to applicable law
(including those rules under the Securities Exchange Act that require that
material changes be promptly disseminated to holders of Homestead shares), we
will have no obligation to publish, advertise or otherwise communicate any
such public announcement other than by issuing a release to the Dow Jones News
Service.
Under the merger agreement, without the prior written consent of the
Homestead special committee and the Homestead Board of Directors, we may not
(a) impose additional conditions to the tender offer, (b) modify or amend the
existing conditions to the tender offer or any other term of the tender offer
in a manner adverse to Homestead stockholders, (c) reduce the number of
Homestead shares subject to the tender offer, (d) reduce the price per
Homestead share, (e) change the form of consideration payable in the tender
offer, or (f) extend the Expiration Date, except as permitted in the merger
agreement.
If we make a material change in the terms of the tender offer, or if we
waive a material condition to the tender offer, we will extend the tender
offer and disseminate additional tender offer materials to the extent
27
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required by Rules 14d-4(d), 14d-6(c) and 14e-1 under the Securities Exchange
Act. The minimum period during which a tender offer must remain open following
material changes in the terms of the offer, other than a change in price or a
change in percentage of securities sought, depends upon the facts and
circumstances, including the materiality of the changes. In the SEC's view, a
tender offer should remain open for a minimum of five business days from the
date the material change is first published, sent or given to stockholders,
and, if material changes are made with respect to information that approaches
the significance of price and the percentage of securities sought, a minimum
of ten business days may be required to allow for adequate dissemination and
investor response. With respect to a change in price, a minimum ten-business-
day period from the date of the change is generally required to allow for
adequate dissemination to stockholders. Accordingly, if, prior to the
Expiration Date, we decrease the number of Homestead shares being sought, or
increase or decrease the consideration offered pursuant to the tender offer,
and if the tender offer is scheduled to expire at any time earlier than the
period ending on the tenth business day from the date that notice of the
increase or decrease is first published, sent or given to holders of Homestead
shares, we will extend the tender offer at least until the expiration of such
period of ten business days. For purposes of the tender offer, a "business
day" means any day other than a Saturday, Sunday or a United States federal
holiday and consists of the time period from 12:01 a.m. through 12:00
midnight, New York City time.
Consummation of the tender offer is subject to the conditions set forth in
Section 12. We reserve the right, in accordance with applicable rules and
regulations of the SEC, to waive any or all of those conditions. If, by the
Expiration Date, any or all of those conditions have not been satisfied, we
may, in the exercise of our good faith judgment, elect to (a) extend the
tender offer, and, subject to applicable withdrawal rights, retain all
tendered Homestead shares until the expiration of the tender offer, as
extended, subject to the terms of the tender offer and the merger agreement;
(b) waive all of the unsatisfied conditions, and, subject to complying with
applicable rules and regulations of the SEC, accept for payment all Homestead
shares so tendered; or (c) terminate the tender offer and not accept for
payment any Homestead shares and return all tendered Homestead shares to
tendering Homestead stockholders. In the event that we waive any condition set
forth in Section 12, the SEC may, if the waiver is deemed to constitute a
material change to the information previously provided to the Homestead
stockholders, require that the tender offer remain open for an additional
period of time or that we disseminate information concerning such waiver.
We will not provide a subsequent offering period during which Homestead
stockholders who do not tender in the tender offer would have another
opportunity to tender at the same price. Those stockholders will have to wait
until after the merger is completed to receive their cash consideration.
As of the date of this Offer to Purchase, the Rights are represented by the
certificates representing the Homestead shares and do not trade separately.
Accordingly, by tendering a certificate representing Homestead shares, a
stockholder is automatically tendering a similar number of associated Rights.
If, however, pursuant to the Rights Agreement or for any other reason, the
Rights detach and separate certificates representing rights ("Rights
Certificates") are issued, stockholders will be required to tender one Right
for each Share tendered in order to effect a valid tender of such Share.
Homestead has provided us with its stockholder lists and security position
listings for the purpose of disseminating the tender offer to holders of
Homestead shares. We will mail this offer to purchase, the related letter of
transmittal and other relevant materials to record holders of Homestead
shares, and we will furnish the materials to brokers, dealers, commercial
banks, trust companies and similar persons whose names, or the names of whose
nominees, appear on the securityholder lists or, if applicable, that are
listed as participants in a clearing agency's security position listing, for
forwarding to beneficial owners of Homestead shares.
2. Acceptance for Payment and Payment for Homestead Shares
Upon the terms and subject to the conditions of the tender offer
(including, if we extend or amend the tender offer, the terms and conditions
of the tender offer as so extended or amended), we will purchase, by accepting
for payment, and will pay for, all Homestead shares validly tendered and not
withdrawn (as permitted by Section
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4) prior to the Expiration Date promptly after the later of (a) the Expiration
Date and (b) the satisfaction or waiver of the conditions to the tender offer
set forth in Section 12. In addition, subject to applicable rules of the SEC,
we reserve the right to delay acceptance for payment of, or payment for,
Homestead shares pending receipt of any governmental approvals which may be
required. See Section 13.
In all cases, we will pay for Homestead shares purchased in the tender
offer only after timely receipt by the Depositary of (a) certificates
representing the Homestead shares ("Homestead Certificates") or timely
confirmation (a "Book-Entry Confirmation") of the book-entry transfer of the
Homestead shares into the Depositary's account at The Depository Trust Company
(the "Book-Entry Transfer Facility") pursuant to the procedures set forth in
Section 3; (b) the appropriate letter of transmittal (or a facsimile),
properly completed and duly executed, with any required signature guarantees
or an Agent's Message (as defined below) in connection with a book-entry
transfer; and (c) any other documents that the letter of transmittal requires.
The consideration per share paid to any stockholder pursuant to the tender
offer will be the highest per share consideration paid to any other
stockholder pursuant to the offer.
The term "Agent's Message" means a message transmitted by the Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book-Entry Confirmation, which states that the Book-Entry Transfer Facility
has received an express acknowledgment from the participant in the Book-Entry
Transfer Facility tendering the Homestead shares that are the subject of the
Book-Entry Confirmation that the participant has received and agrees to be
bound by the terms of the letter of transmittal and that we may enforce that
agreement against the participant.
For purposes of the tender offer, we will be deemed to have accepted for
payment, and purchased, Homestead shares validly tendered and not withdrawn
as, if and when we give oral or written notice to the Depositary of our
acceptance of the Homestead shares for payment pursuant to the tender offer.
In all cases, upon the terms and subject to the conditions of the tender
offer, payment for Homestead shares purchased pursuant to the tender offer
will be made by deposit of the purchase price for the Homestead shares with
the Depositary, which will act as agent for tendering Homestead stockholders
for the purpose of receiving payment from us and transmitting payment to
validly tendering Homestead stockholders.
Under no circumstances will we pay interest on the purchase price for
Homestead shares except as may be required by applicable law.
If we do not purchase any tendered Homestead shares pursuant to the tender
offer for any reason, or if you submit Homestead Certificates representing
more Homestead shares than you wish to tender, we will return Homestead
Certificates representing unpurchased or untendered Homestead shares, without
expense to you (or, in the case of Homestead shares delivered by book-entry
transfer into the Depositary's account at the Book-Entry Transfer Facility
pursuant to the procedures set forth in Section 3, the Homestead shares will
be credited to an account maintained within the Book-Entry Transfer Facility),
as promptly as practicable following the expiration, termination or withdrawal
of the tender offer.
If, prior to the Expiration Date, we increase the price offered to holders
of Homestead shares in the tender offer, we will pay the increased price to
all holders of Homestead shares that we purchase in the tender offer, whether
or not the Homestead shares were tendered before the increase in price.
We reserve the right, subject to the provisions of the merger agreement, to
transfer or assign, in whole or from time to time in part, to one or more of
our subsidiaries or affiliates the right to purchase all or any portion of the
Homestead shares tendered in the tender offer, but any such transfer or
assignment will not relieve us of our obligations under the tender offer or
prejudice your rights to receive payment for Homestead shares validly tendered
and accepted for payment in the tender offer.
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<PAGE>
3. Procedures for Accepting the Offer and Tendering Shares
Valid Tender of Homestead Shares. Except as set forth below, in order for
you to tender Homestead shares in the tender offer, the Depositary must
receive the letter of transmittal (or a facsimile thereof), properly completed
and signed, together with any required signature guarantees or an Agent's
Message in connection with a book-entry delivery of Homestead shares and any
other documents that the letter of transmittal requires at one of its
addresses set forth on the back cover of this tender offer to Purchase on or
prior to the Expiration Date, and either (a) you must deliver Homestead
Certificates representing tendered Homestead shares to the Depositary or you
must cause your Homestead shares to be tendered pursuant to the procedure for
book-entry transfer set forth below and the Depositary must receive Book-Entry
Confirmation, in each case, on or prior to the Expiration Date, or (b) you
must comply with the guaranteed delivery procedures set forth below.
The method of delivery of Homestead Certificates, the letter of transmittal
and all other required documents is at your option and sole risk, and delivery
will be considered made only when the Depositary actually receives the
Homestead Certificates. If delivery is by mail, we recommend using registered
mail with return receipt requested, properly insured. In all cases, you should
allow sufficient time to ensure timely delivery.
Book-Entry Transfer. The Depositary will establish an account with respect
to the Homestead shares at the Book-Entry Transfer Facility for purposes of
the tender offer within two business days after the date of this offer to
purchase. Any financial institution that is a participant in the system of the
Book-Entry Transfer Facility may make book-entry delivery of Homestead shares
by causing the Book-Entry Transfer Facility to transfer the Homestead shares
into the Depositary's account at the Book-Entry Transfer Facility in
accordance with the Book-Entry Transfer Facility's procedures. However,
although Homestead shares may be delivered through book-entry transfer into
the Depositary's account at a Book-Entry Transfer Facility, the Depositary
must receive the letter of transmittal (or facsimile thereof), properly
completed and signed, with any required signature guarantees, or an Agent's
Message in connection with a book-entry transfer, and any other required
documents, at one of its addresses set forth on the back cover of this offer
to purchase on or before the Expiration Date, or you must comply with the
guaranteed delivery procedure set forth below.
Delivery of documents to the Book-Entry Transfer Facility in accordance
with its procedures does not constitute delivery to the Depositary.
Signature Guarantees. A bank, broker, dealer, credit union, savings
association or other entity that is a member in good standing of the
Securities Transfer Agents Medallion Program (an "Eligible Institution") must
guarantee signatures on all letters of transmittal, unless the Homestead
shares tendered are tendered (a) by a registered holder of Homestead shares
that has not completed either the box labeled "Special Payment Instructions"
or the box labeled "Special Delivery Instructions" on the letter of
transmittal or (b) for the account of an Eligible Institution. See Instruction
1 of the letter of transmittal.
If the Homestead Certificates are registered in the name of a person other
than the signer of the letter of transmittal, or if payment is to be made to,
or Homestead Certificates for unpurchased Homestead shares are to be issued or
returned to, a person other than the registered holder, then the tendered
Homestead Certificates must be endorsed or accompanied by appropriate stock
powers, signed exactly as the name or names of the registered holder or
holders appear on the Homestead Certificates, with the signatures on the
Homestead Certificates or stock powers guaranteed by an Eligible Institution
as provided in the letter of transmittal. See Instructions 1 and 5 of the
letter of transmittal.
If the Homestead Certificates are forwarded separately to the Depositary, a
properly completed and duly executed letter of transmittal (or manually signed
facsimile) must accompany each delivery of Homestead Certificates.
Guaranteed Delivery. If you want to tender Homestead shares in the tender
offer and your Homestead Certificates are not immediately available or time
will not permit all required documents to reach the Depositary
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on or before the Expiration Date or the procedures for book-entry transfer
cannot be completed on time, your Homestead shares may nevertheless be
tendered if you comply with all of the following guaranteed delivery
procedures:
. your tender is made by or through an Eligible Institution;
. the Depositary receives, as described below, a properly completed and
signed Notice of Guaranteed Delivery, substantially in the form made
available by us, on or before the Expiration Date; and
. the Depositary receives the Homestead Certificates (or a Book-Entry
Confirmation) representing all tendered Homestead shares, in proper form
for transfer together with a properly completed and duly executed letter
of transmittal (or manually signed facsimile), with any required
signature guarantees (or, in the case of a book-entry transfer, an
Agent's Message) and any other documents required by the letter of
transmittal within three trading days after the date of execution of the
Notice of Guaranteed Delivery, a trading day being defined as any day
the New York Stock Exchange Inc. is open for business.
You may deliver the Notice of Guaranteed Delivery by hand or mail or by
facsimile transmission to the Depositary. The Notice of Guaranteed Delivery
must include a guarantee by an Eligible Institution in the form set forth in
the Notice of Guaranteed Delivery and a representation that you own the
Homestead shares being tendered within the meaning of Rule 14e-4 under the
Securities Exchange Act.
Notwithstanding any other provision of the tender offer, we will pay for
Homestead shares only after timely receipt by the Depositary of Homestead
Certificates for, or, of Book-Entry Confirmation with respect to, the
Homestead shares, a properly completed and duly executed letter of transmittal
(or facsimile thereof), together with any required signature guarantees (or,
in the case of a book-entry transfer, an Agent's Message) and any other
documents required by the appropriate letter of transmittal. Accordingly,
payment might not be made to all tendering stockholders at the same time, and
will depend upon when the Depositary receives Homestead Certificates or Book-
Entry Confirmation that the Homestead shares have been transferred into the
Depositary's account at a Book-Entry Transfer Facility.
Backup United States Federal Income Tax Withholding. Under the backup
United States federal income tax withholding laws applicable to certain
stockholders (other than certain exempt stockholders, including, among others,
all corporations and certain foreign individuals), the Depositary may be
required to withhold 31% of the amount of any payments made to those
stockholders pursuant to the tender offer or the merger. To prevent backup
United States federal income tax withholding, you must provide the Depositary
with your correct taxpayer identification number and certify that you are not
subject to backup United States federal income tax withholding by completing
the Substitute Form W-9 included in the letter of transmittal. Non-United
States holders must submit a completed Form W-8 or Form W-8 BEN to qualify as
an exempt recipient. These forms may be obtained from the Depositary. See
Instruction 9 of the letter of transmittal.
Appointment as Proxy. By executing the letter of transmittal, you
irrevocably appoint our designees, and each of them, as your agents,
attorneys-in-fact and proxies, with full power of substitution, in the manner
set forth in the letter of transmittal, to the full extent of your rights with
respect to the Homestead shares that you tender and that we accept for payment
and with respect to any and all other Homestead shares and other securities or
rights issued or issuable in respect of those Homestead shares on or after the
date of this offer to purchase. All such powers of attorney and proxies will
be considered irrevocable and coupled with an interest in the tendered
Homestead shares. This appointment will be effective when we accept your
Homestead shares for payment in accordance with the terms of the tender offer.
Upon such acceptance for payment, all other powers of attorney and proxies
given by you with respect to your Homestead shares and such other securities
or rights prior to such payment will be revoked, without further action, and
no subsequent powers of attorney and proxies may be given by you (and, if
given, will not be deemed effective). Our designees will, with respect to the
Homestead shares and such other securities and rights for which the
appointment is effective, be empowered to exercise all your voting and other
rights as they, in their sole discretion, may deem proper at any annual or
special
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meeting of Homestead stockholders, or any adjournment or postponement thereof,
or by consent in lieu of any such meeting or otherwise. In order for Homestead
shares to be deemed validly tendered, immediately upon the acceptance for
payment of such Homestead shares, we or our designee must be able to exercise
full voting rights with respect to such Homestead shares and other securities,
including voting at any meeting of Homestead stockholders.
Determination of Validity. All questions as to the form of documents and
the validity, eligibility (including time of receipt) and acceptance for
payment of any tender of Homestead shares will be determined by us, in our
sole discretion, which determination will be final and binding on all parties.
We reserve the absolute right to reject any or all tenders determined by us
not to be in proper form or the acceptance of or payment for which may, in the
opinion of our counsel, be unlawful. We also reserve the absolute right to
waive any of the conditions of the tender offer or any defect or irregularity
in any tender of Homestead shares of any particular Homestead stockholder,
whether or not similar defects or irregularities are waived in the case of
other Homestead stockholders.
No tender of Homestead shares will be deemed to have been validly made
until all defects and irregularities with respect to the tender have been
cured or waived by us. None of Security Capital, Purchaser or any of their
respective affiliates or assigns, the Dealer Manager, the Depositary, the
Information Agent or any other individual or entity will be under any duty to
give any notification of any defects or irregularities in tenders or incur any
liability for failure to give any such notification.
Our acceptance for payment of Homestead shares tendered pursuant to any of
the procedures described above will constitute a binding agreement between us
and you upon the terms and subject to the conditions of the tender offer.
4. Withdrawal Rights.
Except as described in this Section 4, tenders of Homestead shares made in
the tender offer are irrevocable. You may withdraw Homestead shares that you
have previously tendered in the tender offer at any time on or before the
Expiration Date, and, unless theretofore accepted for payment as provided
herein, you may also withdraw Homestead shares at any time after July 7, 2000.
If, for any reason, acceptance for payment of any Homestead shares tendered
in the tender offer is delayed, or we are unable to accept for payment or pay
for Homestead shares tendered in the tender offer, then, without prejudice to
our rights set forth in this document, the Depositary may, nevertheless, on
our behalf, retain Homestead shares that you have tendered, and you may not
withdraw your Homestead shares, except to the extent that you are entitled to
and duly exercise withdrawal rights as described in this Section 4. Any such
delay will be by an extension of the tender offer to the extent required by
law.
In order for your withdrawal to be effective, you must timely deliver a
written or facsimile transmission notice of withdrawal to the Depositary at
one of its addresses set forth on the back cover of this offer to purchase.
Any such notice of withdrawal must specify your name, the number of Homestead
shares that you want to withdraw, and (if Homestead Certificates have been
tendered) the name of the registered holder of the Homestead shares as shown
on the Homestead share Certificate if different from your name. If Homestead
Certificates have been delivered or otherwise identified to the Depositary,
then, prior to the physical release of such Homestead Certificates, you must
submit the serial numbers shown on the particular Homestead Certificates
evidencing the Homestead shares to be withdrawn and an Eligible Institution
must guarantee the signature on the notice of withdrawal, except in the case
of Homestead shares tendered for the account of an Eligible Institution. If
Homestead shares have been tendered pursuant to the procedures for book-entry
transfer set forth in Section 3, the notice of withdrawal must specify the
name and number of the account at the appropriate Book-Entry Transfer Facility
to be credited with the withdrawn Homestead shares, in which case a notice of
withdrawal will be effective if delivered to the Depositary by any method of
delivery described in the first sentence of this paragraph. You may not
rescind a withdrawal of Homestead shares. Any Homestead shares that you
withdraw
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will be considered not validly tendered for purposes of the tender offer, but
you may tender your Homestead shares again at any time before the Expiration
Date by following any of the procedures described in Section 3.
All questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by us, in our sole discretion, which
determination will be final and binding. None of Security Capital, Purchaser,
Homestead or any of their respective affiliates or assigns, the Dealer
Manager, the Depositary, the Information Agent or any other individual or
entity will be under any duty to give any notification of any defects or
irregularities in any notice of withdrawal or incur any liability for failure
to give any such notification.
5. Price Range of the Shares; Dividends
According to Homestead's Form 10-K for the fiscal year ending December 31,
1999, Homestead shares are traded on the New York Stock Exchange (the "NYSE")
under the symbol "HSD". The following table sets forth, for the periods
indicated, the reported high and low sale prices for the Homestead shares on
the NYSE and dividends paid, as reported in Homestead's Form 10-K with respect
to periods occurring in fiscal 1998 and 1999, and as reported during the
current fiscal year by published financial sources with respect to periods
occurring in fiscal 2000. During such period, Homestead has paid no cash
dividends on the shares.
Homestead Village Incorporated
<TABLE>
<CAPTION>
High Low
------ ------
<S> <C> <C>
Fiscal 1998
First Quarter.................................................... $15.75 $13.56
Second Quarter................................................... 16 11
Third Quarter.................................................... 13.81 6.25
Fourth Quarter................................................... 8.19 3.38
Fiscal 1999
First Quarter.................................................... 4.75 2.44
Second Quarter................................................... 5.13 2.13
Third Quarter.................................................... 2.81 1.88
Fourth Quarter................................................... 2.81 2.00
Fiscal 2000
First Quarter.................................................... 3.31 2.00
Second Quarter (through May 8, 2000)............................. 4.00 3.13
</TABLE>
Under the terms of the merger agreement, Homestead is not permitted to
declare or pay dividends with respect to the Homestead shares without the
prior written consent of Security Capital.
The average of the closing prices on the NYSE for the Homestead shares over
the last 20 full days of trading before Security Capital publicly announced
the proposal on March 23, 2000 to acquire Homestead was $2.41 per share. On
March 23, 2000, the day Security Capital announced the proposal to acquire
Homestead, the reported closing price on the NYSE for the Homestead shares was
$2.69 per share. On May 8, 2000, the last full day of trading prior to the
commencement of the tender offer, the reported closing price on the NYSE for
the Homestead shares was $4.00 per share.
Stockholders are urged to obtain current market quotations for the
Homestead shares.
6. Possible Effects of the Tender Offer on the Market for the Homestead
Shares; Stock Quotation; Securities Exchange Act Registration; Margin
Regulations.
If there are validly tendered and not properly withdrawn enough Homestead
shares so that, including the Homestead shares we already own, we would have
control over 90% of the outstanding Homestead shares, we will complete the
merger as soon as possible after the expiration of the tender offer and, in
accordance with
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Maryland law, without a vote of the stockholders of Homestead. Homestead
stockholders who had not previously tendered their shares will receive the
same price per share upon completion of the merger. If, however, we acquire
less than the number of Homestead shares necessary to give us control over 90%
of the outstanding Homestead shares, Homestead would have to hold a vote of
the Homestead stockholders to vote on approval of the merger agreement and the
merger before we could complete the merger. Until we complete the merger, our
purchase of Homestead shares pursuant to the tender offer could have the
following effects.
The Market for Homestead Shares. The purchase of Homestead shares pursuant
to the tender offer will reduce the number of Homestead shares that might
otherwise trade publicly and could adversely affect the liquidity and market
value of the remaining Homestead shares held by the public. The purchase of
Homestead shares pursuant to the tender offer can also be expected to reduce
the number of holders of Homestead shares.
Stock Quotation. Depending upon the number of Homestead shares purchased
pursuant to the tender offer, the Homestead shares may no longer meet the
requirements of the New York Stock Exchange for continued listing on the New
York Stock Exchange. According to the New York Stock Exchange's published
guidelines, the New York Stock Exchange would consider delisting the Homestead
shares if, among other things (a) the number of record holders of 100 or more
Homestead shares should fall below 1,200; (b) the number of publicly held
shares (exclusive of holdings of Security Capital and Purchaser and any other
subsidiaries or affiliates of Security Capital and of officers or directors of
Homestead or their immediate families or other concentrated holdings of 10% or
more ("Excluded Holdings")) should fall below 600,000; or (c) the aggregate
market value of such publicly held Homestead shares (exclusive of Excluded
Holdings) should fall below $5,000,000. If, as a result of the purchase of
shares pursuant to the Offer or otherwise, the Homestead shares no longer meet
the requirements of the New York Stock Exchange for continued listing and the
listing of the Homestead shares is discontinued, the market for the Homestead
shares could be adversely affected.
If the New York Stock Exchange were to delist the Homestead shares, it is
possible that the Homestead shares would continue to trade on another
securities exchange or in the over-the-counter market and that price or other
quotations would be reported by such exchange or through the National
Association of Securities Dealers Automated Quotation System or other sources.
The extent of the public market for the Homestead shares and the availability
of such quotations would, however, depend upon such factors as the number of
holders of Homestead shares remaining at such time, the interest in
maintaining a market in Homestead shares on the part of securities firms, the
possible termination of registration of the Homestead shares under the
Securities Exchange Act, as described below, and other factors. We cannot
predict whether the reduction in the number of Homestead shares that might
otherwise trade publicly would have an adverse or beneficial effect on the
market price for or marketability of the Homestead shares or whether it would
cause future market prices to be higher or lower than the Offer Price.
Securities Exchange Act Registration. The Homestead shares are currently
registered under the Securities Exchange Act. The purchase of the Homestead
shares pursuant to the tender offer may result in the Homestead shares
becoming eligible for deregistration under the Securities Exchange Act.
Registration of the Homestead shares may be terminated upon application by
Homestead to the SEC if the Homestead shares are not listed on a "national
securities exchange" or the Nasdaq Stock Market and there are fewer than 300
record holders of Homestead shares. Termination of registration of the
Homestead shares under the Securities Exchange Act would substantially reduce
the information that Homestead is required to furnish to its stockholders and
the SEC, and would make certain provisions of the Securities Exchange Act,
such as the short-swing profit recovery provisions of Section 16(b) and the
requirements of furnishing a proxy statement in connection with stockholders'
meetings pursuant to Section 14(a) or 14(c) and the related requirement of an
annual report, no longer applicable to Homestead. If the Homestead shares are
no longer registered under the Securities Exchange Act, the requirements of
Rule 13e-3 under the Securities Exchange Act with respect to "going private"
transactions would no longer be applicable to Homestead. In addition, the
ability of "affiliates" of Homestead and persons holding "restricted
securities" of Homestead to dispose of such securities pursuant to Rule 144
promulgated under the Securities Act of 1933, as amended, may be impaired or,
with respect to certain persons, eliminated. If registration of the Homestead
shares under the Securities Exchange Act were terminated, the Homestead shares
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would no longer be "margin securities" or eligible for stock exchange listing
or reporting on the Nasdaq Stock Market. We believe that the purchase of the
Homestead shares pursuant to the tender offer may result in the Homestead
shares becoming eligible for deregistration under the Securities Exchange Act.
If registration of the Homestead shares is not terminated prior to the
merger, then the registration of the Homestead shares under the Securities
Exchange Act and the quotation of the Homestead shares on the NYSE will be
terminated following the completion of the merger.
Margin Regulations. The Homestead shares are currently "margin securities"
under the regulations of the Board of Governors of the Federal Reserve System,
which regulations have the effect, among other things, of allowing brokers to
extend credit on the collateral of the Homestead shares for the purpose of
buying, carrying or trading in securities ("Purpose Loans"). Depending upon
factors, such as the number of record holders of the Homestead shares and the
number and market value of publicly held Homestead shares, following the
purchase of Homestead shares pursuant to the tender offer, the Homestead
shares might no longer constitute "margin securities" for purposes of the
Federal Reserve Board's margin regulations and, therefore, could no longer be
used as collateral for Purpose Loans made by brokers.
7. Information Concerning Homestead
According to Homestead's Form 10-K for the fiscal year ending December 31,
1999, Homestead's principal executive offices are located at 2100 RiverEdge
Parkway, 9th Floor Atlanta, Georgia 30328, and Homestead's telephone number is
(770) 303-2200.
The following description of Homestead and its business has been taken from
Homestead's Form 10-K for the fiscal year ended December 31, 1999, and is
qualified in its entirety by reference to such report. Homestead Village
operates 136 moderately priced, extended stay lodging properties under the
Homestead Village(R) trademark in selected markets in the United States.
Homestead's strategy has been to identify markets that demonstrate strong
demographics and to provide extended stay customers with a consistently high
standard of service and value-conscious pricing. Homestead offers a carefully
designed, custom-built product targeted primarily at the business traveler on
temporary assignment, undergoing relocation or in training. Homestead
properties, which have all been developed by Homestead, are designed to offer
locations with convenient access to major employment centers and retail
support services, and a residential environment that is attractive, well
landscaped and secure.
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The selected financial information of Homestead and its consolidated
subsidiaries set forth below has been excerpted and derived from Homestead's
Form 10-K for the fiscal year ending December 31, 1999 and the First Quarter
Press Release. More comprehensive financial and other information is included
in that report (including management's discussion and analysis of financial
condition and results of operations), release, and in other reports and
documents filed by Homestead with the SEC. The financial information set forth
below is qualified in its entirety by reference to the reports and documents
filed by Homestead with the SEC and the financial statements and related notes
that they contain. You can examine these reports and other documents and
obtain copies of them in the manner set forth below.
Balance Sheet Data
(In thousands, except per share amount)
<TABLE>
<CAPTION>
As at As at
December 31, December 31,
1999 1998
------------ ------------
<S> <C> <C>
Current assets....................................... $ 28,335 $ 20,887
Noncurrent assets.................................... 1,105,105 1,197,504
Current liabilities.................................. 166,752 530,968
Noncurrent liabilities............................... 358,351 229,398
Book value per share................................. 5.07 11.97
</TABLE>
Income Statement Data
(In thousands, except per share amount)
<TABLE>
<CAPTION>
Three Months
Ended Year Ended Year Ended
March 31, December 31, December 31,
2000 1999 1998
------------ ------------ ------------
<S> <C> <C> <C>
Income (loss) from continuing
operations before extraordinary
items................................. $6,573 $(63,208) $ (3,889)
Net Income (loss)...................... 8,495 (71,589) (29,233)
Income per common share -- basic....... .07 (0.82) (0.78)
Income per common share -- diluted*.... .07 (0.82) (0.78)
</TABLE>
- --------
* Basic per share results are presented where diluted calculations produce
anti-dilutive results.
Homestead files annual, quarterly and special reports, proxy statements and
other information with the SEC. You may read and copy any reports, statements
or other information filed at the SEC's public reference room at 450 Fifth
Street, N.W. Washington, D.C. 20549, or at the SEC's public reference rooms in
New York, New York and Chicago, Illinois. Please call the SEC at 1-800-SEC-
0330 for further information on the public reference rooms. Homestead's SEC
filings should also be available to the public from commercial document
retrieval services and at the Internet world wide web site maintained by SEC
at http://www.sec.gov.
Although we have no knowledge that any such information is untrue, we take
no responsibility for the accuracy or completeness of information contained in
this tender offer to Purchase with respect to Homestead or any of its
subsidiaries or affiliates or for any failure by Homestead to disclose events
that may have occurred or may affect the significance or accuracy of any such
information.
Homestead Projections. Homestead management regularly prepares projections
of Homestead's operating performance in the course of budgeting. Homestead
routinely shares these projections with Security Capital. As reflected in
these projections, in March 2000, Homestead management expected Homestead's
EBDADT (earnings before depreciation, amortization and deferred taxes) for
2000, 2001 and 2002 to be $68 million, $72 million and $77 million,
respectively; net income for 2000, 2001 and 2002 to be $24 million, $27
million and $31 million, respectively; and earnings per share for 2000, 2001
and 2002 to be $.20, $.23 and $.26, respectively. Homestead did not prepare
these projections with a view to public disclosure or compliance with
published
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guidelines of the SEC or the guidelines established by the American Institute
of Certified Public Accountants regarding projections. The projections are
included in this offer to purchase only because Homestead provided them to us.
Neither we nor Homestead, nor either of our respective financial advisors nor
the Dealer Manager can be certain that future results or actual values will
not differ materially from the estimates. Although presented with numerical
specificity, Homestead's projections are based upon a variety of assumptions
relating to the business of Homestead which may not be realized and are
subject to significant uncertainties and contingencies, many of which are
beyond the control of us and Homestead. There can be no assurance that
Homestead's projections will be realized, and actual results may vary
materially from those shown.
8. Information Concerning Security Capital and Purchaser
Security Capital Group Incorporated is an international real estate
research, investment and operating management company. Security Capital
operates its businesses through two divisions: the Capital Division, which
invests in high-growth real estate operating companies, and the Financial
Services Division, which provides capital markets and capital management
services primarily to Security Capital and its affiliates. The principal
offices of Security Capital and its directly owned affiliates are in
Amsterdam, Atlanta, Brussels, Chicago, Denver, El Paso, Houston, London,
Luxembourg, New York and Santa Fe.
Security Capital's principal executive offices are located at 125 Lincoln
Avenue, Santa Fe, New Mexico 87501, and its telephone number is (505) 982-
9292. Security Capital beneficially owns 104,471,674 Homestead shares, which
is approximately 87% of the outstanding Homestead shares. This percentage
amount is based upon the number of Homestead shares outstanding as of April
28, 2000, as represented to us by Homestead in the merger agreement.
Purchaser's principal executive offices are located at 125 Lincoln Avenue,
Santa Fe, New Mexico 87501, and its telephone number is (505) 982-9292.
Purchaser is a newly formed Maryland corporation and an indirect wholly owned
subsidiary of Security Capital. Purchaser has not conducted any business other
than in connection with the tender offer and the merger.
The name, business address, citizenship, present principal occupation and
employment history for the past five years of each of the directors and
executive officers of Security Capital and Purchaser are set forth in Schedule
I to this offer to purchase.
None of Security Capital, Purchaser or, to the best knowledge of Security
Capital and Purchaser, any of the persons listed in Schedule I to this offer
to purchase, has during the last five years (a) been convicted in a criminal
proceeding (excluding traffic violations or similar misdemeanors) or (b) been
a party to any judicial or administrative proceeding (except for matters that
were dismissed without sanction or settlement) that resulted in a judgment,
decree or final order enjoining the person from future violations of, or
prohibiting activities subject to, United States federal or state securities
laws or finding any violation of such laws.
Except as set forth elsewhere in this offer to purchase, Schedule I or
Schedule II to this offer to purchase: (a) neither we nor, to our knowledge,
any of the persons listed in Schedule I or any associate or majority-owned
subsidiary of ours or of any of the persons so listed, beneficially owns or
has a right to acquire any Homestead shares or any other equity securities of
Homestead; (b) neither we nor, to our knowledge, any of the individuals or
entities referred to in clause (a) above or any of their executive officers,
directors or subsidiaries has effected any transaction in the Homestead shares
or any other equity securities of Homestead during the past 60 days; (c)
neither we nor, to our knowledge, any of the persons listed in Schedule I to
this offer to purchase, has any contract, arrangement, understanding or
relationship with any other person with respect to any securities of Homestead
(including, but not limited to, any contract, arrangement, understanding or
relationship concerning the transfer or the voting of any such securities,
joint ventures, loan or option arrangements, puts or calls, guaranties of
loans, guaranties against loss or the giving or withholding of proxies,
consents or authorizations); (d) in the past two years, there have been no
transactions that would require reporting under the rules and regulations of
the SEC between us or any of our subsidiaries or, to our knowledge, any of the
persons listed in
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Schedule I, on the one hand, and Homestead or any of its executive officers,
directors or affiliates, on the other hand; and (e) in the past two years,
there have been no contacts, negotiations or transactions between us or any of
our subsidiaries or, to our knowledge, any of the persons listed in Schedule
I, on the one hand, and Homestead or any of its subsidiaries or affiliates, on
the other hand, concerning a merger, consolidation or acquisition, a tender
offer or other acquisition of securities, an election of directors or a sale
or other transfer of a material amount of assets.
Transactions with Homestead within the Last Two Years
On January 15, 1998, Security Capital purchased 8,429,225 Homestead shares
at a price of $15 per Homestead share or a total of $126,438,375. That
purchase was made in connection with a subscription rights offering by
Homestead and on the same terms and at the same time as made available to
other shareholders and investors. In connection with that offering, Homestead
paid a fee of $1,564,026 to Security Capital Markets Group Incorporated, a
wholly-owned subsidiary of Security Capital, for its services as placement
agent for the Homestead shares being sold, and also reimbursed Security
Capital Markets Group Incorporated for approximately $45,000 of out-of-pocket
expenses incurred in connection with the transaction.
On June 15, 1998, Homestead entered into a credit facility with Commerzbank
AG, New York Branch ("AG"), which had a maximum principal amount of $200
million (the "Bridge Facility"). The line was secured by a subscription
agreement with Security Capital for the purchase of up to $200 million of
convertible subordinated debentures. The subscription obligation was
terminated upon the completion of a subscription rights offering by Homestead
in May 1999, as described below, and the repayment of all amounts owed under
the Bridge Facility on May 28, 1999 with the proceeds of the subscription
rights offering. Homestead paid an arrangement fee to Security Capital of
$600,000 for Security Capital's entering into the subscription agreement.
In July 1998, Homestead entered into a mortgage loan purchase agreement
with Security Capital Atlantic Incorporated Atlantic ("Atlantic"), an
affiliate of Security Capital, and Merrill Lynch Mortgage Capital Inc.
("MLMC"), under which the $98 million of Homestead convertible notes held by
Atlantic were modified to, among other things, eliminate their convertibility
feature in exchange for a payment of $21.4 million from Homestead to Atlantic.
The amount paid to Atlantic was based on trailing market prices of Homestead
shares at the time the agreement was entered into, which exceeded the
conversion price of the convertible mortgage notes at that date. The
elimination of the conversion option attached to the mortgage notes reduced
Homestead's contingently issuable shares of common stock by approximately 8.5
million shares. Homestead funded the payment with the proceeds received from
the sale of $24 million of 7.5% convertible subordinated debentures. Also
pursuant to the mortgage loan purchase agreement, Atlantic sold the amended
notes to MLMC for $98 million. In August 1998, Homestead converted the $98
million of mortgage notes and the $24 million of 7.5% convertible subordinated
debentures into a $122 million mortgage note of a newly formed special purpose
subsidiary of Homestead. The note was collateralized by 26 Homestead
properties which were formerly collateral for the Atlantic notes. The $122
million mortgage note had a maturity date of June 30, 1999, and provided for
interest-only monthly payments of LIBOR plus 1.70% through September 30, 1998,
LIBOR plus 2.0% through November 30, 1998, and LIBOR plus 2.25% thereafter.
MLMC had the right to extend the maturity of the mortgage note. Homestead has
repaid and discharged the mortgage note with the proceeds of a sale leaseback
transaction consummated in February 1999, under the terms of which Homestead
sold 18 of the properties that were the collateral for the note payable to
MLMC, and leased the properties from Purchaser.
In May 1999, Homestead completed a rights offering for $225 million
Homestead shares. Security Capital purchased 77,749,220 Homestead shares at
$2.75 per share in the rights offering on the same terms and at the same price
as all other investors. Security Capital's participation in the rights
offering satisfied Security Capital's obligations under the subscription
agreement. The rights offering was originally scheduled to close by the end of
April but was rescheduled to expire on May 21, 1999, and closed on May 28,
1999. In connection with the rescheduling, Security Capital agreed to provide
Homestead with a $25 million line of credit. Homestead paid Security Capital a
$31,944 arrangement fee for the line of credit.
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Homestead owes convertible mortgage notes to Archstone in the amount of
$221,333,620 (the "Convertible Notes"). The notes were funded pursuant to a
mortgage funding commitment agreement to finance the development of properties
acquired by Homestead from Archstone in 1996. The notes are collateralized by
54 Homestead properties with a historical cost of $359.3 million. The notes
accrue interest at 9.0% on the principal amount, and require interest-only
payments every six months on May 28 and November 28. The notes are due October
31, 2006, and are callable on or after May 28, 2001. The notes are
convertible, at the option of the holder, into 21,191,262 shares of Homestead
common stock as a current conversion ratio equal to one share for every
approximate $10.44 of principal amount outstanding. Archstone made its last
funding in May 1998 and has no further funding commitment.
9. The Merger Agreement and the Merger
The Merger Agreement. The following summary description of the merger
agreement is qualified in its entirety by reference to the agreement itself,
which we have filed as Exhibit (d)(1) to the Schedule TO that we have filed
with the SEC. You may examine and copy the Schedule TO as set forth in Section
7, except that it will not be available at the regional offices of the SEC.
The Tender Offer. The merger agreement provides for the tender offer by
Purchaser under the terms described in Section 1.
The Merger. As soon as practicable after the satisfaction or waiver of the
conditions to the merger, Homestead and Purchaser will take actions to make
the merger effective. As a result of the merger, the separate corporate
existence of Purchaser will cease and Homestead will continue as the surviving
corporation. At the time the merger becomes effective (the "Effective Time"),
each Homestead share issued and outstanding immediately prior to the Effective
Time (other than any Homestead shares held by Security Capital or any wholly
owned subsidiary of Security Capital, by Homestead or by any wholly owned
subsidiary of Homestead, which Homestead shares will remain outstanding, and
any Homestead shares held by stockholders, if any, who have appraisal rights
and who shall have properly demanded and perfected appraisal rights under
Maryland law) will be canceled and retired and will be converted into the
right to receive the tender offer price, without interest thereon. At the
Effective Time, shares of common stock of Purchaser outstanding immediately
prior to the Effective Time will be converted into Homestead shares.
The directors of Homestead immediately prior to the Effective Time will be
the initial directors of Homestead and the officers of Homestead immediately
before the Effective Time will remain as officers of Homestead after the
Effective Time. At the Effective Time, the charter of Homestead will continue
to be the charter of Homestead, and the bylaws of Homestead will continue to
be the bylaws of Homestead.
If required by law in order to consummate the merger, Homestead will (a)
prepare and file with the SEC a preliminary proxy statement relating to the
merger agreement, (b) use reasonable best efforts to have it cleared by the
SEC and to cause a definitive proxy statement to be mailed to Homestead
stockholders, and (c) convene a special meeting of Homestead stockholders for
the purpose of considering and taking action upon the merger agreement.
Notwithstanding the foregoing, if Purchaser acquires pursuant to the tender
offer such number of Homestead shares that, when aggregated with the Homestead
shares Security Capital already beneficially owns, represents at least 90% of
the outstanding Homestead shares, the parties to the merger agreement will
take all necessary and appropriate actions to cause the merger to become
effective as soon as practicable after the acceptance for payment of and
payment for the Homestead shares by Purchaser pursuant to the tender offer
without a meeting of Homestead stockholders, in accordance with, and to the
extent permitted by the Maryland General Corporation Law (the "MGCL").
Maryland law requires that notice of the merger be given to each minority
stockholder of Homestead as of a date fixed by the Homested Board which is not
more than 10 days before the date the notice is given. Accordingly, the Notice
of Merger of Purchaser into Homestead is included with this offer to purchase.
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<PAGE>
Stock Options and Replacement Awards. Prior to the completion of the tender
offer, the Homestead Board (or, if appropriate, any committee thereof) will
take all actions necessary to provide for the adjustment, at the Effective
Time, of all outstanding stock options (the "Stock Options") that have been
granted under any stock option plan of Homestead (the "Stock Plans").
In connection with the adjustment of the Stock Options, holders of Stock
Options will not receive any payment and all Stock Options granted as of the
Effective Time will no longer be exercisable for shares of Homestead, but
rather will be exercisable for a cash payment equal to the appraised value of
the Homestead shares.
Representations and Warranties. Homestead has made customary
representations and warranties to Security Capital and Purchaser in the merger
agreement with respect to:
. organization, qualification and . absence of undisclosed
subsidiaries liabilities
. capitalization . litigation
. authority . brokers
. information to be included in the . opinion of the financial
proxy statement and other advisor to the Homestead
documents special committee
. consents and approvals . material contracts
. absence of defaults
Security Capital and Purchaser made customary representations and
warranties to Homestead with respect to:
. organization and qualification . financing
. authority . ownership of Homestead shares
. consents and approvals . conduct of business of
Purchaser
. information to be included in the
proxy statement and other
documents
Covenants. The merger agreement obligates Homestead and its subsidiaries,
from the date of the merger agreement until the Effective Time, to conduct
their businesses in the ordinary course consistent with past practice and
consistent with the terms of the Investor Agreement dated as of October 17,
1996 between Homestead and Security Capital, as amended. The merger agreement
also obligates Homestead and its subsidiaries to use their reasonable best
efforts to preserve intact their business organizations, to keep available the
services of their present officers and key employees and to preserve their
business relationships.
Acquisition Proposals. Under the merger agreement, Homestead must promptly
advise Security Capital of the receipt of any inquiries, discussions,
negotiations or proposals relating to an acquisition proposal, such as (a) a
merger, liquidation, recapitalization, consolidation or other business
combination involving Homestead or its subsidiaries, or (b) the acquisition of
more than 5% of the issued and outstanding Homestead stock or any material
portion of the assets of Homestead or its subsidiaries. Homestead must
identify for Security Capital the offeror and the terms of any acquisition
proposal and must promptly advise Security Capital of any material development
relating to such proposal, including the results of any discussions or
negotiations. Neither Homestead nor any of its subsidiaries may provide any
non-public information to any third party (other than Security Capital,
Purchaser or any of their respective affiliates or advisors) without having
entered into a customary confidentiality agreement with respect to such
information.
Other Actions. Under the merger agreement, Homestead, Security Capital and
Purchaser shall not, and shall use commercially reasonable efforts to cause
their respective subsidiaries not to, take any action that would result in (a)
any representation and warranties of such party (without giving effect to any
"knowledge"
40
<PAGE>
qualification) set forth in the merger agreement that are qualified as to
materiality becoming untrue, (b) any of such representations and warranties
(without giving effect to any "knowledge" qualification) that are not so
qualified becoming untrue in any material respect, or (c) any of the
conditions to the Offer, as described in Section 12, or the Merger, as
described below, not being satisfied.
Access to Information. From May 2, 2000 through the consummation of the
Offer and/or the Effective Time, Homestead will give Security Capital and
Purchaser and their authorized representatives reasonable access to all
employees, hotels, offices, and other facilities and properties and to all
books and records of Homestead and its subsidiaries, will permit Purchaser to
make such inspections as Purchaser shall reasonably request and will cause
Homestead's officers and those of its subsidiaries to furnish Purchaser with
such financial and operating data and other information with respect to the
business and properties of Homestead and any of its Subsidiaries as Purchaser
may from time to time reasonably request. Homestead shall furnish promptly to
Security Capital and Purchaser a copy of each report, schedule, registration
statement and other document filed by it during such period pursuant to the
requirements of federal or state securities laws.
Efforts. Upon the terms and conditions contained in the merger agreement,
Security Capital, Purchaser and Homestead have agreed to use their reasonable
best efforts to take or cause to be taken, all actions, and to do, or cause to
be done, all things necessary, proper or advisable under any applicable laws
to consummate and make effective the transactions contemplated by the merger
agreement as promptly as practicable, including, but not limited to, (a) the
preparation and filing of all forms, registrations and notices required to be
filed to consummate the transactions contemplated hereby and the taking of
such actions as are necessary to obtain any requisite approvals, consents,
orders, exemptions or waivers by any third party or governmental entity, (b)
the satisfaction of the conditions to the consummation of the tender offer or
the merger, and (c) contesting any legal proceeding challenging the Merger,
and (d) the execution of any additional instruments, including the Articles of
Merger, necessary to consummate the transactions contemplated hereby. Subject
to the terms and conditions of the merger agreement and the applicable
provision of the MGCL, Security Capital, Homestead and Purchaser have agreed
to use reasonable best efforts to cause the Effective Time to occur as soon as
practicable after the stockholder vote, if any, with respect to the Merger. In
case at any time after the Effective Time any further action is necessary to
carry out the purposes of the merger agreement, the proper officers and
directors of each party shall use reasonable best efforts to take all such
necessary action.
The parties to the merger must promptly consult with one another and
provide any necessary information with respect to all filings with any
governmental entity, and must otherwise cooperate in responding to
governmental entities.
Consents. Security Capital, Purchaser and Homestead will use all reasonable
efforts to obtain consents of all third parties and governmental entities
necessary, proper or advisable for the completion of the transactions
contemplated by the merger agreement.
Public Announcements. Security Capital, Purchaser and Homestead have agreed
to consult with one another before issuing any press release or other public
statements with respect to the tender offer or the merger, and each has agreed
not to issue any such press release or make any such public statement prior to
consultation, except as may be required by law or in accordance with any
listing agreement that they may have with any national securities exchange.
Employee Benefit Plans. Subject to the following paragraph, Purchaser,
Homestead and its subsidiaries will honor, without modification, all
contracts, agreements and other commitments of the parties prior to the date
of the merger agreement that apply to any current or former employee or
current or former director of Homestead or its subsidiaries. However, this
undertaking will not prevent Security Capital, Purchaser or Homestead or its
subsidiaries from enforcing or complying with any of these commitments in
accordance with its terms, including exercising any right permitted thereunder
or under applicable law to amend, modify, suspend, revoke or terminate any
such commitment in whole or in part. Any workforce reductions carried out
following the Effective Time by Security Capital, Homestead or any of its
subsidiaries with respect to employees of Homestead and its
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subsidiaries shall be carried out in accordance with all laws and regulations
governing the employment relationship and termination thereof, including the
Worker Adjustment and Retraining Notification Act and regulations promulgated
thereunder and any analogous state or local law.
Each of Homestead's employee benefit plans in effect as of the date of the
merger agreement will be maintained with respect to the employees or former
employees of Homestead and its subsidiaries who are covered by any such
Homestead employee benefit plan immediately prior to the Effective Time (the
"Affiliated Employees") until Security Capital, Purchaser or Homestead or its
subsidiaries otherwise determines after the Effective Time. However, the
merger agreement does not limit any right contained in any such Homestead
employee benefit plan or under applicable law to amend, modify, suspend,
revoke or terminate any such Homestead employee benefit plan. Nonetheless, for
a period of not less than one year following the Effective Time, Security
Capital, Purchaser, Homestead or their respective subsidiaries will cause the
Affiliated Employees to be provided with employee benefits that are no less
favorable in the aggregate than those provided to similarly situated employees
of Security Capital and its affiliates. Without limiting the foregoing, with
respect to any benefit plan established to replace any Homestead employee
benefit plan (each such plan, a "New Plan"), each participant in any such
company employee benefit plan shall receive credit for purposes of eligibility
to participate and vesting under such New Plan for service credited for the
corresponding purpose under such Homestead employee benefit plan. Such
crediting of service, however, will not operate to duplicate any benefit to
any such participant or the funding for any such benefit or cause any such
Homestead employee benefit plan or New Plan to fail to comply with the
applicable provisions of the Internal Revenue Code or the Employee Retirement
Income Security Act of 1974, as amended.
With respect to any New Plan that is a welfare benefit plan, other than
limitations, exclusions or waiting periods that are already in effect with
respect to Affiliated Employees and that have not been satisfied as of the
Effective Time, such New Plan shall waive all limitations to pre-existing
conditions, exclusions and waiting periods with respect to participation and
coverage requirements and provide each Affiliated Employee with full credit
for co-payments and deductibles paid prior to the Effective Time in satisfying
any applicable deductible or out-of-pocket requirements applicable to the same
calendar year under such New Plan.
Indemnification; Directors' and Officers' Insurance. Security Capital,
Purchaser and Homestead have agreed that all rights to indemnification or
exculpation now existing in favor of the directors, officers, employees and
agents of Homestead and its subsidiaries in effect as of the date of the
merger agreement with respect to matters occurring prior to the Effective Time
shall survive the Effective Time and shall continue in full force and effect,
and no action shall be taken by Homestead during the six year period beginning
on the last to occur of any of the transactions contemplated in the merger
agreement if such action could reasonably be expected to materially reduce any
such rights to indemnification or exculpation. To the maximum extent permitted
by law, such indemnification shall be mandatory rather than permissive, and
Homestead shall advance expenses in connection with such indemnification.
Purchaser shall cause Homestead to maintain in effect for not less than six
years from the consummation of the last to occur of any of the transactions
contemplated by the merger agreement, the policies of the directors' and
officers' liability and fiduciary insurance most recently maintained by
Homestead (provided that Homestead may substitute therefor policies of at
least the same coverage containing terms and conditions which are no less
advantageous to the beneficiaries thereof so long as such substitution does
not result in gaps or lapses in coverage) with respect to matters occurring
prior to the last to occur of any of the transactions contemplated in the
merger agreement to the extent available; provided that in no event shall
Homestead be required to expend more than an amount per year equal to 150% of
the current annual premiums paid by Homestead (the "Premium Amount") to
maintain or procure insurance coverage pursuant to the terms of the merger
agreement, and provided, further, that, if Homestead is unable to obtain such
insurance described in the merger agreement, Homestead will obtain as much
comparable insurance as is available for the Premium Amount per year.
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Notification of Certain Matters. The parties to the merger agreement agreed
to notify one another promptly of any of the following:
. any fact that would be reasonably likely to cause (a) any representation
or warranty to be untrue or inaccurate in any material respect, or (b)
any covenant, condition or agreement not to be complied with or
satisfied in any material respect; and
. any failure to comply with or satisfy any covenant, condition or
agreement.
State Takeover Laws. Upon Purchaser's request, Homestead will take all
reasonable steps to assist in any challenge by Purchaser to the validity or
applicability of any state takeover law to any transaction contemplated by the
merger agreement.
Stockholder Litigation. Homestead will give Security Capital reasonable
opportunity to participate in the defense of any stockholder litigation
against Homestead or its officers and directors relating to the transactions
contemplated by the merger agreement.
Conditions to Consummation of the Merger. Pursuant to the merger agreement,
the obligations of Security Capital, Purchaser and Homestead to consummate the
merger are subject to the satisfaction of each of the following conditions:
. Purchaser will have accepted for payment Homestead shares pursuant to
the tender offer in accordance with the terms of the tender offer;
. no law or ruling of any court of competent jurisdiction or any
governmental entity will have restrained, enjoined or prohibited the
consummation of the merger, and there shall not be any statute, rule or
regulation that prevents the completion of the merger or has the effect
of making the purchase of Homestead shares illegal; and
. the merger agreement shall have been approved by the affirmative vote of
the Homestead stockholders, if required by MGCL, and in the event that
such vote is not required, the applicable notice requirement shall have
expired.
Termination. The merger agreement may be terminated and the tender offer
and the merger may be abandoned at any time prior to the Effective Time, even
after any approval by Homestead stockholders:
1) by the mutual written consent of Security Capital and Homestead;
2) by Security Capital or Homestead if any law or any final and non-
appealable ruling of a court of competent jurisdiction or governmental
entity has restrained, enjoined or prohibited the consummation of the
merger, or there exists any statute, rule or regulation that permanently
prevents the consummation of the merger or has the effect of making the
purchase of Homestead shares illegal; provided that the party terminating
the agreement shall have used all commercially reasonable efforts to have
any such ruling vacated;
3) by Security Capital or Homestead if the Effective Time has not
occurred by November 2, 2000;
4) by Security Capital if, due to an occurrence or circumstance that
would result in a failure to satisfy any of the conditions to the tender
offer as described in Section 12, Purchaser shall have (a) failed to
commence the tender offer within the time prescribed by the merger
agreement, (b) terminated the tender offer without having accepted any
Homestead shares for payment thereunder, or (c) failed to pay for Homestead
shares pursuant to the tender offer by September 2, 2000, unless the
failure to satisfy any of the conditions to the tender offer has been
caused by a material breach of any of Security Capital's or Purchaser's
representations, warranties or covenants;
5) by Homestead if Purchaser shall have (a) failed to commence the
tender offer within the time period prescribed by the merger agreement, (b)
terminated the tender offer without having accepted any Homestead shares
for payment or (c) failed to pay for Homestead shares pursuant to the
tender offer by September 2, 2000, unless, the failure to satisfy any of
the conditions to the tender offer to commence the tender offer or pay for
the Homestead shares has been caused by a material breach of any of
Homestead's representations, warranties or covenants;
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6) by Homestead if, before Purchaser acquires any Homestead shares in
the tender offer, the Homestead special committee recommends another offer
or an agreement with a third party to effect an acquisition proposal (as
described above) with terms that the Homestead special committee has
determined in good faith (a) based upon the advice of a nationally
recognized investment banker to be more favorable to Homestead and
Homestead stockholders (other than Security Capital and Purchaser) than the
tender offer and the merger, and (b) after consultation with counsel for
the special committee that failure to terminate the merger agreement would
be inconsistent with the fiduciary duties of the special committee under
applicable law;
7) by Security Capital if the Homestead special committee (a) shall have
withdrawn or modified in a manner adverse to Purchaser its approval or
recommendation of the tender offer, the merger agreement or the merger, (b)
shall have approved or recommended another offer or an agreement to effect
a proposal made by a third party to effect an acquisition proposal, or (c)
shall have resolved to effect any of the foregoing; or
8) by Security Capital or Homestead in the event of any of (a) a
material breach by the other party of any representation or warranty
contained in the merger agreement if the breach cannot be or has not been
cured within 20 business days after the giving of written notice, (b) a
material breach by the other party of any of the obligations or agreements
contained in the merger agreement if the breach cannot be or has not been
cured within 20 business days after the giving of written notice to the
breaching party of such breach, or (c) Homestead has incurred a Material
Adverse Effect (as defined in the merger agreement) (in which case Security
Capital may terminate the merger agreement) or Security Capital has
incurred a Material Adverse Effect (as defined in the merger agreement) (in
which case Homestead may terminate the merger agreement).
Effect of Termination. If Security Capital, Purchaser or Homestead
terminates the merger agreement, it will become void and have no effect,
except that in the event of any termination pursuant to paragaphs 6 or 7 under
Termination above, Homestead will pay Security Capital's and Purchaser's
expenses, and in the event of any other termination, each party will bear its
own expenses. No party, and none of its directors, officers or shareholders,
will have any liability, except as may arise from the breach of the merger
agreement.
Amendment. Security Capital, Purchaser and Homestead may amend the merger
agreement by mutual written consent at any time before the Effective Time.
However, if Homestead stockholders have approved the merger agreement,
thereafter no amendment that requires their approval under applicable laws can
be made without their approval.
Waiver. At any time before the Effective Time, any party to the merger
agreement may (a) extend the time for the performance of any of the
obligations or other acts of the other party, (b) waive any inaccuracies in
the representations and warranties of the other party, or (c) waive compliance
by the other party with any of the agreements or conditions. Any agreement to
any extension or waiver will be valid only if set forth in a signed, written
instrument. The failure of any party to assert any of its rights under the
merger agreement will not constitute a waiver of its rights.
Statutory Requirements. In general, under the MGCL, a merger of two
Maryland corporations requires (a) the Board of Directors of each of the
corporations desiring to merge to adopt a resolution declaring that the merger
is advisable on substantially the terms and conditions referred to in the
resolution and directing that the merger be submitted for stockholder approval
and (b) the stockholders of each corporation to approve the merger. The
stockholders of a corporation can approve a merger with the affirmative vote
of the holders of a majority of the outstanding shares of stock entitled to
vote on such merger. According to Homestead's charter, the Homestead shares
are the only securities of Homestead that entitle the holders thereof to
voting rights.
The MGCL also provides that, if a Security Capital company owns at least
90% of each class of stock of a subsidiary which is entitled to vote on the
merger, the Security Capital 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 tender offer or otherwise, Purchaser has
the voting power of at least 90% of the Homestead shares, Purchaser could, and
intends to, effect the merger without any further action by, any other
Homestead stockholder.
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Effects of Inability to Consummate the Merger. Pursuant to the merger
agreement, following the completion of the tender offer and subject to certain
other conditions, Purchaser will be merged with Homestead. If, following the
tender offer, Maryland law requires the approval of Homestead stockholders in
order to complete the merger, Homestead will submit the merger to Homestead
stockholders for approval. There can be no assurance that all other conditions
to the merger (as described in Section 9) will be satisfied. Therefore, it is
possible that the merger will not be completed.
If the merger is completed, Homestead stockholders that elected not to
tender their Homestead shares in the tender offer will receive the same amount
of consideration in exchange for each Homestead share as they would have
received in the tender offer.
Security Capital already controls approximately 87% of the outstanding
Homestead shares. If the merger is not consummated, Homestead stockholders,
other than those affiliated with Security Capital, will lack sufficient voting
power to elect directors or to cause other actions to be taken that require
majority approval. If, for any reason, the merger is not completed, Security
Capital reserves the right (a) to acquire additional Homestead shares through
private purchases, market transactions, tender or exchange offers or otherwise
on terms and at prices that may be more or less favorable than those of the
tender offer, or (b) subject to any applicable legal restrictions, to dispose
of any or all Homestead shares controlled by Security Capital.
Appraisal Rights. No appraisal rights are available under the MGCL in
connection with the tender offer. Additionally, no appraisal rights are
available under the MGCL in connection with the merger provided that the
shares of Homestead continue to be listed on the New York Stock Exchange or
any other national securities exchange or designated as a national market
system security on an interdealer quotation system by the National Association
of Securities Dealers, Inc. (i) as of the date of the Notice of Merger in the
event that Purchaser holds 90% or more of the outstanding voting stock of
Homestead or (ii) as of the record date for determining stockholders entitled
to vote on the merger in the event that a meeting of the stockholders of
Homestead is required to approve the merger. Homestead has set a record date
of May 4, 2000 for the giving of notice of the Merger and has included a
Notice of Merger in the tender offer materials being mailed to all Homestead
shareholders As of the date of the Notice of Merger, Homestead shares continue
to be listed on the New York Stock Exchange.
In the event that Purchaser holds 90% or less of the outstanding voting
stock of Homestead as of the giving of notice of merger and the Homestead
shares are delisted from the New York Stock Exchange and are not relisted on
any other national securities exchange or designated as a national market
system security on an interdealer quotation system by the National Association
of Securities Dealers, Inc. as of the date of the giving of notice of the
merger, Homestead stockholders will be entitled to appraisal rights under the
MGCL in connection with the merger.
Statutory Procedures for Exercising Appraisal Rights. If appraisal rights
are available under the MGCL, with respect to the merger a Homestead
stockholder will be entitled to demand and receive payment of the fair value
of its shares instead of receiving the cash consideration of $4.10 per share.
A Homestead stockholder who wants to receive fair value for its shares must
follow specific procedures. The shareholder must:
. within 30 days after the giving of the Notice of Merger file with
Homestead a written objection to the merger of Purchaser into Homestead;
. not vote in favor of the merger; and
. make written demand on Homestead within 20 days after the articles of
merger evidencing the merger of Purchaser with and into Homestead (the
"Articles of Merger") have been accepted for record by the State
Department of Assessments and Taxation of Maryland (the "SDAT").
Any stockholder who fails to comply with the requirements described above
will be bound by the terms of the merger.
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Homestead is required to promptly notify each objecting stockholder in
writing of the date of acceptance of the Articles of Merger for record by the
SDAT, and may send a written offer to each objecting stockholder to pay for
its shares at what Homestead considers to be the fair value of the shares.
Within 50 days after the SDAT accepts the Articles of Merger for record,
either Homestead or any objecting stockholder who has not received payment for
its shares may petition a court of equity in the appropriate county in
Maryland for an appraisal to determine the fair value of the shares.
Homestead does not presently intend to file an appraisal petition and
stockholders seeking to exercise appraisal rights should not assume that
Homestead will either file such a petition or initiate any negotiations with
respect to the fair value of any shares. Accordingly, stockholders who desire
to have their shares appraised should initiate any petitions necessary for the
perfection of their appraisal rights within the time periods and in the manner
prescribed in the MGCL.
If the court finds that an objecting stockholder is entitled to an
appraisal of its shares, the court is required to appoint three disinterested
appraisers to determine the fair value of the shares on terms and conditions
the court determines proper. The appraisers must, within 60 days after
appointment (or such longer period as the court may direct), file with the
court and mail to each party to the proceeding their report stating their
conclusion as to the fair value of the shares.
If appraisal rights are available, "fair value" would be determined as of
the close of business on the day the Notice of Merger is given and may not
include any appreciation or depreciation which directly or indirectly results
from the merger or from its proposal.
Within 15 days after the filing of the report, any party may object to such
report and request a hearing on it. The court must, upon motion of any party,
enter an order either confirming, modifying or rejecting such report and, if
confirmed or modified, enter judgment against the successor (which would be
Homestead if appraisal rights are available) for the appraised value of the
shares. If the appraisers' report is rejected, the court may determine the
fair value of the shares of the objecting stockholders or may remit the
proceeding to the same or other appraisers. Any judgment entered pursuant to a
court proceeding shall include interest from the date of the special meeting
of Homestead stockholders. Costs of the proceeding must be determined by the
court and may be assessed against Homestead or, under certain circumstances,
the objecting stockholder, or both.
At any time after the filing of a petition for appraisal, the court may
require objecting stockholders to submit their certificates representing the
shares to the clerk of the court for notation of the pendency of the appraisal
proceeding.
A stockholder demanding payment for shares has no right to receive any
dividends or distributions payable to stockholders of record after the close
of business on the date the Notice of Merger is given, and shall cease to have
any rights as a stockholder of Homestead with respect to such shares except
the right to receive payment of the fair value thereof.
The foregoing summary of the rights of dissenting stockholders does not
purport to be a complete statement of the substantive rights of, or the
procedures to be followed by, stockholders desiring to exercise any available
appraisal rights, and is qualified in its entirety by reference to Sections 3-
201 through 3-213 of the MGCL, which are attached as Exhibit (f) of the
Schedule TO.
The preservation and exercise of appraisal rights require strict adherence
to the applicable provisions of the MGCL.
Plans for Homestead. If Security Capital acquires 100% control of
Homestead, it is Security Capital's present intent to operate Homestead as a
subsidiary under Homestead's current name. In addition, Security Capital may
elect individuals to the Homestead Board of Directors as needed if there are
vacancies on the Homestead Board of Directors. Security Capital also reserves
the right to replace current Homestead board
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members. In addition, Security Capital reserves the right to make
recommendations to the Homestead Board of Directors to elect individuals to
fill vacant senior management positions that may exist at Homestead from time
to time.
Homestead has five remaining undeveloped sites which are held for sale.
Security Capital intends to continue its efforts to sell those properties.
As described above, Homestead has received a proposal with respect to the
sale of 29 of its developed properties. While Security Capital has no present
plans to accept this proposal, Security Capital will review and consider the
proposal. See "SPECIAL FACTORS -- Background of the Tender Offer and the
Merger".
Security Capital will conduct a further review of Homestead and its
subsidiaries and their respective assets, businesses, corporate structure,
capitalization, operations, properties, policies, management and personnel.
After such review, Security Capital will determine what actions or further
changes, if any, would be desirable in light of the circumstances that then
exist, and reserves the right to effect such actions or changes. Security
Capital's decisions could be affected by information hereafter obtained,
changes in general economic or market conditions or in the business of
Homestead or its subsidiaries, actions by Homestead or its subsidiaries, and
other factors.
Provisions for Unaffiliated Stockholders.
Security Capital will not grant Homestead stockholders that are
unaffiliated with Security Capital access to the corporate files of Security
Capital. Security Capital will not provide unaffiliated Homestead stockholders
with counsel or appraisal services at the expense of Security Capital.
10. Source and Amount of Funds
Purchaser estimates that the total amount of funds required to purchase all
outstanding Homestead shares pursuant to the tender offer and to pay related
fees and expenses will be approximately $66.7 million. The funds necessary to
purchase Homestead shares pursuant to the tender offer will be derived from
Security Capital's existing $470,000,000 unsecured revolving line of credit
with Wells Fargo Bank, National Association, as agent for a group of lenders
(the "Line of Credit"). Borrowings under the Line of Credit accrue interest at
LIBOR plus a margin (1.30% as of December 31, 1999), based upon Security
Capital's credit rating, or a Base Rate (defined as the higher of Wells Fargo
prime rate or the Federal Funds rate plus .50%). The agreement is effective
through April 6, 2002, with an option to renew for successive one-year periods
with the approval of lenders. Commitment fees on the line range from 0.125% to
0.20% per annum based on the average unfunded line of credit balance. The line
is guaranteed by SC Realty Incorporated ("SC Realty") and SC Realty Shares
Limited, each of which is a wholly owned subsidiary of Security Capital.
Security Capital has paid or will be responsible for paying the following
expenses incurred or estimated to be incurred in connection with the tender
offer and the merger (numbers in thousands):
<TABLE>
<S> <C>
Legal.............................. 1,000
Filing............................. 13
Information Agent.................. 15
Depositary......................... 15
Printing........................... 50
Accounting......................... 10
Other.............................. 485
</TABLE>
11. Dividends and Distributions
Homestead may not, without the prior written consent of Security Capital,
split, combine, or reclassify any shares of its capital stock, declare, set
aside or pay any dividend or other distribution in respect of its capital
stock, or redeem or otherwise acquire any of its securities.
12. Conditions of the Offer
Notwithstanding any other provision of the tender offer, Purchaser is not
required to accept for payment or (subject to any applicable rules and
regulations of the SEC) pay for, and may delay the acceptance for payment of,
any tendered Homestead shares and may terminate or, subject to the terms of
the merger agreement, amend
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the tender offer, if at any time on or after execution of the merger agreement
and before the acceptance for payment for Homestead shares, any of the
following conditions exists or has occurred and remains in effect:
(1) there is pending any material action by any governmental entity, or
any law proposed, sought, promulgated, enacted, entered, enforced or deemed
applicable to the tender offer (provided that Security Capital and
Purchaser shall have used all commercially reasonable efforts to cause any
such action or law to be vacated or lifted):
. seeking to or which does prohibit or impose any material limitations
on Security Capital's or Purchaser's ownership or operation (or that
of any of their respective subsidiaries or affiliates) of all or a
material portion of Homestead's or any of its subsidiaries'
businesses,
. seeking to or which does make the acceptance for payment of, or the
payment for, some or all of the Homestead shares illegal or
otherwise prohibiting, restricting or significantly delaying
consummation of the tender offer or the merger or the performance of
any of the other transactions contemplated by the merger agreement,
or seeking to obtain from Homestead or Purchaser any damages that
are material in Security Capital's view in relation to Homestead and
its subsidiaries taken as a whole,
. seeking to or which does impose material limitations on the ability
of Purchaser, or render Purchaser unable, to acquire or hold or to
exercise effectively all rights of ownership of the Homestead
shares, including, the right to vote any Homestead shares purchased
by Purchaser on all matters properly presented to Homestead
stockholders, or effectively to control in any material respect in
Security Capital's view the business, assets or operations of
Homestead, its subsidiaries or Purchaser or any of their respective
affiliates,
. which otherwise would reasonably be expected to have a material
adverse effect on Homestead; or
(2) there has occurred any change that could reasonably be expected to
constitute a material adverse effect on Homestead; or
(3) there has occurred (A) any general suspension of trading in, or
limitation on prices for, securities on the New York Stock Exchange, Inc.
or the NASDAQ for a period in excess of 24 hours (excluding suspensions or
limitations resulting solely from physical damage or interference with such
exchanges not related to market conditions), (B) the declaration of a
banking moratorium or any suspension of payments in respect of banks in the
United States (whether or not mandatory), (C) the commencement of a war or
other international or national calamity, directly or indirectly, involving
the United States, (D) any limitation whether or not mandated by any United
States governmental authority or agency that would reasonably be expected
to have a material adverse effect on either Security Capital or Purchaser
and on the extension of credit by banks or other financial institutions,
(E) from May 2, 2000 through the date of termination or expiration of the
tender offer, a decline of at least 15% in the Standard & Poor's 500 Index
for any one week period, or (F) in the case of any of the foregoing,
existing at the date of the execution of the merger agreement, a material
acceleration or worsening thereof; or
(4) the merger agreement has been terminated in accordance with its
terms; or
(5) (A) the Homestead Board of Directors based on the recommendations of
the Homestead special committee has withdrawn, changed or modified
(including by amendment of Homestead's Solicitation/Recommendation
Statement on Schedule 14D-9) in a manner adverse to Purchaser or Security
Capital its approval or recommendation of the tender offer, the merger
agreement or the merger or has recommended an acquisition proposal, or has
adopted any resolution to effect any of the foregoing, (B) the Homestead
special committee has recommended any proposal other than this agreement in
respect of an acquisition proposal, (C) the Homestead special committee has
continued discussions with any third party concerning an acquisition
proposal for more than ten business days after the date of receipt of such
acquisition proposal, or (D) an acquisition proposal that is publicly
disclosed and that contains a proposal as to price (without regard to
whether such proposal specifies a specific price or a range of potential
prices) has been commenced, publicly proposed or communicated to Homestead
and the Homestead special
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committee has not rejected such proposal within ten business days of the
earlier to occur of (i) Homestead's receipt of such acquisition proposal
and (ii) the date such acquisition proposal first becomes publicly
disclosed; or
(6) the representations and warranties of Homestead set forth in the
merger agreement are not true and correct as of the date of the merger
agreement or on and as of the Expiration Date as though made on and as of
the Expiration Date (except to the extent any such representation or
warranty expressly speaks as of an earlier or different date, and except
for changes contemplated or permitted by the terms hereof), except, in
either case, where the failure of such representations and warranties to be
so true and correct would not, in the aggregate, be reasonably likely to
have a material adverse effect on Homestead; or
(7) Homestead has not performed in all material respects all obligations
required to be performed by it under the merger agreement at or prior to
the Expiration Date.
The foregoing conditions are for the sole benefit of Security Capital and
Purchaser. Security Capital or Purchaser may assert the failure of any of the
conditions regardless of the circumstances (other than any circumstance
arising solely by any action or inaction by Security Capital or Purchaser)
giving rise to any such failure. The conditions may be waived by Security
Capital or Purchaser in whole or in part at any time. The failure by Security
Capital or Purchaser at any time to exercise any of the foregoing rights shall
not be deemed a waiver of any such right, and each such right shall be deemed
an ongoing right that may be asserted at any time.
A public announcement may be made of a material change in, or waiver of,
such conditions. The tender offer may, in certain circumstances, be extended
in connection with any such change or waiver.
Purchaser acknowledges that the SEC believes that (a) if Purchaser is
delayed in accepting the Homestead shares it must either extend the tender
offer or terminate the tender offer and promptly return the Homestead shares,
and (b) the circumstances in which a delay in payment is permitted are limited
and do not include unsatisfied conditions of the tender offer, except with
respect to most required regulatory approvals.
13. Legal Matters
Except as set forth in this offer to purchase, based on our review of
publicly available filings by Homestead with the SEC and other information
regarding Homestead, we are not aware of any licenses or regulatory permits
that appear to be material to the business of Homestead and its subsidiaries,
taken as a whole, that might be adversely affected by our acquisition of
Homestead shares in the tender offer. In addition, we are not aware of any
filings, approvals or other actions by or with any governmental entity or
administrative or regulatory agency that would be required for our acquisition
or ownership of the Homestead shares. Should any such approval or other action
be required, we expect to seek such approval or action, except as described
under "-- Takeover Laws." Should any such approval or other action be
required, we cannot be certain that we would be able to obtain any such
approval or action without substantial conditions, or that adverse
consequences might not result to Homestead's or its subsidiaries' businesses,
or that certain parts of Homestead's, Security Capital's or any of their
respective subsidiaries' businesses might not have to be disposed of or held
separate in order to obtain such approval or action. In that event, we may not
be required to purchase any Homestead shares in the tender offer. See
"Introduction" and Section 12 for a description of the conditions to the
tender offer.
State Takeover Laws. A number of states (including Maryland, where
Homestead is incorporated) have adopted takeover laws and regulations that
purport to be applicable to attempts to acquire securities of corporations
that are incorporated in those states or that have substantial assets,
stockholders, principal executive offices or principal places of business in
those states. To the extent that these state takeover statutes purport to
apply to the tender offer or the merger, we believe that those laws conflict
with United States federal law and are an unconstitutional burden on
interstate commerce. In 1982, the United States Supreme Court, in Edgar v.
Mite Corp., invalidated, on constitutional grounds, the Illinois Business
Takeovers Statute, which, as a matter of state securities law, made takeovers
of corporations meeting certain requirements more difficult. The reasoning in
that decision is likely to apply to certain other state takeover statutes. In
1987, however, in CTS Corp. v. Dynamics
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Corp. of America, the United States Supreme Court held that the State of
Indiana could, as a matter of corporate law, and, in particular, those aspects
of corporate law concerning corporate governance, constitutionally disqualify
a potential acquiror from voting on the affairs of a target corporation
without the prior approval of the remaining stockholders, as long as those
laws were applicable only under certain conditions. Subsequently, in TLX
Acquisition Corp. v. Telex Corp., a federal district court in Oklahoma ruled
that the Oklahoma statutes were unconstitutional insofar as they apply to
corporations incorporated outside Oklahoma because they would subject those
corporations to inconsistent regulations. Similarly, in Tyson Foods, Inc. v.
McReynolds, a federal district court in Tennessee ruled that four Tennessee
takeover statutes were unconstitutional as applied to corporations
incorporated outside Tennessee. This decision was affirmed by the United
States Court of Appeals for the Sixth Circuit. In December 1988, a federal
district court in Florida held, in Grand Metropolitan PLC v. Butterworth, that
the provisions of the Florida Affiliated Transactions Act and Florida Control
Homestead Share Acquisition Act were unconstitutional as applied to
corporations incorporated outside of Florida.
We have not attempted to comply with any state takeover statutes in
connection with the tender offer or the merger. We reserve the right to
challenge the validity or applicability of any state law allegedly applicable
to the tender offer or the merger, and nothing in this tender offer to
purchase nor any action that we take in connection with the tender offer is
intended as a waiver of that right. In the event that it is asserted that one
or more takeover statutes apply to the tender offer or the merger, and it is
not determined by an appropriate court that the statutes in question do not
apply or are invalid as applied to the tender offer or the merger, as
applicable, we may be required to file certain documents with, or receive
approvals from, the relevant state authorities, and we might be unable to
accept for payment or purchase Homestead shares tendered in the tender offer
or be delayed in continuing or consummating the tender offer. In that case, we
may not be obligated to accept for purchase, or pay for, any Homestead shares
tendered. See Section 12.
Antitrust. Under the Hart-Scott-Rodino Antitrust Improvement Act of 1976,
as amended, and the rules that have been promulgated thereunder by the Federal
Trade Commission, certain transaction may not be consummated unless certain
information has been furnished to the Antitrust Division of the Department of
Justice and the FTC and certain waiting period requirements have been
satisfied. However, the acquisition of Homestead shares by Purchaser pursuant
to the tender offer is not subject to these requirements because Security
Capital and its affiliates currently own in excess of 50% of the outstanding
Homestead shares.
The FTC and the Antitrust Division frequently scrutinize the legality under
the antitrust laws of transactions such as the proposed acquisition of
Homestead shares by Purchaser pursuant to the tender offer. At any time before
or after the purchase of Homestead shares pursuant to the tender offer by
Purchaser, the FTC or the Antitrust Division could take such action under the
antitrust laws as it deems necessary or desirable in the public interest,
including seeking to enjoin the purchase of Homestead shares pursuant to the
tender offer or seeking the divestiture of Homestead shares purchased by
Purchaser or the divestiture of substantial assets of Security Capital or its
subsidiaries. Private parties and the state attorneys general may also bring
legal action under federal or state antitrust laws under certain
circumstances. Based upon an examination of information available to Security
Capital relating to the businesses in which Security Capital, Homestead, and
their respective affiliates are engaged, Security Capital believes that the
tender offer will not violate the antitrust laws. Nevertheless, there can be
no assurance that a challenge to the tender offer on antitrust grounds will
not be made or, if such a challenge is made, what the result would be.
Certain Litigation. Homestead, Security Capital and Homestead's directors
have been named as defendants in four purported stockholder class actions.
Three of these actions have been filed in the Circuit Court for Baltimore
City, Maryland, and are captioned Earl Joseph Maisonneuve v. Eugene B. Vesell,
et al., Robert Merritt v. Security Capital Group Incorporated, and Harold
McClintock v. C. Ronald Blankenship, et al. One of these actions has been
filed in the Circuit Court for Montgomery County, Maryland, and is captioned
Aron Rubin v. Homestead Village, Inc., et al. The allegations in all four
cases (the "Actions") are substantially similar, and each complaint in the
Actions alleges that (a) the Security Capital proposal of $3.40 in cash per
share was unfair, (b) Security Capital and the Homestead directors were
breaching their duties to the stockholders of Homestead not affiliated with
Security Capital in connection with the Homestead proposal, and (c)
appropriate steps were
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not being taken to insure that the stockholders of Homestead not affiliated
with Security Capital would receive fair value for their Homestead shares in
any transaction that might occur. As relief, the complaints in the Actions
sought, among other things, damages in an unspecified amount and rescission of
the transaction, if effected. In addition, the action brought by Harold
McClintock was also filed in a Georgia court and is captioned Harold
McClintock v. C. Ronald Blankenship. The plaintiff has filed a motion to
dismiss the Georgia action; however the court has not yet granted the motion.
On May 2, 2000, as the result of negotiations between counsel for parties
in the Actions, an agreement in principle was reached providing for the
settlement of the Actions, subject to Court approval and the completion of the
merger, among other things.
14. Fees and Expenses.
Chase Securities Inc. is acting as the Dealer Manager in connection with
the tender offer and has provided certain financial advisory services to
Security Capital in connection with the tender offer and the merger. We will
reimburse the Dealer Manager for reasonable out-of-pocket expenses. We have
agreed to indemnify Chase Securities Inc. and its affiliates and certain other
persons against certain liabilities and expenses in connection with its
services as the Dealer Manager and financial advisor, including liabilities
under the United States federal securities laws. At any time, the Dealer
Manager and its affiliates may actively trade Homestead shares for its own
account or for the accounts of customers, and, accordingly, may at any time
hold a long or short position in Homestead shares.
We have retained Georgeson Shareholder Communications, Inc. as Information
Agent in connection with the tender offer. The Information Agent may contact
holders of Homestead shares by mail, telephone, telex, telegraph and personal
interview and may request brokers, dealers and other nominee stockholders to
forward material relating to the tender offer to beneficial owners of
Homestead shares. We will pay the Information Agent reasonable and customary
compensation for these services in addition to reimbursing the Information
Agent for its reasonable out-of-pocket expenses. We have agreed to indemnify
the Information Agent against certain liabilities and expenses in connection
with the tender offer, including certain liabilities under the United States
federal securities laws.
In addition, we have retained EquiServe as the Depositary. We will pay the
Depositary reasonable and customary compensation for its services in
connection with the tender offer, will reimburse the Depositary for its
reasonable out-of-pocket expenses and will indemnify the Depositary against
certain liabilities and expenses, including certain liabilities under the
federal securities laws.
Homestead has paid or will be responsible for paying the following expenses
incurred or estimated to be incurred in connection with the tender offer and
the merger (numbers in thousands):
<TABLE>
<S> <C>
Financial Advisor................. $1,500
Legal............................. 250
Other............................. 400
</TABLE>
Except as set forth above, we will not pay any fees or commissions to any
broker, dealer or other person for soliciting tenders of Homestead shares
pursuant to the tender offer. We will reimburse brokers, dealers, commercial
banks and trust companies and other nominees, upon request, for customary
clerical and mailing expenses incurred by them in forwarding offering
materials to their customers.
15. Miscellaneous.
We are not aware of any jurisdiction in which the making of the tender
offer is prohibited by any administrative or judicial action pursuant to any
valid state statute. If we become aware of any valid state statute prohibiting
the making of the tender offer or the acceptance of Homestead shares, we will
make a good faith effort to comply with that state statute. If, after a good
faith effort, we cannot comply with the state statute, we will not make the
tender offer to, nor will we accept tenders from or on behalf of, the holders
of Homestead shares in that state.
51
<PAGE>
We have filed with the SEC a Schedule TO, together with exhibits,
furnishing certain additional information with respect to the tender offer,
and may file amendments to the Schedule TO. The Schedule TO and any exhibits
or amendments may be examined and copies may be obtained from the SEC in the
same manner as described in Section 7 with respect to information concerning
Homestead, except that copies will not be available at the regional offices of
the SEC.
We have not authorized any person to give any information or to make any
representation on our behalf that is not contained in this offer to purchase
or in the letter of transmittal and, if given or made, you should not rely on
any such information or representation.
Neither the delivery of the offer to purchase nor any purchase pursuant to
the tender offer will, under any circumstances, create any implication that
there has been no change in the affairs of Security Capital, Purchaser,
Homestead or any of their respective subsidiaries since the date as of which
information is furnished or the date of this offer to purchase.
The matters discussed under the heading "Special Factors" and in Section 7
contain forward-looking statements that involve risks and uncertainties.
Stockholders are cautioned that, in addition to the other factors set forth
under the heading "Special Factors," the following factors may cause
Homestead's actual financial performance to differ materially from those
expressed in such forward-looking statements: (a) supply and demand for
Homestead's products and services; (b) competitive pricing pressures; and (c)
changes in industry laws and regulation.
HSD Acquisition Corporation
May 9, 2000
52
<PAGE>
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS OF SECURITY CAPITAL AND PURCHASER
Directors and executive officers of Security Capital. The following table
sets forth the name and present principal occupation or employment, and
material occupations, positions, offices or employment for the past five years
of each director and executive officer of Security Capital. Unless otherwise
indicated below, each occupation set forth opposite each individual refers to
employment with Security Capital. The business address of each such individual
is c/o Security Capital, 125 Lincoln Avenue, Santa Fe, NM 87501. Unless
otherwise indicated below, each such individual is a citizen of the United
States of America.
<TABLE>
<CAPTION>
Name Position
---- --------
<S> <C>
C. Ronald Blankenship... Director, Vice Chairman and Chief Operating Officer since May
1998. He was Managing Director from 1991 to 1998. Prior to June
1997, he was Chairman of Archstone Communities Trust. He is a
Trustee of Archstone and City Center Retail Trust, and a
Director of BelmontCorp, Storage USA, Inc. and CarrAmerica
Realty Corporation. He is Interim Chairman, Chief Executive
Officer and a Director of Homestead since May 1999.
Samuel W. Bodman........ Director since 1990. Chairman and Chief Executive Officer of
Cabot Corporation since 1988. He is a Director of Cabot
Corporation, John Hancock Financial Services, Inc., Thermo
Electron Corp and Westvaco Corp.
Hermann Buerger......... Director since 1996. Executive Vice President of Commerzbank AG
since 1988. He is a Director of Paging Network Incorporated and
United Dominion Industries. Mr. Buerger is a citizen of
Germany.
John P. Frazee, Jr...... Director since 1990. Director, Chairman and Chief Executive
Officer of Paging Network Incorporated since 1997, and
President from 1997 to 1999. He was formerly President and
Chief Operating Officer of Sprint Corporation. He is a Director
of Cable Satellite Public Affairs Network (C-SPAN), Vast
Wireless Solutions, Dean Foods Company, Cabot Microelectronics
Corporation and Homestead. Mr. Frazee is also Chairman and
Chief Executive Officer of Vast Wireless Solutions.
Cyrus F. Freidheim...... Director since 1990. Vice Chairman of Booz.Allen & Hamilton,
Inc., which he joined in 1966. He is a Director of Household
International Inc. and MicroAge, Inc.
H. Laurance Fuller...... Director since 1990. Former Co-Chairman and Director of BP
Amoco p.l.c. from 1999 until March 2000. Prior to 1999, he was
Chairman and Chief Executive Officer of Amoco Corporation. He
is a Director of Abbott Laboratories, Chase Manhattan
Corporation and Motorola, Inc.
Ray L. Hunt............. Director since 1990. Chairman and Chief Executive Officer of
Hunt Oil Company since 1976 and Chairman, Chief Executive
Officer and President of Hunt Consolidated Inc. He is a
Director of Halliburton Company, Electronic Data Systems
Corporation and PepsiCo, Inc.
John T. Kelley, III..... Director since 1990. Founding Officer and Advisory Trustee of
ProLogis Trust since 1993. He has been a Trustee of Archstone
since 1988 and a Director of Regency Realty Corporation since
1999, prior to which he served as Chairman of the Board of
Pacific Retail Trust.
William D. Sanders...... Founder, Chairman and Chief Executive Officer. He is a Director
of Carr America Realty Corporation, Security Capital U.S.
Realty, Security Capital-European Realty and Storage USA, Inc.
and is an Advisory Director of Regency Realty Corporation. He
is a member of the Board of Governors of the National
Association of Real Estate Investment Trusts (NAREIT).
</TABLE>
S-1
<PAGE>
<TABLE>
<CAPTION>
Name Position
---- --------
<S> <C>
Peter S. Willmott....... Director since 1990. Chairman and Chief Executive Officer of
Willmott Services, Inc., since 1989. He is a Director of
Federal Express Corp.
Thomas G. Wattles....... Managing Director since 1991 and a Trustee of ProLogis Trust
since 1993. He was Non-Executive Chairman of ProLogis Trust
from 1997 to 1998, and was Co-Chairman and Chief Investment
Officer of ProLogis Trust from 1993 to 1997. He is a Trustee of
CWS Communities Trust, City Center Retail Trust and Urban
Growth Property Trust.
Jeffrey A. Klopf........ Senior Vice President and Secretary since 1996. He was a
partner with Mayer, Brown & Platt from 1988 to 1995. He is also
Senior Vice President and Secretary of Homestead. He oversees
the provision of legal services for Security Capital and
Homestead.
James C. Swaim.......... Senior Vice President since 1998 and Vice President from 1997
to 1998. He was a private business and financial consultant
from 1996 to 1997. He was employed by Farah Incorporated from
1984 to 1996, where his most recent position was Executive Vice
President and Chief Financial Officer, and where he was a
member of the Board of Directors.
Paul E. Szurek.......... Chief Financial Officer since 1997. He is Managing Director of
SC Group, which provides administrative services to Homestead
under the Administrative Services Agreement. He was Managing
Director of Security Capital U.S. Realty from 1996 to 1997, and
was Senior Vice President from 1993 to 1996.
Thomas B. Allin......... Managing Director of the Capital Division since 1998. He was
President and Chief Operating Officer of Strategic Hotel
Capital Incorporated during 1998. From 1996 to 1997, he was
President and Chief Executive Officer of Gordon Biersch. Prior
to 1996, he was with McDonald's Corp., where his most recent
position was Senior Vice President and Zone Manager. He is a
Director of Access Self-Storage S.A., Interparking S.A.,
Regency Realty Corporation and Security Capital European Realty
and is a Trustee of Urban Growth Property Trust.
Jeffrey A. Cozad........ Managing Director and Director of Security Capital U.S. Realty
since 1996. He was Senior Vice President of the Capital Markets
Group from 1991 to 1996. He is a Director of Regency Realty
Corporation.
C. Robert Heaton........ Managing Director since 1997. He was Senior Vice President from
1996 to 1997. He was Senior Vice President with Right
Management Consultants from 1994 to 1996.
Anthony R. Manno, Jr.... Managing Director of the Global Capital Management Group since
1995.
Caroline S. McBride..... Managing Director of the Capital Division since 1997. She was
Managing Director of the Global Capital Management Group from
1996 to 1997. Prior to 1996, she was with IBM. She is a
Director of the Real Estate Research Institute, BelmontCorp,
Carr America Realty Corporation and Storage USA, Inc. and is a
Trustee of CWS Communities Trust.
A. Richard Moore, Jr.... Managing Director of the Capital Division since 1998; Interim
Chief Financial Officer for Homestead since 1999; Managing
Director of Security Capital European Realty Management Limited
and Security Capital (UK) Management Limited since 2000. He was
Vice President with Goldman, Sachs & Co. from 1990 to 1998.
</TABLE>
S-2
<PAGE>
<TABLE>
<CAPTION>
Name Position
---- --------
<S> <C>
Constance B. Moore...... Managing Director of the Capital Division since 1999. She was
Co-Chairman, Chief Operating Officer and Trustee of Archstone
Communities Trust during 1998, and was Co-Chairman, Chief
Operating Officer and Director of Security Capital Atlantic
Incorporated (which merged into Archstone) from 1996 to 1998.
She was Managing Director of Archstone from 1994 to 1995. She
is a Trustee of Archstone, City Center Retail Trust and CWS
Communites Trust, and a Director of BelmontCorp.
Jeremy Plummer.......... Managing Director of Security Capital European Realty since
1997. He was Head of International Real Estate for SPP
Investment Management from 1993 to 1997. Mr. Plummer is a
citizen of the United Kingdom.
Kenneth D. Statz........ Managing Director of the Global Capital Management Group since
1997. He was Senior Vice President of the Global Capital
Management Group from 1996 to 1997, and Vice President of the
Global Capital Management Group from 1995 to 1996.
Donald E. Suter......... Managing Director of Capital Markets Group since 1997. He was
Senior Vice President of Capital Markets Group from 1996 to
1997. From 1995 to 1996, he was President and Chief Operating
Officer for Cullinan Properties Limited. Mr. Suter is a general
securities principal registered with the NASD.
Robert S. Underhill..... Managing Director of the Capital Division since 1997. He was
Senior Vice President of Security Capital from 1995 to 1997. He
is a Trustee of Urban Growth Property Trust and a Managing
Director of City Center Retail Trust.
</TABLE>
Directors and executive officers of Purchaser. The following table sets
forth the name and present principal occupation or employment, and material
occupations, positions, offices or employments for the past five years of each
director and executive officer of Purchaser. Unless otherwise indicated below,
each occupation set forth opposite each individual refers to employment with
Purchaser. The business address of each such individual is c/o Security
Capital, 125 Lincoln Avenue, Santa Fe, NM 87501, and each such individual is a
citizen of the United States of America.
<TABLE>
<CAPTION>
Name Position
---- --------
<S> <C>
Jeffrey A. Klopf........ Director and President since 2000. He is Senior Vice President
and Secretary of Security Capital and Homestead since 1996. He
was a partner with Mayer, Brown & Platt from 1988 to 1995.
Sara S. Skillen......... Secretary since 2000. Vice President of Capital Markets Group
since 2000. Assistant Secretary of Security Capital since 2000,
and Paralegal from 1999 to 2000. She was a paralegal with
Waller Lansden Dortch & Davis PLLC from 1998 to 1999. She was
self-employed from 1995 to 1998.
James C. Swaim.......... Treasurer since 2000. Senior Vice President of Security Capital
since 1998, and Vice President from 1997 to 1998. He was a
private business and financial consultant from 1997 to 1998.
Prior to 1997, Mr. Swaim was employed by Farah Incorporated,
where his most recent positions were Executive Vice President
and Chief Financial Officer, and where he was a member of the
Board of Directors.
</TABLE>
S-3
<PAGE>
SCHEDULE II
PURCHASES OR SALES OF HOMESTEAD STOCK
The following table sets forth information concerning transactions in
Homestead shares during the past 60 days by (i) Security Capital, its
subsidiaries, and their respective directors and executive officers, and (ii)
Homestead, its subsidiaries, their respective directors and executive officers
and any pension, profit-sharing or similar plan of Homestead. The transaction
listed below involved open-market sales of Homestead's Common Stock. In
addition, the independent administrator of the Homestead 401k plan from time
to time purchases Homestead common shares; during the past 60 days the
administrator purchased approximately 19,000 Homestead shares through open
market purchases.
<TABLE>
<CAPTION>
Number of Shares Price
Transaction of Homestead's Per
Name of Party Date Common Stock Share
- ------------- ----------- ---------------- -------
<S> <C> <C> <C>
Ray L. Hunt................................ 3/24/2000 7,831 $3.1875
</TABLE>
The following sets forth information with respect to purchases of Homestead
shares by Homestead, Security Capital and Purchaser during the past two years.
The purchases during the first quarter of 1998 for 8,429,225 shares and the
second quarter of 1999 were made pursuant to subscription rights offerings by
Homestead and on the same terms and at the same time as made available to
other shareholders and investors. A total of 188,220 shares were purchased in
open market transactions in the first quarter of 1998 after the subscription
rights offering. The purchase during the first quarter of 2000 was made
directly from a former officer of Homestead as part of the repayment of an
outstanding loan from that officer.
<TABLE>
<CAPTION>
Number of
Homestead shares Range of Prices Average Purchase
purchased in Paid Per Share Price Per Share
Quarter Purchaser Quarter during Quarter During Quarter
- ------- ---------------------- ---------------- --------------- ----------------
<S> <C> <C> <C> <C>
Q1 98................... SC Realty 8,617,445 $14.18 - $15.00 $14.98
Q2 98................... None n/a n/a n/a
Q3 98................... None n/a n/a n/a
Q4 98................... None n/a n/a n/a
Q1 99................... None n/a n/a n/a
Q2 99................... SC Realty 77,749,220 $2.75 $ 2.75
Q3 99................... None n/a n/a n/a
Q4 99................... None n/a n/a n/a
Q1 00................... Security Capital Group 25,000 $2.50 $ 2.50
</TABLE>
S-4
<PAGE>
Facsimile copies of letters of transmittal, properly completed and duly
executed, will be accepted. Letters of transmittal, Homestead Certificates and
any other required documents should be sent or delivered by each Homestead
stockholder or broker, dealer, commercial bank, trust company or other nominee
to the Depositary at one of its addresses set forth below:
The Depositary for the tender offer is:
EquiServe
<TABLE>
<CAPTION>
By Mail: By Hand: By Overnight Courier:
<S> <C> <C>
EquiServe Securities Transfer & Reporting Services Inc. EquiServe
Attn: Corporate Actions c/o EquiServe Attn: Corporate Actions
P.O. Box 8029 100 William Street, Galleria 150 Royall Street
Boston, MA 02266-8029 New York, NY 10038 Canton, MA 02021
</TABLE>
<TABLE>
<CAPTION>
By Facsimile Transmission: Telephone to Confirm
Fax:
<S> <C>
(781) 575-2232 or
(781) 575-2233 (800) 730-6001
</TABLE>
You may direct questions and requests for assistance to the Information
Agent or the Dealer Manager at the addresses and telephone numbers set forth
below. You may obtain additional copies of this offer to purchase, the letter
of transmittal and other tender offer materials from the Information Agent or
the Dealer Manager as set forth below, and they will be furnished promptly at
our expense. You may also contact your broker, dealer, commercial bank, trust
company or other nominee for assistance concerning the tender offer.
The Information Agent for the tender offer is:
[LOGO OF GEORGESON SHAREHOLDER COMMUNICATIONS INC.]
17 State Street, 10th Floor
New York, New York 10004
Banks and Brokers Call Collect: (212) 440-9800
All Others Call Toll Free (800) 223-2064
The Dealer Manager for the tender offer is:
Chase Securities Inc.
270 Park Avenue
New York, New York 10017
Call Collect (212) 270-2631
<PAGE>
EXHIBIT (a)(2)
LETTER OF TRANSMITTAL
To Tender Shares of Common Stock
(Including the Associated Preferred Share Purchase Rights)
of
Homestead Village Incorporated
Pursuant to the Offer to Purchase Dated May 9, 2000
by
HSD Acquisition Corporation
an indirect wholly owned subsidiary
of
Security Capital Group Incorporated
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON TUESDAY, JUNE 6, 2000, UNLESS THE OFFER IS EXTENDED.
The Depositary for the Offer is:
EquiServe
<TABLE>
<CAPTION>
<S> <C> <C>
By Mail: By Hand: By Overnight Courier:
EquiServe Securities Transfer & Reporting EquiServe
Attn: Corporate Actions Services Inc. Attn: Corporate Actions
P.O. Box 8029 c/o EquiServe 150 Royall Street
Boston, MA 02266-8029 100 Williams Street, Galleria Canton, MA 02021
New York, NY 10038
Facsimile Transmission: Telephone to Confirm Fax:
(781) 575-2232 or 1 (800) 730-6001
(781) 575-2233
</TABLE>
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TO A NUMBER OTHER THAN AS
LISTED ABOVE DOES NOT CONSTITUTE A VALID DELIVERY. YOU MUST SIGN THIS LETTER
OF TRANSMITTAL WHERE INDICATED BELOW AND COMPLETE THE SUBSTITUTE FORM W-9
PROVIDED BELOW.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
DESCRIPTION OF SHARES TENDERED
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
2Name(s) and Address(es) of Registered Holder(s)
(Please Fill in, if blank, exactly as name(s) appear on Share Certificate(s) and Share(s) Tendered
certificate(s)) (Attach Additional Signed List, if Necessary)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Total Number of Number of
Share Certificate Shares Represented by Shares
Number(s)* Share Certificate(s)* Tendered**
-----------------------------------------------------
-----------------------------------------------------
-----------------------------------------------------
-----------------------------------------------------
Total Certificated
Shares Tendered
---------------------------------
Total Book
Shares Tendered
---------------------------------
Total Shares Tendered
- -------------------------------------------------------------------------------
</TABLE>
* Certificate numbers are not required if tender is made by book-entry
transfer.
** If you desire to tender fewer than all Shares represented by any
certificate listed above, please indicate in this column the number of
Shares you wish to tender. Otherwise, all Shares represented by such
certificate will be deemed to have been tendered. See Instruction 4.
[_] IF ANY OF THE CERTIFICATES REPRESENTING SHARES THAT YOU OWN HAVE BEEN LOST
OR DESTROYED, YOU MUST COMPLETE AN AFFIDAVIT OF LOSS AND RETURN IT WITH
THIS LETTER OF TRANSMITTAL, PLEASE CALL (800) 730-6001 FOR FURTHER
INSTRUCTIONS.
[_] Number of Shares represented by the lost or destroyed certificates:
<PAGE>
This Letter of Transmittal is to be completed by stockholders of Homestead
Village Incorporated either if certificates ("Share Certificates")
representing shares of common stock, par value $.01 per share (the "Shares")
and the associated preferred share purchase rights, are to be forwarded
herewith or, unless an Agent's Message (as defined in the Offer to Purchase)
is utilized, if delivery of Shares is to be made by book-entry transfer to an
account maintained by EquiServe (the "Depositary") at The Depository Trust
Company (the "Book-Entry Transfer Facility") pursuant to the procedures set
forth under "THE OFFER--Procedures for Accepting the Offer and Tendering
Shares" in the Offer to Purchase dated May 9, 2000 (the "Offer to Purchase").
Delivery of documents to the Book-Entry Transfer Facility in accordance with
the Book-Entry Transfer Facility's procedures does not constitute delivery to
the Depositary.
Stockholders whose Share Certificates are not immediately available or who
cannot deliver their Share Certificates and all other required documents to
the Depositary on or prior to the expiration date of the Offer or who are
unable to complete the procedure for book-entry transfer prior to the
expiration date of the Offer may nevertheless tender their Shares pursuant to
the guaranteed delivery procedures set forth under "THE OFFER--Procedures for
Accepting the Offer and Tendering Shares" in the Offer to Purchase. See
Instruction 2 below.
NOTE: SIGNATURE(S) MUST BE PROVIDED BELOW.
PLEASE READ THE INSTRUCTIONS SET FORTH IN THIS LETTER OF TRANSMITTAL
CAREFULLY.
[_] CHECK HERE IF SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO AN
ACCOUNT MAINTAINED BY THE DEPOSITARY WITH THE BOOK-ENTRY TRANSFER FACILITY
AND COMPLETE THE FOLLOWING:
Name of Tendering Institution: _______________________________________________
Provide Account Number and Transaction Code Number:
Account Number: ______________________________________________________________
Transaction Code Number: _____________________________________________________
[_] CHECK HERE IF SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED
DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING.
PLEASE ENCLOSE A PHOTOCOPY OF SUCH NOTICE OF GUARANTEED DELIVERY.
Name(s) of Registered Holder(s): _____________________________________________
Window Ticket Number (if any): _______________________________________________
Date of Execution of Notice of Guaranteed Delivery: __________________________
Name of Institution which Guaranteed Delivery: _______________________________
If Delivered by Book-Entry Transfer to the Book-Entry Transfer Facility,
check box: [_]
Account Number: ______________________________________________________________
Transaction Code Number: _____________________________________________________
2
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to HSD Acquisition Corporation
("Purchaser"), a Maryland corporation and an indirect wholly owned subsidiary
of Security Capital Group Incorporated, a Maryland corporation ("Parent"), the
above-described shares of Common Stock, par value $.01 per share (the
"Shares"), of Homestead Village Incorporated, a Maryland corporation (the
"Company") and the associated preferred share purchase rights (the "Rights")
issued pursuant to the Rights Agreement dated as of May 16, 1996 between the
Company and The First National Bank of Boston as Rights Agent (as the same may
be amended, the "Rights Agreement"), pursuant to Purchaser's offer to purchase
all outstanding Shares at $4.10 per Share, net to the seller in cash, without
interest thereon, upon the terms and subject to the conditions set forth in
the Offer to Purchase, dated May 9, 2000 (the "Offer to Purchase"), receipt of
which is hereby acknowledged, and in this Letter of Transmittal (which, as
amended or supplemented from time to time, collectively constitute the
"Offer"). Unless the context indicates otherwise, all references to Shares
shall include the Rights.
Subject to, and effective upon, acceptance for payment of the Shares
tendered herewith, in accordance with the terms of the Offer, the undersigned
hereby sells, assigns and transfers to, or upon the order of, Purchaser all
right, title and interest in and to all the Shares that are being tendered
hereby and all dividends, distributions (including, without limitation,
distributions of additional Shares) and rights declared, paid or distributed
in respect of such Shares on or after May 9, 2000 (collectively,
"Distributions") and irrevocably appoints EquiServe (the "Depositary") the
true and lawful agent and attorney-in-fact of the undersigned with respect to
such Shares and all Distributions, with full power of substitution (such power
of attorney being deemed to be an irrevocable power coupled with an interest),
to (i) deliver certificates representing Shares ("Share Certificates") and all
Distributions, or transfer ownership of such Shares and all Distributions on
the account books maintained by the Book-Entry Transfer Facility, together, in
either case, with all accompanying evidences of transfer and authenticity, to
or upon the order of Purchaser; (ii) present such Shares and all Distributions
for transfer on the books of the Company; and (iii) receive all benefits and
otherwise exercise all rights of beneficial ownership of such Shares and all
Distributions, all in accordance with the terms of the Offer.
The undersigned hereby irrevocably appoints Jeffrey A. Klopf, Brent Shaffer
and James C. Swaim as attorney-in-fact and proxy of the undersigned, each with
full power of substitution, to vote in such manner as such attorney and proxy
or his substitute shall, in his sole discretion, deem proper and otherwise act
(by written consent or otherwise) with respect to all the Shares tendered
hereby which have been accepted for payment by Purchaser prior to the time of
such vote or other action and all Shares and other securities issued in
Distributions in respect of such Shares, which the undersigned is entitled to
vote at any meeting of stockholders of the Company (whether annual or special
and whether or not an adjourned or postponed meeting) or consent in lieu of
any such meeting or otherwise. This proxy and power of attorney is coupled
with an interest in the Shares tendered hereby, is irrevocable and is granted
in consideration of, and is effective upon, the acceptance for payment of such
Shares by Purchaser in accordance with the terms of the Offer. Such acceptance
for payment shall revoke all other proxies and powers of attorney granted by
the undersigned at any time with respect to such Shares (and all Shares and
other securities issued in Distributions in respect of such Shares), and no
subsequent proxy or power of attorney shall be given or written consent
executed (and if given or executed, shall not be effective) by the undersigned
with respect thereto. The undersigned understands that, in order for Shares to
be deemed validly tendered, immediately upon Purchaser's acceptance of such
Shares for payment, Purchaser or its designee must be able to exercise full
voting, consent and other rights with respect to such Shares and other
securities, including, without limitation, voting at any meeting of the
Company's stockholders.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the Shares
tendered hereby and all Distributions, and that when such Shares are accepted
for payment by Purchaser, Purchaser will acquire good, marketable and
unencumbered title thereto and to all Distributions, free and clear of all
liens, restrictions, charges and encumbrances, and that none of such Shares or
Distributions will be subject to any adverse claim. The undersigned, upon
request, shall execute and deliver all additional documents deemed by the
Depositary or Purchaser to be necessary or desirable to complete the sale,
assignment and transfer of the Shares tendered hereby and all Distributions.
In addition, the undersigned shall remit and transfer promptly to the
Depositary for the account of Purchaser all Distributions in respect of the
Shares tendered hereby, accompanied by appropriate documentation of transfer,
and pending such remittance and transfer or appropriate assurance thereof,
Purchaser shall be entitled to all rights and privileges
3
<PAGE>
as owner of each such Distribution and may withhold the entire purchase price
of the Shares tendered hereby, or deduct from such purchase price, the amount
or value of such Distribution as determined by Purchaser in its sole
discretion.
No authority herein conferred or agreed to be conferred shall be affected
by, and all such authority shall survive, the death or incapacity of the
undersigned. All obligations of the undersigned hereunder shall be binding
upon the heirs, personal representatives, successors and assigns of the
undersigned. Except as stated in the Offer to Purchase, this tender is
irrevocable. See "THE OFFER -- Withdrawal Rights" in the Offer to Purchase.
The undersigned understands that tenders of Shares pursuant to any one of
the procedures described in the Offer to Purchase under "THE OFFER --
Procedures for Accepting the Offer and Tendering Shares" and in the
instructions hereto will constitute the undersigned's acceptance of the terms
and conditions of the Offer. Purchaser's acceptance of such Shares for payment
will constitute a binding agreement between the undersigned and Purchaser upon
the terms and subject to the conditions of the Offer. Without limiting the
foregoing, if the price to be paid in the Offer is amended in accordance with
the Offer, the price to be paid to the undersigned will be the amended price
notwithstanding the fact that a different price is stated in this Letter of
Transmittal. The undersigned recognizes that under certain circumstances set
forth in the Offer to Purchase, Purchaser may not be required to accept for
payment any of the Shares tendered hereby.
Unless otherwise indicated herein in the box entitled "Special Payment
Instructions," please issue the check for the purchase price of all Shares
purchased, and return all Share Certificates not purchased or not tendered in
the name(s) of the registered holder(s) appearing above in the box entitled
"Description of Shares Tendered." Similarly, unless otherwise indicated in the
box entitled "Special Delivery Instructions," please mail the check for the
purchase price of all Shares purchased and all Share Certificates not tendered
or not purchased (and accompanying documents, as appropriate) to the
address(es) of the registered holder(s) appearing above in the box entitled
"Description of Shares Tendered." In the event that the boxes entitled
"Special Payment Instructions" and "Special Delivery Instruction" are both
completed, please issue the check for the purchase price of all Shares
purchased and return all Share Certificates not purchased or not tendered in
the name(s) of, and mail such check and Share Certificates to, the person(s)
so indicated. Unless otherwise indicated herein in the box entitled "Special
Payment Instructions," please credit any Shares tendered hereby and delivered
by book-entry transfer, but which are not purchased, by crediting the account
at the Book-Entry Transfer Facility. The undersigned recognizes that Purchaser
has no obligation, pursuant to the Special Payment Instructions, to transfer
any Shares from the name of the registered holder(s) thereof if Purchaser does
not purchase any of the Shares tendered hereby.
The undersigned understands that Purchaser reserves the right to transfer
or assign, in whole at any time, or in part from time to time, to one or more
of its affiliates, the right to purchase all or any portion of the Shares
tendered pursuant to the Offer, but any such transfer or assignment will not
relieve Purchaser of its obligations under the Offer and will in no way
prejudice the rights of tendering stockholders to receive payment for Shares
validly tendered and accepted for payment pursuant to the Offer.
4
<PAGE>
SPECIAL PAYMENT INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 1, 5, 6 and 7) (See Instructions 1, 5, 6 and 7)
To be completed ONLY if Share To be completed ONLY if Share
Certificates not tendered or not Certificates not tendered or not
purchased and/or the check for purchased and/or the check for
the purchase price of the Shares the purchase price of the Shares
purchased are to be issued in the purchased are to be sent to
name of and sent to someone other someone other than the
than the undersigned, or if undersigned, or to the
Shares tendered by book-entry undersigned at an address other
transfer which are not purchased than that shown above.
are to be returned by credit to
an account maintained at the Mail[_] Check and/or
Book-Entry Transfer Facility [_] Certificate(s)
other than the account indicated to:
above.
Name: ____________________________
(Please Print)
Address: _________________________
__________________________________
Issue[_] Check and/or
[_] Certificates to: __________________________________
__________________________________
Name: ____________________________ (Include Zip Code)
(Please Print)
Address: _________________________ __________________________________
__________________________________ (Taxpayer Identification or
__________________________________ Social Security No.)
__________________________________
(Include Zip Code)
__________________________________
(Taxpayer Identification or
Social Security No.)
(also complete Substitute Form W-
9 below)
[_]Credit unpurchased Shares
tendered by book-entry
transfer to the Book-Entry
Transfer Facility account set
forth below:
__________________________________
(Account Number)
5
<PAGE>
SIGN HERE
(and please complete Substitute Form W-9)
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Signature(s) of Holder(s)
Dated: , 2000
(Must be signed by registered holder(s) exactly as name(s) appear(s) on Share
Certificate(s) or on a security position listing or by person(s) authorized
to become registered holder(s) by Share Certificates and documents
transmitted herewith. If a signature is by an officer on behalf of a
corporation or by an executor, administrator, trustee, guardian, attorney-in-
fact, agent or other person acting in a fiduciary or representative capacity,
please provide the following information. See Instructions 1 and 5.)
Name(s): _____________________________________________________________________
------------------------------------------------------------------------------
(Please Print)
Name of Firm: ________________________________________________________________
Capacity (full title): _______________________________________________________
Address: _____________________________________________________________________
------------------------------------------------------------------------------
(Include Zip Code)
(Area Code) Telephone Number: ________________________________________________
Taxpayer Identification or
Social Security No.: _________________________________________________________
(See Substitute Form W-9)
GUARANTEE OF SIGNATURE(S)
(If Required -- See Instructions 1 and 5)
------------------------------------------------------------------------------
Authorized Signature
------------------------------------------------------------------------------
Name (Please Print)
------------------------------------------------------------------------------
Name of Firm
------------------------------------------------------------------------------
Address
------------------------------------------------------------------------------
Zip Code
------------------------------------------------------------------------------
(Area Code) Telephone No.
Dated: , 2000
6
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
To complete the Letter of Transmittal, you must do the following:
. Fill in the box entitled "Description of Shares Being Tendered."
. Sign and date the Letter of Transmittal in the box entitled "Sign
Here."
. Fill in and sign in the box entitled "Substitute Form W-9."
In completing the Letter of Transmittal, you may (but are not required to)
also do the following:
. If you want the payment for any Shares purchased issued in the name
of another person, complete the box entitled "Special Payment
Instructions."
. If you want any certificate for Shares not tendered or Shares not
purchased issued in the name of another person, complete the box
entitled "Special Payment Instructions."
. If you want any payment for Shares or certificate for Shares not
tendered or purchased delivered to an address other than that
appearing under your signature, complete the box entitled "Special
Delivery Instructions."
If you complete the box entitled "Special Payment Instructions" or "Special
Delivery Instructions," you must have your signature guaranteed by an Eligible
Institution (as defined in Instruction 1 below) unless the Letter of
Transmittal is signed by an Eligible Institution.
1. Guarantee of Signatures. All signatures on this Letter of Transmittal
must be guaranteed by a bank, broker, dealer, credit union, savings
association or other entity that is a member in good standing of the
Securities Transfer Agents Medallion Program (an "Eligible Institution"),
unless (i) this Letter of Transmittal is signed by the registered holder(s)
(which term, for purposes of this document, shall include any participant in
the Book-Entry Transfer Facility whose name appears on a security position
listing as the owner of Shares) of the Shares tendered hereby and such
holder(s) has not completed either the box entitled "Special Payment
Instructions" or the box entitled "Special Delivery Instructions" herein or
(ii) such Shares are tendered for the account of an Eligible Institution. If a
Share Certificate is registered in the name of a person other than the person
signing this Letter of Transmittal, or if payment is to be made, or a Share
Certificate not accepted for payment and not tendered is to be returned to a
person other than the registered holder(s), then such Share Certificate must
be endorsed or accompanied by appropriate stock powers, in either case signed
exactly as the name(s) of the registered holder(s) appear on such Share
Certificate, with the signatures on such Share Certificate or stock powers
guaranteed as described above. See Instruction 5.
2. Delivery of Letter of Transmittal and Share Certificates. This Letter of
Transmittal is to be used either if Share Certificates are to be forwarded
herewith or, unless an Agent's Message (as defined below) is used, if Shares
are to be delivered by book-entry transfer pursuant to the procedure set forth
under "THE OFFER -- Procedures for Accepting the Offer and Tendering Shares"
in the Offer to Purchase. Share Certificates representing all physically
tendered Shares, or confirmation of a book-entry transfer, if such procedure
is available, into the Depositary's account at the Book-Entry Transfer
Facility ("Book-Entry Confirmation") of all Shares delivered by book-entry
transfer together with a properly completed and duly executed Letter of
Transmittal (or facsimile thereof), or an Agent's Message in the case of book-
entry transfer, and any other documents required by this Letter of
Transmittal, must be received by the Depositary at one of its addresses set
forth herein prior to the expiration date of the Offer. If Share Certificates
are forwarded to the Depositary in multiple deliveries, a properly completed
and duly executed Letter of Transmittal must accompany each such delivery.
Stockholders whose Share Certificates are not immediately available, who
cannot deliver their Share Certificates and all other required documents to
the Depositary prior to the expiration date of the Offer or who cannot
complete the procedure for delivery by book-entry transfer on a timely basis
may tender their Shares pursuant to the guaranteed delivery procedure
described under "THE OFFER -- Procedures for Accepting the Offer and Tendering
Shares" in the Offer to Purchase.
7
<PAGE>
Pursuant to such procedure: (i) such tender must be made by or through an
Eligible Institution; (ii) a properly completed and duly executed Notice of
Guaranteed Delivery, substantially in the form made available by Purchaser,
must be received by the Depositary prior to the expiration date of the Offer;
and (iii) the Share Certificates representing all physically delivered Shares
in proper form for transfer by delivery, or Book-Entry Confirmation of all
Shares delivered by book-entry transfer, in each case together with a Letter
of Transmittal (or facsimile thereof), properly completed and duly executed,
with any required signature guarantees (or, in the case of a book-entry
transfer, an Agent's Message), and any other documents required by this Letter
of Transmittal, must be received by the Depositary within three New York Stock
Exchange trading days after the date of execution of such Notice of Guaranteed
Delivery, all as described under "THE OFFER -- Procedures for Accepting the
Offer and Tendering Shares" in the Offer to Purchase.
The term "Agent's Message" means a message, transmitted by the Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of
the Book-Entry Confirmation, which states that the Book-Entry Transfer
Facility has received an express acknowledgment from the participants in the
Book-Entry Transfer Facility tendering the Shares that such participant has
received this Letter of Transmittal and agrees to be bound by the terms of
this Letter of Transmittal and that Purchaser may enforce such agreement
against such participant.
The method of delivery of this Letter of Transmittal, Share Certificates
and all other required documents, including delivery through the Book-Entry
Transfer Facility, is at the option and risk of the tendering stockholder, and
the delivery will be deemed made only when actually received by the Depositary
(including, in the case of a book-entry transfer, by Book-Entry Confirmation).
If delivery is by mail, registered mail with return receipt requested,
properly insured, is recommended. In all cases, sufficient time should be
allowed to ensure timely delivery.
No alternative, conditional or contingent tenders will be accepted and no
fractional Shares will be purchased. By execution of this Letter of
Transmittal (or facsimile hereof), all tendering stockholders waive any right
to receive any notice of the acceptance of their Shares for payment.
3. Inadequate Space. If the space provided herein under "Description of
Shares Tendered" is inadequate, the certificate numbers, the number of Shares
represented by such Share Certificates and the number of Shares tendered
should be listed on a separate schedule and attached hereto.
4. Partial Tenders (Not Applicable to Stockholders who Tender by Book-Entry
Transfer). If fewer than all the Shares represented by any Share Certificate
delivered to the Depositary herewith are to be tendered hereby, fill in the
number of Shares which are to be tendered in the box entitled "Number of
Shares Tendered." In such cases, a new certificate representing the remainder
of the Shares that were represented by the Share Certificates delivered to the
Depositary herewith will be sent to each person signing this Letter of
Transmittal, unless otherwise provided in the box entitled "Special Delivery
Instructions" herein as soon as practicable after the expiration or
termination of the Offer. All Shares represented by Share Certificates
delivered to the Depositary will be deemed to have been tendered unless
otherwise indicated.
5. Signatures on Letter of Transmittal, Stock Powers and Endorsements. If
this Letter of Transmittal is signed by the registered holder(s) of the Shares
tendered hereby, the signature(s) must correspond with the name(s) as written
on the face of the Share Certificates evidencing such Shares without
alteration, enlargement or any other change whatsoever.
If any Share tendered hereby is owned of record by two or more persons, all
such persons must sign this Letter of Transmittal.
If any of the Shares tendered hereby are registered in the names of
different holders, it will be necessary to complete, sign and submit as many
separate Letters of Transmittal as there are different registrations of such
Shares.
If this Letter of Transmittal is signed by the registered holder(s) of the
Shares tendered hereby, no endorsements of Share Certificates or separate
stock powers are required, unless payment is to be made to, or Share
Certificates not tendered or not purchased are to be issued in the name of, a
person other than the registered holder(s), in which case, the Share
Certificate(s) representing the Shares tendered hereby must be endorsed or
accompanied by appropriate stock powers, in either case signed exactly as the
name(s) of the registered holder(s) appear on such Share Certificate(s).
Signatures on such Share Certificate(s) and stock powers must be guaranteed by
an Eligible Institution.
8
<PAGE>
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the Shares tendered hereby, the Share Certificate(s)
representing the Shares tendered hereby must be endorsed or accompanied by
appropriate stock powers, in either case signed exactly as the name(s) of the
registered holder(s) appear(s) on such Share Certificate(s). Signatures on
such Share Certificate(s) and stock powers must be guaranteed by an Eligible
Institution.
If this Letter of Transmittal or any certificate or stock power is signed
by a trustee, executor, administrator, guardian, attorney-in-fact, officer of
a corporation or other person acting in a fiduciary or representative
capacity, such person should so indicate when signing, and proper evidence
satisfactory to Purchaser of such person's authority to so act must be
submitted.
6. Stock Transfer Taxes. Except as otherwise provided in this Instruction
6, Purchaser will pay all stock transfer taxes with respect to the sale and
transfer of any Shares to it or its order pursuant to the Offer. If, however,
payment of the purchase price of any Shares purchased is to be made to, or
Share Certificate(s) representing Shares not tendered or not purchased are to
be issued in the name of, a person other than the registered holder(s), the
amount of any stock transfer taxes (whether imposed on the registered
holder(s), such other person or otherwise) payable on account of the transfer
to such other person will be deducted from the purchase price of such Shares
purchased, unless evidence satisfactory to Purchaser of the payment of such
taxes, or exemption therefrom, is submitted.
Except as provided in this Instruction 6, it will not be necessary for
transfer tax stamps to be affixed to the Share Certificates representing the
Shares tendered hereby.
7. Special Payment and Delivery Instructions. If a check for the purchase
price of any Shares tendered hereby is to be issued, or Share Certificate(s)
representing Shares not tendered or not purchased are to be issued, in the
name of a person other than the person(s) signing this Letter of Transmittal
or if such check or any such Share Certificate is to be sent to someone other
than the person(s) signing this Letter of Transmittal or to the person(s)
signing this Letter of Transmittal but at an address other than that shown in
the box entitled "Description of Shares Tendered" herein, the appropriate
boxes in this Letter of Transmittal must be completed. Stockholders delivering
Shares tendered hereby by book-entry transfer may request that Shares not
purchased be credited to the account maintained at the Book-Entry Transfer
Facility as such stockholder may designate in the box entitled "Special
Payment Instructions" herein. If no such instructions are given, all such
Shares not purchased will be returned by crediting the same account at the
Book-Entry Transfer Facility as the account from which such Shares were
delivered.
8. Waiver of Conditions. The conditions of the Offer may be waived, in
whole or in part, by Purchaser, in its sole discretion, at any time and from
time to time, in the case of any Shares tendered. See "THE OFFER -- Certain
Conditions to the Offer" in the Offer to Purchase.
9. Lost, Destroyed or Stolen Certificates. If any Share Certificate(s) have
been lost, destroyed or stolen, the stockholder should promptly notify the
Depositary by checking the box immediately preceding the special
payment/special delivery instructions, indicating the number of Shares lost
and delivering the Letter of Transmittal. The stockholder should also contact
the Company's transfer will then be contacted and provided with instructions
as to the procedures for replacing the Share Certificate(s). This Letter of
Transmittal and related documents cannot be processed until the lost,
destroyed or stolen certificates have been replaced and the replacement Share
Certificates have been delivered to the Depositary in accordance with the
Procedures set forth in "THE OFFER -- Procedures for Accepting the Offer and
Tendering Shares" in the Offer to Purchase and the instructions contained in
this Letter of Transmittal.
10. Questions and Requests for Assistance or Additional Copies. Questions
and requests for assistance may be directed to the Information Agent or the
Dealer Manager at their respective addresses or telephone numbers set forth
below. Additional copies of the Offer to Purchase, this Letter of Transmittal,
the Notice of Guaranteed Delivery and the Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9 may be obtained from the
Information Agent or the Dealer Manager or from brokers, dealers, commercial
banks or trust companies.
11. Substitute Form W-9. Each tendering stockholder is required to provide
the Depositary with a correct Taxpayer Identification Number ("TIN") on the
Substitute Form W-9 which is provided under "Important Tax Information" below,
9
<PAGE>
and to certify, under penalties of perjury, that such number is correct and
that such stockholder is not subject to backup withholding of Federal income
tax. If a tendering stockholder has been notified by the Internal Revenue
Service that such stockholder is subject to backup withholding, such
stockholder must cross out item (2) of the Certification box of the Substitute
Form W-9, unless such stockholder has since been notified by the Internal
Revenue Service that such stockholder is no longer subject to backup
withholding. Failure to provide the information on the Substitute Form W-9 may
subject the tendering stockholder to a $50 penalty imposed by the Internal
Revenue Service and to 31% Federal income tax withholding on the payment of
the purchase price of all Shares purchased from such stockholder. If the
tendering stockholder has not been issued a TIN and has applied for one or
intends to apply for one in the near future, such stockholder should write
"Applied For" in the space provided for the TIN in Part I of the Substitute
Form W-9, and sign and date the Substitute Form W-9 and the Certificate of
Awaiting Taxpayer Identification Number. If "Applied For" is written in Part I
and the Depositary is not provided with a TIN within 60 days, the Depositary
will withhold 31% on all payments of the purchase price to such stockholder
until a TIN is provided to the Depositary. Each foreign stockholder must
complete and submit Form W-8 in order to be exempt from the 31% Federal income
tax backup withholding due on payments with respect to the Shares.
Important: This Letter of Transmittal (or facsimile thereof), together with
any required signature guarantees, or, in the case of a book-entry transfer,
an Agent's Message, and any other required documents, must be received by the
Depositary prior to the expiration of the Offer, and either Share Certificates
for tendered Shares must be received by the Depositary or Shares must be
delivered pursuant to the procedures for book-entry transfer, in each case
prior to the expiration date of the Offer, or the tendering stockholder must
comply with the procedures for guaranteed delivery.
10
<PAGE>
IMPORTANT TAX INFORMATION
Under the Federal income tax law, a stockholder whose tendered Shares are
accepted for payment is required by law to provide the Depositary (as payer)
with such stockholder's correct TIN on Substitute Form W-9 below. If such
stockholder is an individual, the TIN is such stockholder's social security
number. If the Depositary is not provided with the correct TIN, the
stockholder may be subject to a $50 penalty imposed by the Internal Revenue
Service and payments that are made to such stockholder with respect to Shares
purchased pursuant to the Offer may be subject to backup withholding of 31%.
Certain stockholders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. In order for a foreign individual to qualify as an exempt
recipient, such individual must submit a Form W-8, signed under penalties of
perjury, attesting to such individual's exempt status. A Form W-8 can be
obtained from the Depositary. Exempt stockholders should furnish their TIN,
write "Exempt" on the face of the Substitute Form W-9, and sign, date and
return the Substitute Form W-9 to the Depositary. See the enclosed Guidelines
for Certification of Taxpayer Identification Number on Substitute Form W-9 for
additional instructions. A stockholder should consult his or her tax advisor
as to such stockholder's qualification for an exemption from backup
withholding and the procedure for obtaining such exemption.
If backup withholding applies, the Depositary is required to withhold 31%
of any payments made to the stockholder. Backup withholding is not an
additional tax. Rather, the Federal income tax liability of persons subject to
backup withholding will be reduced by the amount of tax withheld. If
withholding results in an overpayment of taxes, a refund may be obtained from
the Internal Revenue Service.
Purpose of Substitute Form W-9
To prevent backup withholding on payments that are made to a stockholder
with respect to Shares purchased pursuant to the Offer, the stockholder is
required to notify the Depositary of such stockholder's correct TIN by
completing the form below certifying that (a) the TIN provided on Substitute
Form W-9 is correct (or that such stockholder is awaiting a TIN) and (b) that
(i) such stockholder has not been notified by the Internal Revenue Service
that such stockholder is subject to backup withholding as a result of a
failure to report all interest or dividends or (ii) the Internal Revenue
Service has notified such stockholder that such stockholder is no longer
subject to backup withholding.
What Number to Give the Depositary
The stockholder is required to give the Depositary the social security
number or employer identification number of the record holder of the Shares
tendered hereby. If the Shares are in more than one name or are not in the
name of the actual owner, consult the enclosed Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9 for additional guidance
on which number to report. If the tendering stockholder has not been issued a
TIN and has applied for a number or intends to apply for a number in the near
future, the stockholder should write "Applied For" in the space provided for
the TIN in Part I, and sign and date the Substitute Form W-9 and the
Certificate of Awaiting Taxpayer Identification Number. If "Applied For" is
written in Part I and the Depositary is not provided with a TIN within 60
days, the Depositary will withhold 31% of all payments of the purchase price
to such stockholder until a TIN is provided to the Depositary.
11
<PAGE>
TO BE COMPLETED BY ALL TENDERING STOCKHOLDERS
(See Instruction 11)
PAYER'S NAME: EQUISERVE, AS DEPOSITARY
Part 1 -- Taxpayer
SUBSTITUTE Identification Number -- ----------------------
Form W-9 Please provide your TIN in Social Security Number
Department of the box at right and OR
the Treasury certify by signing and
Internal dating below. If awaiting ----------------------
Revenue TIN, write "Applied For." Employer Identification
Service Number
--------------------------------------------------------
Part 2 -- For Payees Exempt from Backup
Withholding -- Check the box if you are NOT
subject to backup withholding. [_]
--------------------------------------------------------
Payer's Request for Taxpayer
Identification Number ("TIN") Part 3 -- Certification -- Under penalties of
and Certification perjury, I certify that:
(1) The number shown on this form is my correct
taxpayer identification number (or I am waiting
for a number to be issued to me), and
(2) I am not subject to backup withholding because:
(a) I am exempt from backup withholding, or (b) I
have not been notified by the Internal Revenue
Service (IRS) that I am subject to backup
withholding as a result of a failure to report
all interest or dividends, or (c) the IRS has
notified me that I am no longer subject to backup
withholding.
Certification Instructions. -- You must cross out
item 2 above if you have been notified by IRS that
you are currently subject to backup withholding
because you have failed to report all interest and
dividends on your tax return. For real estate
transactions, item 2 does not apply. For mortgage
interest paid, acquisition or abandonment of secured
property, cancellation of debt, contributions to an
individual retirement arrangement (IRA), and
generally, payments other than interest and
dividends, you are not required to sign the
Certification, but you must provide your correct TIN.
(See the instructions on page 2).
- -------------------------------------------------------------------------------
SIGNATURE _______________________________ DATE ______________
- -------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31%
OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. IN ADDITION, FAILURE
TO PROVIDE SUCH INFORMATION MAY RESULT IN A PENALTY IMPOSED BY THE
INTERNAL REVENUE SERVICE. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR
CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9
FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU WROTE "APPLIED FOR"
INSTEAD OF A TIN IN THE SUBSTITUTE FORM W-9
-------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
- -------------------------------------------------------------------------------
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (a) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or
(b) I intend to mail or deliver an application in the near future. I
understand that if I do not provide a taxpayer identification number by the
time of payment, 31% of all reportable payments made to me will be withheld
until I provide a number.
______________________________________ _________________
Signature Date
- -------------------------------------------------------------------------------
12
<PAGE>
Questions and requests for assistance or additional copies of the Offer to
Purchase, Letter of Transmittal and other tender offer materials may be
directed to the Information Agent or the Dealer Manager as set forth below:
The Information Agent for the Offer is:
[LOGO OF GEORGESON SHAREHOLDER COMMUNICATIONS INC.]
17 State Street 10th Floor
New York, New York 10004
Banks and Brokers Call Collect: (212) 440-9800
All Others Call Toll Free: (800) 223-2064
The Dealer Manager for the Offer is:
Chase Securities Inc.
270 Park Avenue
New York, New York 10017
Call Collect (212) 270-2631
13
<PAGE>
EXHIBIT (a)(3)
Notice of Guaranteed Delivery
for Tender of Shares of Common Stock
(Including the Associated Preferred Share Purchase Rights)
of
Homestead Village Incorporated
at
$4.10 Net Per Share
by
HSD Acquisition Corporation
an indirect wholly owned subsidiary
of
Security Capital Group Incorporated
(Not to be Used for Signature Guarantees)
This Notice of Guaranteed Delivery (or one substantially in the form
hereof) must be used to accept the Offer (as defined herein) if (a)
certificates representing shares of common stock, par value $.01 per share, of
Homestead Village Incorporated, a Maryland corporation, and the associated
Rights (as defined in the Offer to Purchase), are not immediately available;
(b) time will not permit all required documents to reach EquiServe (the
"Depositary"), on or prior to the expiration date of the Offer; or (c) the
procedure for book-entry transfer, as set forth in the Offer to Purchase,
cannot be completed on a timely basis. This Notice of Guaranteed Delivery may
be delivered by hand or mail or transmitted by facsimile to the Depositary.
See "THE OFFER--Procedures for Accepting the Offer and Tendering Shares" in
the Offer to Purchase.
The Depositary for the Offer is:
EquiServe
<TABLE>
<S> <C> <C>
By First Class Mail: By Hand: By Overnight Courier:
EquiServe Securities Transfer & Reporting EquiServe
Attn: Corporate Actions Services Inc. Attn: Corporate Actions
P.O. Box 8029 c/o EquiServe 150 Royall Street
Boston, MA 02266-8029 100 Williams Street, Galleria Canton, MA 02021
New York, NY 10038
Facsimile Transmission: Telephone to Confirm Fax:
(781) 575-2232 or (800) 730-6001
(781) 575-2233
</TABLE>
Delivery of this Notice of Guaranteed Delivery to an address other than as
set forth above, or transmission of instructions via facsimile to a number
other than as listed above does not constitute a valid delivery.
This Notice of Guaranteed Delivery is not to be used to guarantee
signatures. If a signature on a Letter of Transmittal is required to be
guaranteed by an "Eligible Institution" under the instructions thereto, such
signature guarantee must appear in the applicable space provided in the
signature box in the Letter of Transmittal.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to HSD Acquisition Corporation, a Maryland
corporation and an indirect wholly owned subsidiary of Security Capital Group
Incorporated, a Maryland corporation, upon the terms and subject to the
conditions set forth in the Offer to Purchase, dated May 9, 2000 (the "Offer
to Purchase"), and the related Letter of Transmittal (which, as amended or
supplemented from time to time, collectively constitute the "Offer"), receipt
of each of which is hereby acknowledged, the number of Shares (the term
"Shares" includes the associated Rights unless the context otherwise requires)
indicated below pursuant to the guaranteed delivery procedures set forth under
"THE OFFER--Procedures for Accepting the Offer and Tendering Shares" in the
Offer to Purchase:
-----------------------------------
Name(s) of Record Holder(s)
-----------------------------------
-----------------------------------
Address(es)
-----------------------------------
Zip Code
-----------------------------------
(Area Code) Telephone No.
X _________________________________
X _________________________________
Signature(s) of Record Holder(s)
-----------------------------------
Number of Shares
-----------------------------------
Certificate No(s). (if available)
Indicate account number at Book-
Entry Transfer Facility if Shares
will be tendered by book-entry
transfer:
-----------------------------------
Account Number
Dated: ______________________, 2000
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a bank, broker, dealer, credit union, savings
association or other entity that is a member in good standing of the
Securities Transfer Agents Medallion Program (an "Eligible Institution"),
hereby guarantees delivery to the Depositary, at one of its addresses set
forth above, either of Share Certificates evidencing all Shares tendered
hereby in proper form for transfer, or confirmation of the book-entry
transfer of Shares into the Depositary's account at The Depository Trust
Company, in either case together with delivery of a properly completed and
duly executed Letter of Transmittal (or facsimile thereof) with any required
signature guarantee, or an Agent's Message (as defined in the Offer to
Purchase) in connection with a book-entry delivery, and any other documents
required by the Letter of Transmittal, within three New York Stock Exchange
trading days after the date of execution of this Notice of Guaranteed
Delivery.
The Eligible Institution that completes this form must communicate the
guarantee to the Depositary and must deliver the Letter of Transmittal and
Share Certificates to the Depositary within the time period indicated
herein. Failure to do so may result in financial loss to such Eligible
Institution.
---------------------------------- X _______________________________
Name of Firm Authorized Signature
----------------------------------
Address ----------------------------------
Name (Please Print or Type)
----------------------------------
Zip Code ----------------------------------
Title
---------------------------------- Dated: _____________________, 2000
(Area Code) Telephone No.
NOTE: DO NOT SEND SHARE CERTIFICATES WITH THIS NOTICE
SHARE CERTIFICATES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL
2
<PAGE>
EXHIBIT (a)(4)
Offer to Purchase for Cash
All Outstanding Shares of Common Stock
(Including the Associated Preferred Share Purchase Rights)
of
Homestead Village Incorporated
at
$4.10 Net Per Share
by
HSD Acquisition Corporation
an indirect wholly owned subsidiary
of
Security Capital Group Incorporated
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON TUESDAY, JUNE 6, 2000, UNLESS THE OFFER IS EXTENDED.
May 9, 2000
To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
We have been appointed by HSD Acquisition Corporation, a Maryland
corporation (the "Purchaser"), and an indirect wholly owned subsidiary of
Security Capital Group Incorporated, a Maryland corporation (the "Parent"), to
act as Dealer Manager in connection with the Purchaser's offer to purchase all
outstanding shares of Common Stock, par value $.01 per share and the
associated preferred share purchase rights (the "Rights"), of Homestead
Village Incorporated, a Maryland corporation (the "Company") (other than
Common Stock and Rights owned by Security Capital and its subsidiaries), at a
purchase price of $4.10 per Share, net to the seller in cash, without interest
thereon, upon the terms and subject to the conditions set forth in the Offer
to Purchase dated May 9, 2000 (the "Offer to Purchase"), and in the related
Letter of Transmittal (which, as amended or supplemented from time to time,
collectively constitute the "Offer") enclosed herewith. Unless the context
otherwise requires, all references to Shares shall include the associated
Rights.
Please furnish copies of the enclosed materials to those of your clients
for whose accounts you hold Shares registered in your name or in the name of
your nominee.
The offer is not conditioned upon any minimum number of shares being
tendered. It is, however subject to other terms and conditions described in
the Offer to Purchase. See the introduction and Section 12 of the Offer to
Purchase.
<PAGE>
The Board of Directors of the Company has determined that the Offer, the
Merger (as defined below) and the Merger Agreement (as defined below) are
advisable, fair to, and in the best interests of, the Company and its
stockholders, and recommends that the Company's stockholders accept the Offer
and approve the merger. The Homestead Board of Directors recommends that
Homestead stockholders tender their Homestead shares in the tender offer and
vote to approve the merger.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of May 2, 2000 (the "Merger Agreement"), among the Company, Parent and the
Purchaser pursuant to which, following the consummation of the Offer and in
accordance with the Maryland General Corporation Law, and subject to the
satisfaction or waiver of certain conditions, the Purchaser will be merged
with and into the Company (the "Merger"), with the Company continuing as the
surviving corporation and as an indirect wholly owned subsidiary of Parent.
Enclosed herewith for your information and forwarding to your clients are
copies of the following documents:
1. The Offer to Purchase, dated May 9, 2000.
2. The Letter of Transmittal for your use to tender Shares and for the
information of your clients. Facsimile copies of the Letter of Transmittal
may be used to tender Shares.
3. A printed form of letter which may be sent to your clients for whose
accounts you hold Shares registered in your name or in the name of your
nominee, with space provided for obtaining such clients' instructions with
regard to the Offer.
4. The Notice of Guaranteed Delivery for Shares to be used to accept
the Offer if certificates for Shares ("Share Certificates") and all other
required documents are not immediately available or cannot be delivered to
EquiServe (the "Depositary") by the Expiration Date (as defined in the
Offer to Purchase) or if the procedure for book-entry transfer cannot be
completed by the Expiration Date.
5. A letter to stockholders from the Secretary of the Company
accompanied by the Company's Solicitation/Recommendation Statement on
Schedule 14D-9.
6. Guidelines of the Internal Revenue Service for Certification of
Taxpayer Identification Number on Substitute Form W-9.
7. A return envelope addressed to the Depositary.
Your prompt action is requested. We urge you to contact your clients as
promptly as possible. Please note that the Offer and withdrawal rights will
expire at 12:00 Midnight, New York City time, on Tuesday, June 6, 2000, unless
the offer is extended.
In order to accept the Offer, a duly executed and properly completed Letter
of Transmittal and any required signature guarantees, or an Agent's Message
(as defined in the Offer to Purchase) in connection with a book-entry delivery
of Shares, and any other required documents should be sent to the Depositary
and either Share Certificates representing the tendered Shares should be
delivered to the Depositary, or Shares should be tendered by book-entry
transfer into the Depositary's account maintained at one of the Book Entry
Transfer Facilities (as described in the Offer to Purchase), all in accordance
with the instructions set forth in the Letter of Transmittal and the Offer to
Purchase.
2
<PAGE>
If holders of Shares wish to tender, but it is impracticable for them to
forward their Share Certificates or other required documents on or prior to
the Expiration Date or to comply with the book-entry transfer procedures on a
timely basis, a tender may be effected by following the guaranteed delivery
procedures specified in Section 3 of the Offer to Purchase.
The Purchaser will not pay any commissions or fees to any broker, dealer
or other person, other than the Information Agent and the Dealer Manager, for
soliciting tenders of Shares pursuant to the Offer. The Purchaser will,
however, upon request, reimburse you for customary clerical and mailing
expenses incurred by you in forwarding any of the enclosed materials to your
clients. The Purchaser will pay or cause to be paid any stock transfer taxes
applicable to its purchase of Shares pursuant to the Offer, in respect of
Shares tendered to it, except as otherwise provided in Instruction 6 of the
Letter of Transmittal.
Any inquiries you may have with respect to the Offer should be addressed
to, and additional copies of the enclosed material may be obtained from, the
Information Agent or the Dealer Manager at their respective addresses and
telephone number set forth on the back cover of the Offer to Purchase.
Very truly yours,
Chase Securities Inc.
Nothing contained herein or in the enclosed documents shall constitute you
or any other person the agent of Parent, the Purchaser, the Company, the
Dealer Manager, the Depositary or the Information Agent, or any affiliate of
any of them, or authorize you or any other person to make any statement or use
any document on behalf of any of them in connection with the Offer other than
the enclosed documents and the statements contained therein.
3
<PAGE>
EXHIBIT (a)(5)
Offer to Purchase for Cash
All Outstanding Shares of Common Stock
(Including the Associated Preferred Share Purchase Rights)
of
Homestead Village Incorporated
at
$4.10 Net Per Share
by
HSD Acquisition Corporation
an indirect wholly owned subsidiary
of
Security Capital Group Incorporated
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON TUESDAY, JUNE 6, 2000, UNLESS THE OFFER IS EXTENDED.
May 9, 2000
To Our Clients:
Enclosed for your consideration are the Offer to Purchase, dated May 9, 2000
(the "Offer to Purchase"), and the related Letter of Transmittal (which, as
amended or supplemented from time to time, collectively constitute the
"Offer") in connection with the offer by HSD Acquisition Corporation, a
Maryland corporation (the "Purchaser") and an indirect wholly owned subsidiary
of Security Capital Group Incorporated, a Maryland corporation (the "Parent")
to purchase all outstanding shares of Common Stock, par value $.01 per share
(the "Shares"), including the associated preferred share purchase rights (the
"Rights"), of Homestead Village Incorporated, a Maryland corporation (the
"Company"), (other than Common Stock and Rights owned by Security Capital and
its subsidiaries) at a purchase price of $4.10 per Share, net to the seller in
cash, without interest thereon, upon the terms and subject to the conditions
set forth in the Offer to Purchase and in the related Letter of Transmittal
enclosed herewith. Unless the context otherwise requires, all references to
Shares shall include the associated Rights. Holders of Shares whose
certificates for such Shares (the "Share Certificates") are not immediately
available, or who cannot deliver their Share Certificates and all other
required documents to EquiServe (the "Depositary") on or prior to the
Expiration Date (as defined in the Offer to Purchase), or who cannot complete
the procedures for book-entry transfer on a timely basis, must tender their
Shares according to the guaranteed delivery procedures set forth in Section 3
of the Offer to Purchase.
<PAGE>
We are the holder of record of shares held by us for your account. A tender
of such shares can be made only by us as the holder of record and pursuant to
your instructions. The enclosed Letter of Transmittal is furnished to you for
your information only and cannot be used by you to tender Shares held by us
for your account.
Accordingly, we request instructions as to whether you wish to have us
tender on your behalf any or all Shares held by us for your account pursuant
to the terms and conditions set forth in the Offer.
Please note the following:
1. The tender price is $4.10 per Share, net to you in cash, without
interest thereon, upon the terms and subject to the conditions set forth
in the Offer.
2. The Offer is being made for all outstanding Shares.
3. The Board of Directors of the Company has approved, by a unanimous
vote of the directors (other than the two directors who abstained because
of their positions with Parent), the Offer, the Merger (as defined below)
and the Merger Agreement (as defined below) and determined that the terms
of each are advisable, fair to, and in the best interests of, the Company
and its Stockholders, and recommends that the Company's stockholders
accept the Offer and tender their Shares pursuant to the Offer.
4. The offer is being made pursuant to an Agreement and Plan of
Merger, dated as of May 2, 2000 (the "Merger Agreement"), among the
Company, Parent and the Purchaser pursuant to which, following the
consummation of the Offer and in accordance with the Maryland General
Corporation Law, and subject to the satisfaction or waiver of certain
conditions, the Purchaser will be merged with and into the Company (the
"Merger"), with the Company continuing as the surviving corporation and as
an indirect wholly owned subsidiary of Parent.
5. The Offer is not conditioned upon any minimum number of shares
being tendered. The Offer is, however, subject to other terms and
conditions described in the Offer to Purchase. See the Introduction and
Section 12 of the Offer to Purchase.
6. Any stock transfer taxes applicable to the sale of Shares to the
Purchaser pursuant to the Offer will be paid by the Purchaser, except as
otherwise provided in Instruction 6 of the Letter of Transmittal.
7. The Offer and withdrawal rights will expire at 12:00 Midnight, New
York City time, on Tuesday, June 6, 2000, unless the Offer is extended.
8. Payment for Shares purchased pursuant to the Offer will in all
cases be made only after timely receipt by the Depositary of (a) Share
Certificates or timely confirmation of the book-entry transfer of such
Shares into the account maintained by the Book-Entry Transfer Facility (as
described in the Offer to Purchase), pursuant to the procedures set forth
in Section 3 of the Offer to Purchase, (b) the Letter of Transmittal (or a
facsimile thereof), properly completed and duly executed, with any
required signature guarantees or an Agent's Message (as defined in the
Offer to Purchase), in
2
<PAGE>
connection with a book-entry delivery and (c) any other documents required
by the Letter of Transmittal. Accordingly, payment may not be made to all
tendering stockholders at the same time, depending upon when Share
Certificates or confirmations of book-entry transfer of such Shares into
the Depositary's account at the Book-Entry Transfer Facility are actually
received by the Depositary.
If you wish to have us tender any or all of the Shares held by us for your
account, please so instruct us by completing, executing, detaching and
returning to us the instruction form set forth on the back page of this
letter. If you authorize the tender of your Shares, all such Shares will be
tendered unless otherwise specified on the back page of this letter. An
envelope to return your instructions to us is enclosed. Your instructions
should be forwarded to us in ample time to permit us to submit a tender on
your behalf prior to the expiration of the Offer.
The Purchaser is not aware of any state where the making of the Offer is
prohibited by administrative or judicial action pursuant to any valid state
statute. If the Purchaser becomes aware of any valid state statute prohibiting
the making of the Offer of the acceptance of the Shares pursuant thereto, the
Purchaser will make a good faith effort to comply with such statute or seek to
have such statute declared inapplicable to the Offer. If, after such good
faith effort, the Purchaser cannot comply with such state statute, the Offer
will not be made to (nor will tenders be accepted from or on behalf of)
holders of Shares in such state. In any jurisdiction where the securities,
"blue sky" or other laws require the Offer to be made by a licensed broker or
dealer, the Offer shall be deemed to be made on behalf of the Purchaser by
Chase Securities Inc. (the "Dealer Manager"), or one or more registered
brokers or dealers that are licensed under the laws of such jurisdiction.
3
<PAGE>
Instructions with Respect to the Offer to Purchase for Cash
All Outstanding Shares of Common Stock
(Including the Associated Preferred Share Purchase Rights)
of
Homestead Village Incorporated
at
$4.10 Net Per Share
by
HSD Acquisition Corporation
an indirect wholly owned subsidiary
of
SECURITY CAPITAL GROUP INCORPORATED
The undersigned acknowledge(s) receipt of your letter, the enclosed Offer to
Purchase, dated May 9, 2000 (the "Offer to Purchase"), and the related Letter
of Transmittal (which, as amended or supplemented from time to time,
collectively constitute the "Offer") in connection with the offer by HSD
Acquisition Corporation, a Maryland corporation (the "Purchaser") and an
indirect wholly owned subsidiary of Security Capital Group Incorporated, a
Maryland corporation, to purchase all outstanding shares of Common Stock, par
value $.01 per share (the "Shares"), including the associated preferred share
purchase rights (the "Rights"), of Homestead Village Incorporated, a Maryland
corporation, (other than Common Stock and Rights owned by Security Capital and
its subsidiaries) at a purchase price of $4.10 per Share, net to the seller in
cash, without interest thereon, upon the terms and subject to the conditions
set forth in the Offer. Unless the context otherwise requires, all references
to Shares shall include the associated Rights.
This will instruct you to tender to the Purchaser the number of Shares
indicated below (or if no number is indicated below, all Shares) which are
held by you for the account of the undersigned, upon the terms and subject to
the conditions set forth in the Offer.
Number of Shares to be Tendered: ____ Shares*
------------------------------------------------------------------------------
Sign Below
Account Number: _______________ Signature(s) ______________________________
Dated: ____________ , 2000
------------------------------------------------------------------------------
PLEASE TYPE OR PRINT NAME(S)
------------------------------------------------------------------------------
PLEASE TYPE OR PRINT ADDRESS(ES) HERE
------------------------------------------------------------------------------
AREA CODE AND TELEPHONE NUMBERS
------------------------------------------------------------------------------
TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER(S)
------------------------------------------------------------------------------
*Unless otherwise indicated, it will be assumed that you instruct us to
tender all Shares held by us for your account.
<PAGE>
EXHIBIT (a)(9)
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
Guidelines for Determining the Proper Identification Number for the Payee
(You) to Give the Payer.--Social Security numbers have nine digits separated
by two hyphens: i.e., 000-00-0000. Employer identification numbers have nine
digits separated by only one hyphen: i.e., 00-0000000. The table below will
help determine the number to give the payer. All "Section" references are to
the Internal Revenue Code of 1986, as amended. "IRS" is the Internal Revenue
Service.
<TABLE>
<CAPTION>
- ----------------------------------------------
Give the name and
SOCIAL SECURITY
For this type of account: number of--
- -----------------------------------------------
<S> <C>
1. Individual The individual
2. Two or more individuals The actual owner of
(joint account) the account or, if
combined funds, the
first individual on
the account(1)
3. Custodian account of a The minor(2)
minor (Uniform Gift to
Minors Act)
4.a The usual revocable The grantor-
savings trust account trustee(1)
(grantor is also
trustee)
b So-called trust account The actual owner(1)
that is not a legal or
valid trust under state
law
5. Sole proprietorship The owner(3)
</TABLE>
<TABLE>
<CAPTION>
Give the name and
EMPLOYER
IDENTIFICATION
For this type of account: number of--
- ----------------------------------------------
<S> <C>
6. Sole proprietorship The owner(3)
7. A valid trust, estate, The legal entity(4)
or pension trust
8. Corporate The corporation
9. Association, club, The organization
religious, charitable,
educational, or other
tax-exempt
organization
10. Partnership The partnership
11. A broker or registered The broker or
nominee nominee
12. Account with the The public entity
Department of
Agriculture in the
name of a public
entity (such as a
state or local
government, school
district, or prison)
that receives
agricultural program
payments
- -----------------------------------------------
</TABLE>
(1) List first and circle the name of the person whose number you furnish. If
only one person on a joint account has a social security number, that
person's number must be furnished.
(2) Circle the minor's name and furnish the minor's social security number.
(3) You must show your individual name, but you may also enter your business
or "doing business as" name. You may use either your social security
number or your employer identification number (if you have one).
(4) List first and circle the name of the legal trust, estate, or pension
trust. (Do not furnish the taxpayer identification number of the personal
representative or trustee unless the legal entity itself is not designated
in the account title.)
Note: If no name is circled when there is more than one name listed, the
number will be considered to be that of the first name listed.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
Page 2
Obtaining a Number
If you don't have a taxpayer identification number, obtain Form SS-5,
Application for a Social Security Card at the local Social Security
Administration office, or Form SS-4, Application for Employer Identification
Number, by calling 1 (800) TAX-FORM, and apply for a number.
Payees Exempt from Backup Withholding
Payees specifically exempted from withholding include:
. An organization exempt from tax under Section 501(a), an individual
retirement account (IRA), or a custodial account under Section 403(b)(7)
if the account satisfies the requirements of Section 410(f)(2).
. The United States or any of its agencies or instrumentalities.
. A state, the District of Columbia, a possession of the United States, or
any of their political subdivisions or instrumentalities.
. A foreign government or any of its political subdivisions, agencies or
instrumentality.
. An international organization or any agency, or instrumentality thereof.
Payees that may be exempt from backup withholding include:
. A corporation.
. A foreign central bank of issue.
. A dealer in securities or commodities required to register in the United
States, the District of Columbia, or a possession of the United States.
. A futures commission merchant registered with the Commodity Futures
Trading Commission.
. A real estate investment trust.
. An entity registered at all times during the tax year under the Investment
Company Act of 1940.
. A common trust fund operated by a bank under Section 584(a).
. A financial institution.
. A middleman known in the investment community as a nominee or custodian.
. A trust exempt from tax under Section 664 or described in Section 4947.
Payments of dividends and patronage dividends generally exempt from backup
withholding include:
. Payments to nonresident aliens subject to withholding under section 1441.
. Payments to partnerships not engaged in a trade or business in the United
States and that have at least one nonresident alien partner.
. Payments of patronage dividends not paid in money.
. Payments made by certain foreign organizations.
. Section 404(k) distributions made by an ESOP.
Payments of interest generally exempt from backup withholding include:
. Payments of tax-exempt interest (including exempt-interest dividends under
Section 852).
. Payments described in Section 6049(b)(5) to nonresident aliens.
. Payments on tax-free covenant bonds under Section 1451.
. Payments made by certain foreign organizations.
Certain payments, other than payments of interest, dividends, and patronage
dividends, that are exempt from information reporting are also exempt from
backup withholding. For details, Sections 6041, 6041A, 6042, 6044, 6045, 6049,
6050A and 6050N and the regulations thereunder.
Exempt payees should complete a substitute Form W-9 to avoid possible
erroneous backup withholding. Furnish your taxpayer identification number,
check the box in Part II on the form, sign and date the form and return it to
the payor.
Privacy Act Notice.--Section 6109 requires you to provide your correct
taxpayer identification number to payers who must report the payments to the
IRS. The IRS uses the numbers for identification purposes and to help verify
the accuracy of your return and may also provide this information to various
government agencies for tax enforcement or litigation purposes. Payers must be
given the numbers whether or not recipients are required to file tax returns.
Payers must generally withhold 31% of taxable interest, dividend, and certain
other payments to a payee who does not furnish a taxpayer identification
number to a payer. Certain penalties may also apply.
Penalties
(1) Failure to Furnish Taxpayer Identification Number.--If you fail to furnish
your taxpayer identification number to a payer, you are subject to a penalty
of $50 for each such failure unless your failure is due to reasonable cause
and not to willful neglect.
(2) Civil Penalty for False Information With Respect To Withholding.--If you
make a false statement with no reasonable basis that results in no backup
withholding, you are subject to a $500 penalty.
(3) Criminal Penalty for Falsifying Information.--Willfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.
<PAGE>
EXHIBIT (A)(10)
This announcement is neither an offer to purchase nor a solicitation of an
offer to sell Shares (as defined below). The Offer (as defined below) is made
solely pursuant to the Offer to Purchase, dated May 9, 2000, and the related
Letter of Transmittal (and any amendments or supplements thereto), and is being
made to all holders of Shares. Purchaser (as defined below) is not aware of any
state where the making of the Offer is prohibited by administrative or judicial
action pursuant to any valid state statute. If Purchaser becomes aware of any
valid state statute prohibiting the making of the Offer or the acceptance of the
Shares pursuant thereto, Purchaser shall make a good faith effort to comply with
such statute or seek to have such statute declared inapplicable to the Offer.
If, after such good faith effort, Purchaser cannot comply with such state
statute, the Offer will not be made to (nor will tenders be accepted from or on
behalf of) holders of Shares in such state. In any jurisdiction where the
securities, "blue sky" or other laws require the Offer to be made by a licensed
broker or dealer, the Offer shall be deemed to be made on behalf of Purchaser by
Chase Securities Inc. ("Chase Securities" or the "Dealer Manager") or one or
more registered brokers or dealers licensed under the laws of such jurisdiction.
Notice of Offer to Purchase for Cash
All Outstanding Shares of Common Stock
(and the Associated Preferred Share Purchase Rights)
of
Homestead Village Incorporated
at
$4.10 Net Per Share
by
HSD Acquisition Corporation
an indirect wholly owned subsidiary of
Security Capital Group Incorporated
HSD Acquisition Corporation, a Maryland corporation ("Purchaser") and an
indirect wholly owned subsidiary of Security Capital Group Incorporated, a
Maryland corporation ("Parent"), hereby offers to purchase all outstanding
shares of Common Stock, par value $0.01 per share (the "Shares") and the
associated preferred share purchase rights (the "Rights") issued pursuant to the
Rights Agreement dated as of May 16, 1996 between Homestead Village
Incorporated, a Maryland corporation (the "Company") and The First National Bank
of Boston as Rights Agent, as it may be amended, of the Company (other than
those Shares already owned by Security Capital and its subsidiaries) at a
purchase price of $4.10 per Share, net to the seller in cash (less any required
withholding taxes), without interest thereon, upon the terms and subject to the
conditions set forth in the Offer to Purchase, dated May 9, 2000 (the "Offer to
Purchase"), and in the related letter of transmittal (the "Letter of
Transmittal," which together with the Offer to Purchase, as amended or
supplemented from time to time, collectively constitute the "Offer"). Unless the
context otherwise requires, all references to Shares shall include the
associated Rights. Stockholders of record who tender directly to the Depositary
(as defined below) will not be obligated to pay brokerage fees or commissions
or, subject to Instruction 6 of the Letter of Transmittal, stock transfer taxes,
if any, on the purchase of Shares by Purchaser pursuant to the Offer.
Stockholders who hold their Shares through a broker or bank should consult such
institution as to whether it charges any service fees. Purchaser will pay all
charges and expenses of the Dealer Manager, EquiServe, which is acting as
depositary (the "Depositary"), and Georgeson Shareholder Communications, Inc.,
which is acting as the information agent (the "Information Agent"), incurred in
connection with the Offer. Following the consummation of the Offer, Purchaser
intends to effect the Merger (as defined below) described below.
- --------------------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON TUESDAY, JUNE 6, 2000, UNLESS THE OFFER IS EXTENDED.
- --------------------------------------------------------------------------------
The Offer is not conditioned upon any minimum number of shares being
tendered. The Offer is however subject to the other conditions set forth in the
Offer to Purchase. See Section 12, "Conditions of the Offer," of the Offer to
Purchase.
A special committee of the Board of Directors of the Company has determined
that the Offer and the Merger are fair to, advisable and in the best interests
of the Company and its stockholders, and has recommended to the Board of
Directors of the Company that it approve, accept and declare advisable the Offer
and the Merger and recommend to the Company stockholders acceptance of the Offer
and approval of the Merger (as defined below) and the Offer.
The Board of Directors of the Company has determined that, based upon the
recommendation of the special committee and other considerations, the Offer and
the Merger are fair to, advisable and in the best interests of the Company and
its stockholders, and has voted to recommend to the Company stockholders
acceptance of the Offer and approval of the Merger. The Board of Directors of
the Company recommends that the stockholders tender their Shares pursuant to the
Offer and approve and adopt the Merger Agreement.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of May 2, 2000 (the "Merger Agreement"), among Parent, Purchaser and the
Company pursuant to which, following the consummation of the Offer and in
accordance with the Maryland General Corporation Law, and subject to the
satisfaction or waiver of certain conditions, Purchaser will be merged with and
into the Company (the "Merger"), with the Company continuing as the surviving
corporation and as an indirect wholly owned subsidiary of Parent. The purpose of
the Offer and the Merger is to enable Parent to acquire control of the entire
equity interest in the Company. Parent and its affiliates currently own
approximately 87% of the Shares. At the effective time of the Merger (the
"Effective Time"), each Share issued and outstanding immediately prior to the
Effective Time (other than any Shares held by Parent, Purchaser, any direct or
indirect wholly owned subsidiary of Parent or Purchaser, the Company or by any
wholly owned subsidiary of the Company, and other than Shares, if any, held by
stockholders who validly perfect their appraisal rights, if any, under Maryland
law) will be converted into the right to receive $4.10 in cash, without
interest, or any higher price that is paid in the Offer (less any withholding
taxes required under applicable law). The Merger Agreement is more fully
described in the Offer to Purchase.
For purposes of the Offer, Purchaser will be deemed to have accepted for
payment, and thereby purchased, Shares validly tendered to Purchaser and not
properly withdrawn if, as and when Purchaser gives oral or written notice to the
Depositary of Purchaser's acceptance of such Shares for payment pursuant to the
Offer. In all cases, upon the terms and subject to the conditions of the Offer,
payment for Shares purchased pursuant to the Offer, will be made by deposit of
the purchase price therefor with the Depositary, which will act as agent for
tendering stockholders for the purpose of receiving payment from Purchaser and
transmitting payment to validly tendering stockholders. Under no circumstances
will interest on the purchase price for Shares be paid by Purchaser, regardless
of any extension of the Offer or any delay in making such payment. In all cases,
payment for Shares accepted for payment pursuant to the Offer will be made only
after timely receipt by the Depositary of (i) certificates representing Shares
(the "Share Certificates") or timely confirmation of the book-entry transfer of
such Shares into the Depositary's account at The Depository Trust Company
("DTC") pursuant to the procedures set forth in Section 3, "Procedures for
Accepting the Offer and Tendering Shares," of the Offer to Purchase, (ii) the
Letter of Transmittal properly completed and duly executed, with any required
signature guarantees or an Agent's Message (as defined in the Offer to Purchase)
in connection with a book-entry transfer of Shares, and (iii) any other
documents required by the Letter of Transmittal.
If any of the conditions set forth in the Offer to Purchase that relate to
the Purchaser's obligations to purchase the Shares are not satisfied by 12:00
Midnight, New York City time, on Tuesday, June 6, 2000 (or any other time then
set as the Expiration Date) Purchaser may, subject to the Merger Agreement,
elect to, (i) extend the Offer and, subject to applicable withdrawal rights,
retain all tendered Shares until the expiration of the Offer, as extended, (ii)
subject to complying with applicable rules and regulations of the Securities and
Exchange Commission (the "SEC"), accept for payment all Shares so tendered and
not extend the Offer, or (iii) terminate the Offer and not accept for payment
any Shares and return all tendered Shares to tendering stockholders. The term
"Expiration Date" means 12:00 Midnight, New York City time, on Tuesday, June 6,
2000, unless Purchaser shall have extended the period of time for which the
Offer is open, in which event the term "Expiration Date" shall mean the latest
time and date at which the Offer, as so extended by Purchaser, shall expire.
Subject to the terms and conditions set forth in the Offer to Purchase and
the provisions of the Merger Agreement and subject to, and as may be required
by, the applicable rules and regulations of the Securities and Exchange
Commission, Purchaser expressly reserves the right, in its sole discretion, at
any time and from time to time, to extend the period of time during which the
Offer is open and thereby to delay acceptance for payment of, and payment for,
any Shares, if the conditions to the Offer described in Section 12 "Conditions
of the Offer" of the Offer to Purchase have not been satisfied or earlier
waived. So long as the Merger Agreement is in effect, and the Conditions of the
Offer have not been satisfied or waived, Purchaser and Parent shall cause the
Offer not to expire, subject to Parent and Purchaser's rights of termination
under the Merger Agreement. During any such extension, all Shares previously
tendered and not properly withdrawn will remain subject to the Offer, subject to
the rights of a tendering stockholder to withdraw such stockholder's Shares. No
subsequent offering period will be available.
Subject to the provisions of the Merger Agreement and the applicable rules
and regulations of the SEC, Purchaser also reserves the right, in its sole
discretion, at any time or from time to time, to: (1) terminate the Offer
(whether or not any Shares have previously been purchased pursuant to the Offer)
if the conditions referred to in Section 12, "Conditions of the Offer," of the
Offer to Purchase have not been satisfied or earlier waived or upon the
occurrence of any event specified in such section; or (2) waive any such
unsatisfied condition; or (3) except as set forth in the Merger Agreement,
otherwise amend the Offer in any respect, in each case, by giving oral or
written notice of the termination, waiver or amendment to the Depositary and,
other than, in the case of any waiver, by making a public announcement thereof.
Any extension, delay, termination or amendment of the Offer will be
followed as promptly as practicable by a public announcement. An announcement in
the case of an extension will be made no later than 9:00 a.m., New York City
time, on the next business day after the previously scheduled Expiration Date.
Tenders of Shares made pursuant to the Offer are irrevocable, except that
Shares tendered pursuant to the Offer may be withdrawn at any time on or prior
to the Expiration Date and, unless theretofore accepted for payment as provided
in the Offer to Purchase, may also be withdrawn at any time after July 7, 2000.
In order for a withdrawal to be effective, a written or facsimile transmission
notice of withdrawal must be timely received by the Depositary at one of its
addresses set forth on the back cover of the Offer to Purchase. Any such notice
of withdrawal must specify the name of the person who tendered the Shares to be
withdrawn, the number of Shares to be withdrawn, and (if Share Certificates have
been tendered) the name of the registered holder of the Shares as set forth in
the Share Certificate, if different from that of the person who tendered such
Shares. If Share Certificates evidencing Shares to be withdrawn have been
delivered or otherwise identified to the Depositary, then prior to the physical
release of such certificates, unless the Shares have been tendered by an
Eligible Institution (as defined in the Offer to Purchase), the tendering
stockholder must submit the serial numbers shown on the particular certificates
evidencing the Shares to be withdrawn and the signature on the notice of
withdrawal must be guaranteed by an Eligible Institution. If Shares have been
tendered pursuant to the procedures for book-entry transfer as set forth in
Section 3, "Procedures for Accepting the Offer and Tendering Shares," of the
Offer to Purchase, any notice of withdrawal must also specify the name and
number of the account at the appropriate Book-Entry Transfer Facility (as
defined in the Offer to Purchase) to be credited with the withdrawn Shares, in
which case a notice of withdrawal will be effective if delivered to the
Depositary by any method of delivery described in this paragraph. Withdrawals of
Shares may not be rescinded. Any Shares properly withdrawn will thereafter be
deemed not validly tendered for purposes of the Offer, but may be tendered at
any subsequent time prior to the Expiration Date by following any of the
procedures described in Section 3, "Procedures for Accepting the Offer and
Tendering Shares," of the Offer to Purchase. All questions as to the form and
validity (including time of receipt) of notices of withdrawal will be determined
by Purchaser, in its sole discretion, whose determination shall be final and
binding.
The receipt of cash in exchange for Shares pursuant to the Offer (or the
Merger) will be a taxable transaction for U.S. federal income tax purposes and
may also be a taxable transaction under applicable state, local or foreign tax
laws. Generally, a stockholder who receives cash in exchange for Shares pursuant
to the Offer (or the Merger) will recognize gain or loss for U.S. federal income
tax purposes equal to the difference between the amount of cash received and
such stockholder's adjusted tax basis in the Shares exchanged therefor. Provided
that such Shares constitute capital assets in the hands of the stockholder, such
gain or loss will be capital gain or loss, and will be long-term capital gain or
loss if the holder has held the Shares for more than one year at the time of
sale. The maximum U.S. federal income tax rate applicable to individual
taxpayers on long-term capital gain is 20%, and the deductibility of capital
losses is subject to limitations. All stockholders should consult with their own
tax advisors as to the particular tax consequences of the Offer and the Merger
to them, including the applicability and effect of the alternative minimum tax
and any state, local or foreign income and other tax laws and of changes in such
tax laws. For a more complete description of certain U.S. federal income tax
consequences of the Offer and the Merger see Section II, "Purpose of,
Alternative to, Reasons for and Effects of the Tender Offer and the Merger," of
the Offer to Purchase.
The information required to be disclosed pursuant to Rules 14d-6(d)(1) of
the General Rules and Regulations under the Securities Exchange Act of 1934, as
amended, is contained in the Offer to Purchase, and is incorporated herein by
reference.
The Company has provided Purchaser with the Company's stockholder list and
security position listings for the purpose of disseminating the Offer to holders
of Shares. The Offer to Purchase and the related Letter of Transmittal and, if
required, other relevant materials will be mailed to record holders of Shares
whose names appear on the stockholder list, and will be furnished to brokers,
dealers, commercial banks, trust companies and similar persons whose names, or
the names of whose nominees, appear on the stockholder list or who are listed as
participants in a clearing agency's security position listing for subsequent
transmittal to beneficial owners of Shares.
The Offer to Purchase and the related Letter of Transmittal contain
important information which should be read carefully before any decision is made
with respect to the Offer.
Questions and requests for assistance or for additional copies of the
Offer to Purchase, the Letter of Transmittal, the Notice of Guaranteed Delivery
and other tender offer materials may be directed to the Dealer Manager or the
Information Agent at their respective telephone numbers and addresses listed
below, and copies will be furnished at Purchaser's expense. Neither Parent nor
Purchaser will pay any fees or commissions to any broker, dealer or other person
other than the Depositary, the Dealer Manager and the Information Agent in
connection with soliciting tenders of Shares pursuant to the Offer.
The Information Agent for the Offer is:
[LOGO OF GEORGESON SHAREHOLDER COMMUNICATIONS INC.]
17 State Street, 10th Floor
New York, New York 10004
Banks and Brokers Call Collect: (212) 440-9800
All Others Call Toll Free: (800) 223-2064
The Dealer Manager for the Offer is:
Chase Securities Inc.
270 Park Avenue
New York, New York 10017
Call Collect: (212) 270-2631
May 9, 2000
<PAGE>
EXHIBIT (a)(11)
NOTICE OF MERGER OF
HSD ACQUISITION CORPORATION
INTO
HOMESTEAD VILLAGE INCORPORATED
Notice is hereby given by HSD Acquisition Corporation, a Maryland
corporation ("HSD"), of the proposed merger (the "Merger") of HSD into
Homestead Village Incorporated, a Maryland corporation ("Homestead"). Articles
of Merger pursuant to which the Merger will become effective will be filed
with the State Department of Assessments and Taxation of Maryland (the "SDAT")
on June 8, 2000. This Notice is given pursuant to Section 3-106(d) of the
Maryland General Corporation Law to each stockholder of record of Homestead as
of May 4, 2000 and is conditioned upon the ownership by HSD of 90% or more of
the outstanding shares of common stock of Homestead as of the time of
acceptance for record of the Articles of Merger by the SDAT.
HSD ACQUISITION CORPORATION
By: /s/ Jeffrey A. Klopf
---------------------------------
President
May 4, 2000
<PAGE>
[Logo of Stern Stewart]
Exhibit (C)(1)
May 2, 2000
Special Committee of the
Board of Directors
Homestead Village Incorporated
2100 River Edge Parkway
Atlanta, Georgia 30328
Dear Mr. Vesell:
We understand that Security Capital Group, Inc. ("Security Capital") has
offered to purchase all of the outstanding shares and associated preferred
share purchase rights of Homestead Village Incorporated (the "Company") not
already owned by Security Capital (the "Remaining Shares"), pursuant to a
tender offer for $4.10 in cash per share and in the related merger of a
subsidiary of Security Capital with and into the Company (the "Transaction").
We further understand that Security Capital currently owns approximately 87%
of the Company's common shares and associated preferred share purchase rights.
You have asked for our opinion ("Opinion") as to the fairness from a financial
point of view of the consideration to be paid to the holders of the Remaining
Shares by Security Capital in connection with the Transaction.
STERN STEWART & CO. ("STERN STEWART"), AS PART OF ITS CORPORATE FINANCIAL
ADVISORY BUSINESS, IS REGULARLY ENGAGED IN THE VALUATION OF BUSINESSES AND
THEIR SECURITIES AND CONTRACTS, BUSINESS UNITS, AND JOINT VENTURES. WE WILL
RECEIVE A FEE FOR ACTING AS FINANCIAL ADVISOR TO THE SPECIAL COMMITTEE OF THE
BOARD OF DIRECTORS OF THE COMPANY (THE "SPECIAL COMMITTEE") AND FOR RENDERING
THIS OPINION. IN ADDITION, THE COMPANY HAS AGREED TO INDEMNIFY US FOR CERTAIN
LIABILITIES ARISING OUT OF THE RENDERING OF THIS OPINION. WE HAVE NOT
PREVIOUSLY ADVISED THE COMPANY OR THE BOARD OF DIRECTORS.
In arriving at our Opinion set forth below, we have, among other things:
1. Reviewed financial and other information that was publicly available
or furnished to us by the Company, including information provided during
discussions with management. We have used, studied and analyzed forward-
looking projections provided to us by the Company.
2. Reviewed the Company's assumptions and projections and, based on
information provided to us by management, have made revisions to certain
assumptions to reflect positive variances from budgets in the Company's
performance in the first quarter of 2000. We have revised these forward-
looking projections to reflect the long-term operating performance of the
Company.
3. Incorporated discounted EVA(R) and discounted cash flow valuation
analyses and methodologies.
4. Familiarized ourselves to the extent appropriate and feasible with the
financial and operating performance, current financial condition, business,
and prospects of the Company and reviewed other Company-specific and
industry-related information provided to us.
5. Compared certain financial data of the Company with various industry
reports and conducted such other reviews and evaluations of industry data
and reports as we deemed appropriate for the purposes of this Opinion.
<PAGE>
6. Discussed the past and current operations and financial condition and
the prospects of the Company with senior executives of the Company.
7. Prepared sensitivity analyses of the financial impact that changes in
the assumptions used in financial forecasts have on the value of the
Company.
8. Conducted such other financial studies, analyses, or investigations,
and reviewed such other documents as we deemed appropriate for the purposes
of this Opinion. We have not made an independent evaluation or appraisal of
any of the assets or liabilities of the Company, nor have we been furnished
with such appraisals.
9. Reviewed the Merger Agreement and certain related documents.
10. Compared the financial terms of the Transaction, to the extent
applicable, with the terms of certain other recent transactions that we
deemed relevant.
11. Reviewed the trading history of the common stock of the Company and a
comparison of that trading history with the trading histories of those
other companies that we deemed relevant.
In rendering this Opinion, we have relied, without independent verification,
on the accuracy and completeness of all financial and other information
reviewed by us for the purposes of this Opinion. With respect to the Company's
projections and assumptions, we have assumed that they were reasonably
prepared on bases reflecting the best currently available estimates and good
faith judgement of the Company's management.
On the basis of and subject to the foregoing, as of the date hereof, it is
our Opinion that the consideration to be paid to the holders of the Remaining
Shares in connection with the Transaction is fair, from a financial point of
view, to the holders of the Remaining Shares.
Sincerely yours,
Stern Stewart & Co.
By: /s/ Dennis Soter
Dennis Soter
Partner
<PAGE>
EXHIBIT (c)(2)
Homestead
---------
Village.
Fairness Option
May 2, 2000
CONFIDENTIAL
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Stern Stewart & Co.
<PAGE>
[LOGO]
Homestead
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Village.
TABLE OF CONTENTS
I. EXECUTIVE SUMMARY
----------------------------------------------------------------
II. SUPPORTING ANALYSIS
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<PAGE>
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Homestead
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Village.
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I. EXECUTIVE SUMMARY
<PAGE>
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Village.
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EXECUTIVE SUMMARY
<TABLE>
<S> <C>
o Industry stock prices have fallen significantly; HSD LTM TSR = -18.8%, peer portfolio TSR = -17.2%,
S&P Hotel Index TSR = -36.9%
o HSD 52 Week High = $5.13, Low = $1.88; Pre SCZ-Offer closing price on 3/23/00 = $2.69
o HSD 1999 EBITDA margin = 41.9% versus peer median EBITDA margin = 41.1%
o HSD TMV/EBITDA @ $ 4.10/share = 10.5x
- HSD @ $2.69 = 8.7x
- Peer median = 8.2x
o Comparable lodging transactions median TMV/EBITDA = 9.0x
- Implies price = $3.37/share based on HSD 1999 EBITDA = $94.6 million and price = $4.63/share
based on HSD 2000 EBITDA = $111.3 million[1]
o Premiums paid in comparable lodging transactions (1998 & 1999) range from 17.7%-to-35.9% versus
52.9% premium implicit in $4.10 per share purchase price
o Peer company 1999 Sale and Leaseback transactions imply value = $4.06/share
o HSD 1999 Sale and Leaseback implies value = $4.29/share
</TABLE>
[1] HSD actual 1st Qtr. 2000 EBITDA exceeded budget. Using Stern Stewart's
revised 2000 EBITDA = $114.0 and based on 9.0x TMV/EBITDA multiple
implies value = $4.83
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================================================================================
EXECUTIVE SUMMARY, (CONT'D)
<TABLE>
<S> <C>
o Market Value Added (MVA) increases $176 million from -$376 million based on stock price
= $2.69/share to -$200 million based on price = $4.10/share
- HSD growth value implicit in Total Market Value increased from 38% based on stock price of
$2.69/share to 49% based on $4.10/share, versus peer median growth value of 10%
o Based on management forecast extended to ten years by Stern Stewart, Stern Stewart's median DEVA(R)
and DCF value = $4.31/share and based on Stern Stewart's revision of management's forecast due to
improved 1st Qtr. 2000 results, median value = $4.86/share
- Weighted average cost of capital ranges from 7.8%-to-8.7%
- Cost of equity ranges from 10.3%-to-12.4%
o Implied value per room ranges from $40,767/room based on $2.69/share to $45,455/room based on
$3.40/share to $50,078/room based on $4.10/share
</TABLE>
SCZ Purchase Price of $4.10 is Fair to Public Shareholders
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Homestead
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Village.
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EXECUTIVE SUMMARY
[BAR CHART]
Premium = 52.4%
<TABLE>
Peer Multiples Transactions Comps. S&L HSD S&L 10-Yr. DCF
- -------------- ------------ ---------- ------- ----------
<S> <C> <C> <C> <C>
$2.69-$3.94 $3.37-$4.63 $4.06-$4.20 $4.29-$4.43 $3.76-$5.45
Pre-Offer Final Price
$2.69 $4.10
</TABLE>
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II. SUPPORTING ANALYSIS
<PAGE>
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Village
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STOCK PRICE PERFORMANCE
May 1, 1997 - April 30, 2000
[LINE GRAPH]
HSD Peers S&P Hotel S&P 500
-------- -------- -------- --------
05/01/97 100 100 100 100
100 107.4794 103.2891 101.5006
99.3007 104.9277 105.1196 102.1965
99.3007 102.0173 105.2227 104.328
96.5035 104.1591 103.2591 104.5193
99.3007 105.1569 103.635 105.7575
96.5035 101.6752 101.8347 110.0642
94.40559 101.72 106.8812 110.7438
100.3497 103.3517 104.1034 109.3619
98.6014 104.7392 108.3163 112.9849
94.05594 102.0117 107.7527 113.0058
93.35664 104.2772 114.6843 112.847
102.0979 107.3445 116.1774 115.7104
98.6014 107.0487 116.4872 116.7932
93.00699 104.751 116.883 115.1252
92.30769 100.5439 113.7141 111.0884
91.95804 100.2189 115.532 113.8933
93.70629 112.4021 113.5979 110.9238
97.9021 116.3172 114.7811 114.5527
97.9021 124.6091 115.2566 113.9682
104.5455 125.2868 118.8085 117.2414
99.3007 123.5285 116.2398 116.6302
99.3007 128.7827 123.4188 119.0698
101.049 123.5092 127.2422 119.3583
92.65734 117.8483 123.1043 116.5129
89.51049 113.577 130.2901 116.2119
89.51049 107.8365 122.5572 112.8783
88.81119 109.1955 124.5475 114.513
95.45455 105.8285 122.708 114.6683
90.90909 110.5934 125.0666 118.9181
87.41259 106.7553 125.2648 118.0087
92.65734 109.0477 127.1647 121.5039
87.41259 101.4813 121.9433 117.7403
83.91608 86.06677 118.8609 116.938
85.31469 85.76747 122.2384 115.665
86.01399 91.69626 125.7344 120.3913
83.56643 89.80718 124.2787 114.4405
83.91608 86.33875 121.4491 118.5516
81.46853 85.94769 126.0212 118.0776
81.81818 89.20486 122.2902 120.8792
85.31469 96.78134 126.1851 124.843
83.56643 101.2587 127.5503 125.833
81.11888 102.1629 126.2865 127.6043
79.72028 102.4045 131.0225 129.4986
77.97203 107.6498 137.4557 130.3422
77.97203 104.8629 139.5369 131.9775
82.51748 102.3804 143.5741 135.7113
88.11189 101.1106 143.0932 135.2804
84.26573 100.9799 135.0813 138.6249
84.61538 101.6474 136.0917 137.1795
89.51049 102.4262 143.601 138.6724
84.61538 99.70204 130.8948 136.8407
81.46853 102.8277 130.0117 138.4959
80.76923 101.3968 132.6415 136.9384
76.92308 98.24472 131.7498 137.1204
81.11888 96.333 135.3123 137.3711
83.91608 93.70652 132.5573 134.9615
74.12587 93.11816 130.0571 137.8236
71.67832 90.24719 124.5233 136.0095
67.13287 88.96515 127.3733 136.2468
61.53846 90.26741 124.3981 140.2477
72.72727 91.63463 122.3211 141.8929
70.27972 91.89738 121.3856 144.1531
67.83217 92.06879 118.09 146.9137
61.53846 88.18303 120.329 141.1264
59.44056 81.03384 116.0546 138.6621
55.24476 75.27388 115.0932 134.7848
56.29371 70.19745 117.0658 131.5101
51.74825 70.48224 114.58 133.814
47.55245 65.45857 109.8423 126.9892
45.1049 55.00363 95.07485 120.2756
44.75524 54.85457 95.58803 124.5938
40.90909 52.36979 89.57061 125.9907
49.65035 55.64464 89.37356 129.0074
41.60839 59.9569 82.68705 123.755
30.06993 55.84326 71.33325 121.5332
22.37762 58.33209 80.51491 130.1268
25.52448 60.94063 88.9298 131.8835
34.96503 59.95234 94.88799 135.3315
39.86014 67.51637 96.85813 140.4963
39.16084 64.13622 95.69603 138.6686
38.11189 62.70786 98.10494 143.2829
36.36364 62.06364 103.8568 146.8323
33.56643 61.11816 100.7854 144.9435
28.67133 59.3283 99.59069 143.7271
22.37762 59.30459 95.5657 146.3782
20.97902 56.96141 96.06313 151.0247
25.17483 68.85122 102.3689 151.4374
23.77622 67.30263 104.8042 157.0381
24.47552 71.14087 99.55267 153.0823
22.72727 67.06398 100.8324 150.8529
23.77622 67.76202 109.1787 157.4505
22.02797 65.31319 108.3734 152.4623
22.02797 64.08254 103.7051 151.3902
18.88112 61.74654 99.55702 152.5355
19.23077 61.01266 103.5854 152.4708
20.62937 57.85893 101.2219 157.0401
19.58042 57.18254 104.0991 159.4344
17.83217 60.50619 105.5485 160.0298
13.63636 58.92084 101.6485 157.9935
15.38462 59.44899 107.4833 159.3758
14.68531 60.08674 110.9051 166.0133
15.38462 62.51678 111.1426 162.3723
15.73427 61.54094 105.1926 166.9791
22.37762 59.59674 102.1305 164.3346
16.43357 60.26821 104.2707 165.5891
15.73427 59.69315 108.148 164.7974
15.38462 61.40768 106.8752 163.9015
16.43357 60.00633 98.07882 160.4082
16.08392 60.44331 97.50126 163.6118
13.28671 56.64318 103.2725 159.4156
15.03497 55.71967 110.3144 165.3831
14.68531 58.89541 109.9722 161.9633
13.28671 62.33917 110.0333 171.0935
11.88811 61.56149 111.8765 172.6359
12.93706 56.84544 109.7537 174.5461
12.93706 59.09489 110.0988 166.7811
12.58741 53.93155 104.5408 163.3195
11.88811 54.36442 100.1359 159.859
12.23776 54.61656 100.0354 163.2518
13.28671 53.51686 104.0996 164.3766
13.63636 50.19151 107.7162 165.8339
15.38462 48.40263 99.50909 166.9997
15.73427 48.40263 97.56979 166.3434
15.38462 46.21952 92.27604 164.3907
14.33566 46.10455 99.09852 157.0911
14.68531 44.36577 96.44727 157.8131
15.03497 43.57437 98.82585 164.2664
15.03497 41.78413 92.46037 174.4811
14.33566 42.94278 93.68138 159.1132
14.33566 43.70506 98.26348 166.4739
13.98601 46.54101 99.27006 167.3958
13.98601 47.0037 99.21316 170.6034
13.98601 46.91901 106.2067 173.7863
12.93706 45.62508 102.9506 173.152
12.93706 47.27238 99.21754 175.2474
13.63636 44.95169 101.5392 173.2755
11.53846 44.25841 96.45603 173.8143
12.23776 41.80449 99.01841 178.3465
11.88811 40.68605 102.3401 179.704
12.58741 41.40041 101.1626 176.3326
13.63636 40.4063 103.1975 179.2252
13.63636 41.36836 106.1095 176.3014
13.63636 41.93408 94.98985 166.1135
13.63636 40.43918 96.24851 173.8123
12.23776 39.82271 93.80573 169.2764
11.53846 42.93078 76.59226 164.2354
11.88811 41.85751 71.11685 162.7094
11.88811 41.88505 65.0099 171.7662
13.98601 44.24439 59.87437 170.0863
14.68531 45.80069 59.37441 178.3962
17.83217 47.3363 64.79062 185.9146
17.83217 45.45513 65.06472 182.3942
18.18182 44.06154 64.87614 184.5969
17.83217 44.39637 65.34101 164.063
17.83217 45.69603 62.45748 173.2467
04/30/00 18.18182 46.45599 64.45074 176.9101
Annulized Returns
HSD -43.3%
Peers -22.6%
S&P Hotel -13.6%
S&P 500 20.9%
Note: 52 Week High = $5.13, Low = $1.88; Pre-Offer Price as Close of
Markets 3/23/00 = $2.69
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SUMMARY STOCK PRICE PERFORMANCE
Through April 28, 2000
[BAR CHART]
<TABLE>
<CAPTION>
1-Yr. 3-Yr. Since Oct-96
- ---------------------------------- ----------------------------------- -----------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
S&P S&P S&P
Hotel S&P Hotel S&P Hotel S&P
HSD Peers Index 500 HSD Peers Index 500 HSD Peers Index 500
- ------ ------ ------ ---- ------ ------ ------ ----- ------ ------ ------ -----
- -18.8% -17.2% -36.9% 7.3% -43.3% -22.6% -13.6% 20.9% -37.9% -25.8% -10.4% 23.0%
</TABLE>
HSD closing price 4/28/00 = $3.25
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SUMMARY PERFORMANCE
Management Forecast
($Mil.)
<TABLE>
<CAPTION>
1998 1999 2000 2001 2002
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
EBITDA $59.8 $94.6 $111.3 $114.6 $119.5
NOI $84.1 $127.6 $136.4 $140.1 $145.5
NOI Margin 60.2% 57.1% 56.3% 56.7% 57.2%
EBITDA Margin 42.3% 41.9% 46.1% 46.1% 46.6%
EBITDA to Interest 2.6x 1.8x 2.6x 2.8x 2.9x
Debt to EBITDA 11.7x 5.2x 3.8x 3.8x 3.5x
</TABLE>
Note: Stern Stewart revised management's projections due to improved 1st Qtr.
2000 profitability. 2000 EBITDA = $114.0, 2001 EBITDA = $119.4 and 2002
EBITDA = $124.2
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HOMESTEAD TOTAL MARKET VALUE TO SALES
[BAR CHART]
Implied Multiple @ $4.10 = 4.4x
1997 1998 1999 P/O Price
---- ---- ---- ---------
14.2x 6.2x 3.3x 3.6x
HSD 1999 Sales = $225.6M
P/O Price = Pre-Offer Price, i.e., $2.69
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TOTAL MARKET VALUE TO SALES
[Bar Chart]
Implied Multiple @ $4.10 = 4.4x
6X
4.7x
4.1x
4X 3.6x Median
4.1x
2X
1.8x
0X
CNDL ESA SLAM HSD
Based on 1999 sales and stock prices as of 4/28/00
HSD Multiple Based on Pre-Offer Price, i.e., $2.69
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HOMESTEAD TOTAL MARKET VALUE TO EBITDA
[BAR CHART]
15x 42.9x
14.7x
Implied Multiple @ $4.10 = 10.5x
12x
9x 8.7x
7.9x
6x
3x
0x
1997 1998 1999 P/O Price
HSD 1999 EBITDA = $94.6M
P/O Price = Pre-Offer Price, i.e., $2.69
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TOTAL MARKET VALUE TO EBITDA [Bar Chart]
Implied Multiple $4.10 = 10.5
15x
11.8x 8.2x 4.4x 8.7x Median
12x 8.2x
9x
6x
3x
0x
CNDL ESA SLAM HSD
Based on 1999 EBITDA and stock prices as of 4/28/00
HSD Multiple Based on Pre-Offer Price, i.e., $2.69
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HOMESTEAD TOTAL MARKET VALUE TO TOTAL BOOK VALUE
[Bar Chart]
Implied Multiple @ $4.10 = 0.91x
1.2x 1.14x
1.0x
0.8x
0.75x 0.75x
0.69x
0.6x
0.4x
0.2x
0.0x
1997 1998 1999 P/O Price
HSD 1999 Total Book Value = $1,096.0M
P/O Price = Pre-Offer Price, i.e., $2.69
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TOTAL MARKET VALUE TO TOTAL BOOK VALUE
[BAR CHART]
1.5x Implied Multiple @ $4.10 = 0.91x
1.01x
1.0x Median
0.96x 0.96x
0.75x
0.60x
0.5x
0.0x
----- --- ---- ---
CNDL ESA SLAM HSD
Based on book value and stock prices as of 4/28/00
HSD Multiple Based on Pre-Offer Price, i.e., $2.69
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RECENT LODGING TRANSACTIONS
<TABLE>
<CAPTION>
- ------------- ----------------------- ------------------ ------ ------ ------ -------
Announcement TMV/ TMV/ TMV/ TMV/
Date Acquirer Target Sales EBIT EBITDA Book
- ------------- ----------------------- ------------------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C> <C>
05-Jan-98 Meditrust Acquisition Co La Quinta Inns Inc 6.32x 16.56x 12.48x 2.19x
23-Mar-98 Felcor Lodging Trust Inc Bristol Hotel Co 3.94x 19.39x 13.71x 1.34x
11-Jun-99 Humphrey Hospitality Supertel Hospitality Inc 2.09x 8.55x 6.22x 1.15x
12-Jul-99 Accor SA Red Roof Inns Inc 3.27x 11.07x 8.01x 1.25x
07-Sep-99 Hilton Hotels Corp Promus Hotel Corp. 4.52x 11.99x 9.03x 2.77x
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Mean 4.03x 13.51x 9.89x 1.74x
Median 3.94x 11.99x 9.03x 1.34x
Low 2.09x 8.55x 6.22x 1.15x
High 6.32x 19.39x 13.71x 2.77x
===============================================================================================================================
</TABLE>
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RECENT LODGING TRANSACTIONS
$Mil. Except per Share Data
Trans. Multiples HSD Value HSD Value Per Share
---------------- --------- -------------------
Mean Median 1999 2000 1999 2000
---- ------ ---- ---- ---- ----
TMV/Sales 4.03x 3.94x $225.6 $241.5 $3.65 $4.17
TMV/EBITDA 9.89x 9.03x $94.6 $111.3 $3.37 $4.63
TMV/Total Book Value 1.74x 1.34x $1096.0 $1043.9 $8.51 $7.93
HSD Valuation Based on Median Transaction Values
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LODGING PREMIUMS PAID
1998 and 1999 Comparable Transactions
[BAR CHART]
N/A 17.7% 20.3% 26.0% 35.9% 52.4%
Bristol SPPR PRH RRI LQI HSD
HSD Premium Based on Final Offer Price of $4.10 and Pre-Offer Price of $2.69
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WHAT IS EVA/R/?
EVA = NOPAT minus Capital Charge
Economic ) Profits in Excess
Net Value ) of Investors'
Operating Added ) Required Returns
Profit
After Capital )
Taxes Charge ) Minimum
(NOPAT) ) Required
) NOPAT
)
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MEASURING WEALTH CREATION: MARKET VALUE ADDED(MVA)
) Market Value )
) Added ) MVA = Present Value of
) ) Future EVA/R/
Total Market )
Value ) )
) Capital )
) )
Market Value Added (MVA) = Total Market Value - Capital
MVA measures management's success in creating wealth for stockholders
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EVA/R/ AND MVA
($Mil)
MVA EVA
($376) ($56)
Total
Market
Value* NOPAT
$821 $33
Capital
Capital Charge
$1,197 $90
Note: Capital, NOPAT and EVA for fiscal 1999, Cost of Capital = 8.2%
Numbers may not add due to rounding
* Based on stock price = $2.69 as at 3/23/00
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EVA(R) versus MVA
EVA
---
1997 1998 1999
---- ---- ----
($16.5) ($31.7) ($56.4)
MVA
---
1997 1998 1999
---- ---- ----
$115 ($281) ($446)
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MVA: PRE-OFFER VERSUS FINAL PRICE
($Mil.)
Pre-Offer @ $2.69
Total Market Value $821
MVA ($376)
Capital $1,197
Final Offer @ $4.10
Total Market Value $997
MVA ($200)
Capital $1,197
MVA and Shareholder Wealth Increase = $176 million
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BETA
HSD
---
Barra 0.87
Peer Portfolio[1] 0.85
Peer & Industry Portfolio[2] 0.91
Beta Used to Determine Cost of Capital: 0.85-to-0.91
/1/ Based on portfolio of extended stay peers; CNDL, ESA, SLAM & HSD
/2/ Based on portfolio of 18 lodging companies
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WEIGHTED COST OF CAPITAL
Cost
of
Capital Cost of Equity
7.8% - 8.7% 10.3% - 12.4%
Cost of Capital
Cost of Debt
=9.5%
55% Debt as % of Market Value
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EVA(R) : HISTORICAL AND PROJECTED
Management Projections, Revised
($Mil.)
[BAR CHART]
<TABLE>
<CAPTION>
'97 '98 '99 '00 '01 '02 '03 '04 '05
--- --- --- --- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
EVA (16,453) (31,735) (56,350) (52,538) (47,684) (42,734) (39,159) (35,144) (31,075)
<CAPTION>
'06 '07 '08 '09
--- --- --- ---
<S> <C> <C> <C> <C>
EVA (26,951) (22,771) (18,533) (14,235)
</TABLE>
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EVA/R/ VALUATION
($Mil.)
Growth
$506
Total
Market EVA
Value Capitalized )
$1,018 ($685) )
) Current
) Operations
Total ) $512
Capital )
$1,197
Growth Value/Total Market Value = 49.7%
Stock Price = $4.31
Valuation Based on Cost of Capital = 8.2%
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EVA(R)VALUATION: MANAGEMENT FORECAST
($Mil.)
Capitalized Current EVA (684.9)
Capital 1,145.8
PV of NOL Tax Savings 28.1
Proceeds from Additional Land Sales 4.8
Non-operating Cash 18.5
------------------------------------------------------
Current Operations Value 512.3
PV of EVA Improvement 505.8
------------------------------------------------------
EVA Valuation 1,018.1
Total Debt 487.6
Total Warrants 13.7
------------------------------------------------------
Equity Value 516.8
Total Shares 120.0
Stock Price=$4.31
Valuation Based on Cost of Capital =8.2%
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DISCOUNTED EVA(R) SENSITIVITY
- --------------------------------------------------------------------------------
Management Forecast
- --------------------------------------------------------------------------------
Beta
---------------------------------------
Risk Premium 0.85[a] 0.87[b] 0.91[c]
----- ----- -----
5% $4.85 $4.78 $4.67
6% $4.38 $4.31 $4.19
7% $3.96 $3.89 $3.76
- --------------------------------------------------------------------------------
Management Forecast - Revised
- --------------------------------------------------------------------------------
Beta
---------------------------------------
Risk Premium 0.85[a] 0.87[b] 0.91[c]
----- ----- -----
5% $5.45 $5.38 $5.25
6% $4.94 $4.86 $4.73
7% $4.48 $4.40 $4.27
[a] Based on portfolio of extended stay peers; CNDL, ESA, SLAM & HSD
[b] Barra Beta
[c] Based on portfolio of 18 lodging companies
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HOMESTEAD GROWTH VALUE AS % OF TOTAL VALUE
[BAR GRAPH]
1997 1998 1999 Pre-Offer Final Price
---- ---- ---- --------- -----------
38% 21% 32% 38% 49%
-----------------------------------------------------
Stock Price $15.06 $4.50 $2.13 $2.69 $4.10
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PEER GROWTH VALUE AS % OF TOTAL VALUE
[BAR CHART]
Peer Median = 10%
28% 10% -43% 49%
CNDL ESA SLAM HSD @ $4.10
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HPT SALE & LEASEBACK
Implied Value/Room = $10,556
Difference |
$1.60/Share |
V
Sale/Leaseback
Implied Price x 2,413 Rooms Sold
Per Share HSD =$25.5 Million
= $4.29 Pre-Offer Exposure to HTP
Price
= $2.69
1999 S&L HSD
Selling Price/ Share Price
Property
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INDUSTRY SALE & LEASEBACK TRANSACTIONS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Date of
Name Rooms Selling Price SPPR Sale Buyer Name Seller
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Candlewood Suites 558 $36,000,000 $64,516 1/5/98 Hospitality Properties Trust CNDL
Candlewood Suites 500 $29,900,000 $59,800 5/27/98 Hospitality Properties Trust CNDL
Candlewood Suites 473 $26,000,000 $54,968 1/25/98 Hospitality Properties Trust CNDL
Candlewood Suites 2,014 $108,945,316 $54,094 1998 Hospitality Properties Trust CNDL
Sierra Suites 315 $16,800,000 $53,333 10/15/98 Sierra Hotel Associates LP Innkeepers
USA Trust
Homestead Village 2,413 $145,000,000 $60,091 2/23/99 Hospitality Properties Trust HSD
Weighted Mean $57,811
- ---------------------------------------------------------------
</TABLE>
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INDUSTRY SALE & LEASEBACK VALUATION
($MIL.)
For Sale Properties (28) 84.3
Sale-Leaseback Properties (18) 145.0
Other Properties (90) 689.8
-------------------------------------------------------------
Property and Equipment 919.1
PV of NOL Tax Savings 28.1
Proceeds from Additional Land Sales 4.8
Cash and Cash Equivalents 20.6
Deposit 16.1
-------------------------------------------------------------
Total Value 988.6
Total Debt 487.6
Total Warrants 13.7
-------------------------------------------------------------
Equity Value 487.3
Total Shares 120.0
HSD Valuation Based on 1999 S&L = $4.06/Share
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SALE & LEASEBACK VALUATION
($Mil.)
For Sale Properties (28) 84.3
Sale-Leaseback Properties (18) 145.0
Other Properties (90) 717.0
----------------------------------------------------------------------
Property and Equipment 946.3
PV of NOL Tax Savings 28.1
Proceeds from Additional Land Sales 4.8
Cash and Cash Equivalents 20.6
Deposit 16.1
----------------------------------------------------------------------
Total Value 1,015.8
Total Debt 487.6
Total Warrants 13.7
----------------------------------------------------------------------
Equity Value 515.5
Total Shares 120.0
HSD Valuation Based on 1999 S&L = $4.29/Share
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IMPLIED VALUE PER ROOM
[BAR CHART]
52 Week Pre- First Final
Low Offer Offer Price
$1.88 $2.69 $3.40 $4.10
----- ----- ----- -----
$35.4 $40.8 $45.5 $50.1
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<PAGE>
Exhibit (c)(3)
PROJECT HOMECOMING
Presentation to the Board of Directors
Strictly Private and Confidential
Chase Securities Inc.
March 23, 2000
<PAGE>
Table of Contents
- --------------------------------------------------------------------------------
Executive Summary..............................................................I
Company Overview..............................................................II
Preliminary Valuation Analysis...............................................III
Appendices
Valuation Materials............................................................A
Supplementary Company Information..............................................B
1
<PAGE>
- --------------------------------------------------------------------------------
Executive Summary
- --------------------------------------------------------------------------------
2
<PAGE>
Executive Summary
Overview
- --------------------------------------------------------------------------------
. Chase Securities Inc. ("Chase") is pleased to meet with Security Capital
Group ("Group" or the "Company") in order to present its view on a
potential acquisition by Group of the shares of Homestead Village Inc.
("HSD") which are not already owned by Group
. Group has advised Chase that Group will fund a potential transaction with
its existing credit facilities
. Chase has based its analyses on the financial projections (2000-2002E)
provided by HSD to Group and used the following methodologies in arriving
at a preliminary valuation range:
- Comparable Publicly Traded Companies Analysis;
- Premiums Paid Analysis;
- Discounted Cash Flow Analysis; and
- Net Asset Value Analysis
. Preliminary valuation analyses suggest an implied value for the common
stock of HSD of $3.00 to $3.50 per share; a premium of 14% to 33% over the
current stock price of $2.63 (as of 3/20/00)
3
<PAGE>
- --------------------------------------------------------------------------------
Company Overview
- --------------------------------------------------------------------------------
4
<PAGE>
Company Overview
Market Capitalization
- --------------------------------------------------------------------------------
($ in millions, except per share and room data)
- --------------------------------------------------------------------------------
Current Market
- --------------------------------------------------------------------------------
Current Stock Price (3/20/00) $2.63
52-Week High (5/3/99)(1) 4.38
52-Week Low (8/10/99) 1.94
3-Month High 2.63
3-Month Low 2.06
% 52-Week High 60.0%
% 3-Month High 100.0%
Basic Shares Outstanding (MM)(2) 120.031
Options and Convertible Mortgage Notes(2) 0.485
-----
Diluted Shares Outstanding (MM) 120.516
Market Value of Equity $316.4
Plus: Net Total Debt (3) 444.5
-----
Enterprise Value $760.8
======
- --------------------------------------------------------------------------------
Trading Multiples
---------------------------------
Year 1999 2000E
- --------------------------------------------------------------------------------
Property NOI Cap. Rate 16.8% 17.9%
EBITDA Multiple 8.0x 6.7x
Per Room Amount $41,750 $41,750
EBDADT Multiple 7.2x 5.7x
P/E NM 11.4x
- --------------------------------------------------------------------------------
Operating Statistics (4)
---------------------------------
Year 1999 2000E
- --------------------------------------------------------------------------------
Property NOI $127.6 $136.4
EBITDA 94.6 113.2
Number of Rooms 18,224 18,224
EBDADT $44.2 $55.8
EPS 0.02 0.23
1. Excluding closing prices from 4/27/99 to 5/3/99 due to news about potential
sale of the company, the 52-week high is $3.06 as of 3/22/99. Prior to a
tripling of shares outstanding through a rights offering.
2. Source: HSD press release on fourth quarter financial results dated 2/3/00.
Diluted shares outstanding calculated using the treasury method based on
2.946 million options outstanding at an average exercise price of $2.19.
3. Source: HSD press release on fourth quarter financial results dated 2/3/00.
HSD net debt includes $125.4 million of lines of credit, $221.3 million of
convertible mortgage notes payable to affiliates, and $140.9 million of
capital lease obligations, less $20.7 million of cash and $22.4 million of
book value of land inventory.
4. Projected property NOI, EBITDA and EPS based on Salomon Smith Barney
Monthly Lodging Industry Report, February 2000. 2000 projected EBDADT based
on Merrill Lynch research report dated February 10, 2000.
5
<PAGE>
Company Overview
Recent Share Price Performance
- --------------------------------------------------------------------------------
[GRAPH SHOWING CLOSING SHARE PRICES AND TRADING
VOLUMES DURING PERIOD 3/15/99 TO 3/20/00]
Share Performance
High Average Low
------ ------- ------
1 Year: $4.375 $2.502 $1.938
6 Months: 2.813 2.404 2.063
3 Months: 2.625 2.303 2.063
1 Month: 2.625 2.301 2.063
3/15/99- Expected 1st quarter EBITDA below analysts' expectations.
5/3/99- In discussion with an unidentified party for a possible "business
combination."
5/4/99- Announced termination of discussions on "business combination."
10/7/99- Expected earnings in 3rd quarter to be 20 cents to 21 cents a share,
excluding gains from the sale of land, higher than the estimate of 17 cents from
analysts polled by First Call Corp.
10/12/99- Raised to "Market Perform" at Goldman Sachs.
1/20/00- Announced that its 4th quarter EBITDA will be 18 cents to 19 cents per
diluted share, exceeding the First Call consensus estimate of 16 cents.
- ---------------------------------------------
Source: IDD Information Service and Bloomberg
6
<PAGE>
- --------------------------------------------------------------------------------
Preliminary Valuation Analysis
- --------------------------------------------------------------------------------
7
<PAGE>
Preliminary Valuation Analysis
Valuation Approach and Methodology
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Valuation Analysis
Comparable Publicly
Traded Companies Premiums Paid Discounted Cash Net Asset Valuation
Analysis Analysis Flow Analysis Analysis
<S> <C> <C> <C>
. Analysis of valuations for . Analysis of premium paid . Present value as of . Based on 2000E
peer groups in minority equity buy-in 6/30/00 of projected Adjusted NOI
transactions unlevered free cash flows
. Review of historical and . 5% of revenues as
projected trading . Review of initial and final . Terminal 2005 EBITDA Management Fee,
multiples pricing multiples of 6.0x - 8.0x 4% of revenues as FF&E
. Adjustments for non- . Discount rates of 13.5% - . Economic Capitalization
recurring items 15.5% Rate of 13.0% - 14.0%
. Add book value of land . Cash flows reflect benefits . Add book value of land
inventory of NOLs inventory
. Based on HSD
management projections
. Add book value of land
inventory
</TABLE>
8
<PAGE>
Preliminary Valuation Analysis
Valuation Summary
- --------------------------------------------------------------------------------
[GRAPH SHOWING ESTIMATED VALUATIONS]
<TABLE>
<S> <C> <C> <C> <C>
$4.38 $3.90 $3.40 $4.20 $4.00 Preliminary
$1.94 $2.00 $3.00 $2.60 $3.50 Valuation Range
$3.00 to $3.50
-------------------------------------
Current Share Price (3/20/2000)=$2.63
-------------------------------------
52 Week Comparable Premiums Paid Discounted Net Asset Valuation
High/Low Publicly Traded Analysis Cash Flow Analysis
Companies Analysis
Analysis 15.0% to 30.0%
Premium Paid over 6.0x to 8.0x Exit Multiple 2000E adjusted NOI
6.0x to 8.0x Current Price 2005E EBITDA of $114.7 million
2000E EBITDA of $130.6 million 13.0% to 14.0%
of $111.3 million 13.5% to 15.5% Discount Rates Cap Rates
No Synergies
</TABLE>
(1) Valuation as of 6/30/00. Net Debt equals working capital revolver
($76.0MM)+Archstone mortgages ($221.3MM)+HPT sale/leaseback ($138.9MM)-cash
($5.0 million). Diluted shares include 2.946 million options outstanding at
an average exercise price of $2.19.
(2) Based on 120.516 million fully diluted shares outstanding calculated using
treasury stock method.
(3) Includes book value of $7.4 million of land inventory, as of 6/30/00.
(4) Excluding closing prices from 4/27/99 to 5/3/99 due to news about potential
sale of the company, the 52-week high is $3.06 as of 3/22/99.
9
<PAGE>
Preliminary Valuation Analysis
Valuation Matrix
- --------------------------------------------------------------------------------
($ in millions except per share data)
<TABLE>
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
HSD Offer Price Per Share $2.63 $2.75 $3.00 $3.25 $3.50
% Premium to Current Market Price (1) 0.0% 4.8% 14.3% 23.8% 33.3%
Transaction Equity Value (2) $316.4 $331.7 $362.5 $393.3 $424.1
Transaction Enterprise Value (3) 740.2 755.5 786.3 817.1 847.9
- ------------------------------------------------------------------------------------------------------------
Property NOI
1999 $127.6 17.2% 16.9% 16.2% 15.6% 15.1%
2000E(4) 136.4 18.4 18.1 17.3 16.7 16.1
EBITDA
1999 $94.6 7.8x 8.0x 8.3x 8.6x 9.0x
2000E(4) 111.3 6.7 6.8 7.1 7.3 7.6
EBDADT
1999 $44.2 7.2x 7.5x 8.2x 8.9x 9.6x
2000E(4) 67.8 4.7 4.9 5.3 5.8 6.3
Net Income
1999(5) $2.1 NM NM NM NM NM
2000E(4) 23.7 13.4x 14.0x 15.3x 16.6x 17.9x
</TABLE>
(1) Based on closing share price of $2.63 as of March 20, 2000.
(2) Based on basic shares outstanding of 120.031 million and in-the-money
options.
(3) Enterprise value includes net debt as of 6/30/00, which comprises $138.9
million of capital lease obligations, $76.0 million of lines of credit and
$221.3 million of convertible mortgage notes payable to affiliates, less
$5.0 million of cash and $7.4 million of book value of land inventory.
(4) Based on HSD Management's estimates.
(5) Excludes one-time charges.
10
<PAGE>
Preliminary Valuation Analysis
Publicly Traded Comparable Companies
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2000E EBITDA Multiples (1)
- --------------------------------------------------------------------------------
[GRAPH SHOWING 2000E EBITDA MULTIPLES]
Median=5.8x
8.4x 6.7x 6.7x 5.8x 5.4x 5.2x
CNDL HSD ESA SLAM SNB PDQ
- --------------------------------------------------------------------------------
2000E EBDADT Multiples (1)
- --------------------------------------------------------------------------------
[GRAPH SHOWING 2000E EBDADT MULTIPLES]
Median=3.6x
5.7x 5.7x 4.4x 3.6x 2.4x 2.3x
ESA HSD SLAM PDQ SNB CNDL
(1) HSD excluded from median calculation
11
<PAGE>
Preliminary Valuation Analysis
Premiums Paid Analysis
- --------------------------------------------------------------------------------
. Analyzed 48 Minority Buy - In transactions with the following criteria:
Domestic transactions announced between 1/1/1997 and 3/20/2000
Minority stake value greater than $20 million prior to the announcement date
. In 26 transactions (54%), offers were increased from initial levels
- - The median percent increase in the final offers from initial offers was
12.3%
Summary of Median Premiums Paid
Share Price Prior to Initial Offer Price Final Offer Price
Announcement
1 day 11.5% 22.3%
1 week 18.0% 25.3%
4 weeks 24.5% 30.9%
Source: SDC
12
<PAGE>
Preliminary Valuation Analysis
Historical and Projected Financials (1)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Revenues
- --------------------------------------------------------------------------------
[GRAPH SHOWING REVENUES]
$58 $140 $224 $241 $249 $256 $264 $272
1997 1998 1999 2000 2001 2002 2003 2004
- --------------------------------------------------------------------------------
Property NOI
- --------------------------------------------------------------------------------
[GRAPH SHOWING PROPERTY NOI]
$35 $82 $128 $136 $140 $145 $150 $154
1997 1998 1999 2000 2001 2002 2003 2004
- --------------------------------------------------------------------------------
EBITDA
- --------------------------------------------------------------------------------
[GRAPH SHOWING EBITDA]
$20 $60 $95 $111 $115 $119 $123 $127
1997 1998 1999 2000 2001 2002 2003 2004
- --------------------------------------------------------------------------------
Net Income
- --------------------------------------------------------------------------------
[GRAPH SHOWING NET INCOME]
$6 $3 $2 $24 $27 $31 $23 $24
1997 1998 1999 2000 2001 2002 2003 2004
(1) Source: HSD's management estimates for 2000-2002E. Chase estimates
thereafter.
13
<PAGE>
Preliminary Valuation Analysis
DCF Analysis
- --------------------------------------------------------------------------------
($ in millions, except per share data)
Enterprise Value + Land Inventory Less:
- --------------------------------------------------------------------------------
2005E EBITDA Exit Multiple
Discount -------------------------- Net
Rate 6.0x 7.0x 8.0x Debt
- --------------------------------------------------------------------------------
13.5% $792.2 $866.1 $940.0 $431.3
14.5% 767.7 838.7 909.7 431.3
15.5% 744.3 812.6 880.9 431.3
Equity Value Equity Value Per Share
- -------------------------- ----------------------------
2005E EBITDA Exit Multiple 2005E EBITDA Exit Multiple
- -------------------------- ----------------------------
6.0x 7.0x 8.0x 6.0x 7.0x 8.0x
- -------------------------- ----------------------------
$360.9 $434.8 $508.7 $2.99 $3.61 $4.22
336.4 407.4 478.5 2.79 3.38 3.97
313.0 381.3 449.6 2.60 3.16 3.73
- ---------------------------------------
Notes:
(1) 2000-2002E estimates based on HSD's management projections. Chase estimates
thereafter.
(2) Discount rates based on estimated weighted average cost of capital.
(3) Present values calculated as of June 30, 2000. Cash flows include benefits
of NOLs.
(4) Terminal value discounted 4.5 years; based on FYE December 31, 2005E EBITDA
of $130.6 million.
(5) Net debt equals working capital revolver ($76.0MM)+Archstone mortgages
($221.3MM)+HPT sale/leaseback ($138.9MM)-cash ($5.0 million).
(6) Based on 120.516 million fully diluted shares outstanding calculated using
treasury stock method. Diluted shares include 2.946 million options
outstanding at an average exercise price of $2.19.
(7) Land inventory at book value of $7.4 million.
14
<PAGE>
Preliminary Valuation Analysis
NAV Analysis
- --------------------------------------------------------------------------------
(Dollars in millions, except per share data)
2000E(1)
----------
Revenues $241.4
Operating Expenses 105.1
-----
Property NOI $136.4
Margin 56.5%
Adjustments (2):
Management Fee (5% of revenues) $12.1
FF&E (4% of revenues) 9.7
----
Total Adjustments 21.7
Adjusted NOI $114.7
2000E
-------------------------------
Economic Capitalization Rate (2) 13.0% 14.0%
Estimated Value of Real Estate Operations $882.0 $819.0
Book Value of Land Inventory $7.4 $7.4
---- ----
Total $889.4 $826.4
Projected 2000E Debt:
- ---------------------
Revolving Credit Line (3) $46.6 $46.6
Convertible Mortgages 221.3 221.3
Lease Obligation 137.0 137.0
----- -----
Total Debt $404.9 $404.9
Projected 2000 NAV Range
-------------------------------
Net Asset Value $484.4 $421.4
Diluted Shares Outstanding (MM) 120.516 120.516
- ------------------------------------------------------------------------------
NAV/Share $4.02 $3.50
- ------------------------------------------------------------------------------
(1) Based on management's projections.
(2) Chase estimate based on current market conditions and recent transactions.
(3) Subtract dividend of $16.2 million to normalize estimated debt as of
12/31/00.
15
<PAGE>
- --------------------------------------------------------------------------------
APPENDICES
- --------------------------------------------------------------------------------
16
<PAGE>
- --------------------------------------------------------------------------------
Valuation Materials
- --------------------------------------------------------------------------------
17
<PAGE>
Valuation Materials
Publicly Traded Comparable Companies (Extended Stay Sector)
- --------------------------------------------------------------------------------
Hotel C-Corps: Market Information
<TABLE>
<CAPTION>
3/20/00 % of Equity Total 2000E Aggregate Value/
Share 52-week Market Market Price/EPS(4) Payout EBITDA (5)
Company Price High Value(2) Capitalization(3) 1999E 2000E EPS(4) 1999E 2000E
- ------------------------ ------- ------- -------- ----------------- ------------- ------ ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Candlewood Hotel (1) $2.00 45.7% $40.6 $514.6 N/A 13.3 0.0% 12.6x 8.4x
Extended Stay America 8.06 63.5% 783.7 1,603.7 16.8 14.4 0.0% 8.3 6.7
Prime Hospitality 8.75 67.6% 463.8 1,036.0 8.3 7.5 0.0% 5.6 5.2
Suburban Lodges America 5.78 80.4% 89.0 187.8 11.8 10.0 0.0% 6.6 5.8
Sunburst Hospitality (8) 4.69 69.4% 87.9 357.4 12.3 10.2 0.0% 5.7 5.4
- ----------------------------------------------------------------------------------------------------------------------
Average $293.0 $739.9 12.3x 11.1x 0% 7.8x 6.3x
Median $89.0 $514.6 12.1x 10.2x 0% 6.6x 5.8x
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
Homestead Village (9) $2.63 51.2% $316.4 $804.0 NM 11.4x 0.0% 8.0x 6.7x
- ----------------------------------------------------------------------------------------------------------------------
<CAPTION>
Equity Mkt Cap/
EBDADT(6) 5-Yr EPS
---------------- Dividend Growth
Company 1999E 2000E Yield Rate(7)
- ------------------------ ------- ------- -------- --------
<S> <C> <C> <C> <C>
Candlewood Hotel (1) 6.2x 2.3x 0.0% 40.0%
Extended Stay America 6.6 5.7 0.0% 17.8%
Prime Hospitality 3.9 3.6 0.0% 12.5%
Suburban Lodges America 4.7 4.4 0.0% 16.0%
Sunburst Hospitality (8) 2.6 2.4 0.0% 20.0%
- -----------------------------------------------------------------
Average 4.8x 3.7x 0.0% 21%
Median 4.7x 3.6x 0.0% 18%
- -----------------------------------------------------------------
- -----------------------------------------------------------------
Homestead Village (9) 7.2x 5.7x 0.0% 14.0%
- -----------------------------------------------------------------
</TABLE>
Notes:
(1) For Candlewood Hotel, debt includes implied lease value and EBITDAR is used
instead of EBITDA to calculate EBITDA multiple.
(2) Includes common shares, common share equivalents (excluding options) and
operating partnership units.
(3) Equals the sum of equity market value (fully diluted), debt outstanding and
preferred stock at liquidation preference.
(4) Estimates from First Call as of March 09, 2000.
(5) Aggregate Value is Total Market Capitalization less Cash and Cash
Equivalents. EBITDA estimates from analyst reports.
(6) EBDADT estimates extrapolated from analyst reports.
(7) Estimates from First Call as of March 09, 2000.
(8) Sunburst Hospitality Corp. operating statistics for 1999 are based on press
release on full year financial results dated 2/17/00 and 2000 estimates are
based on Salomon Smith Barney Monthly Lodging Report, February 2000.
(9) Homestead operating statistics for 1999 are based on press release on full
year financial results dated 2/3/00. Projected property NOI, EBITDA and EPS
based on Salomon Smith Barney Monthly Lodging Industry Report, February
2000. 2000 projected EBDADT based on Merrill Lynch research report dated
February 10, 2000. 5-Year EPS growth rate is CAGR to 2002 as per HSD's
estimate.
18
<PAGE>
Valuation Materials
Publicly Traded Comparable Companies (Extended Stay Sector)
- --------------------------------------------------------------------------------
Hotel C-Corps: Credit Information
<TABLE>
<CAPTION>
3/20/00 Equity Total Debt-to- Debt+Prfd/ Debt-to-
Share Market Market Total Market Total Market Total Book
Company Price Value(2) Capitalization(3) Capitalization Capitalization Capitalization(4)
- ----------------------- ------- -------- ----------------- -------------- -------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Candlewood Hotel (1) $2.00 $40.6 $514.6 71% 92% 96%
Extended Stay America 8.06 783.7 1,603.7 51% 51% 47%
Prime Hospitality 8.75 463.8 1,036.0 55% 55% 47%
Suburban Lodges America 5.78 89.0 187.8 53% 53% 31%
Sunburst Hospitality 4.69 87.9 357.4 75% 75% 72%
- -----------------------------------------------------------------------------------------------------------------------
Average $293.0 $739.9 61% 65% 59%
Median $89.0 $514.6 55% 55% 47%
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
Homestead Village (6) $2.63 $316.4 $804.0 61% 61% 44%
- -----------------------------------------------------------------------------------------------------------------------
<CAPTION>
Senior Debt
Secured LTM Ratings (5)
Debt/ EBITDA/ Debt/ 2000E Debt/ -------------
Company Total Debt Interest EBITDA EBDADT Moody's / S&P
- ----------------------- --------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Candlewood Hotel (1) 45% 1.5x 6.2x 30.5x NR/ NR
Extended Stay America 0% 3.7 3.4 2.8 Ba3/B+
Prime Hospitality 65% 5.4 2.9 4.2 Ba2/BB
Suburban Lodges America 100% 5.1 3.4 6.7 NR/ NR
Sunburst Hospitality 38% 2.5 4.2 8.0 NR/ NR
- ----------------------------------------------------------------------------------
Average 49% 3.6x 4.0x 10.5x
Median 45% 3.7x 3.4x 6.7x
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
Homestead Village (6) 45% 1.9x 4.3x 11.0x NR/ NR
- ----------------------------------------------------------------------------------
</TABLE>
Notes:
(1) For Candlewood Hotel, debt includes implied lease value and EBITDAR is used
instead of EBITDA to calculate EBITDA multiple.
(2) Includes common shares, common share equivalents (excluding options) and
operating partnership units.
(3) Equals the sum of equity market value (fully diluted), debt outstanding and
preferred stock at liquidation preference.
(4) Book capitalization equals the sum of debt outstanding, minority interests
and shareholders' equity.
(5) Senior Debt Rating (Notes are rated B1/ B).
(6) Homestead operating statistics for 1999 are based on press release on full
year financial results dated 2/3/00. Projected property NOI, EBITDA and EPS
based on Salomon Smith Barney Monthly Lodging Industry Report, February
2000. 2000 projected EBDADT based on Merrill Lynch research report dated
February 10, 2000. 5-Year EPS growth rate is CAGR to 2002 as per HSD's
estimate.
19
<PAGE>
Valuation Materials
Premiums Paid Versus Majority Ownership
- --------------------------------------------------------------------------------
[GRAPH SHOWING PREMIUMS PAID VERSUS PERCENTAGE OF PRE-ACQUISITION STAKE]
20
<PAGE>
Valuation Materials
Premiums Paid Analysis
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Transaction % Owned
Ann. Value before % Initial Price Final Price
Date Target Name Acquiror Name ($MM) Transaction Acq. Per Share Per Share
<C> <C> <C> <C> <C> <C> <C> <C>
01/13/97 Zurich Reinsurance Centre Zurich Versicherungs GmbH $319.0 66.0 34.0 $36.00 $36.00
01/21/97 Mafco Consolidated Group Mafco Holdings Inc. 116.8 85.0 15.0 38.50 33.50
01/28/97 Calgene Inc. Monsanto Co. 242.6 56.3 43.7 7.25 8.00
02/25/97 Fina Inc. Petrofina SA 257.0 85.3 14.7 60.00 60.00
05/14/97 Enron Global Power & Pipelines Enron Corp. 428.0 51.9 48.1 32.00 33.83
05/22/97 Chaparral Steel Co. Texas Industries Inc. 72.8 85.0 15.0 14.25 15.50
06/02/97 Acordia Inc. Anthem Inc. 193.2 66.8 33.2 40.00 40.00
06/03/97 Faulding Inc. FH Faulding & Co Ltd. 77.3 62.0 38.0 12.00 13.50
06/13/97 Bally's Grand Inc. Hilton Hotels Corp. 42.6 95.2 4.8 52.75 52.75
06/20/97 Wheelabrator Technologies Inc. Waste Management Inc. 869.7 67.0 33.0 15.00 16.50
07/09/97 Seaman Furniture Co. Investor Group 45.6 80.0 20.0 24.00 25.05
09/18/97 Guaranty National Corp. Orion Capital Corp. 117.2 77.3 22.7 34.00 36.00
10/23/97 Brad Ragan Inc. Goodyear Tire & Rubber Co. 20.7 75.0 25.0 32.00 37.25
01/08/98 Rayonier Timberlands LP. Rayonier Inc. 65.8 74.7 25.3 13.00 13.00
01/22/98 BT Office Products International Inc. Koninklijke KNP BT NV 138.1 70.0 30.0 10.50 13.75
03/27/98 International Specialty Products ISP Holdings Inc. 324.5 83.8 16.2 18.25 18.25
03/31/98 Thermo Voltek Corp. Thermedics 49.1 67.0 33.0 7.00 7.00
04/30/98 Mycogen Corp. Dow AgroSciences 379.3 68.3 31.7 20.50 28.00
07/07/98 Life Technologies Inc. Dexter Corp. 215.8 56.5 23.4 37.00 39.13
08/24/98 Tele-Commun International Liberty Media 379.1 81.1 18.9 20.49 20.77
09/08/98 PEC Israel Economic Corp. Investor Group 125.0 81.4 18.7 25.50 30.00
09/23/98 J&L Specialty Steel Inc. Usinor SA 115.0 53.5 46.5 5.75 6.38
09/23/98 Ryerson Tull Inc. Inland Steel Industries Inc. 61.2 86.4 13.6 10.46 11.44
09/29/98 Newmont Gold Co. Newmont Mining Corp. 264.8 93.8 6.3 25.37 25.37
10/21/98 Capital Factors Holdings Inc. Union Planters Bank National 22.2 87.3 12.7 17.50 17.50
10/22/98 BA Merchant Services Bank of America National Trust 339.4 65.4 32.8 15.50 20.50
<CAPTION>
% Premium of Final Offer Price to
Ann. % Target Share Price Before Ann. Type(s) of
Date Target Name Acquiror Name Inc. 1-Day 1-Week 1-Month Consideration
<S> <C> <C> <C> <C> <C> <C> <C>
01/13/97 Zurich Reinsurance Centre Zurich Versicherungs GmbH 0.0% 17.1 18.5 11.6 CASH
01/21/97 Mafco Consolidated Group Mafco Holdings Inc. -13.0% 23.5 23.5 27.6 CASH
01/28/97 Calgene Inc. Monsanto Co. 10.3% 62.0 60.0 60.0 CASH
02/25/97 Fina Inc. Petrofina SA 0.0% 19.7 18.5 21.5 CASH
05/14/97 Enron Global Power & Pipelines Enron Corp. 5.7% 11.8 13.7 19.7 STOCK
05/22/97 Chaparral Steel Co. Texas Industries Inc. 8.8% 20.4 25.3 29.2 CASH
06/02/97 Acordia Inc. Anthem Inc. 0.0% 12.7 11.5 26.0 CASH
06/03/97 Faulding Inc. FH Faulding & Co Ltd. 12.5% 25.6 22.7 45.9 CASH
06/13/97 Bally's Grand Inc. Hilton Hotels Corp. 0.0% 27.9 29.8 31.1 CASH
06/20/97 Wheelabrator Technologies Inc. Waste Management Inc. 10.0% 26.9 28.2 30.7 CASH
07/09/97 Seaman Furniture Co. Investor Group 4.4% 21.5 25.3 21.5 CASH
09/18/97 Guaranty National Corp. Orion Capital Corp. 5.9% 10.8 23.9 27.7 COMBINATION
10/23/97 Brad Ragan Inc. Goodyear Tire & Rubber Co. 16.4% 6.7 -1.2 5.4 CASH
01/08/98 Rayonier Timberlands LP. Rayonier Inc. 0.0% 11.2 25.3 17.5 CASH
01/22/98 BT Office Products International Inc. Koninklijke KNP BT NV 31.0% 32.5 78.9 78.9 CASH
03/27/98 International Specialty Products ISP Holdings Inc. 0.0% 4.3 1.7 14.5 STOCK
03/31/98 Thermo Voltek Corp. Thermedics 0.0% 45.5 60.0 40.0 CASH
04/30/98 Mycogen Corp. Dow AgroSciences 36.6% 41.8 40.0 52.4 CASH
07/07/98 Life Technologies Inc. Dexter Corp. 5.8% 25.2 24.7 19.0 CASH
08/24/98 Tele-Commun International Liberty Media 1.4% -1.1 -4.5 -9.9 STOCK
09/08/98 PEC Israel Economic Corp. Investor Group 17.6% 31.5 28.0 23.7 CASH
09/23/98 J&L Specialty Steel Inc. Usinor SA 11.0% 100.0 112.5 37.8 CASH
09/23/98 Ryerson Tull Inc. Inland Steel Industries Inc. 9.4% -8.5 -11.6 -40.8 STOCK
09/29/98 Newmont Gold Co. Newmont Mining Corp. 0.0% -5.2 20.8 62.4 STOCK
10/21/98 Capital Factors Holdings Inc. Union Planters Bank National 0.0% 4.5 8.9 2.9 CASH
10/22/98 BA Merchant Services Bank of America National Trust 32.3% 47.1 56.2 42.0 CASH
</TABLE>
21
<PAGE>
Valuation Materials
Premiums Paid Analysis (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Transaction % Owned
Ann. Value before % Initial Price Final Price
Date Target Name Acquiror Name ($MM) Transaction Acq. Per Share Per Share
<C> <C> <C> <C> <C> <C> <C> <C>
10/27/98 Citizens Corp. Allmerica Financial Corp. $212.4 81.8 18.2 $29.00 $33.25
11/12/98 Aquila Gas Pipeline Corp. UtiliCorp United Inc. 43.2 81.6 18.4 8.00 8.00
12/03/98 Banner Aerospace Inc. Fairchild Corp. 82.4 69.2 30.8 9.75 11.00
01/22/99 Treadco Inc. Arkansas Best Corp. 22.7 51.0 49.0 9.00 9.00
03/08/99 LabOne Inc. Lab Holdings Inc. 34.3 80.5 19.5 12.75 12.75
03/09/99 Sun Energy Partners LP. Kerr-McGee Corp. 43.4 98.2 1.8 4.52 5.75
03/21/99 Spelling Entertainment Group Viacom Inc. 191.6 80.9 19.1 9.00 9.75
03/24/99 Knoll Inc. Warburg, Pincus Ventures Inc. 490.8 58.2 41.8 25.00 28.00
04/01/99 Aqua Alliance Inc. Vivendi SA 117.1 83.0 17.0 2.00 2.90
04/12/99 Meadowcraft Inc. Investor Group 53.2 73.0 27.0 8.00 10.00
05/05/99 Thermo Power Corp. Thermo Electron Corp. 34.8 78.0 22.0 12.00 12.00
05/07/99 J Ray McDermott SA McDermott International Inc. 514.5 63.0 37.0 35.62 35.62
05/21/99 ThermoSpectra Thermo Instrument Systems Inc. 26.1 92.0 8.0 16.00 16.00
10/20/99 Thermo TerraTech Inc. Thermo Electron Corp. 80.7 87.0 13.0 7.25 7.25
10/20/99 Thermoretec Corp. Thermo Electron Corp. 27.6 71.0 29.0 7.00 7.00
11/05/99 PEC Israel Economic Corp. Discount Investment Corp. 205.8 69.3 30.7 36.50 36.50
11/12/99 Howmet International Inc. Cordant Technologies Inc. 261.4 84.6 15.4 17.00 18.75
12/02/99 Boise Cascade Office Products Boise Cascade Corp. 163.9 81.2 18.8 13.25 16.50
01/11/00 Hayes Lemmerz International Investor Group 165.2 75.0 25.0 21.00 N/A
01/19/00 Conning Corp. Metropolitan Life Insurance Co. 60.8 61.0 39.0 10.50 12.50
01/19/00 Trigen Energy Corp. Elyo 159.2 52.7 47.3 23.50 23.50
01/31/00 Sunrise Intl Leasing Inc. King Management Corp. 37.6 57.0 43.0 5.25 N/A
<CAPTION>
% Premium of Final Offer Price to
Ann. % Target Share Price Before Ann. Type(s) of
Date Target Name Acquiror Name Inc. 1-Day 1-Week 1-Month Consideration
<S> <C> <C> <C> <C> <C> <C> <C>
10/27/98 Citizens Corp. Allmerica Financial Corp. 14.7% 20.6 17.2 20.9 CASH
11/12/98 Aquila Gas Pipeline Corp. UtiliCorp United Inc. 0.0% 23.1 17.4 68.4 CASH
12/03/98 Banner Aerospace Inc. Fairchild Corp. 12.8% 25.7 41.9 40.8 STOCK
01/22/99 Treadco Inc. Arkansas Best Corp. 0.0% 38.5 46.9 24.1 CASH
03/08/99 LabOne Inc. Lab Holdings Inc. 0.0% 17.2 10.3 8.5 COMBINATION
03/09/99 Sun Energy Partners LP. Kerr-McGee Corp. 27.2% 41.5 43.8 50.8 CASH
03/21/99 Spelling Entertainment Group Viacom Inc. 8.3% 8.3 43.1 54.5 CASH
03/24/99 Knoll Inc. Warburg, Pincus Ventures Inc. 12.0% 83.6 51.9 46.4 CASH
04/01/99 Aqua Alliance Inc. Vivendi SA 45.0% 28.9 19.0 101.7 CASH
04/12/99 Meadowcraft Inc. Investor Group 25.0% 64.9 63.3 77.8 CASH
05/05/99 Thermo Power Corp. Thermo Electron Corp. 0.0% 5.5 -1.5 41.2 CASH
05/07/99 J Ray McDermott SA McDermott International Inc. 0.0% 16.8 13.1 19.2 CASH
05/21/99 ThermoSpectra Thermo Instrument Systems Inc. 0.0% 39.1 43.8 61.0 CASH
10/20/99 Thermo TerraTech Inc. Thermo Electron Corp. 0.0% -15.8 -9.4 11.6 STOCK
10/20/99 Thermoretec Corp. Thermo Electron Corp. 0.0% 27.3 33.3 34.9 CASH
11/05/99 PEC Israel Economic Corp. Discount Investment Corp. 0.0% 0.2 1.0 2.8 CASH
11/12/99 Howmet International Inc. Cordant Technologies Inc. 10.3% 33.3 31.0 45.6 CASH
12/02/99 Boise Cascade Office Products Boise Cascade Corp. 24.5% 12.3 52.6 59.0 CASH
01/11/00 Hayes Lemmerz International Investor Group N/A N/A N/A N/A CASH
01/19/00 Conning Corp. Metropolitan Life Insurance Co. 19.0% 15.6 38.9 53.9 CASH
01/19/00 Trigen Energy Corp. Elyo 0.0% 38.2 42.4 31.9 CASH
01/31/00 Sunrise Intl Leasing Inc. King Management Corp. N/A N/A N/A N/A CASH
-----------------------------------------------------------------
Mean 16.1% 24.8 29.1 33.8
Median 12.3% 22.3 25.3 30.9
-----------------------------------------------------------------
</TABLE>
Source: SDC
22
<PAGE>
Valuation Materials
Historical and Projected Income Statement
- --------------------------------------------------------------------------------
(dollars in millions, except per share data)
<TABLE>
<CAPTION>
FYE December 31 Projected FYE December 31 5 Yr CAGR
------------------------ ------------------------------------------ ---------
1997 1998 1999 2000 2001 2002 2003 2004 1999-2004
------------------------ ------------------------------------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Room Revenue $58.4 $139.7 $223.5 $241.4 $248.5 $256.1 $263.9 $271.9
(% Growth) 76.6% 139.2% 60.0% 8.0% 2.9% 3.0% 3.0% 3.0%
Other Revenue 1.5 5.8 2.1 0.0 0.0 0.0 0.0 0.0
--- --- --- --- --- --- --- ---
Total Revenues $59.9 $145.5 $225.6 $241.4 $248.5 $256.1 $263.9 $271.9 3.8%
Total Operating Expense 25.1 63.3 98.0 105.1 108.4 110.6 113.9 117.4
---- ---- ---- ----- ----- ----- ----- -----
NOI $34.8 $82.1 $127.6 $136.4 $140.1 $145.5 $149.9 $154.5
Corporate Expense 15.2 22.3 33.0 25.1 25.5 26.0 26.8 27.7
---- ---- ---- ---- ---- ---- ---- ----
EBITDA $19.5 $59.8 $94.6 $111.3 $114.6 $119.5 $123.1 $126.8 6.0%
Depreciation/Amortization 12.1 34.2 42.2 44.1 44.9 45.7 47.1 48.6
---- ---- ---- ---- ---- ---- ---- ----
EBIT $7.4 $25.6 $52.4 $67.1 $69.7 $73.7 $76.0 $78.3 8.4%
Interest Expense $2.2 $23.2 $51.3 $42.7 $41.3 $41.5 $41.1 $40.7
Other Expenses 0.0 0.0 0.0 1.2 1.5 1.7 1.7 1.7
Interest Income 0.6 1.0 1.0 0.4 0.4 0.6 1.4 2.3
Pretax Income $5.8 $3.4 $2.1 $23.6 $27.3 $31.2 $34.6 $38.2
Taxes 0.0 0.0 0.0 0.0 0.0 0.0 12.0 14.5
-----------------------------------------------------------------------
Net Income $5.8 $3.4 $2.1 $23.6 $27.3 $31.2 $22.6 $23.7
Basic Shares Outstanding 38.232 38.244 120.031 120.031 120.031 120.031 120.031 120.031
EPS $0.15 $0.09 $0.02 $0.20 $0.23 $0.26 $0.19 $0.20
Assumptions:
- --------------------------------------------------------------------------------------------------------
Room Revenue (% Growth) N/A 139.2% 60.0% 8.0% 2.9% 3.0% 3.0% 3.0%
Other Revenue (% Room Rev.) 2.5% 4.1% 1.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Total Operating Expense (% Room) 43.0% 45.3% 43.5% 43.5% 43.6% 43.2% 43.2% 43.2%
NOI Margin 58.1% 56.5% 56.6% 56.5% 56.4% 56.8% 56.8% 56.8%
Corporate Expense (% of Rev.) 16.9% 16.9% 14.6% 10.4% 10.3% 10.2% 10.2% 10.2%
EBITDA (% of Revenues) 32.6% 41.1% 41.9% 46.1% 46.1% 46.6% 46.6% 46.6%
Depreciation (% of Revenues) 20.2% 23.5% 18.7% 18.3% 18.1% 17.9% 17.9% 17.9%
EBIT (% of Revenues) 12.4% 17.6% 23.2% 27.8% 28.0% 28.8% 28.8% 28.8%
Tax Rate 38.0% 38.0% 38.0% 38.0% 38.0% 38.0% 38.0% 38.0%
- --------------------------------------------------------------------------------------------------------
</TABLE>
Historical and projected financials exclude one time charges.
23
<PAGE>
Valuation Materials
DCF Analysis
- --------------------------------------------------------------------------------
Dollars in millions, except per share data
<TABLE>
<CAPTION>
FYE December 31 Projected FYE December 31
------------------------ -------------------------------------------
1997 1998 1999 2000E 2001E 2002E 2003E 2004E
------------------------ -------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue $59.8 $145.5 $225.6 $241.4 $248.5 $256.1 $263.9 $271.9
EBITDA 34.8 59.8 94.6 111.3 114.6 119.5 123.1 126.8
Less: Depreciation (12.1) (24.9) (42.2) (44.1) (44.9) (45.7) (47.1) (48.6)
------------------------ -------------------------------------------
EBITA $22.7 $34.9 $52.4 $67.1 $69.7 $73.7 $76.0 $78.3
Less: Taxes (8.6) 0.0 0.0 0.0 0.0 0.0 12.0 14.5
------------------------ -------------------------------------------
Tax-effected EBITA $14.1 $34.9 $52.4 $67.1 $69.7 $73.7 $63.9 $63.8
Plus: Depreciation $12.1 $24.9 $42.2 $44.1 $44.9 $45.7 $47.1 $48.6
Less: Capital Expenditures (3.2) (7.6) (12.3) (14.2) (11.2) (11.5) (11.8) (12.2)
Less: Changes in Working Capital 7.4 7.7 6.2 0.9 6.5 7.6 0.0 0.0
------------------------ -------------------------------------------
Free Cash Flow $30.4 $59.9 $88.5 $98.0 $110.0 $115.5 $99.2 $100.1
</TABLE>
<TABLE>
<CAPTION>
A + B = C
------------- -------------------------------- --------------------------------
PV of Terminal Value as a Enterprise Value +
Discounted Multiple of 2005 EBITDA (c) Land Inventory (d)
Cash Flow -------------------------------- --------------------------------
Discount Rate 2000-2004(b) 6.0x 7.0x 8.0x 6.0x 7.0x 8.0x
- ---------------- ------------- -------------------------------- --------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
13.5% $341.5 $443.3 $517.2 $591.1 $792.2 $866.1 $940.0
14.5% 334.1 426.2 497.2 568.2 767.7 838.7 909.7
15.5% 327.1 409.8 478.1 546.4 744.3 812.6 880.9
- D = E
------------- --------------------------------
Equity Value Equity Value per Share (f)
Net Debt -------------------------------- --------------------------------
Discount Rate @ June 2000(e) 6.0x 7.0x 8.0x 6.0x 7.0x 8.0x
- ---------------- ------------- --------------------------------
13.5% $431.3 $360.9 $434.8 $508.7 $2.99 $3.61 $4.22
14.5% 431.3 336.4 407.4 478.5 2.79 3.38 3.97
15.5% 431.3 313.0 381.3 449.6 2.60 3.16 3.73
--------------------------------
</TABLE>
- --------------------------------------------------------------------------------
(a) Source: Based on HSD's management projections for 2000-2002E. Chase
estimates thereafter.
(b) Present value calculated as of June 30, 2000.
(c) Discounted 4.5 years; based on FYE December 31, 2005 EBITDA of $130.6
million.
(d) Includes $7.4 million of excess land inventory.
(e) Net Debt equals working capital revolver ($76.0MM)+Archstone mortgages
($221.3MM)+HPT sale/leaseback ($138.9MM)-Cash ($5.0MM).
(f) Based on 120.516 million fully diluted shares outstanding. Diluted shares
include 2.946 million options outstanding at an average exercise price of
$2.19.
24
<PAGE>
-----------------------------------
Supplementary Company Information
-----------------------------------
25
<PAGE>
Supplementary Company Information
Stock Market Performance
- --------------------------------------------------------------------------------
Since October 1998, Hotel Management and Franchise Companies have outperformed
Hotel REITs and C-Corps with real estate ownership
[GRAPH SHOWING INDEXED STOCK MARKET PERFORMANCE
FOR THE PERIOD FROM 1/2/98 TO 3/20/00 FOR HSD, SELECTED HOTEL C-CORPS,
HOTEL MANAGEMENT AND FRANCHISE COMPANIES, AND HOTEL REITS]
Hotel C-Corps: CNDL, ESA, HLT, HSD, JQH, LOD, PDQ, HOT, SLAM, SNB, WYN
Hotel Mgt & Franchise: BH, CHH, CLJ, FS, MAR, MMH, USFS
Hotel REITs: BOY, ENN, FCH, HPT, HMT, KPA, LHO, MHX, RFS, WXH
- ----------------------------------------
Source: IDD Information Service
26
<PAGE>
Supplementary Company Information
Stock Volume Traded Performance
- --------------------------------------------------------------------------------
1 Month Volume Traded
% of Total Volume
February 20,2000 to March 20, 2000
[GRAPH SHOWING 1 MONTH VOLUME TRADED]
<TABLE>
<S> <C> <C> <C> <C> <C>
12.5% 23.2% 28.0% 48.6% 55.2% 100.0%
(Less than)$2.07 (Less than)$2.15 (Less than)$2.23 (Less than)$2.47 (Less than)$2.55 (Less than)$2.63
</TABLE>
AVERAGE PRICE: $2.301
TOTAL SHARES TRADED: 1,454,200
% OF FLOAT: 1.21%
3 Months Volume Traded
% of Total Volume Traded
December 20, 1999 to March 20, 2000
[GRAPH SHOWING 3 MONTH VOLUME TRADED]
5.9% 14.6% 29.2% 40.5%
(Less than)$2.10 (Less than)$2.17 (Less than)$2.24 (Less than)$2.31
55.0% 73.4% 80.5% 100.0%
(Less than)$2.38 (Less than)$2.45 (Less than)$2.52 (Less than)$2.63
AVERAGE PRICE: $2.303
TOTAL SHARES TRADED: 3,341,600
% OF FLOAT: 2.78%
6 Months Volume Traded
% of Total Volume Traded
September 20, 1999 to March 20, 2000
[GRAPH SHOWING 6 MONTH VOLUME TRADED]
4.5% 22.0% 30.3% 42.7%
(Less than)$2.10 (Less than)$2.20 (Less than)$2.30 (Less than)$2.40
56.6% 72.2% 93.6% 100.0%
(Less than)$2.50 (Less than)$2.60 (Less than)$2.70 (Less than)$2.90
AVERAGE PRICE: $2.404
TOTAL SHARES TRADED: 6,624,700
% OF FLOAT: 5.52%
9 Months Volume Traded
% of Total Volume Traded
June 20, 1999 to March 20, 2000
[GRAPH SHOWING 9 MONTH VOLUME TRADED]
AVERAGE PRICE: $2.400
TOTAL SHARES TRADED: 10,466,200
% OF FLOAT: 8.72%
2.3% 14.7% 30.8% 58.9%
(Less than)$2.00 (Less than)$2.15 (Less than)$2.30 (Less than)$2.45
71.8% 92.2% 100.0%
(Less than)$2.60 (Less than)$2.75 (Less than)$2.90
- ---------------------------------------
Source: IDD Information Service
27
<PAGE>
Supplementary Company Information
Ownership Profile
- --------------------------------------------------------------------------------
Shareholders
<TABLE>
<CAPTION>
Current % of Total Current Est. Shares % of Total
Estimated Basic & In-the-money Diluted
Corporate Investors Shares Held Shares Options Held (2) Shares
<S> <C> <C> <C> <C>
Security Capital Group Inc. 104,446,672 87.02% 104,446,672 86.7%
LaSalle National Bank 934,060 0.78% 934,060 0.78%
Oppenheimer Capital 853,502 0.71% 853,502 0.71%
Baupost Group, L.L.C. 852,700 0.71% 852,700 0.71%
Segall Bryant & Hamill 818,481 0.68% 818,481 0.68%
Dimensional Fund Advisors Inc. 749,400 0.62% 749,400 0.62%
New York State Common Retirement System 620,600 0.52% 620,600 0.51%
William Harris Investors 563,374 0.47% 563,374 0.47%
Kensington Investment Group Inc. 321,900 0.27% 321,900 0.27%
Vanguard Group, Inc. 294,191 0.25% 294,191 0.24%
Barclays Global Investors 209,394 0.17% 209,394 0.17%
LaSalle Invt. Management (Securities) 107,694 0.09% 107,694 0.09%
Smith Barney Asset Management 99,460 0.08% 99,460 0.08%
Goldman Sachs & Company 92,070 0.08% 92,070 0.08%
Mellon Bank (Private Asset Management) 59,735 0.05% 59,735 0.05%
California State Teachers' Retirement System 44,667 0.04% 44,667 0.04%
Wilshire Asset Management 42,650 0.04% 42,650 0.04%
Private Asset Management 41,885 0.03% 41,885 0.03%
Spectrum Advisory Services 32,481 0.03% 32,481 0.03%
Prudential Investment Corporation 24,706 0.02% 24,706 0.02%
World Asset Management 22,900 0.02% 22,900 0.02%
Northern Trust Quantitative Advisors, Inc. 14,656 0.01% 14,656 0.01%
------------- --------- ------------- ---------
Total Corporate Investors 111,247,178 92.68% 111,247,178 92.31%
Executive Officers and Directors 229,697 0.19% 714,504 0.59%
Public 8,554,125 7.13% 8,554,125 7.10%
------------- --------- ------------- ---------
Total 120,031,000 100.00% 120,515,807 100.00%
============= ========= ============= =========
</TABLE>
(1) Source: Global Equity Ownership.
(2) Options outstanding have an exercise price range of $2.19 to $15.39;
Archstone convertible mortgage bond has a conversion price of $10.44.
28
<PAGE>
Exhibit (c)(4)
Preliminary Valuation Analysis
Valuation Summary
- --------------------------------------------------------------------------------
[GRAPH SHOWING ESTIMATED VALUATIONS]
<TABLE>
<S> <C> <C> <C> <C>
$4.38 $4.00 $3.40 $4.20 $4.10 Preliminary
$1.94 $2.12 $3.00 $2.60 $3.57 Valuation Range
$3.00 to $3.50
-------------------------------------
Current Share Price (3/20/2000)=$2.63
-------------------------------------
52 Week Comparable Premiums Paid Discounted Net Asset Valuation
High/Low Publicly Traded Analysis Cash Flow Analysis
Companies Analysis
Analysis 15.0% to 30.0%
Premium Paid over 6.0x to 8.0x Exit Multiple 2000E adjusted NOI
6.0x to 8.0x Current Price 2005E EBITDA of $115.9 million
2000E EBITDA of $130.6 million 13.0% to 14.0%
of $113.3 million 13.5% to 15.5% Discount Rates Cap Rates
No Synergies
</TABLE>
- ----------------------------------
(1) Valuation as of 6/30/00. Net Debt equals working capital revolver
($76.0MM)+Archstone mortgages ($221.3MM)+HPT sale/leaseback ($138.9MM)-cash
($5.0 million). Diluted shares include 2.946 million options outstanding at
an average exercise price of $2.19.
(2) Based on 120.516 million fully diluted shares outstanding calculated using
treasury stock method.
(3) Includes book value of $7.4 million of land inventory, as of 6/30/00.
(4) Excluding closing prices from 4/27/99 to 5/3/99 due to news about potential
sale of the company, the 52-week high is $3.06 as of 3/22/99.
<PAGE>
Preliminary Valuation Analysis
NAV Analysis
- --------------------------------------------------------------------------------
(Dollars in millions, except per share data)
2000E(1)
--------------
Revenues $242.1
Operating Expenses 104.3
-----
Property NOI $137.7
Margin 56.9%
Adjustments (2):
Management Fee (5% of revenues) $12.1
FF&E (4% of revenues) 9.7
---
Total Adjustments 21.8
Adjusted NOI $115.9
2000E
-----------------------------
Economic Capitalization Rate (2) 13.0% 14.0%
Estimated Value of Real Estate Operations $891.9 $828.2
Book Value of Land Inventory $7.4 $7.4
---- ----
Total $899.3 $835.6
Projected 2000E Debt:
- ---------------------
Revolving Credit Line (3) $46.6 $46.6
Convertible Mortgages 221.3 221.3
Lease Obligation 137.0 137.0
----- -----
Total Debt $404.9 $404.9
Projected 2000 NAV Range
-----------------------------
Net Asset Value $494.4 $430.6
Diluted Shares Outstanding (MM) 120.516 120.516
- --------------------------------------------------------------------------
NAV/Share $4.10 $3.57
- --------------------------------------------------------------------------
(1) Based on management's projections.
(2) Chase estimate based on current market conditions and recent transactions.
(3) Subtract dividend of $16.2 million to normalize estimated debt as of
12/31/00.
2
<PAGE>
Preliminary Valuation Analysis
Potential Synergies
- --------------------------------------------------------------------------------
(Dollars in millions, except per share data)
Potential Public Company Cost Savings (p.a.) $0.7 $0.7 $0.7
Discount Rate Range 10% 12% 14%
Present Value of Potential Cost Savings $7.0 $5.8 $5.0
Total Costs for Additional $0.10 Per Share of
Minority Interest $1.6 $1.6 $1.6
Net Present Value $5.4 $4.3 $3.4
Break - Even Amount Per Share $0.45 $0.37 $0.32
3
<PAGE>
EXHIBIT (d)(1)
EXECUTION COPY
--------------
============================================================
AGREEMENT AND PLAN OF MERGER
by and among
SECURITY CAPITAL GROUP INCORPORATED
HSD ACQUISITION CORPORATION
and
HOMESTEAD VILLAGE INCORPORATED
dated as of
May 2, 2000
============================================================
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
ARTICLE I
THE OFFER
<S> <C>
Section 1.1 The Offer............................................................. 2
Section 1.2 Company Actions....................................................... 3
Section 1.3 Actions by Parent and Purchaser....................................... 4
ARTICLE II
THE MERGER
Section 2.1 The Merger............................................................ 5
Section 2.2 Effective Time........................................................ 5
Section 2.3 Effects of the Merger................................................. 5
Section 2.4 Charter and Bylaws of the Surviving Corporation....................... 6
Section 2.5 Directors............................................................. 6
Section 2.6 Officers.............................................................. 6
Section 2.7 Conversion of Shares.................................................. 6
Section 2.8 Conversion of Purchaser Common Stock.................................. 6
Section 2.9 Options; Stock Plans.................................................. 7
Section 2.10 Stockholders' Meeting................................................. 7
Section 2.11 Merger without Meeting of Stockholders................................ 8
ARTICLE III
DISSENTING SHARES; PAYMENT FOR SHARES
Section 3.1 Dissenting Shares.................................................... 8
Section 3.2 Payment for Shares................................................... 9
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 4.1 Organization and Qualification; Subsidiaries......................... 11
Section 4.2 Capitalization of the Company and its Subsidiaries................... 12
Section 4.3 Authority Relative to This Agreement; Consents and Approvals......... 12
Section 4.4 Proxy Statement; Offer Documents..................................... 13
Section 4.5 Consents and Approvals; No Violations................................ 13
Section 4.6 No Default........................................................... 14
Section 4.7 No Undisclosed Liabilities........................................... 14
Section 4.8 Litigation........................................................... 14
Section 4.9 Brokers.............................................................. 14
Section 4.10 Opinion of Financial Advisor......................................... 14
Section 4.11 Material Contracts................................................... 15
Section 4.12 Information Known to Parent.......................................... 15
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Page
----
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF PARENT AND PURCHASER
<S> <C>
Section 5.1 Organization and Qualification; Subsidiaries......................... 15
Section 5.2 Authority Relative to This Agreement................................. 16
Section 5.3 Consents and Approvals; No Violations................................ 16
Section 5.4 Proxy Statement; Schedule 14D-9...................................... 16
Section 5.5 Financing............................................................ 17
Section 5.6 Ownership of Company Stock........................................... 17
Section 5.7 Conduct of Business of Purchaser..................................... 17
ARTICLE VI
COVENANTS
Section 6.1 Conduct of Business of the Company................................... 17
Section 6.2 Acquisition Proposals................................................ 17
Section 6.3 Other Actions........................................................ 18
Section 6.4 Access to Information................................................ 18
Section 6.5 Additional Agreements; Reasonable Efforts............................ 18
Section 6.6 Consents............................................................. 19
Section 6.7 Public Announcements................................................. 19
Section 6.8 Indemnification...................................................... 19
Section 6.9 Employee Benefit Arrangements........................................ 20
Section 6.10 Notification of Certain Matters...................................... 21
Section 6.11 Stockholder Litigation............................................... 21
Section 6.12 State Takeover Laws.................................................. 21
ARTICLE VII
CONDITIONS TO CONSUMMATION OF THE MERGER
Section 7.1 Conditions to Each Party's Obligation to Effect the Merger.......... 21
Section 7.2 Frustration of Closing Conditions................................... 22
ARTICLE VIII
TERMINATION; AMENDMENTS; WAIVER
Section 8.1 Termination......................................................... 22
Section 8.2 Effect of Termination............................................... 24
Section 8.3 Amendment........................................................... 24
Section 8.4 Waiver.............................................................. 24
ARTICLE IX
MISCELLANEOUS
Section 9.1 Nonsurvival of Representations and Warranties...................... 24
Section 9.2 Entire Agreement; Assignment....................................... 24
</TABLE>
-ii-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 9.3 Validity........................................................... 25
Section 9.4 Notices............................................................ 25
Section 9.5 Governing Law...................................................... 26
Section 9.6 Descriptive Headings............................................... 26
Section 9.7 Parties in Interest................................................ 26
Section 9.8 Counterparts....................................................... 26
Section 9.9 Fees and Expenses.................................................. 26
Section 9.10 Specific Performance............................................... 26
Section 9.11 Interpretation; Absence of Presumption............................. 27
</TABLE>
ANNEX I Conditions to the Offer
-iii-
<PAGE>
AGREEMENT AND PLAN OF MERGER
----------------------------
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of May 2,
---------
2000, by and among Security Capital Group Incorporated ("Parent"), a Maryland
------
corporation, HSD Acquisition Corporation, a Maryland corporation and an indirect
wholly owned subsidiary of Parent ("Purchaser"), and Homestead Village
---------
Incorporated, a Maryland corporation (the "Company").
-------
WHEREAS, Parent beneficially owns 104,471,674 shares of the common
stock, par value $0.01 per share, of the Company (each individually a "Common
------
Share" and together with the associated preferred share purchase right (the
- -----
"Right") issued pursuant to the Rights Agreement dated as of May 16, 1996
- ------
between the Company and The First National Bank of Boston as Rights Agent (the
"Rights Agreement"), a "Share");
- ----------------- -----
WHEREAS, it is proposed that Purchaser acquire all of the issued and
outstanding Shares not beneficially owned by Parent or Purchaser (references to
Parent shall, where the context so requires, be deemed to refer to Purchaser as
well);
WHEREAS, it is proposed that Purchaser will make a cash tender offer
(the "Offer") in compliance with Section 14(d)(1) of the Securities Exchange Act
-----
of 1934, as amended (the "Exchange Act"), and the rules and regulations
------------
promulgated thereunder to acquire all the issued and outstanding Shares for
$4.10 per Share (such amount, or any greater amount per Share paid pursuant to
the Offer, being hereinafter referred to as the "Offer Price"), net to the
-----------
seller in cash, upon the terms and subject to the conditions of this Agreement
and Annex I hereto; and that the Offer will be followed by the merger (the
"Merger") of Purchaser with and into the Company, with the Company being the
- -------
surviving corporation, in accordance with the Maryland General Corporation Law
("MGCL"), pursuant to which each issued and outstanding Common Share not
----
beneficially owned by Parent will be converted into the right to receive the
Offer Price upon the terms and subject to the conditions provided herein and in
Annex I hereto;
WHEREAS, a special committee (the "Special Committee") of the Board
-----------------
of Directors of the Company (the "Company Board") has received the written
-------------
opinion (the "Fairness Opinion") of Stern Stewart & Co. (the "Financial
---------
Advisor") to the effect that, based on, and subject to, the various assumptions
- -------
and qualifications set forth in such opinion, as of the date of such opinion,
the Offer Price to be received by the holders of the Shares (other than Parent
or any of its affiliates, including the Company and its wholly owned
Subsidiaries (as defined in Section 4.1)) pursuant to the Offer and the Merger
is fair to such holders from a financial point of view;
WHEREAS, the Special Committee has determined that this Agreement, the
Offer, the Merger and the other transactions contemplated hereby are fair to,
advisable and in the best interests of the Company and its stockholders, and has
voted to recommend to the Company Board that the Company Board approve this
Agreement, and the Offer and the other transactions contemplated hereby; and
WHEREAS, the Company Board has determined that this Agreement, the
Offer, the Merger and the other transactions contemplated hereby are fair to,
advisable and in the best
<PAGE>
interests of the Company and its stockholders and has voted to approve this
Agreement, and recommend acceptance and approval by the Company's stockholders
of, the Offer, the Merger, and the other transactions contemplated hereby; and
NOW, THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements contained herein, and for
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, and intending to be legally bound hereby, Parent, Purchaser
and the Company agree as follows:
ARTICLE I
THE OFFER
Section 1.1. The Offer.
---------
(a) Provided that this Agreement shall not have been terminated in
accordance with Article VIII and none of the conditions set forth in Annex I
hereto (the "Tender Offer Conditions") shall exist after the date hereof and
-----------------------
prior to the commencement of the Offer, as promptly as practicable, but not
later than 10 business days following the date hereof, Purchaser shall, and
Parent shall cause Purchaser to, commence (within the meaning of Rule 14d-2
under the Exchange Act) an offer to purchase all outstanding Shares at the Offer
Price and shall take the actions set forth in Section 1.3 below and shall take
all other actions as required by any order, writ, injunction, judgment,
arbitration award, agency requirement, decree, law, statute, ordinance, rule or
regulation (each a "Law"). The obligation of Purchaser to accept for payment or
---
pay for any Shares tendered pursuant thereto will be subject only to the
satisfaction or waiver of the Tender Offer Conditions.
(b) Without the prior written consent of the Special Committee,
Purchaser shall not (i) impose conditions to the Offer in addition to the Tender
Offer Conditions, (ii) modify or amend the Tender Offer Conditions or any other
term of the Offer in a manner adverse to the holders of Shares, (iii) reduce the
number of Shares subject to the Offer, (iv) reduce the Offer Price, (v) except
as provided in the following sentence, extend the Offer if all of the Tender
Offer Conditions are satisfied or waived, or (vi) change the form of
consideration payable in the Offer. Notwithstanding the foregoing, Purchaser
may, in accordance with applicable Law, and without the consent of the Special
Committee, extend the Offer at any time, and from time to time, (i) if at the
then-scheduled expiration date of the Offer, any of the Tender Offer Conditions
shall not have been satisfied or waived; or (ii) for any period required by any
rule, regulation, interpretation or position of the United States Securities and
Exchange Commission (the "SEC") or its staff applicable to the Offer; for an
aggregate period of not more than 20 business days (for all such extensions)
beyond the latest expiration date that would be permitted under clause (i) or
(ii) of this sentence (such aggregate period, the "Subsequent Offering Period").
--------------------------
So long as this Agreement is in effect, the Offer has been commenced, the Tender
Offer Conditions have not been satisfied or waived Purchaser shall, and Parent
shall cause Purchaser to, cause the Offer not to expire, subject, however, to
Purchaser's and Parent's rights of termination under this Agreement. Parent and
Purchaser shall comply with the obligations respecting prompt payment and
announcement under the Exchange Act.
-2-
<PAGE>
(c) Parent and Purchaser represent that the Offer Documents (as
defined in Section 1.3(a)) will comply in all material respects with the
provisions of applicable federal securities Laws and, on the date filed with the
SEC and on the date first published, sent or given to the Company's
stockholders, shall not 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 were made, not misleading, except that no representation is made by Parent
or Purchaser with respect to information supplied by the Company in writing
specifically for inclusion in the Offer Documents. Each of Parent and Purchaser,
on the one hand, and the Company, on the other hand, agrees to correct promptly
any information provided by it for use in the Offer Documents if and to the
extent that it shall have become false or misleading in any material respect and
Purchaser further agrees to take all steps necessary to cause the Offer
Documents as so corrected to be filed with the SEC and to be disseminated to
stockholders of the Company, in each case, as and to the extent required by
applicable federal securities Laws.
(d) Parent shall provide or cause to be provided to Purchaser on a
timely basis funds sufficient to accept for payment, and pay for, any and all
Shares that Purchaser becomes obligated to accept for payment, and pay for,
pursuant to the Offer.
Section 1.2. Company Actions.
---------------
(a) The Company shall file with the SEC and mail to the holders of
Shares, on the date of the filing by Parent and Purchaser of the Offer
Documents, a Solicitation/Recommendation Statement on Schedule 14D-9 (together
with any amendments or supplements thereto, the "Schedule 14D-9"), and shall
--------------
disseminate the Schedule 14D-9 as required by Rule 14d-9 promulgated under the
Exchange Act. The Schedule 14D-9 will set forth, and the Company hereby
represents that the Company Board and the Special Committee, at meetings duly
called and held, have (i) determined by unanimous vote of the Directors voting,
that the Offer and the Merger are fair to, advisable and in the best interests
of the Company and its stockholders, (ii) approved the Offer, the Merger and
this Agreement and the transactions contemplated hereby in accordance with the
MGCL, (iii) resolved to recommend acceptance of the Offer and approval of the
Merger by the Company's stockholders, and (iv) taken all action, if any,
necessary to render Sections 3-601 through 3-604 and 3-701 through 3-709 of the
MGCL inapplicable to the Offer and the Merger; provided, however, that such
recommendations and approvals may be withdrawn, modified or amended to the
extent that the Company Board or the Special Committee determines in good faith
and on a reasonable basis, after consultation with outside counsel, that failure
to take such action would be inconsistent with the Company Board's fiduciary
duties or the Special Committee's fiduciary duties, respectively, under
applicable Law. The Company further represents that, prior to the execution
hereof, the Financial Advisor has delivered to the Special Committee the
Fairness Opinion. The Company further represents and warrants that it has been
authorized by the Financial Advisor to reproduce the Fairness Opinion in full,
and may also include references to the Opinion and to the Financial Advisor and
its relationship with the Special Committee and the Company (in each case in
form and substance as the Financial Advisor shall reasonably approve), in any
statement on Schedule 14D-9 or proxy statement relating to the transactions
contemplated hereby that the Company is required to file or distribute to its
stockholders under the Exchange Act or other applicable Law. The Company further
represents that it will file such other documentation and take such other
actions as re-
-3-
<PAGE>
quired by Law to effect the purposes of this Agreement so long as such actions
and filings are not inconsistent with the fiduciary duties of the Company Board
or the Special Committee. The Company hereby consents to the inclusion in the
Offer Documents of the recommendations of the Company Board and the Special
Committee described in this Section 1.2(a).
(b) The Schedule 14D-9 will comply in all material respects with the
provisions of applicable federal securities Laws, and, on the date filed with
the SEC and on the date first published, sent or given to the Company's
stockholders, shall not 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 were made, not misleading, except that no representation is made by the
Company with respect to information supplied by Parent or Purchaser in writing
specifically for inclusion in the Schedule 14D-9. Each of the Company, on the
one hand, and Parent and Purchaser, on the other hand, shall promptly correct
any information provided by it for use in the Schedule 14D-9 if and to the
extent that it shall have become false or misleading, and the Company shall take
all steps necessary to cause the Schedule 14D-9 as so corrected to be filed with
the SEC and to be disseminated to the holders of Shares, in each case, as and to
the extent required by applicable federal securities Law.
(c) In connection with the Offer, the Company will promptly, or shall
cause its transfer agent to promptly, furnish Purchaser with mailing labels,
security position listings, any non-objecting beneficial owner lists and any
available listing containing the names and addresses of the record holders of
Shares as of the most recent practicable date and shall furnish Purchaser with
such additional information (including, but not limited to, updated lists of
holders of Shares and their addresses, mailing labels and lists of security
positions and non-objecting beneficial owner lists) and such other assistance as
Purchaser or its agents may reasonably request in communicating the Offer to the
Company's record and beneficial stockholders. Subject to the requirements of
applicable Law, and except for such steps as are appropriate to disseminate the
Offer Documents and any other documents necessary to consummate the Merger,
Parent, Purchaser and their affiliates, associates, agents and advisors shall
hold in confidence and use only in connection with the Offer and the Merger the
information contained in any such labels, listings and files, and, if this
Agreement shall be terminated, will promptly deliver to the Company all copies
of such information then in their possession.
Section 1.3. Actions by Parent and Purchaser. Provided that this
-------------------------------
Agreement shall not have been terminated in accordance with Article VIII and
none of the Tender Offer Conditions exists after the date hereof and prior to
the commencement of the Offer, as promptly as practicable, but no later than 10
business days following the date hereof, Parent and Purchaser shall file with
the SEC a Tender Offer Statement and a Rule 13e-3 Transaction Statement on
Schedule TO, including all exhibits thereto (together with all amendments and
supplements thereto, the "Schedule TO"), with respect to the Offer, the Merger
-----------
and the other transactions contemplated hereby. The Schedule TO shall contain
or incorporate by reference an offer to purchase (the "Offer to Purchase") and
-----------------
forms of the related letter of transmittal and any related documents (the
Schedule TO, the Offer to Purchase, the summary advertisement, and such other
documents, together with all supplements or amendments thereto, collectively,
the "Offer Documents"). The Offer Documents shall comply in all material
---------------
respects with the requirements of the applicable federal securities Laws. On
the date filed with the SEC and on the date first published, sent or given to
the Company's stockholders, the Offer Documents shall not contain any
-4-
<PAGE>
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 therein, in
light of the circumstances under which they were made, not misleading, except
that no representation is made by Parent or Purchaser with respect to
information supplied by the Company in writing specifically for inclusion in the
Offer Documents. Parent and Purchaser agree that the Company and its counsel
shall be given an opportunity to review and comment on the Schedule TO before it
is filed with the SEC. Parent and Purchaser shall provide the Company and the
Special Committee and their respective counsel copies of any written comments
and telephone notification of any oral comments Parent, Purchaser or their
counsel may receive from the SEC or its staff with respect to the Offer
Documents promptly after receipt of such comments. Parent and Purchaser shall
use their respective reasonable best efforts to respond to such comments
promptly, shall provide the Company, the Special Committee and their counsel
with a reasonable opportunity to participate in all communications with the SEC
and its staff, including meetings and telephone conferences, relating to the
Offer Documents, this Agreement or the transactions contemplated hereby, and
shall provide the Company and the Special Committee copies of any written
responses and telephonic notification of any verbal responses by Parent,
Purchaser or their counsel.
ARTICLE II
THE MERGER
Section 2.1. The Merger. Upon the terms and subject to the
----------
satisfaction or waiver of the conditions hereof, and in accordance with the
applicable provisions of this Agreement and the MGCL, at the Effective Time (as
defined below) Purchaser shall be merged with and into the Company. Following
the Merger, the separate corporate existence of Purchaser shall cease, and the
Company shall continue as the surviving corporation (the "Surviving
Corporation"). Parent may, upon notice to the Company, modify the structure of
the Merger if Parent determines it advisable to do so because of tax or other
considerations, and the Company shall promptly enter into any amendment to this
Agreement necessary or desirable to accomplish such structural modification;
provided that no such amendment shall reduce the Offer Price, change the form of
consideration payable in the Offer, or otherwise adversely affect the Company or
its stockholders or delay or hinder the transactions contemplated hereby.
Section 2.2. Effective Time. As soon as practicable after the
--------------
satisfaction or waiver of the conditions set forth in Article VII, the Company
and Purchaser shall cause articles of merger ("Articles of Merger") to be
executed, verified and filed with, and delivered to in the manner required by
the MGCL, the State Department of Assessment and Taxation of Maryland, and the
parties shall take such other and further actions as may be required by Law to
make the Merger effective. The time at which the Merger becomes effective in
accordance with applicable Law is referred to as the "Effective Time." Prior to
--------------
the filing referred to in this Section 2.2, the closing will be held at the
offices of Wachtell, Lipton, Rosen & Katz, 51 West 52nd Street, New York, New
York 10019 (or such other place as the parties may agree) for the purpose of
confirming all of the foregoing.
Section 2.3. Effects of the Merger. From and after the Effective
---------------------
Time, the Merger shall have the effects set forth in the MGCL. Without limiting
the generality of the foregoing, and subject thereto, at the Effective Time, all
the properties, rights, privileges, powers and
-5-
<PAGE>
franchises of the Company and Purchaser shall vest in the Surviving Corporation,
and all debts, liabilities and duties of the Company and Purchaser shall become
the debts, liabilities and duties of the Surviving Corporation.
Section 2.4. Charter and Bylaws of the Surviving Corporation.
-----------------------------------------------
(a) Subject to the provisions of Section 6.8, the charter of Company
as in effect immediately prior to the Effective Time shall continue to be the
charter of the Surviving Corporation until thereafter amended in accordance with
the provisions thereof and applicable Law.
(b) Subject to the provisions of Section 6.8, the bylaws of Company
in effect at the Effective Time shall continue to be the bylaws of the Surviving
Corporation until amended in accordance with the provisions thereof, the charter
and applicable Law.
Section 2.5. Directors. The directors of the Company immediately
---------
prior to the Effective Time shall be the initial directors of the Surviving
Corporation and shall hold office until their respective successors are duly
elected or appointed and qualified, or their earlier death, resignation or
removal in accordance with the charter and the bylaws of the Surviving
Corporation.
Section 2.6. Officers. The officers of the Company immediately prior
--------
to the Effective Time shall be the initial officers of the Surviving Corporation
and shall hold office until their respective successors are duly elected or
appointed and qualified, or their earlier death, resignation or removal in
accordance with the charter and the bylaws of the Surviving Corporation.
Section 2.7. Conversion of Shares. At the Effective Time, by virtue
--------------------
of the Merger and without any action on the part of the holders thereof, each
Share issued and outstanding immediately prior to the Effective Time, (other
than (i) any Shares held by Parent, Purchaser, any direct or indirect wholly
owned Subsidiary of Parent or Purchaser (the "Parent Shares"), or by the Company
-------------
or any wholly owned Subsidiary of the Company, which Shares shall remain
outstanding, and (ii) Dissenting Shares (as defined herein)), shall by virtue of
the Merger be cancelled and retired and shall be converted into the right to
receive pursuant to Section 3.2 the Offer Price, payable to the holder thereof,
without interest thereon, upon surrender of the certificate formerly
representing such Share or any replacement certificates representing such Shares
as may be obtained from the transfer agent of the Company.
Section 2.8. Conversion of Purchaser Common Stock. Purchaser has
------------------------------------
outstanding 100 shares of common stock, par value $0.01 per share, all of which
shares are entitled to vote with respect to approval and adoption of this
Agreement. At the Effective Time, each share of common stock, par value $0.01
per share, of Purchaser issued and outstanding immediately prior to the
Effective Time shall, by virtue of the Merger and without any action on the part
of the holder thereof, be converted into and become 100 validly issued, fully
paid and non-assessable shares of common stock, par value $0.01 per share, of
the Surviving Corporation.
-6-
<PAGE>
Section 2.9. Options; Stock Plans.
--------------------
(a) Prior to the consummation of the Offer, the Company Board (or, if
appropriate, any committee thereof) shall adopt appropriate resolutions and take
all other actions necessary to provide for the adjustment, effective at the
Effective Time, of all the outstanding stock options, (the "Stock Options"),
-------------
heretofore granted under any stock option plan or agreement of the Company (such
stock option plans or agreements being collectively referred to herein as the
"Stock Plans"). Such adjustment shall occur in accordance with the terms of the
-----------
Stock Plans and without any payment therefor.
(b) The Company shall take all actions necessary to provide that,
effective as of the Effective Time, (i) each of the Stock Plans shall be
adjusted, and (ii) no holder of Stock Options will have any right to receive any
shares of stock of the Company or, if applicable, the Surviving Corporation,
upon exercise of any Stock Option but instead shall be entitled to receive cash
in accordance with the amended Stock Plans.
Section 2.10. Stockholders' Meeting.
---------------------
(a) If required by applicable Law in order to consummate the Merger,
the Company, acting through the Company Board, shall, in accordance with
applicable Law, and provided that this Agreement shall not have been terminated:
(i) duly call, give notice of, convene and hold a special meeting of
its stockholders (the "Special Meeting") to be held as soon as practicable
---------------
following the acceptance for purchase of and payment for Shares by Purchaser
pursuant to the Offer for the purpose of considering and taking action upon this
Agreement;
(ii) together with Parent, prepare and file with the SEC a preliminary
proxy statement relating to this Agreement, and use reasonable best efforts (A)
to obtain and furnish the information required to be included by the SEC in the
Proxy Statement (as defined herein) and, after consultation with each other, to
respond as soon as practicable to any comments made by the SEC with respect to
the preliminary proxy statement and cause a definitive proxy statement (the
"Proxy Statement"), which the parties agree shall comply as to form in all
---------------
material respects with all applicable Law, to be mailed to its stockholders at
the earliest practicable date following expiration or termination of the Offer,
and (B) subject to the fiduciary duties of the Company Board and the Special
Committee under applicable Law, to obtain the necessary approvals of the Merger
and this Agreement by Company stockholders representing a majority of the
outstanding Common Shares entitled to vote at the Special Meeting (other than
Parent Shares); and
(iii) subject to the fiduciary duties of the Company Board and the
Special Committee under applicable Law, include in the Proxy Statement (x) the
recommendations of the Company Board and the Special Committee that stockholders
of the Company vote in favor of the approval of the Merger and of this Agreement
(except as set forth in the proviso to Section 1.2(a)) and (y) the Fairness
Opinion.
(b) Parent will vote, or cause to be voted, all Common Shares then
owned by it, Purchaser or any of Parent's other Subsidiaries in favor of the
approval of this Agreement.
-7-
<PAGE>
(c) Whenever any event occurs which is required to be set forth in an
amendment or supplement to the Proxy Statement, Parent or the Company, as the
case may be, shall promptly inform the other of each such occurrence and
cooperate in the filing with the SEC and/or mailing to the Company stockholders
of such amendment or supplement. Each of the parties agrees that the information
provided by it for inclusion in the Proxy Statement and each amendment or
supplement thereto, at the time of mailing thereof and at the time of the
Special Meeting, will not include an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. If, at any time prior to the Effective Time, any information
pertaining to one of the parties or, to such party's knowledge, any of its
affiliates or its officers or directors, contained in or omitted from the Proxy
Statement makes statements contained therein materially false or misleading,
such party shall promptly so advise the other parties and provide such other
parties with the information necessary to make the statements contained therein
not false or misleading. In the event of such advice being given pursuant to the
preceding sentence, the Company and Parent shall cooperate to promptly file with
the SEC (after reasonable opportunity to Parent and the Company to review and
comment thereon) any required amendments or supplements to the Proxy Statement
and, to the extent required by law, disseminate such amendments or supplements
to the Company stockholders.
Section 2.11. Merger without Meeting of Stockholders. Notwithstanding
--------------------------------------
Section 2.10, in the event that Purchaser shall acquire pursuant to the Offer
such number of Common Shares which, when aggregated with the number of Common
Shares currently beneficially owned by Parent, represents at least 90% of the
total number of outstanding Common Shares on and after giving effect to the date
of purchase, the parties hereto agree to 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 by Purchaser pursuant to the
Offer without a meeting of stockholders of the Company, in accordance with
Section 3-106 of the MGCL, including providing notice, as promptly as
practicable, of the Merger to each stockholder of record of the Company in
accordance with Section 3-106(d).
ARTICLE III
DISSENTING SHARES; PAYMENT FOR SHARES
Section 3.1. Dissenting Shares. Notwithstanding Section 2.7 or 3.2,
-----------------
Shares 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 timely demanded and perfected the right, if any, for appraisal for such
Shares in accordance with Sections 3-201 to 3-213 of the MGCL ("Dissenting
----------
Shares") shall not be converted into the right to receive the Offer Price,
- ------
unless such holder fails to perfect or withdraws or otherwise loses such
holder's right to appraisal. If, after the Effective Time, such holder fails to
perfect or withdraws or loses such holder's right to appraisal, such Shares
shall be treated as if they had been converted as of the Effective Time into the
right to receive the Offer Price. The Company shall give Parent prompt notice of
any demands received by the Company for appraisal of Shares, and Parent shall
have the right to participate in all negotiations and proceedings with respect
to such demands. The Company
-8-
<PAGE>
shall not, except with the prior written consent of Parent, make any payment
with respect to, or settle or offer to settle, or otherwise negotiate, any such
demands.
Section 3.2. Payment for Shares.
------------------
(a) Prior to the Effective Time, Purchaser shall designate a bank or
trust company reasonably acceptable to the Company to act as paying agent (the
"Paying Agent") in effecting the payment of the Offer Price in respect of
------------
certificates that, immediately prior to the Effective Time, represent Shares
(the "Certificates") entitled to payment of the Offer Price pursuant to Section
------------
2.7. At the Effective Time, Parent or Purchaser shall deposit, or cause to be
deposited, in trust with the Paying Agent the aggregate Offer Price to which
holders of Shares shall be entitled at the Effective Time pursuant to Section
2.7.
(b) Promptly after the Effective Time, Purchaser shall cause the
Paying Agent to mail to each record holder of Certificates a form of letter of
transmittal which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon proper delivery of the
Certificates to the Paying Agent and instructions for use in surrendering such
Certificates and receiving the Offer Price in respect thereof. Upon the
surrender of each such Certificate, together with a duly executed letter of
transmittal and any other required documents, the holder of such Certificate
shall be entitled to receive, as promptly as practicable, an amount equal to the
product of (x) the Offer Price multiplied by (y) the number of Common Shares
formerly represented by such Certificate, in consideration therefor, and such
Certificate shall forthwith be cancelled. Until so surrendered, each such
Certificate (other than Certificates representing Common Shares held by Parent
or Purchaser, any wholly owned Subsidiary of Parent or Purchaser, or by the
Company or any wholly owned Subsidiary of the Company or Dissenting Shares)
shall represent solely the right to receive the aggregate Offer Price relating
thereto. No interest or dividends shall be paid or accrued on the Offer Price.
If the Offer Price (or any portion thereof) is to be delivered to any
individual, corporation, trust, association, unincorporated association, estate,
partnership, joint venture, limited liability company, Governmental Entity (as
defined in Section 4.5) or other legal entity (each, a "Person"), other than the
------
Person in whose name the Certificate surrendered is registered, it shall be a
condition to such right to receive such Offer Price that the Certificate so
surrendered shall be properly endorsed or otherwise be in proper form for
transfer, that the signatures on the Certificate shall be properly guaranteed,
and that the Person surrendering such Shares shall pay to the Paying Agent any
transfer or other taxes required by reason of the payment of the Offer Price to
a Person other than the registered holder of the Certificate surrendered, or
shall establish to the satisfaction of the Paying Agent that such taxes have
been paid or are not applicable. In the event any Certificate shall have been
lost, stolen or destroyed, the Paying Agent shall be required to pay the full
Offer Price in respect of any Shares represented by such Certificate; however,
Parent may require the owner of such lost, stolen or destroyed Certificate to
execute and deliver to the Paying Agent a form of affidavit claiming such
Certificate to be lost, stolen or destroyed in form and substance reasonably
satisfactory to Parent, and the posting by such owner of a bond in such amount
as Parent may determine is reasonably necessary as indemnity against any claim
that may be made against Parent or the Paying Agent.
(c) Promptly following the date which is 180 days after the Effective
Time, the Paying Agent shall deliver to the Surviving Corporation all cash,
Certificates and other
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<PAGE>
documents in its possession relating to the transactions contemplated hereby,
and the Paying Agent's duties shall terminate. Thereafter, each holder of a
Certificate may surrender such Certificate to the Surviving Corporation and
(subject to applicable abandoned property, escheat and similar Laws) receive in
consideration therefor the aggregate Offer Price relating thereto, without any
interest or dividends thereon, except as required under applicable Law.
Notwithstanding the foregoing, none of Parent, Purchaser, the Company or the
Paying Agent shall be liable to any Person in respect of any cash delivered to a
public official pursuant to any applicable abandoned property, escheat or
similar Law. If any Certificates shall not have been surrendered immediately
prior to such date on which any payment pursuant to this Article III would
otherwise escheat to or become the property of any Governmental Entity (as
defined herein), and all of the rights of the holder of such Certificates have
elapsed, the cash payment in respect of such Certificate shall, to the extent
permitted by applicable Law, become the property of the Surviving Corporation,
free and clear of all claims or interests of any Person previously entitled
thereto.
(d) Immediately prior to the Effective Time, the stock transfer books
of the Company shall be closed, and, after the Effective Time, there shall be no
transfers on the stock transfer books of the Surviving Corporation of any Shares
which were outstanding immediately prior to the Effective Time. If, after the
Effective Time, Certificates are presented to the Surviving Corporation or the
Paying Agent, they shall be surrendered and cancelled in return for the payment
of the aggregate Offer Price relating thereto, as provided in this Article III.
(e) From and after the Effective Time, the holders of Certificates
representing Common Shares outstanding immediately prior to the Effective Time
shall cease to have any rights with respect to such Shares except as otherwise
provided herein or by applicable Law. Such holders shall have no rights, after
the Effective Time, with respect to such Shares except to surrender such
Certificates in exchange for the Offer Price pursuant to this Agreement or to
perfect any rights of appraisal as a holder of Dissenting Shares that such
holders may have pursuant to Sections 3-201 to 3-213 of the MGCL.
(f) Each of Parent, Purchaser, Paying Agent and the Surviving
Corporation shall be entitled to deduct and withhold from the consideration
otherwise payable pursuant to this Agreement to any holder of Shares such
amounts as it is required to deduct and withhold with respect to the making of
such payment under the Internal Revenue Code of 1986, as amended (the "Code")
and the rules and regulations promulgated thereunder, or any provision of state,
local or foreign tax law. To the extent that amounts are so withheld by Parent,
Surviving Corporation, Purchaser or Paying Agent, as the case may be, such
withheld amounts shall be treated for all purposes of this Agreement as having
been paid to the holder of the Shares in respect of which such deduction and
withholding was made by Parent, Surviving Corporation, Purchaser or Paying
Agent, as the case may be.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
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<PAGE>
Except as set forth in the schedule delivered to Parent prior to the
execution of this Agreement (the "Company Disclosure Schedule"), the Company
---------------------------
hereby represents and warrants to Purchaser and Parent as follows:
Section 4.1. Organization and Qualification; Subsidiaries.
--------------------------------------------
(a) Each of the Company and its Subsidiaries (as defined below) is a
corporation or other legal entity duly organized, validly existing and in good
standing under the Laws of the jurisdiction of its incorporation and has all
requisite corporate or other power and authority to own, lease and operate its
properties and assets and to carry on its businesses as now being conducted and
is qualified to do business and is in good standing as a foreign corporation in
each jurisdiction where the ownership, leasing or operation of its properties or
assets or conduct of its business requires such qualification, except where the
failure to be so qualified or in good standing or to have such power or
authority, would not, individually or in the aggregate, reasonably be expected
to have a Company Material Adverse Effect (as defined below). The Company has
heretofore delivered or made available to Purchaser accurate and complete copies
of the charter and bylaws and other organizational documents, as currently in
effect, of the Company and each of its Subsidiaries. As used in this Agreement,
"Subsidiary" shall mean, with respect to any party, any corporation or other
----------
organization, whether incorporated or unincorporated or domestic or foreign to
the United States, of which (i) such party or any other Subsidiary of such party
is a general partner or (ii) at least a majority of the securities or other
interests 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 party or by any one or more of its Subsidiaries, or by such
party and one or more of its Subsidiaries. The term "Company Material Adverse
------------------------
Effect" means any event, change in or effect on the business of the Company or
- ------
its Subsidiaries, taken as a whole, that is or would reasonably be expected to
be materially adverse to (i) the business, results of operations, properties
(including intangible properties), financial condition, assets or liabilities,
of the Company and its Subsidiaries, taken as a whole, or (ii) the ability of
the Company to consummate the transactions contemplated hereby or to perform its
obligations under this Agreement; provided, however, that none of the following
shall be deemed in themselves, either alone or in combination, to constitute,
and none of the following shall be taken into account in determining whether
there has been, will be or would reasonably be expected to be, a Company
Material Adverse Effect: (a) any adverse change, effect, event, occurrence,
state of facts or development attributable to conditions generally affecting the
industry in which the Company participates or the U.S. economy as a whole; or
(b) any adverse change, effect, event, occurrence, state of facts or development
arising from or relating to any action taken or inaction or decision made by
Parent under the terms of the Investor Agreement (as defined below); provided
further that the litigation, or the resolution thereof, listed in Paragraph 8 of
Schedule 4.8 shall be deemed not to be a Company Material Adverse Effect,
however, any other litigation filed after the date hereof may be considered a
Company Material Adverse Effect.
(b) Except as set forth in Section 4.1(b) of the Company Disclosure
Schedule, the Company does not own (i) any equity interest in any corporation or
other entity, or (ii) marketable securities, where in either case the Company's
equity interest in any entity exceeds 5% of the outstanding equity of such
entity on the date hereof.
-11-
<PAGE>
Section 4.2. Capitalization of the Company and its Subsidiaries.
--------------------------------------------------
(a) The authorized stock of the Company consists of: 249,822,502
Common Shares and 177,498 shares of Series A Junior Participating Preferred
Stock, par value $0.01 per share ("Preferred Shares"). As of April 28, 2000,
----------------
120,031,477 Common Shares were issued and outstanding and no Preferred Shares
were outstanding. All Common Shares have been duly authorized, validly issued,
and are fully paid, nonassessable and free of preemptive rights or other similar
rights. Except as provided in the Rights Agreement, the Company has no
commitments to issue or deliver any Common Shares except that, as of the date
hereof, a total of 3,246,103 Common Shares are reserved for issuance pursuant to
outstanding Options under the Stock Plans and 21,191,262 Common Shares reserved
for issuance under the $221,000,000 principal amount Convertible Mortgages held
by Archstone Communities Trust, a Maryland real estate investment trust (the
"Convertible Mortgages"). The Preferred Shares are reserved for issuance upon
exercise of the Rights. Since April 1, 2000, no shares of the Company's stock
have been issued other than pursuant to Options already in existence on such
date, and no Options have been granted. The Company has previously delivered to
the Purchaser and Parent a correct and complete list of each outstanding Option,
including the holder, date of grant, exercise price and number of Common Shares
subject thereto. Except as set forth in Section 4.2 of the Company Disclosure
Schedule, each of the outstanding shares of stock or other securities of each of
the Company's Subsidiaries is duly authorized, validly issued, fully paid and
nonassessable and owned by the Company or by a direct or indirect wholly owned
Subsidiary of the Company, free and clear of any Lien (as defined below). Except
as set forth above, there are no Common Shares or Preferred Shares authorized,
reserved, issued or outstanding and there are no preemptive or other outstanding
rights, subscriptions, options, warrants, stock appreciation rights, redemption
rights, repurchase rights, convertible, exercisable, or exchangeable securities
or other agreements, arrangements or commitments of any character relating to
the issued or unissued share capital or other ownership interest of the Company
or any of its Subsidiaries or any other securities or obligations convertible or
exchangeable into or exercisable for, or giving any Person a right to subscribe
for or acquire, any securities of the Company or its Subsidiaries, and no
securities evidencing such rights are authorized, issued or outstanding. Except
as set forth above, the Company does not have outstanding any bonds, debentures,
notes or other obligations the holders of which have the right to vote (or
convertible or exchangeable into or exercisable for securities having the right
to vote) with the stockholders of the Company on any matter. For purposes of
this Agreement, "Lien" means, with respect to any asset (including any security)
----
any option, claim, mortgage, lien, pledge, charge, security interest or
encumbrance or restrictions of any kind in respect of such asset.
(b) There are no voting trusts or other agreements or understandings
to which the Company or any of its Subsidiaries is a party with respect to the
voting of the stock of the Company or any of the Subsidiaries.
Section 4.3. Authority Relative to This Agreement; Consents and
--------------------------------------------------
Approvals.
- ---------
(a) The Company has all the necessary corporate power and authority,
and subject to obtaining stockholder approval, if necessary, has taken all
corporate action necessary, to execute, deliver and perform this Agreement and
to consummate the transactions contemplated hereby in accordance with the terms
hereof, subject only to the matters set forth in Section
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<PAGE>
4.5. This Agreement has been duly and validly executed and delivered by the
Company and, assuming the due authorization, execution and delivery hereof by
each of Parent and Purchaser, constitutes a valid, legal and binding agreement
of the Company, enforceable against the Company in accordance with its terms,
except as may be subject to applicable bankruptcy, insolvency or other similar
Laws, now or hereafter in effect, affecting creditors' rights generally.
(b) Each of the Special Committee and the Company Board have duly and
validly approved this Agreement and the Special Committee has received the
Fairness Opinion from the Financial Advisor.
Section 4.4. Proxy Statement; Offer Documents. The Proxy Statement
--------------------------------
will comply as to form in all material respects with the Exchange Act and the
rules and regulations promulgated thereunder, except that no representation is
made by the Company with respect to information supplied by Parent for inclusion
in the Proxy Statement. None of the information supplied by the Company in
writing specifically for inclusion in the Offer Documents or provided by the
Company in the Schedule 14D-9 will, at the respective times that the Offer
Documents and the Schedule 14D-9 are filed with the SEC and are first published
or sent or given to holders of Common Shares, 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 therein, in light of the
circumstances under which they were made, not misleading.
Section 4.5. Consents and Approvals; No Violations. No filing with or
-------------------------------------
notice to, and no permit, authorization, registration, consent or approval of,
any court or tribunal or administrative, governmental or regulatory body,
agency, authority or other entity (a "Governmental Entity") is required on the
-------------------
part of the Company or any of its Subsidiaries for the execution, delivery and
performance by the Company of this Agreement or the consummation by the Company
of the transactions contemplated hereby, except (i) as set forth in Section 4.5
of the Company Disclosure Schedule, (ii) pursuant to the applicable requirements
of the Securities Act and the Exchange Act, (iii) the acceptance for record of
the Articles of Merger pursuant to the MGCL, (iv) to comply with state
securities or "blue-sky" Laws, or (v) where the failure to obtain such permits,
authorizations, consents or approvals or to make such filings or give such
notice would not reasonably be expected to have a Company Material Adverse
Effect. Neither the execution, delivery and performance of this Agreement by the
Company nor the consummation by the Company of the transactions contemplated
hereby will (A) conflict with or result in any breach, violation or infringement
of any provision of the respective charter or bylaws (or similar governing
documents) of the Company or of any its Subsidiaries, (B) except as set forth in
Section 4.5 of the Company Disclosure Schedule, result in a breach, violation or
infringement of, or constitute (with or without due notice or lapse of time or
both) a default (or give rise to the creation of any Lien or any right of
termination, amendment, cancellation or acceleration) under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, lease, license,
contract, agreement or other instrument or obligation, whether written or oral
(each a "Contract"), to which the Company or any of its Subsidiaries is a party
--------
or by which any of them or any of their respective properties or assets may be
bound, (C) change the rights or obligations of any party under any Contract, or
(D) violate or infringe any Law applicable to the Company or any of its
Subsidiaries or any of their respective properties or assets, except in the case
of (B), (C) or (D) for breaches, violations, infringements, defaults or changes
which would not, individually or in the aggregate, reasonably be expected to
have a Company Material Adverse Effect
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<PAGE>
or, which result from acts or omissions by, or the status of any facts
pertaining to Parent or Purchaser.
Section 4.6. No Default. Neither the Company nor any of its
----------
Subsidiaries has any knowledge that the Company or any of its Subsidiaries is in
default or violation (and no event has occurred which with notice or the lapse
of time or both would constitute a default or violation) of any term, condition
or provision of (i) its charter or bylaws (or similar governing documents), (ii)
any Contract to which the Company or any of its Subsidiaries is now a party or
by which any of them or any of their respective properties or assets may be
bound, or (iii) any Law applicable to the Company, any of its Subsidiaries or
any of their respective properties or assets, except in the case of clause (ii)
or (iii) of this sentence for violations, breaches or defaults that would not,
individually or in the aggregate, reasonably be expected to have a Company
Material Adverse Effect.
Section 4.7. No Undisclosed Liabilities. Except as set forth in the
--------------------------
Company SEC Documents, neither the Company nor any of its Subsidiaries has
knowledge that the Company or any of its Subsidiaries has incurred any, or has
knowledge of any facts or circumstances that could give rise to any, liabilities
or obligations of any nature, whether or not accrued, contingent, fixed, matured
or otherwise, and whether or not required to be disclosed, that have, or could
reasonably be expected to have, a Company Material Adverse Effect.
Section 4.8. Litigation. Except as set forth in Section 4.8 of the
----------
Company Disclosure Schedule, neither the Company nor any of its Subsidiaries has
knowledge that there is any civil, criminal or administrative suit, claim,
hearing, inquiry, action, proceeding or investigation (each an "Action") pending
------
or, to the knowledge of the Company, threatened against, affecting or involving
the Company or any of its Subsidiaries or any of their respective properties or
assets, or which would make the Company or any of its Subsidiaries a party in
such Action, except as would not, individually or in the aggregate, reasonably
be expected to have a Company Material Adverse Effect. Except as disclosed in
Section 4.8 of the Company Disclosure Schedule, neither the Company nor any of
its Subsidiaries has knowledge that the Company or its Subsidiaries is subject
to any outstanding order, writ, injunction or decree, except as would not,
individually or in the aggregate, reasonably be expected to have a Company
Material Adverse Effect.
Section 4.9. Brokers. No broker, finder or investment banker (other
-------
than the Financial Advisor, a true and correct copy of whose engagement
agreement has been provided to Purchaser) is entitled to any brokerage, finder's
or other fee or commission in connection with the transactions contemplated
hereby based upon arrangements made by or on behalf of the Company. Except as
set forth in Section 4.9 of the Company Disclosure Schedule, no material
financial advisory, legal, accounting, consulting or other fees and expenses are
payable by or on behalf of the Company or any of its Subsidiaries in connection
with this Agreement.
Section 4.10. Opinion of Financial Advisor. The Financial Advisor has
----------------------------
delivered its written opinion (the "Fairness Opinion") to the Special Committee
----------------
to the effect that, as of the date of such opinion, the Offer Price to be
received in the transactions contemplated hereby by the holders of Shares (other
than Parent and its affiliates, including the Company and its wholly owned
Subsidiaries) is fair from a financial point of view to such holders, and such
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<PAGE>
opinion has not been withdrawn or modified prior to consummation of the Offer or
prior to the Effective Time, a copy of which opinion has been delivered to
Purchaser.
Section 4.11. Material Contracts. To the knowledge of the Company
------------------
and its Subsidiaries all of the Contracts of the Company and its Subsidiaries
that are required to be described in any forms, reports, schedules, statements
and other documents required to be filed by it with the SEC pursuant to the
Securities Act of 1933, as amended (including the rules and regulations
promulgated thereunder the "Securities Act") and the Exchange Act (any such
--------------
documents filed prior to the date hereof being collectively, the "Company SEC
-----------
Documents") or to be filed as exhibits thereto are described in the Company SEC
- ---------
Documents or filed as exhibits thereto, respectively, and are in full force and
effect and, upon consummation of the Offer and the Merger, shall continue in
full force and effect without penalty, acceleration, termination, repurchase
right or other adverse consequence. Neither the Company nor any of its
Subsidiaries nor, any other party, to the knowledge of the Company, is in breach
of or in default under any such Contract except for such breaches and defaults
as would not, individually or in the aggregate, reasonably be expected to have a
Company Material Adverse Effect.
Section 4.12. Information Known to Parent. No representation or
---------------------------
warranty is made by the Company as to any matter or condition which (a) C.
Ronald Blankenship, A. Richard Moore, Jr. or Jeffrey A. Klopf (each a "Parent
Designee") had actual knowledge of on or prior to the date of this Agreement (i)
through written disclosure which the Parent Designee received, (ii) through a
written or oral disclosure made by any officer or director of the Company or
(iii) through any means if any such Parent Designee freely acknowledges a clear
recollection of such actual knowledge, (b) was the subject of any matter
approved by Parent pursuant to the terms of the Investor Agreement or (c) was
discussed at any meeting of the Board of Directors of the Company on or prior to
the date of this Agreement or any committee of the Board on or prior to the date
of this Agreement at which any Parent Designee was present.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF PARENT AND PURCHASER
Parent and Purchaser represent and warrant to the Company as follows:
Section 5.1. Organization and Qualification; Subsidiaries. Parent is
--------------------------------------------
a corporation duly organized, validly existing and in good standing under the
Laws of the State of Maryland, and Purchaser is a corporation duly organized,
validly existing and in good standing under the Laws of the State of Maryland,
and each of Parent and Purchaser has all requisite corporate or other power and
authority to own, lease and operate its properties and assets, and to carry on
its business as now being conducted, except where the failure to be so
qualified, organized, existing and in good standing or to have such power and
authority would not reasonably be expected to have in the aggregate a Purchaser
Material Adverse Effect (as defined below) on Purchaser or Parent. When used in
connection with Purchaser or Parent, the term "Purchaser Material Adverse
--------------------------
Effect" means any change or effect that is materially adverse to the ability of
- ------
-15-
<PAGE>
each of Purchaser or Parent to consummate the transactions contemplated hereby
or to perform its obligations under this Agreement.
Section 5.2. Authority Relative to This Agreement. Each of Parent and
------------------------------------
Purchaser has all necessary power and authority, and has taken all action
necessary, to execute, deliver and perform this Agreement and to consummate the
transactions contemplated hereby in accordance with the terms hereof. This
Agreement has been duly and validly executed and delivered by each of Parent and
Purchaser, and assuming due authorization, execution and delivery hereof by the
Company, constitutes a valid, legal and binding agreement of each of Parent and
Purchaser, enforceable against each of Parent and Purchaser in accordance with
its terms, except as may be subject to applicable bankruptcy, insolvency or
other similar Laws, now or hereafter in effect, affecting creditors' rights
generally.
Section 5.3. Consents and Approvals; No Violations. No filing with or
-------------------------------------
notice to, and no permit, authorization, registration, consent or approval of,
any Governmental Entity is required on the part of Parent or Purchaser for the
execution, delivery and performance by Parent and Purchaser of this Agreement or
the consummation by Parent and Purchaser of the transactions contemplated
hereby, except (i) pursuant to the applicable requirements of the Securities Act
and the Exchange Act, (ii) the acceptance for record of the Articles of Merger
pursuant to the MGCL, (iii) to comply with state securities or "blue-sky" Laws,
(iv) as required to be made with the New York Stock Exchange and other
applicable self-regulatory organizations, or (v) where the failure to obtain
such permits, authorizations, consents or approvals or to make such filings or
give such notice would not reasonably be expected to have a Parent Material
Adverse Effect. Neither the execution, delivery and performance of this
Agreement by each of Parent and Purchaser nor the consummation by each of Parent
and Purchaser of the transactions contemplated hereby will (A) conflict with or
result in any breach, violation or infringement of any provision of the
respective charter or bylaws (or similar governing documents) of Parent,
Purchaser or any of their respective Subsidiaries, (B) result in a breach,
violation or infringement of, or constitute (with or without due notice or lapse
of time or both) a default (or give rise to the creation of any Lien or any
right of termination, amendment, cancellation or acceleration) under, any of the
terms, conditions or provisions of any Contract to which Parent, Purchaser or
any of their respective Subsidiaries is a party or by which any of them or any
of their respective properties or assets may be bound or (C) violate any Law
applicable to Parent, Purchaser or any of their respective Subsidiaries or any
of their respective properties or assets, except in the case of clauses (B) or
(C) for breaches, violations, infringements or defaults which could not,
individually or in the aggregate, reasonably be expected to have a Purchaser
Material Adverse Effect.
Section 5.4. Proxy Statement; Schedule 14D-9. None of the information
-------------------------------
supplied or to be supplied by Parent or Purchaser in writing for inclusion in
the Proxy Statement, if any, the Schedule 14D-9 or other filings with the SEC
required to effectuate the transactions contemplated by this Agreement will, at
the respective times that the Proxy Statement, if any, the Schedule 14D-9 or
such other filings are filed with the SEC and are first published or sent or
given to holders of Common Shares, and in the case of the Proxy Statement, if
any, at the time that it or any amendment or supplement thereto is mailed to the
Company's stockholders, at the time of the Special Meeting or at the Effective
Time, 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
-16-
<PAGE>
the statements therein, in light of the circumstances under which they were
made, not misleading.
Section 5.5. Financing. Parent has available, and will provide
---------
Purchaser with, all funds necessary to consummate the Merger and the
transactions contemplated by this Agreement.
Section 5.6. Ownership of Company Stock. Except for Parent's Shares
--------------------------
and except as listed on Section 5.6 of the Parent Disclosure Schedule, neither
Parent nor, to its knowledge, any of its Subsidiaries or affiliates (other than
the Company), (i) beneficially owns directly or indirectly, or (ii) is party to
any agreement, arrangement or understanding for the purpose of acquiring,
holding, voting or disposing of, in each case, shares of stock of the Company or
securities convertible into or exchangeable for shares of stock of the Company.
Section 5.7. Conduct of Business of Purchaser. Purchaser was formed
--------------------------------
solely for the purpose of engaging in the transactions contemplated hereby, has
engaged in no other business activities and has conducted its operations only as
contemplated hereby.
ARTICLE VI
COVENANTS
Section 6.1. Conduct of Business of the Company. Except (i) as set
----------------------------------
forth in Section 6.1 of the Company Disclosure Schedule, (ii) as expressly
contemplated by this Agreement, (iii) as agreed in writing by Purchaser, during
the period from the date hereof to the Effective Time, the Company will, and
will cause each of its Subsidiaries to, conduct its and their respective
operations only in the ordinary course of business consistent with past
practice, and the terms of the Investor Agreement dated as of October 17, 1996
as amended through the date hereof by and between the Company and Parent, (the
"Investor Agreement"), and seek to preserve intact its current business
organization of the Company and each of its Subsidiaries, to keep available the
services of its and their present officers and key employees, and to preserve
its business relationships including customers.
Section 6.2. Acquisition Proposals. From and after the execution of
---------------------
this Agreement, the Company shall promptly advise Parent in reasonable detail of
the receipt, directly or indirectly, of any inquiries, discussions, negotiations
or proposals relating to a merger, liquidation, recapitalization, consolidation
or other business combination involving the Company or its Subsidiaries or
acquisition of more than 5% of its issued and outstanding stock or any material
portion of the assets of the Company or its Subsidiaries, or any combination of
the foregoing (an "Acquisition Transaction"), including identifying the offeror
-----------------------
and the terms of any proposal relating to an Acquisition Transaction. The
Company shall promptly advise Parent of any material development relating to
such proposal, including the results of any discussions or negotiations with
respect thereto. Neither the Company nor any of its Subsidiaries shall provide
any non-public information to any third party (other than Parent, Purchaser or
any of their respective affiliates or advisors) without having entered into a
customary confidentiality agreement with respect to such information.
-17-
<PAGE>
Section 6.3. Other Actions. Each of the Company, on the one hand, and
-------------
Parent and Purchaser, on the other hand, shall not, and shall use commercially
reasonable efforts to cause their respective Subsidiaries and affiliates not to,
take any action that would result in (i) any representations and warranties of
such party (without giving effect to any "knowledge" qualification) set forth in
this Agreement that are qualified as to materiality becoming untrue, (ii) any of
such representations and warranties (without giving effect to any "knowledge"
qualification) that are not so qualified becoming untrue in any material
respect, or (iii) any of the conditions to the Offer or the Merger set forth in
Article VII and Annex I not being satisfied.
Section 6.4. Access to Information. Between the date hereof and the
---------------------
consummation of the Offer and/or Effective Time, as the case may be, the Company
will give Parent and Purchaser and their authorized representatives reasonable
access to all employees, hotels, offices, and other facilities and properties
and to all books and records of the Company and its Subsidiaries, will permit
Purchaser to make such inspections as Purchaser shall reasonably request and
will cause the Company's officers and those of its Subsidiaries to furnish
Purchaser with such financial and operating data and other information with
respect to the business and properties of the Company and any of its
Subsidiaries as Purchaser may from time to time reasonably request. The Company
shall furnish promptly to Parent and Purchaser a copy of each report, schedule,
registration statement and other document filed by it during such period
pursuant to the requirements of federal or state securities Laws.
Section 6.5. Additional Agreements; Reasonable Efforts.
-----------------------------------------
(a) Upon the terms and subject to the conditions of this Agreement,
each of Parent, Purchaser and the Company agrees to use its reasonable best
efforts to take, or cause to be taken, all actions, and to do, or cause to be
done, all things necessary, proper or advisable under any applicable Laws to
consummate and make effective the transactions contemplated hereby as promptly
as practicable including, but not limited to, (i) the preparation and filing of
all forms, registrations and notices required to be filed to consummate the
transactions contemplated hereby and the taking of such actions as are necessary
to obtain any requisite approvals, consents, orders, exemptions or waivers by
any third party or Governmental Entity, (ii) the satisfaction of the conditions
to the consummation of the Offer or the Merger, and (iii) contesting any legal
proceeding challenging the Merger, and (iv) the execution of any additional
instruments, including the Articles of Merger, necessary to consummate the
transactions contemplated hereby. Subject to the terms and conditions of this
Agreement and the applicable provision of the MGCL, each party hereto agrees to
use reasonable best efforts to cause the Effective Time to occur as soon as
practicable after the stockholder vote, if any, with respect to the Merger. In
case at any time after the Effective Time any further action is necessary to
carry out the purposes of this Agreement, the proper officers and directors of
each party hereto shall use reasonable best efforts to take all such necessary
action.
(b) Each party shall promptly consult with the other parties hereto
with respect to, provide any necessary information with respect to and provide
the other (or its counsel) copies of, all filings made by such party with any
Governmental Entity or any other information supplied by such party to a
Governmental Entity in connection with this Agreement and the transactions
contemplated hereby. Each party hereto shall promptly inform the other of any
communication from any Governmental Entity regarding any of the transactions
contemplated
-18-
<PAGE>
hereby. If any party hereto or affiliate thereof receives a request for
additional information or documentary material from any such Governmental Entity
with respect to the transactions contemplated hereby, 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. To the extent that transfers of any permits,
licenses, variances, exemptions, orders and other authorizations, consents and
approvals of all Governmental Entities necessary for the conduct of their
respective businesses as presently conducted (the "Company Permits") are
---------------
required as a result of execution of this Agreement or consummation of the
transactions contemplated hereby, the Company shall use its commercially
reasonable best efforts to effect such transfers.
Section 6.6. Consents. Subject to other provisions contained in this
--------
Agreement, Parent, Purchaser and the Company each will use all reasonable
efforts to obtain consents of all third parties and Governmental Entities
necessary, proper or advisable for the consummation of the transactions
contemplated hereby.
Section 6.7. Public Announcements. Parent, Purchaser and the Company,
--------------------
as the case may be, will consult with one another before issuing any press
release or otherwise making any public statements with respect to the
transactions contemplated hereby, including the Offer and the Merger, and shall
not issue any such press release or make any such public statement prior to such
consultation, except as may be required by applicable Law or by obligations
pursuant to any listing agreement with any national securities exchange, as
determined in good faith by Purchaser or the Company, as the case may be.
Section 6.8. Indemnification.
---------------
(a) The Surviving Corporation agrees that all rights to
indemnification or exculpation now existing in favor of the directors, officers,
employees and agents of the Company and its Subsidiaries as provided in their
respective certificates or charter or bylaws or otherwise in effect as of the
date hereof with respect to matters occurring prior to the consummation of the
last to occur of any of the transactions contemplated hereby shall survive such
consummation and shall continue in full force and effect, and no action shall be
taken by the Surviving Corporation during the six year period beginning on the
last to occur of any of the transactions contemplated hereby if such action
could reasonably be expected to materially reduce any such rights to
indemnification or exculpation. To the maximum extent permitted by law, such
indemnification shall be mandatory rather than permissive, and the Company or
the Surviving Corporation, as the case may be, shall advance expenses in
connection with such indemnification.
(b) Purchaser shall cause the Company or the Surviving Corporation,
as the case may be, to maintain in effect for not less than six (6) years from
the consummation of the last to occur of any of the transactions contemplated
hereby, the policies of the directors' and officers' liability and fiduciary
insurance most recently maintained by the Company (provided that the Surviving
Corporation may substitute therefor policies of at least the same coverage
containing terms and conditions which are no less advantageous to the
beneficiaries thereof so long as such substitution does not result in gaps or
lapses in coverage) with respect to matters occurring prior to the consummation
of the last to occur of any of the Transactions contemplated hereby to the
extent available; provided that in no event shall the Company or the Surviving
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<PAGE>
Corporation, as the case may be, be required to expend more than an amount per
year equal to 150% of the current annual premiums paid by the Company (the
"Premium Amount") to maintain or procure insurance coverage pursuant hereto, and
--------------
provided, further, that, if the Surviving Corporation is unable to obtain the
insurance called for by this Section 6.8(b), the Surviving Corporation will
obtain as much comparable insurance as is available for the Premium Amount per
year.
Section 6.9. Employee Benefit Arrangements. (a) The Company will not
-----------------------------
take any action which could prevent or impede the adjustment of the Stock Plans,
in accordance with Section 2.9(a), and any other plans, programs or arrangements
providing for the issuance or grant of any other interest in respect of the
stock of the Company or any Subsidiary of the Company in each case effective
prior to the Effective Time. The Company, as instructed by Parent, shall take
all steps necessary or appropriate so that as of the Effective Time, each person
who holds a Stock Option that is adjusted pursuant to Section 2.9(a) shall
receive an amended award in accordance with the provisions of the Stock Plans.
(b) Subject to Section 6.9(c), Purchaser and the Company and its
Subsidiaries shall honor, without modification, all contracts, agreements,
collective bargaining agreements and other commitments of the parties prior to
the date hereof which apply to any current or former employee or current or
former director of the Company or its Subsidiaries; provided, however, that this
undertaking shall not prevent Parent, Purchaser or the Company or its
Subsidiaries from enforcing or complying with any such commitments in accordance
with its terms, including, exercising any right permitted thereunder or under
applicable law to amend, modify, suspend, revoke or terminate any such
commitment in whole or in part. Any workforce reductions carried out following
the Effective Time by Parent or the Company or any of its Subsidiaries with
respect to employees of the Company and its Subsidiaries shall be carried out in
accordance with all laws and regulations governing the employment relationship
and termination thereof, including the Worker Adjustment and Retraining
Notification Act and regulations promulgated thereunder and any analogous state
or local law.
(c) Each of the Company Employee Benefit Plans in effect as of the
date hereof shall be maintained in effect with respect to the employees or
former employees of the Company and its Subsidiaries who are covered by any such
Company Employee Benefit Plan immediately prior to the Effective Time (the
"Affiliated Employees") until Parent, Purchaser or the Company or its
--------------------
Subsidiaries otherwise determines after the Effective Time; provided, however,
that nothing herein contained shall limit any right contained in any such
Company Employee Benefit Plan or under applicable law to amend, modify, suspend,
revoke or terminate any such Company Employee Benefit Plan; and provided,
further, however, that Parent, Purchaser or the Company or their Subsidiaries
shall cause the Affiliated Employees to be provided with employee benefits for a
period of not less than one year following the Effective Time which are no less
favorable in the aggregate than those provided to similarly situated employees
of Parent and its Affiliates. Without limiting the foregoing, with respect to
any benefit plan established to replace any Company Employee Benefit Plan (each
such plan, a "New Plan"), each participant in any such Company Employee Benefit
--------
Plan shall receive credit for purposes of eligibility to participate and vesting
under such New Plan for service credited for the corresponding purpose under
such Company Employee Benefit Plan; provided, however, that such crediting of
service shall not operate to duplicate any benefit to any such participant or
the funding for any such
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<PAGE>
benefit or cause any such Company Employee Benefit Plan or New Plan to fail to
comply with the applicable provisions of the Code or ERISA.
(d) With respect to any New Plan which is a welfare benefit plan,
other than limitations, exclusions or waiting periods that are already in effect
with respect to Affiliated Employees and that have not been satisfied as of the
Effective Time, such New Plan shall waive all limitations to pre-existing
conditions, exclusions and waiting periods with respect to participation and
coverage requirements and provide each Affiliated Employee with full credit for
co-payments and deductibles paid prior to the Effective Time in satisfying any
applicable deductible or out-of-pocket requirements applicable to the same
calendar year under such New Plan.
Section 6.10. Notification of Certain Matters. Parent, Purchaser and
-------------------------------
the Company shall promptly notify each other of (i) the occurrence or non-
occurrence of any fact or event which would be reasonably likely (A) to cause
any representation or warranty contained in this Agreement to be untrue or
inaccurate in any material respect at any time from the date hereof to the
Effective Time or (B) to cause any covenant, condition or agreement under this
Agreement not to be complied with or satisfied in any material respect and (ii)
any failure of the Company, Parent or Purchaser, as the case may be, to comply
with or satisfy any covenant, condition or agreement to be complied with or
satisfied by it hereunder in any material respect; provided, however, that no
such notification shall affect the representations or warranties of any party or
the conditions to the obligations of any party hereunder. Each of the Company,
Parent and Purchaser shall give prompt notice to the other parties hereof of any
notice or other communication from any third party alleging that the consent of
such third party is or may be required in connection with the transactions
contemplated by this Agreement.
Section 6.11. Stockholder Litigation. The Company shall give Parent
----------------------
reasonable opportunity to participate in the defense of any stockholder
litigation against the Company and/or its officers and directors relating to the
transactions contemplated hereby.
Section 6.12. State Takeover Laws. Prior to the Effective Time, the
-------------------
Company shall, upon the request of Purchaser, take all reasonable steps to
assist in any challenge by Purchaser to the validity or applicability of any
state takeover Law to the transactions contemplated by this Agreement, including
the Offer and the Merger.
ARTICLE VII
CONDITIONS TO CONSUMMATION OF THE MERGER
Section 7.1. Conditions to Each Party's Obligation to Effect the
---------------------------------------------------
Merger. The respective obligations of Parent, Purchaser and the Company to
- ------
consummate the Merger and the transactions contemplated hereby are subject to
the satisfaction or waiver, at or before the Effective Time, of each of the
following conditions:
(a) Purchase of Shares. Purchaser shall have accepted for payment
------------------
Shares pursuant to the Offer in accordance with the terms hereof.
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<PAGE>
(b) Injunctions; Illegality. The consummation of the Merger shall
-----------------------
not be restrained, enjoined or prohibited by any Law or ruling of a court of
competent jurisdiction or any Governmental Entity, and there shall not have been
any statute, rule or regulation enacted, promulgated or deemed applicable to the
Merger by any Governmental Entity which prevents the consummation of the Merger
or has the effect of making the purchase of Shares illegal. Each party agrees
that, in the event that any such Law shall have been enacted, entered,
promulgated or enforced, such party shall use its reasonable best efforts to
cause such Law to be complied with, lifted or vacated.
(c) Stockholder Approval; Notice of Merger. This Agreement and the
--------------------------------------
Merger shall have been approved by the affirmative vote of the stockholders of
the Company to the extent required by the MGCL and the charter and bylaws of the
Company; and in the event the Merger shall be consummated pursuant to Section
2.11 of this Agreement, the notice requirement in Section 3-106(d) of the MGCL
shall have been satisfied and the 30-day period required by Section 3-106(d) of
the MGCL for notice to minority stockholders of the Company prior to the filing
of Articles of Merger shall have expired.
Section 7.2. Frustration of Closing Conditions. Neither Parent,
---------------------------------
Purchaser nor the Company may rely on the failure of any condition set forth in
Section 7.1 to be satisfied if such failure was caused solely by such party's
own failure to use reasonable best efforts to consummate the Merger and the
transactions contemplated hereby, as required by and subject to Sections 6.3 and
6.5.
ARTICLE VIII
TERMINATION; AMENDMENTS; WAIVER
Section 8.1. Termination. This Agreement may be terminated and the
-----------
Offer (subject to applicable securities laws) and the Merger may be abandoned at
any time prior to the Effective Time notwithstanding any requisite approval of
this Agreement by the stockholders of the Company (with any termination by
Parent also being an effective termination by Purchaser):
(a) by mutual written consent of Parent and the Company;
(b) by Parent or the Company if (i) the consummation of the Merger
shall have been restrained, enjoined or prohibited by any Law or ruling of a
court of competent jurisdiction or any Governmental Entity which has become
final and nonappealable, or there shall have been any statute, rule or
regulation enacted, promulgated or deemed applicable to the Merger by any
Governmental Entity which permanently prevents the consummation of the Merger or
has the effect of making the purchase of Shares illegal, provided that the party
terminating this Agreement pursuant to this Section 8.1(b) shall have used all
commercially reasonably efforts to have any such ruling vacated; or (ii) the
Effective Time shall not have occurred on or before the date which is six months
from the date hereof; provided, however, that the right to terminate this
Agreement under this Section 8.1(b) shall not be available to any party whose
failure to fulfill any obligation under this Agreement has been the cause of, or
resulted in, the failure of the Effective Time to occur on or before such date;
-22-
<PAGE>
(c) by Parent if, due to an occurrence or circumstance which would
result in a failure to satisfy any of the Tender Offer Conditions, Purchaser
shall have (i) failed to commence the Offer within the time period prescribed in
Section 1.1(a), (ii) terminated the Offer without having accepted any Shares for
payment thereunder, or (iii) failed to pay for Shares pursuant to the Offer by
the date which is four months from the date hereof, unless, in each case, such
failure to commence the Offer or accept or pay for Shares shall have been caused
by or resulted from a material breach of any of Parent's or Purchaser's
representations, warranties or covenants;
(d) by the Company if, Purchaser shall have (A) failed to commence
the Offer within the time period prescribed in Section 1.1(a), (B) terminated
the Offer without having accepted any Shares for payment or (C) failed to pay
for Shares pursuant to the Offer by the date which is four months from the date
hereof, unless, in each case, such failure to satisfy any of the Tender Offer
Conditions, to commence the Offer or to accept and pay for the Shares shall have
been caused by or resulted from a material breach of any of the Company's
representations, warranties or covenants;
(e) by the Company if, prior to the purchase of Shares pursuant to
the Offer in accordance with the terms of this Agreement, the Special Committee
recommends another offer or an agreement to effect a proposal made by a third
party (other than an affiliate of Parent) to effect an Acquisition Transaction
having terms which the Special Committee has determined in good faith (i) based
upon the advice of a nationally recognized investment banker, to be more
favorable to the Company and its stockholders (other than Parent and Purchaser)
than the Offer and the Merger and (ii) after consultation with counsel for the
Special Committee, that failure to terminate this Agreement would be
inconsistent with the fiduciary duties of the Special Committee under applicable
Law; or
(f) by Parent if the Special Committee or the Company Board (i) shall
have withdrawn or modified (including by amendment of the Schedule 14D-9) in a
manner adverse to Purchaser its approval or recommendation of the Offer, this
Agreement or the Merger, or (ii) shall have approved or recommended another
offer or an agreement to effect a proposal made by a third party (other than an
affiliate of Parent) to effect an Acquisition Transaction or (iii) shall have
resolved to effect any of the foregoing; or
(g) by Parent or by the Company (provided that the terminating party
is not then in material breach of any representation, warranty, covenant or
other agreement contained herein), as the case may be, in the event of any of
(A) a breach by the other party of any representation or warranty contained
herein (subject to the standard set forth in Section (f) of Annex I,
substituting the words Parent or Purchaser for Company where applicable when
referring to a Company right of termination pursuant to this provision), which
breach cannot be or has not been cured within 20 business days after the giving
of written notice to the breaching party of such breach; (B) a material breach
by the other party of any of the obligations or agreements contained herein,
which breach cannot be or has not been cured within 20 business days after the
giving of written notice to the breaching party of such breach; or (C) a Company
Material Adverse Effect exists (in which case Parent may terminate this
Agreement) or a Parent Material Adverse Effect exists (in which case the Company
may terminate this Agreement).
-23-
<PAGE>
Section 8.2. Effect of Termination. In the event of a termination
---------------------
and abandonment of this Agreement by the Company pursuant to Section 8.1(e) or
by Parent pursuant to Section 8.1(f), the Company shall promptly, but in no
event later than the date of such termination, pay Parent all of Parent's and
Purchaser's reasonable fees and expenses (including expenses of counsel)
incurred in connection with this Agreement or the transactions contemplated
hereby. In addition to the preceding, in the event of the termination and
abandonment of this Agreement pursuant to Section 8.1, this Agreement shall
forthwith become void and have no effect, without any liability on the part of
any party or its directors, officers or stockholders, other than the provisions
of this Section 8.2 and Sections 9.5 and 9.9, which shall survive any such
termination. Nothing contained in this Section 8.2 shall relieve any party from
any liability for any breach of this Agreement.
Section 8.3. Amendment. Subject to applicable Law, this Agreement
---------
may be amended by action taken by the Company, Parent and Purchaser at any time
before or after approval of this Agreement by the stockholders of the Company
(if required by applicable Law) but, after any such approval, no amendment shall
be made which requires the approval of such stockholders under applicable Law
without such approval. This Agreement may not be amended except by an instrument
in writing signed on behalf of the parties hereto.
Section 8.4. Waiver. At any time prior to the Effective Time, any
------
party hereto may (i) extend the time for the performance of any of the
obligations or other acts of the other party, (ii) waive any inaccuracies in the
representations and warranties of the other party contained herein or in any
document, certificate or writing delivered pursuant hereto, or (iii) waive
compliance by the other party with any of the agreements or conditions contained
herein. Any agreement on the part of any party hereto to any such extension or
waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party. The failure of either party hereto to assert any of its
rights hereunder shall not constitute a waiver of such rights.
ARTICLE IX
MISCELLANEOUS
Section 9.1. Nonsurvival of Representations and Warranties. The
---------------------------------------------
representations, warranties and covenants made herein shall not survive beyond
the Effective Time. Notwithstanding the foregoing, the agreements set forth in
Section 2.3, Section 2.9, Article III, Section 6.8 and Section 6.9 shall survive
the Effective Time indefinitely (except to the extent a shorter period of time
is explicitly specified therein).
Section 9.2. Entire Agreement; Assignment. This Agreement (i)
----------------------------
constitutes the entire agreement between the parties hereto with respect to the
subject matter hereof and supersedes all other prior agreements and
understandings, both written and oral, between the parties with respect to the
subject matter hereof, and (ii) shall not be assigned by operation of Law or
otherwise; provided, however, that Purchaser may assign any or all of its rights
and obligations under this Agreement to any Subsidiary or affiliate of
Purchaser, but no such assignment shall relieve Purchaser or Parent of its
obligations hereunder if such assignee does not perform such obligations.
-24-
<PAGE>
Section 9.3. Validity. If any provision of this Agreement, or the
--------
application thereof to any Person or circumstance, is held invalid or
unenforceable, such provision shall be enforced to the maximum extent
permissible in the circumstances, and the remainder of this Agreement, and the
application of such provision to other Persons or circumstances, shall not be
affected thereby, and to such end, shall be enforced to the greatest extent
permitted by applicable Law. The provisions of this Agreement are thus agreed to
be severable.
Section 9.4. Notices. All notices, requests, claims, demands and
-------
other communications hereunder shall be in writing (including by facsimile with
written confirmation thereof) and unless otherwise expressly provided herein,
shall be delivered during normal business hours by hand, by Federal Express,
United Parcel Service or other nationally recognized overnight commercial
delivery service, or by facsimile notice, confirmation of receipt received,
addressed as follows, or to such other address as may be hereafter notified by
the respective parties hereto:
(a) If to Security Capital Group Incorporated or HSD Acquisition
Corporation:
Security Capital Group Incorporated
125 Lincoln Avenue
Santa Fe, New Mexico 87501
Attention: Jeffrey A. Klopf, Esq.
Facsimile Number: (505) 980-8920
With a copy, which will not constitute notice, to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Adam O. Emmerich, Esq.
Facsimile Number: (212) 403-2234
(b) If to Homestead Village Incorporated:
Homestead Village Incorporated
2100 RiverEdge Parkway
Atlanta, Georgia 30328
Attention: James C. Potts
Facsimile Number: (770) 303-0019
With copies, which will not constitute notice, to:
King & Spalding
1100 Louisiana
Houston, Texas 77002-3200
Attention: Randolph C. Coley, Esq.
Facsimile Number: (713) 751-3280
-25-
<PAGE>
and
Mayer, Brown & Platt
190 South LaSalle
Chicago, Illinois 60603
Attention: Edward J. Schneidman, Esq.
Facsimile Number: (312) 701-7711
Section 9.5. Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the Laws of the State of Maryland, without regard
to the principles of conflicts of Law thereof. The parties hereto hereby agree
and consent to be subject to the exclusive jurisdiction of the federal and state
courts in the State of Maryland in any suit, action or proceeding seeking to
enforce any provision of, or based on any matter arising out of or in connection
with, this Agreement or the transactions contemplated hereby. Each party hereto
hereby irrevocably waives, to the fullest extent permitted by Law, (i) any
objection that it may now or hereafter have to laying venue of any suit, action
or proceeding brought in such courts, and (ii) any claim that any suit, action
or proceeding brought in such courts has been brought in an inconvenient forum.
Section 9.6. Descriptive Headings. The descriptive headings herein
--------------------
are inserted for convenience of reference only and are not intended to be part
of or to affect the meaning or interpretation of this Agreement.
Section 9.7. Parties in Interest. This Agreement shall be binding
-------------------
upon and inure solely to the benefit of each party hereto and its successors and
permitted assigns, and except as provided in Section 6.8 and 6.9, nothing in
this Agreement, express or implied, is intended to or shall confer upon any
other Person any rights, benefits or remedies of any nature whatsoever under or
by reason of this Agreement.
Section 9.8. Counterparts. This Agreement may be executed in two or
------------
more counterparts (including by facsimile), each of which shall be deemed to be
an original, but all of which shall constitute one and the same agreement.
Section 9.9. Fees and Expenses. Whether or not the Merger is
-----------------
consummated, except as otherwise specifically provided in Section 8.2, all costs
and expenses incurred in connection with the Offer, this Agreement and the
Merger shall be paid by the party incurring such expenses.
Section 9.10. Specific Performance. The parties hereto 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 were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any court of the United
States or any state having jurisdiction, this being in addition to any other
remedy to which they are entitled at Law or in equity, provided, that this
Section 9.10 shall have no force and effect from and after the termination of
this Agreement in accordance with Section 8.1.
-26-
<PAGE>
Section 9.11. Interpretation; Absence of Presumption. (a) For the
--------------------------------------
purposes hereof, (1) words in the singular shall be held to include the plural
and vice versa and words of one gender shall be held to include the other gender
as the context requires, (2) the terms "hereof", "herein", and "herewith" and
words of similar import shall, unless otherwise stated, be construed to refer to
this Agreement as a whole (including all of the Exhibits hereto) and not to any
particular provision of this Agreement, and Article, Section, paragraph and
Exhibit references are to the Articles, Sections, paragraphs and Exhibits to
this Agreement unless otherwise specified, (3) the word "including" and words of
similar import when used in this Agreement shall mean "including without
limitation" unless the context otherwise requires or unless otherwise specified,
(4) the word "or" shall not be exclusive, (5) provisions shall apply, when
appropriate, to successive events and transactions, and (6) all references to
any period of days shall be deemed to be to the relevant number of calendar days
unless otherwise specified.
(b) This Agreement shall be construed without regard to any
presumption or rule requiring construction or interpretation against the party
drafting or causing any instrument to be drafted.
-27-
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be duly executed on its behalf as of the day and year first above
written.
SECURITY CAPITAL GROUP
INCORPORATED
By:
---------------------------
Name:
Title:
HSD ACQUISITION CORPORATION
By:
---------------------------
Name:
Title:
HOMESTEAD VILLAGE
INCORPORATED
By:
---------------------------
Name:
Title:
-28-
<PAGE>
ANNEX I
-------
CONDITIONS TO THE OFFER
-----------------------
THE CAPITALIZED TERMS USED HEREIN HAVE THE MEANINGS SET FORTH IN THE
AGREEMENT AND PLAN OF MERGER (THE "MERGER AGREEMENT") TO WHICH THIS ANNEX I IS
ATTACHED.
Notwithstanding any other provisions of the Offer, Purchaser shall not
be required to accept for payment or (subject to any applicable rules and
regulations of the SEC) pay for, and may delay the acceptance for payment of,
any Shares and may terminate or, subject to the terms of the Merger Agreement,
amend the Offer, if at any time on or after the date of the Merger Agreement and
prior to the acceptance for payment for Shares, any of the following conditions
exists or shall have occurred and remain in effect:
(a) there shall be pending any material Action by any Governmental
Entity, or any Law proposed, sought, promulgated, enacted, entered,
enforced or deemed applicable to the Offer, (i) seeking to or which
does prohibit or impose any material limitations on Parent's or
Purchaser's ownership or operation (or that of any of their respective
Subsidiaries or affiliates) of all or a material portion of the
Company's or any of its Subsidiaries' businesses or assets, (ii)
seeking to or which does make the acceptance for payment of, or the
payment for, some or all of the Shares illegal or otherwise
prohibiting, restricting or significantly delaying consummation of the
Offer or the Merger or the performance of any of the other
transactions contemplated by the Merger Agreement, or seeking to
obtain from the Company or Purchaser any damages that are material in
Parent's view in relation to the Company and its Subsidiaries as taken
as a whole, (iii) seeking to or which does impose material limitations
on the ability of Purchaser, or renders Purchaser unable, to acquire
or hold or to exercise effectively all rights of ownership of the
Shares, including, the right to vote any Shares purchased by Purchaser
on all matters properly presented to the stockholders of the Company,
or effectively to control in any material respect in Parent's view the
business, assets or operations of the Company, its Subsidiaries or
Purchaser or any of their respective affiliates, or (iv) which
otherwise would reasonably be expected to have a Company Material
Adverse Effect; provided that Parent and Purchaser shall have used all
commercially reasonable efforts to cause any such Action or Law to be
vacated or lifted, or
(b) there shall have occurred any change that would reasonably be
expected to constitute a Company Material Adverse Effect; or
(c) there shall have occurred (i) any general suspension of trading
in, or limitation on prices for, securities on the New York Stock
Exchange, Inc. or The Nasdaq Stock Market for a period in excess of 24
hours (excluding suspensions or limitations resulting solely from
physical damage or interference with such exchanges not related to
market conditions), (ii) the declaration of a banking moratorium or
any suspension of payments in respect of banks in the United States
(whether or not mandatory), (iii) the commencement of a war or other
international or national calamity directly or in-
<PAGE>
directly involving the United States, (iv) any limitation (whether or
not mandatory) by any U.S. governmental authority or agency that would
reasonably be expected to have a material adverse affect on either
Parent or Purchaser and on the extension of credit by banks or other
financial institutions, (v) from the date of the Merger Agreement
through the date of termination or expiration of the Offer, a decline
of at least 15% in the Standard & Poor's 500 Index for any one week
period, or (vi) in the case of any of the foregoing, existing at the
date of the execution of the Merger Agreement, a material acceleration
or worsening thereof; or
(d) the Merger Agreement shall have been terminated in accordance
with its terms; or
(e) (i) the Company Board based on the recommendation of the Special
Committee shall have withdrawn, changed or modified (including by
amendment of the Schedule 14D-9) in a manner adverse to Purchaser or
Parent its approval or recommendation of the Offer, the Merger
Agreement or the Merger or shall have recommended an Acquisition
Proposal, or shall have adopted any resolution to effect any of the
foregoing, (ii) the Special Committee or the Company Board shall have
recommended any proposal other than this Agreement in respect of an
Acquisition Proposal, (iii) the Special Committee or the Company Board
shall have continued discussions with any third party concerning an
Acquisition Proposal for more than ten (10) business days after the
date of receipt of such Acquisition Proposal, or (iv) an Acquisition
Proposal that is publicly disclosed and that contains a proposal as to
price (without regard to whether such proposal specifies a specific
price or a range of potential prices) shall have been commenced,
publicly proposed or communicated to the Company and the Special
Committee or the Company Board shall not have rejected such proposal
within ten (10) business days of the earlier to occur of (A) the
Company's receipt of such Acquisition Proposal and (B) the date such
Acquisition Proposal first becomes publicly disclosed; or
(f) the representations and warranties of the Company set forth in
the Merger Agreement shall not be true and correct (without giving
effect to any qualifications as to "Company Material Adverse Effect,"
"material" or similar qualifications) as of the date of the Merger
Agreement or on and as of the expiration date as though made on and as
of the expiration date (except to the extent any such representation
or warranty expressly speaks as of an earlier or different date, and
except for changes contemplated or permitted by the terms hereof)
except, in either case, where the failure of such representations and
warranties to be so true and correct (without giving effect to any
qualifications as to "Company Material Adverse Effect," "material" or
similar qualifications) would not, in the aggregate, be reasonably
likely to have a Company Material Adverse Effect; or
(g) the Company shall not have performed in all material respects all
obligations required to be performed by it under the Merger Agreement
at or prior to the Expiration Date.
The parties acknowledge that the Tender Offer Conditions set forth
above in this Annex I are for the sole benefit of Parent and Purchaser, that
Parent or Purchaser may assert the
I-2
<PAGE>
failure of any of the Tender Offer Conditions regardless of the circumstances
(other than any circumstance arising solely by any action or inaction by Parent
or Purchaser) giving rise to any such failure, that the Company shall not assert
the failure of, or waive, any such condition without the prior written consent
of Parent and Purchaser, and that if Parent or Purchaser elects to waive any
such condition to the Offer (which Parent or Purchaser may do in whole or in
part at any time and from time to time), the Company shall cooperate and comply
with such election. The failure by Parent or Purchaser at any time to exercise
any of the foregoing rights shall not be deemed a waiver of any such right, and
each such right shall be deemed an ongoing right that may be asserted at any
time and from time to time.
Should the Offer be terminated pursuant to any of the foregoing
provisions, all tendered Shares not theretofore accepted for payment shall
forthwith be returned to the tendering stockholders.
I-3
<PAGE>
Exhibit (F)
MARYLAND GENERAL CORPORATION LAW
CORPORATIONS AND ASSOCIATIONS
TITLE 3. CORPORATIONS IN GENERAL -- EXTRAORDINARY ACTIONS
Subtitle 2. Rights of Objecting Stockholders.
(S) 3-201 "Successor" defined.
(a) Corporation amending charter.--In this subtitle, except as
provided in subsection (b) of this section, "successor" includes a
corporation which amends its charter in a way which alters the
contract rights, as expressly set forth in the charter, of any
outstanding stock, unless the right to do so is reserved by the
charter of the corporation.
(b) Corporation whose stock is acquired. -- When used with reference
to a share exchange, "successor" means the corporation the stock of
which was acquired in the share exchange.
(S) 3-202 Right to fair value of stock.
(a) General rule. -- Except as provided in subsection (c) of this
section, a stockholder of a Maryland corporation has the right to
demand and receive payment of the fair value of the stockholder's
stock from the successor if:
(1) The corporation consolidates or merges with another
corporation;
(2) The stockholder's stock is to be acquired in a share
exchange;
(3) The corporation transfers its assets in a manner requiring
action under (S) 3-105 (e) of this title;
(4) The corporation amends its charter in a way which alters
the contract rights, as expressly set forth in the charter,
of any outstanding stock and substantially adversely
affects the stockholder's rights, unless the right to do so
is reserved by the charter of the corporation; or
(5) The transaction is governed by (S) 3-602 of this title or
exempted by (S) 3-603 (b) of this title.
(b) Basis of fair value. --
(1) Fair value is determined as of the close of business:
(i) With respect to a merger under (S) 3-106 of this
title of a 90 percent or more owned subsidiary
with or into its parent corporation, on the day
notice is given or waived under (S) 3-106; or
(ii) With respect to any other transaction, on the day
the stockholders voted on the transaction
objected to.
(2) Except as provided in paragraph (3) of this subsection,
fair value may not include any appreciation or depreciation
which directly or indirectly results from the transaction
objected to or from its proposal.
(3) In any transaction governed by (S) 3-602 of this title or
exempted by (S) 3-603 (b) of this title, fair value shall
be value determined in accordance with the requirements of
(S) 3-603 (b) of this title.
(c) When right to fair value does not apply. -- Unless the
transaction is governed by (S) 3-602 of this title or is exempted by
(S) 3-603 (b) of this title, a stockholder may not demand the fair
value of his stock and is bound by the terms of the transaction if:
(1) The stock is listed on a national securities exchange or is
designated as a national market system security on an
interdealer quotation system by the National Association of
Securities Dealers, Inc.:
(i) With respect to a merger under (S) 3-106 of this
title of a 90 percent or more owned subsidiary
with or into its parent corporation, on the date
notice is given or waived under (S) 3-106; or
(ii) With respect to any other transaction, on the
record date for determining stockholders entitled
to vote on the transaction objected to;
(2) The stock is that of the successor in a merger, unless:
<PAGE>
(i) The merger alters the contract rights of the
stock as expressly set forth in the charter, and
the charter does not reserve the right to do so;
or
(ii) The stock is to be changed or converted in whole
or in part in the merger into something other
than either stock in the successor or cash,
scrip, or other rights or interests arising out
of provisions for the treatment of fractional
shares of stock in the successor; or
(3) The stock is that of an open-end investment company
registered with the Securities and Exchange Commission
under the Investment Company Act of 1940 and the value
placed on the stock in the transaction is its net asset
value.
(S) 3-203 Procedure by stockholder.
(a) Specific duties. -- A stockholder of a corporation who desires
to receive payment of the fair value of his stock under this subtitle:
(1) Shall file with the corporation a written objection to the
proposed transaction:
(i) With respect to a merger under (S) 3-106 of this
title of a 90 percent or more owned subsidiary
with or into its parent corporation, within 30
days after notice is given or waived under
(S) 3-106; or
(ii) With respect to any other transaction, at or
before the stockholders' meeting at which the
transaction will be considered;
(2) May not vote in favor of the transaction; and
(3) Within 20 days after the Department accepts the articles
for record, shall make a written demand on the successor
for payment for his stock, stating the number and class of
shares for which he demands payment.
(b) Failure to comply with section. -- A stockholder who fails to
comply with this section is bound by the terms of the consolidation,
merger, share exchange, transfer of assets, or charter amendment.
(S) 3-204 Effect of demand on dividend and other rights.
A stockholder who demands payment for his stock under this subtitle:
(1) Has no right to receive any dividends or distributions
payable to holders of record of that stock on a record date
after the close of business on the day as at which fair
value is to be determined under (S) 3-202 of this subtitle;
and
(2) Ceases to have any rights of a stockholder with respect to
that stock, except the right to receive payment of its fair
value.
(S) 3-205 Withdrawal of demand.
A demand for payment may be withdrawn only with the consent of the successor.
(S) 3-206 Restoration of dividend and other rights.
(a) When rights restored. -- The rights of a stockholder who demands
payment are restored in full, if:
(1) The demand for payment is withdrawn;
(2) A petition for an appraisal is not filed within the time
required by this subtitle;
(3) A court determines that the stockholder is not entitled to
relief; or
(4) The transaction objected to is abandoned or rescinded.
(b) Effect of restoration. -- The restoration of a stockholder's
rights entitles him to receive the dividends, distributions, and
other rights he would have received if he had not demanded payment
for his stock. However, the restoration does not prejudice any
corporate proceedings taken before the restoration.
(S) 3-207 Notice and offer to stockholders.
<PAGE>
(a) Duty of successor. --
(1) The successor promptly shall notify each objecting
stockholder in writing of the date the articles are
accepted for record by the Department.
(2) The successor also may send a written offer to pay the
objecting stockholder what it considers to be the fair
value of his stock. Each offer shall be accompanied by the
following information relating to the corporation which
issued the stock:
(i) A balance sheet as of a date not more than six
months before the date of the offer;
(ii) A profit and loss statement for the 12 months ending
on the date of the balance sheet; and
(iii) Any other information the successor considers
pertinent.
(b) Manner of sending notice. -- The successor shall deliver the
notice and offer to each objecting stockholder personally or mail
them to him by certified mail, return receipt requested, bearing a
postmark from the United States Postal Service, at the address he
gives the successor in writing, or, if none, at his address as it
appears on the records of the corporation which issued the stock.
(S) 3-208 Petition for appraisal; consolidation of proceedings; joinder of
objectors.
(a) Petition for appraisal. -- Within 50 days after the Department
accepts the articles for record, the successor or an objecting
stockholder who has not received payment for his stock may petition a
court of equity in the county where the principal office of the
successor is located or, if it does not have a principal office in
this State, where the resident agent of the successor is located, for
an appraisal to determine the fair value of the stock.
(b) Consolidation of suits; joinder of objectors. --
(1) If more than one appraisal proceeding is instituted, the
court shall direct the consolidation of all the proceedings
on terms and conditions it considers proper.
(2) Two or more objecting stockholders may join or be joined in
an appraisal proceeding.
(S) 3-209 Notation on stock certificate.
(a) Submission of certificate. -- At any time after a petition for
appraisal is filed, the court may require the objecting stockholders
parties to the proceeding to submit their stock certificates to the
clerk of the court for notation on them that the appraisal proceeding
is pending. If a stockholder fails to comply with the order, the
court may dismiss the proceeding as to him or grant other appropriate
relief.
(b) Transfer of stock bearing notation. -- If any stock represented
by a certificate which bears a notation is subsequently transferred,
the new certificate issued for the stock shall bear a similar
notation and the name of the original objecting stockholder. The
transferee of this stock does not acquire rights of any character
with respect to the stock other than the rights of the original
objecting stockholder.
(S) 3-210 Appraisal of fair value.
(a) Court to appoint appraisers. -- If the court finds that the
objecting stockholder is entitled to an appraisal of his stock, it
shall appoint three disinterested appraisers to determine the fair
value of the stock on terms and conditions the court considers
proper. Each appraiser shall take an oath to discharge his duties
honestly and faithfully.
(b) Report of appraisers -- Filing. -- Within 60 days after their
appointment, unless the court sets a longer time, the appraisers
shall determine the fair value of the stock as of the appropriate
date and file a report stating the conclusion of the majority as to
the fair value of the stock.
(c) Same -- Contents. -- The report shall state the reasons for the
conclusion and shall include a transcript of all testimony and
exhibits offered.
<PAGE>
(d) Same -- Service; objection. --
(1) On the same day that the report is filed, the appraisers
shall mail a copy of it to each party to the proceedings.
(2) Within 15 days after the report is filed, any party may
object to it and request a hearing.
(S) 3-211 Action by court on appraisers' report.
(a) Order of court. -- The court shall consider the report and, on
motion of any party to the proceeding, enter an order which:
(1) Confirms, modifies, or rejects it; and
(2) If appropriate, sets the time for payment to the
stockholder.
(b) Procedure after order. --
(1) If the appraisers' report is confirmed or modified by the
order, judgment shall be entered against the successor and
in favor of each objecting stockholder party to the
proceeding for the appraised fair value of his stock.
(2) If the appraisers' report is rejected, the court may:
(i) Determine the fair value of the stock and enter
judgment for the stockholder; or
(ii) Remit the proceedings to the same or other
appraisers on terms and conditions it considers
proper.
(c) Judgment includes interest. --
(1) Except as provided in paragraph (2) of this subsection, a
judgment for the stockholder shall award the value of the
stock and interest from the date as at which fair value is
to be determined under (S) 3-202 of this subtitle.
(2) The court may not allow interest if it finds that the
failure of the stockholder to accept an offer for the stock
made under (S) 3-207 of this subtitle was arbitrary and
vexatious or not in good faith. In making this finding, the
court shall consider:
(i) The price which the successor offered for the
stock;
(ii) The financial statements and other information
furnished to the stockholder; and
(iii) Any other circumstances it considers relevant.
(d) Costs of proceedings. --
(1) The costs of the proceedings, including reasonable
compensation and expenses of the appraisers, shall be set
by the court and assessed against the successor. However,
the court may direct the costs to be apportioned and
assessed against any objecting stockholder if the court
finds that the failure of the stockholder to accept an
offer for the stock made under (S) 3-207 of this subtitle
was arbitrary and vexatious or not in good faith. In
making this finding, the court shall consider:
(i) The price which the successor offered for the
stock;
(ii) The financial statements and other information
furnished to the stockholder; and
(iii) Any other circumstances it considers relevant.
(2) Costs may not include attorney's fees or expenses. The
reasonable fees and expenses of experts may be included
only if:
(i) The successor did not make an offer for the
stock under (S) 3-207 of this subtitle; or
(ii) The value of the stock determined in the
proceeding materially exceeds the amount offered
by the successor.
(e) Effect of judgment. -- The judgment is final and conclusive on
all parties and has the same force and effect as other decrees in
equity. The judgment constitutes a lien on the assets of the
successor with priority over any mortgage or other lien attaching on
or after the effective date of the consolidation, merger, transfer,
or charter amendment.
(S) 3-212 Surrender of stock.
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The successor is not required to pay for the stock of an objecting stockholder
or to pay a judgment rendered against it in a proceeding for an appraisal
unless, simultaneously with payment:
(1) The certificates representing the stock are surrendered to
it, indorsed in blank, and in proper form for transfer; or
(2) Satisfactory evidence of the loss or destruction of the
certificates and sufficient indemnity bond are furnished.
(S) 3-213 Rights of successor with respect to stock.
(a) General rule. -- A successor which acquires the stock of an
objecting stockholder is entitled to any dividends or distributions
payable to holders of record of that stock on a record date after the
close of business on the day as at which fair value is to be
determined under (S) 3-202 of this subtitle.
(b) Successor in transfer of assets. -- After acquiring the stock of
an objecting stockholder, a successor in a transfer of assets may
exercise all the rights of an owner of the stock.
(c) Successor in consolidation, merger, or share exchange. -- Unless
the articles provide otherwise, stock in the successor of a
consolidation, merger, or share exchange otherwise deliverable in
exchange for the stock of an objecting stockholder has the status of
authorized but unissued stock of the successor. However, a proceeding
for reduction of the capital of the successor is not necessary to
retire the stock or to reduce the capital of the successor
represented by the stock.
