<PAGE> 1
OFFER TO PURCHASE FOR CASH ANY AND
ALL OF THE OUTSTANDING SHARES OF COMMON STOCK
OF
BROOKDALE LIVING COMMUNITIES, INC.
AT
$15.25 NET PER SHARE
BY
FORTRESS BROOKDALE ACQUISITION LLC
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON TUESDAY, SEPTEMBER 5, 2000, UNLESS THE OFFER IS EXTENDED.
The offer is being made pursuant to an Agreement and Plan of Merger, dated
as of July 26, 2000, by and among Fortress Registered Investment Trust
("Fortress"), Fortress Brookdale Acquisition LLC ("Purchaser"), FBZ Acquisition
Corp. ("Acquisition Sub") and Brookdale Living Communities, Inc. (the "Company"
or "Brookdale").
THE BOARD OF DIRECTORS OF THE COMPANY, AFTER RECEIVING THE UNANIMOUS
RECOMMENDATION OF THE COMMITTEE OF INDEPENDENT DIRECTORS OF THE BOARD (A)
DETERMINED THAT EACH OF THE OFFER AND THE MERGER IS FAIR TO AND IN THE BEST
INTERESTS OF THE COMPANY'S STOCKHOLDERS (OTHER THAN PURCHASER), (B) APPROVED THE
MERGER AGREEMENT, THE OFFER AND THE MERGER AND THE TRANSACTIONS CONTEMPLATED BY
THE MERGER AGREEMENT, AND (C) RECOMMENDS THAT THE COMPANY'S STOCKHOLDERS ACCEPT
THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER.
IMPORTANT
Any stockholder desiring to tender all or any portion of such stockholder's
shares of common stock, par value $.01 per share, of the Company (the "Shares"
or the "Company Common Stock") should either (i) complete and sign the enclosed
Letter of Transmittal (or a facsimile thereof) in accordance with the
instructions in the Letter of Transmittal, have such stockholder's signature
thereon guaranteed (if required by Instruction 1 to the Letter of Transmittal),
mail or deliver the Letter of Transmittal (or a manually signed facsimile
thereof) and any other required documents to the Depositary (as defined herein)
and either deliver the certificates for such Shares along with the Letter of
Transmittal to the Depositary or tender such Shares pursuant to the procedures
for book-entry transfer set forth in "THE TENDER OFFER -- Section 3. Procedures
for Tendering Shares" or (ii) request such stockholder's broker, dealer,
commercial bank, trust company or other nominee to effect the transaction for
such stockholder. Any stockholder whose Shares are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee must contact
such broker, dealer, commercial bank, trust company or other nominee to tender
such Shares.
ANY STOCKHOLDER WHO DESIRES TO TENDER SHARES AND WHOSE CERTIFICATES
EVIDENCING SUCH SHARES ARE NOT IMMEDIATELY AVAILABLE, OR WHO CANNOT COMPLY WITH
THE PROCEDURES FOR BOOK-ENTRY TRANSFER DESCRIBED IN THIS OFFER TO PURCHASE ON A
TIMELY BASIS, OR WHO CANNOT DELIVER ALL REQUIRED DOCUMENTS TO THE DEPOSITARY
PRIOR TO THE EXPIRATION OF THE OFFER, MAY TENDER SUCH SHARES BY FOLLOWING THE
PROCEDURES FOR GUARANTEED DELIVERY SET FORTH IN "THE TENDER OFFER -- SECTION 3.
PROCEDURES FOR TENDERING SHARES."
Questions and requests for assistance may be directed to Corporate Investor
Communications, Inc. (the "Information Agent") or Prudential Securities
Incorporated (the "Dealer Manager" or "Prudential Securities") at their
respective addresses and telephone numbers set forth on the back cover of this
Offer to Purchase. Requests for additional copies of this Offer to Purchase, the
Letter of Transmittal or other tender offer material may be directed to the
Information Agent. Stockholders may also contact their broker, dealer,
commercial bank, trust company or other nominee for assistance concerning the
Offer.
------------------------
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE FAIRNESS OR MERITS OF
SUCH TRANSACTION OR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED
IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
The Dealer Manager for the Offer is:
PRUDENTIAL SECURITIES INCORPORATED
August 1, 2000
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
SUMMARY TERM SHEET............................................... 1
INTRODUCTION..................................................... 4
SPECIAL FACTORS.................................................. 6
Background of the Offer..................................... 6
Recommendation of the Independent Committee and the Company
Board; Fairness of the Offer and the Merger; and Opinion
of the Independent Committee's Financial Advisor.......... 9
Position of Purchaser Regarding Fairness of the Offer and
the Merger................................................ 9
Purpose and Structure of the Offer and the Merger; Reasons
for the Offer and the Merger.............................. 10
Plans for the Company After the Offer and the Merger;
Certain Effects of the Offer.............................. 10
The Merger Agreement........................................ 11
Dissenters' Rights.......................................... 16
Beneficial Ownership of Common Stock by Certain Persons..... 20
Transactions and Arrangements Concerning the Shares......... 21
Related Party Transactions.................................. 22
Interests of Certain Persons in the Offer and the Merger.... 22
THE TENDER OFFER................................................. 23
1. Terms of the Offer; Expiration Date......................... 23
2. Acceptance for Payment and Payment for Shares............... 24
3. Procedures for Tendering Shares............................. 25
4. Withdrawal Rights........................................... 28
5. Certain United States Federal Income Tax Consequences....... 28
6. Price Range of Shares; Dividends............................ 29
7. Certain Information Concerning the Company.................. 29
8. Certain Information Concerning Fortress, Purchaser and
Acquisition Sub........................................... 30
9. Source and Amount of Funds.................................. 31
10. Dividends and Distributions................................. 31
11. Certain Effects of the Offer on the Market for the Shares... 31
12. Fees and Expenses........................................... 32
13. Certain Conditions to the Offer............................. 33
14. Certain Legal Matters....................................... 34
15. Miscellaneous............................................... 36
SCHEDULE I....................................................... I-1
</TABLE>
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<PAGE> 3
SUMMARY TERM SHEET
The following are some of the questions that you, as a stockholder of
Brookdale Living Communities, Inc., may have and answers to those questions. We
urge you to read carefully the remainder of this offer to purchase and the
accompanying letter of transmittal and Brookdale's Solicitation/Recommendation
Statement on Schedule 14D-9 which is being mailed to stockholders with these
materials because the information in this summary is not complete and additional
important information is contained in those documents.
WHO IS OFFERING TO BUY MY SECURITIES?
The offer to purchase any and all of the outstanding shares of common stock
of Brookdale for $15.25 per share in cash is being made by Fortress Brookdale
Acquisition LLC, a Delaware limited liability company, which was formed in April
2000 by Fortress Registered Investment Trust to acquire 4,004,350 shares of
Brookdale common stock in a privately negotiated transaction. We are currently
59.3% owned by Fortress and 40.7% owned by Health Partners, an affiliate of
Capital Z Partners, Ltd. Health Partners owns a $100 million principal amount
convertible note issued by Brookdale which is convertible into 5,479,452 shares
of Brookdale common stock and acquired its membership interests in our company
in exchange for its agreement to contribute this convertible note to us.
Fortress Registered Investment Trust is a Delaware business trust whose
business is to make private equity investments in residential and commercial
real estate-related assets. Health Partners is a Bermuda exempted partnership
and an investment vehicle sponsored by Capital Z Partners, Ltd. Wesley R. Edens,
William B. Doniger, Paul H. Warren and Mark H. Tabak, who are members of our
operating committee, currently serve as directors of Brookdale. See "THE TENDER
OFFER -- Section 8. Certain Information Concerning Fortress, Purchaser and
Acquisition Sub."
WHAT ARE THE CLASSES AND AMOUNTS OF SECURITIES SOUGHT IN THE OFFER?
We are seeking to purchase any and all of Brookdale's outstanding common
stock. See "INTRODUCTION."
HOW MUCH ARE YOU OFFERING TO PAY AND WHAT IS THE FORM OF PAYMENT?
We are offering to pay $15.25 per share, net to you in cash, less any
amounts required by law to be withheld and paid to governmental entities. If you
are the record owner of your shares and you tender your shares to us in the
offer, you will not have to pay brokerage fees or similar expenses. If you own
your shares through a broker or other nominee, and your broker tenders your
shares on your behalf, your broker or nominee may charge you a fee for doing so.
You should consult your broker or nominee to determine whether any charges will
apply. See "INTRODUCTION" and "THE TENDER OFFER -- Section 3. Procedures for
Tendering Shares."
DO YOU HAVE THE FINANCIAL RESOURCES TO MAKE PAYMENT?
Fortress, which through its parent, Fortress Investment Fund LLC, has
access to over $700 million in committed uninvested equity capital, has
committed to provide us with sufficient cash to purchase all shares validly
tendered and not properly withdrawn in the offer and will provide funding for
the merger of a newly formed subsidiary with and into Brookdale, which is
expected to follow the successful completion of the offer. The offer is not
conditioned upon any financing arrangements. See "THE TENDER OFFER -- Section 9.
Source and Amount of Funds."
HOW LONG DO I HAVE TO DECIDE WHETHER TO TENDER IN THE OFFER?
You will have at least until 12:00 midnight, New York City time, on
September 5, 2000 to decide whether to tender your shares in the offer. Further,
if you cannot deliver everything that is required in order to make a valid
tender by that time, you may be able to use a guaranteed delivery procedure,
which is described later in this offer to purchase. See "THE TENDER
OFFER -- Section 3. Procedures for Tendering Shares."
1
<PAGE> 4
CAN THE OFFER BE EXTENDED AND UNDER WHAT CIRCUMSTANCES?
Subject to the terms of the merger agreement described in this offer to
purchase, we can extend the offer. We have agreed in the merger agreement that
we may extend the offer from time to time until December 15, 2000 if certain
conditions to the offer have not been satisfied. In addition, we may extend the
offer in connection with an increase of the offer price to the extent required
by law or to acquire additional shares. See "THE TENDER OFFER -- Section 1.
Terms of the Offer; Expiration Date."
HOW WILL I BE NOTIFIED IF THE OFFER IS EXTENDED?
If we extend the offer, we will inform LaSalle Bank National Association,
which is the depositary for the offer, of that fact and will make a public
announcement of the extension, not later than 9:00 a.m., New York City time, on
the day after the day on which the offer was scheduled to expire. See "THE
TENDER OFFER -- Section 1. Terms of the Offer; Expiration Date."
HOW DO I TENDER MY SHARES?
To tender your shares, you must deliver the certificates evidencing your
shares, together with a completed letter of transmittal, to LaSalle Bank
National Association, the depositary for the offer, not later than the time the
offer expires. If your shares are held in street name (that is, through a
broker, dealer or other nominee), the shares can be tendered by your nominee
through The Depository Trust Company. If you cannot deliver a required item to
the depositary by the expiration of the offer, you may get a little extra time
to do so by having a broker, bank or other fiduciary who is a member of the
Securities Transfer Agent Medallion Program or other eligible institution
guarantee that the missing items will be received by the depositary within three
Nasdaq trading days. However, the depositary must receive the missing items
within that three day trading period. See "THE TENDER OFFER -- Section 3.
Procedures for Tendering Shares."
UNTIL WHAT TIME CAN I WITHDRAW PREVIOUSLY TENDERED SHARES?
You can withdraw previously tendered shares at any time until the offer has
expired and, if we have not agreed to accept your shares for payment by
September 29, 2000, you can withdraw them at any time after such time until we
do accept your shares for payment. This right to withdraw will not apply to any
subsequent offering period. See "THE TENDER OFFER -- Section 1. Terms of the
Offer; Expiration Date" and "-- Section 4. Withdrawal Rights."
HOW DO I WITHDRAW PREVIOUSLY TENDERED SHARES?
To properly withdraw shares, you must deliver a written notice of
withdrawal, or a facsimile of one, with the required information to the
depositary while you still have the right to withdraw the shares. See "THE
TENDER OFFER -- Section 4. Withdrawal Rights."
WHAT DOES BROOKDALE'S BOARD OF DIRECTORS THINK OF THE OFFER?
Brookdale's board of directors, after receiving the unanimous
recommendation of the committee of independent directors of the board,
unanimously (except for our four affiliated directors who abstained) determined
that each of the offer and the merger described in this offer to purchase is
fair to and in the best interests of Brookdale's stockholders, approved the
merger agreement, the offer and the merger and the transactions contemplated by
the merger agreement, and recommends that you accept the offer and tender your
shares in the offer. In connection with making their respective recommendations,
the independent committee and the board of directors received an opinion from
Merrill Lynch, Pierce, Fenner & Smith Incorporated to the effect that the
consideration to be received by Brookdale's stockholders (other than us) in the
offer and the merger, taken as a whole, was fair to them from a financial point
of view. See "SPECIAL FACTORS -- Recommendation of the Independent Committee and
the Company Board; Fairness of the Offer and the Merger; and Opinion of the
Independent Committee's Financial Advisor." The reasons for the independent
committee's and the Brookdale board's recommendations and the opinion of the
independent committee's financial advisor are set forth in Brookdale's
Solicitation/Recommendation Statement on Schedule 14D-9 which is being mailed to
stockholders of Brookdale with the tender offer materials.
2
<PAGE> 5
WILL THE TENDER OFFER BE FOLLOWED BY A MERGER IF NOT ALL THE PUBLICLY TRADED
SHARES OF BROOKDALE ARE TENDERED IN THE OFFER?
Yes. Following the offer, we expect that our subsidiary, FBZ Acquisition
Corp., will be merged with and into Brookdale. If the merger takes place,
Brookdale will become a privately owned company, and all of the remaining
stockholders of Brookdale will receive $15.25 per share in cash (or if a higher
price per share were to be paid in the offer, such higher price). See "SPECIAL
FACTORS -- The Merger Agreement."
IF I DECIDE NOT TO TENDER, HOW WILL THE OFFER AFFECT MY SHARES?
If the merger described above takes place, stockholders not tendering in
the offer will receive the same amount of cash per share which they would have
received had they tendered their shares in the offer or may exercise dissenters'
rights. Therefore, if the merger takes place, the only difference to you between
tendering your shares and not tendering your shares is that you will be paid
earlier if you tender your shares in the offer. However, if for some reason the
merger does not take place, and if we purchase all the tendered shares, there
may be so few remaining stockholders and publicly held shares that the shares
will no longer be eligible to be quoted on the Nasdaq National Market, or any
other securities market, there may not be a public trading market for the shares
and Brookdale may cease making filings with the Securities and Exchange
Commission or otherwise cease being required to comply with SEC rules relating
to publicly-held companies. See "SPECIAL FACTORS -- Plans for the Company After
the Offer and the Merger; Certain Effects of the Offer" and "-- Dissenters'
Rights."
WHAT IS THE MARKET VALUE OF MY SHARES AS OF A RECENT DATE?
On April 19, 2000, the last trading day before Brookdale publicly announced
that we had agreed to purchase 4,004,350 shares at $15.00 per share and were
free to commence a tender offer after July 5, 2000, for any and all shares at
not less than $15.00 per share, the last sale price of the shares quoted on the
Nasdaq was $10.75 per share. On July 31, 2000, the last full trading day prior
to the commencement of the offer, the last sale price of the shares reported on
the Nasdaq was $15.00 per share. We advise you to obtain a recent quotation for
the shares in deciding whether to tender your shares. See "THE TENDER
OFFER -- Section 6. Price Range of Shares; Dividends."
WHAT ARE THE PRINCIPAL TAX CONSEQUENCES OF TENDERING SHARES?
The receipt of cash for shares pursuant to the offer will be a taxable
transaction for United States federal income tax purposes and possibly for
state, local and foreign income tax purposes as well. In general, a stockholder
who sells shares pursuant to the offer will recognize gain or loss for United
States federal income tax purposes equal to the difference, if any, between the
amount of cash received and the stockholder's adjusted tax basis in the shares
sold pursuant to the offer. If the shares exchanged constitute capital assets in
the hands of the stockholder, such gain or loss will be capital gain or loss. In
general, capital gains recognized by an individual will be subject to a maximum
United States federal income tax rate of 20% if the shares were held for more
than one year, and if held for one year or less they will be subject to tax at
ordinary income tax rates.
WILL I HAVE TO PAY A STOCK TRANSFER TAX IF I TENDER MY SHARES?
If you instruct the depositary in the letter of transmittal to make the
payment for the shares to the registered holder, you will not incur any stock
transfer tax.
WHO CAN I TALK TO IF I HAVE QUESTIONS ABOUT THE TENDER OFFER?
You can call Corporate Investor Communications, Inc. at (800) 548-1027 or
Prudential Securities Incorporated at (888) 713-4198. Corporate Investor
Communications is acting as the information agent for our offer and Prudential
Securities is acting as the dealer manager for our offer. See the back cover of
this offer to purchase for further information.
3
<PAGE> 6
To the Holders of Common Stock
of Brookdale Living Communities, Inc.
INTRODUCTION
Fortress Brookdale Acquisition LLC, a Delaware limited liability company
("Purchaser"), hereby offers to purchase any and all of the outstanding shares
of common stock, par value $.01 per share (the "Shares" or the "Company Common
Stock"), of Brookdale Living Communities, Inc., a Delaware corporation (the
"Company" or "Brookdale"), at $15.25 per Share, net to the seller in cash (the
"Offer Price"), less any amounts required by law to be withheld and paid to
governmental entities, upon the terms and subject to the conditions set forth in
this offer to purchase ("Offer to Purchase") and in the related Letter of
Transmittal (which together constitute the "Offer"). Purchaser is a limited
liability company owned by Fortress Registered Investment Trust, a Delaware
business trust ("Fortress" or "Parent") and Health Partners ("Health Partners"),
a Bermuda exempted partnership and an investment vehicle sponsored by Capital Z
Partners, Ltd. ("Cap Z"). Since May 18, 2000, Purchaser has beneficially owned
4,004,350 Shares, representing approximately 40.3% of the outstanding common
stock of the Company, and, since July 26, 2000, has beneficially owned a
$100,000,000 principal amount 5 1/2% Convertible Subordinated Note due 2009
issued by the Company (the "Convertible Note") convertible into 5,479,452
Shares. Tendering stockholders will not be obligated to pay brokerage fees or
commissions or, except as set forth in the Letter of Transmittal, transfer taxes
on the purchase of Shares by Purchaser pursuant to the Offer. Purchaser will pay
all charges and expenses of Prudential Securities Incorporated as the Dealer
Manager (the "Dealer Manager" or "Prudential Securities"), Corporate Investor
Communications, Inc. as the Information Agent (the "Information Agent") and
LaSalle Bank National Association as the Depositary (the "Depositary"), incurred
in connection with the Offer.
THE BOARD OF DIRECTORS OF THE COMPANY (THE "COMPANY BOARD"), AFTER
RECEIVING THE UNANIMOUS RECOMMENDATION OF THE COMMITTEE OF INDEPENDENT DIRECTORS
OF THE COMPANY BOARD UNANIMOUSLY (WITH THE FOUR DIRECTORS WHO ARE AFFILIATES OF
PURCHASER ABSTAINING) (A) DETERMINED THAT EACH OF THE OFFER AND THE MERGER IS
FAIR TO AND IN THE BEST INTERESTS OF THE COMPANY'S STOCKHOLDERS (OTHER THAN
PURCHASER), (B) APPROVED THE MERGER AGREEMENT, THE OFFER AND THE MERGER AND THE
TRANSACTIONS CONTEMPLATED BY THE MERGER AGREEMENT, AND (C) RECOMMENDS THAT THE
COMPANY'S STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE
OFFER.
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED ("MERRILL LYNCH"),
FINANCIAL ADVISOR TO THE INDEPENDENT COMMITTEE, HAS DELIVERED AN OPINION TO THE
COMPANY BOARD AND THE INDEPENDENT COMMITTEE TO THE EFFECT THAT THE ALL CASH
CONSIDERATION TO BE RECEIVED BY THE COMPANY'S STOCKHOLDERS (OTHER THAN
PURCHASER) IN THE OFFER AND THE MERGER, TAKEN AS A WHOLE, IS FAIR FROM A
FINANCIAL POINT OF VIEW TO SUCH STOCKHOLDERS. THE REASONS FOR THE INDEPENDENT
COMMITTEE'S AND THE COMPANY BOARD'S RECOMMENDATIONS AND MERRILL LYNCH'S OPINION
ARE SET FORTH IN THE COMPANY'S SOLICITATION/RECOMMENDATION STATEMENT ON SCHEDULE
14D-9 (THE "SCHEDULE 14D-9") WHICH IS BEING MAILED TO STOCKHOLDERS OF THE
COMPANY TOGETHER WITH THE OFFER. SEE "SPECIAL FACTORS RECOMMENDATION OF THE
INDEPENDENT COMMITTEE AND THE COMPANY BOARD; FAIRNESS OF THE OFFER AND THE
MERGER; AND OPINION OF THE INDEPENDENT COMMITTEE'S FINANCIAL ADVISOR."
THE OFFER IS NOT CONDITIONED UPON ANY MINIMUM NUMBER OF SHARES BEING
TENDERED. THE OFFER IS SUBJECT TO CERTAIN CONDITIONS. SEE "THE TENDER
OFFER -- SECTION 13. CERTAIN CONDITIONS TO THE OFFER."
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<PAGE> 7
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of July 26, 2000 (the "Merger Agreement"), by and among Fortress, Purchaser,
FBZ Acquisition Corp. ("Acquisition Sub") and the Company. Pursuant to the
Merger Agreement, as soon as practicable after the completion of the Offer and
the satisfaction or waiver of the conditions set forth in the Merger Agreement,
Purchaser intends to cause Acquisition Sub to be merged with and into the
Company (the "Merger") in accordance with the applicable provisions of the
Delaware General Corporation Law (the "DGCL"). Following the Merger, the Company
shall be the surviving corporation (the "Surviving Corporation") and the
separate corporate existence of Acquisition Sub shall cease.
At the effective time of the Merger (the "Effective Time") (i) each issued
and outstanding Share (other than Shares held by Purchaser and any of its
affiliates or subsidiaries and Shares held by stockholders who have properly
exercised dissenters' rights (the "Dissenting Shares") under the DGCL) will be
converted into and represent the right to receive an amount equal to the Offer
Price (the "Merger Consideration"), and (ii) each share of common stock, par
value $.01 per share, of Acquisition Sub (the "Acquisition Sub Common Stock"),
then issued and outstanding will be converted into and become one share of
common stock of the Surviving Corporation ("Surviving Corporation Common
Stock"). See "SPECIAL FACTORS -- The Merger Agreement" for a description of the
Merger and the Merger Agreement.
If Purchaser owns 90% or more of the outstanding Shares after the Offer,
then Purchaser intends to cause Acquisition Sub to effect the Merger as a
"short-form" merger under the DGCL, without a vote of the stockholders of the
Company (a "Short-Form Merger"). See "SPECIAL FACTORS -- The Merger Agreement."
Purchaser has been advised by the Company that, to the best of the
Company's knowledge, all of the Company's officers and directors, currently
intend to tender all Shares owned by them pursuant to the Offer. See "SPECIAL
FACTORS -- Interests of Certain Persons in the Offer and the Merger."
The information contained in this Offer to Purchase concerning the Company,
including, without limitation, information about the deliberation of the Company
Board and the Independent Committee in connection with the Offer and the Merger
and the opinion of Merrill Lynch, the Independent Committee's financial advisor,
was taken from public information or was provided by the Company and is set
forth in greater detail in the Schedule 14D-9 filed by the Company which is
being mailed to stockholders of the Company with this Offer to Purchase.
Purchaser takes no responsibility for the accuracy or completeness of such
information.
STOCKHOLDERS ARE URGED TO READ THIS OFFER TO PURCHASE, THE RELATED LETTER
OF TRANSMITTAL AND THE SCHEDULE 14D-9 CAREFULLY BEFORE DECIDING WHETHER TO
TENDER THEIR SHARES.
5
<PAGE> 8
SPECIAL FACTORS
BACKGROUND OF THE OFFER
In early 1999, Prudential Securities introduced representatives of Cap Z to
Darryl W. Copeland, Jr., then Executive Vice President and Chief Financial
Officer and director of Brookdale, while he was attempting to raise cash in an
offering of subordinated debt for the Company. Negotiations ensued between Cap Z
and the Company regarding a potential investment in the Company by Health
Partners but were terminated by Cap Z shortly thereafter.
In the middle of March 1999, the Company contacted Cap Z and indicated that
it was still interested in pursuing a possible investment in the Company by
Health Partners. Cap Z and its counsel, Weil, Gotshal & Manges LLP, conducted
due diligence during late March and early April of 1999. On April 27, 1999, the
Company executed a definitive agreement for the sale of the Convertible Note,
which subsequently closed on May 14, 1999.
Following the closing of that transaction, and pursuant to the stockholders
agreement (the "Stockholder's Agreement") entered into in connection with the
purchase of the Convertible Note, Paul H. Warren, a Cap Z partner, and Mark H.
Tabak, a partner of Health Partners, were appointed to the Company Board. Also,
as part of the Stockholders Agreement, Health Partners entered into a standstill
provision (the "HP Standstill") with the Company and The Prime Group, Inc.
(together with its affiliates, "Prime"). The HP Standstill limited the ability
of Health Partners and their affiliates to purchase or otherwise acquire, alone
or in collaboration with others, beneficial ownership of more than 49.9% of
Brookdale's Common Stock.
In late January 2000, Fortress commenced discussions with Michael W.
Reschke, Prime's Chairman, Chief Executive Officer and President who was then
also Chairman of the Board of Brookdale, regarding a possible investment by
Fortress in Prime. In early March, following a period of due diligence, and for
a variety of reasons, Fortress and Prime mutually agreed to terminate
discussions regarding an investment by Fortress in Prime but agreed to continue
discussions regarding the acquisition of certain investments owned by Prime. On
March 27, 2000, representatives of Fortress began discussions with Mr. Reschke
and with Prime with respect to a possible acquisition of the Company or a
privately negotiated purchase of the Company Common Stock then beneficially
owned by Prime.
On April 6, 2000, Fortress sent a letter to the Company Board requesting an
opportunity to discuss a possible business combination pursuant to which
Fortress, together with Health Partners, would acquire all the issued and
outstanding Shares of Company Common Stock at a price to be mutually agreed upon
after negotiation. In the letter, Fortress proposed that Mr. Reschke and Prime
agree not to sell the Shares they owned prior to a specified date. Fortress also
requested that the Company Board waive the applicability of Section 203 of the
DGCL to its proposed private transaction with Mr. Reschke and Prime (the
"Section 203 waiver"), and sought the approval of the Company Board to commence
discussions with Health Partners with a view to joining in Fortress' acquisition
proposal for the entire Company.
On April 11, 2000 the Company Board authorized a committee of independent
directors, consisting of Wayne D. Boberg, Darryl W. Hartley-Leonard and Bruce L.
Gewertz (the "Independent Committee"), to discuss the terms on which Fortress
could acquire all of the shares owned by Mr. Reschke and Prime, and instructed
the Independent Committee to negotiate and execute a standstill agreement with
Fortress.
During the next week, discussions, negotiations and exchanges of draft
documents ensued among Fortress, its counsel Skadden, Arps, Slate, Meagher &
Flom LLP, the Company and its counsel Winston & Strawn, and Prime represented by
Robert Rudnik, Esq., Executive Vice President and General Counsel of the Company
and Prime.
On April 12, 2000 during a telephone conversation between representatives
of Fortress, the Company, acting through the Independent Committee, and Prime,
the Company indicated that it would be prepared
6
<PAGE> 9
to approve the transfer of Prime's shares to Fortress, subject to certain
conditions described below, but that it was not prepared at that time to permit
Fortress to join with Health Partners or to negotiate the sale of the entire
Company. The Company indicated that the execution of a mutually satisfactory
standstill agreement was a condition to the Section 203 waiver. Later, on April
12, 2000, Fortress sent a letter to the Independent Committee reiterating its
interest in a possible business combination involving the Company and set forth
the terms of a proposed standstill agreement between the Company and Fortress to
be executed simultaneously with the execution of a stock purchase agreement
relating to the sale of the Prime Shares to Fortress.
On April 20, 2000, Fortress entered into a privately negotiated transaction
with Mr. Reschke and Prime to acquire 4,004,350 Shares at $15.00 per Share in
cash (the "Stock Purchase Transaction"), the rights and obligation under which
Fortress subsequently assigned to Purchaser. Purchaser's acquisition represented
approximately 40.3% of the Company's outstanding Shares and was subject to
approval of the Company Board acting through the Independent Committee and
regulatory approval under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act").
On that day, the Independent Committee approved the Stock Purchase
Transaction for purposes of DGCL sec.203 based, in part, on the simultaneous
execution of a standstill agreement by and between Fortress and the Company
dated as of April 20, 2000 (the "Fortress Standstill Agreement").
Pursuant to the Fortress Standstill Agreement with the Company, Purchaser
agreed that until July 5, 2000, it would not purchase any additional Shares and
that, except for making a cash tender offer for all of the Company's Shares at
not less than $15.00 per share, after such date, it would not, without the
consent of the Company, acquire any additional Shares until the earlier of two
years or until Purchaser had acquired a majority of the Company's Shares in a
manner permitted by the Fortress Standstill Agreement, such as pursuant to a
cash tender offer. Restrictions contained in both the Fortress Standstill
Agreement and the HP Standstill, however, are extinguished if any person, other
than Health Partners, Fortress or any of their affiliates, acquires or announces
its intention to acquire 20% or more of the Company Common Stock or publicly
announces its intention to commence a public proxy contest pursuant to which
such person seeks to defeat or otherwise challenge the election of any Health
Partners or Fortress designee to the Company Board.
On April 20, 2000, the Company issued a press release announcing its
approval of the Stock Purchase Transaction and describing the terms of the
Fortress Standstill Agreement including the fact that Fortress would be free to
make a cash tender offer for any and all remaining outstanding Shares at not
less than $15.00 per Share after July 5, 2000. On April 21, 2000, the Company
filed a current report on Form 8-K with the Securities and Exchange Commission
(the "SEC") in which the terms of the Stock Purchase Transaction were described
and with which the material agreements related thereto, including the Fortress
Standstill Agreement, were filed as exhibits. The Stock Purchase Transaction was
consummated on May 18, 2000, following compliance with the HSR Act, and on May
22, 2000, Purchaser filed a Schedule 13D with the SEC which also included the
material agreements as exhibits. Upon completion of the Stock Purchase
Transaction, Mr. Reschke resigned as the Company's Chairman of the Board and as
a member of the Company Board and two of Purchaser's designees, Wesley R. Edens
and William B. Doniger, were elected by the Company Board to fill the vacancy
created by Mr. Reschke's resignation and to fill a previously existing vacancy
on the Company Board. Following its approval of the Stock Purchase Transaction,
the Independent Committee interviewed and retained independent legal and
financial advisors.
During the month of May 2000 representatives of Purchaser informally
reiterated their interest in acquiring all of the remaining outstanding shares
of the Company. On June 1, 2000, Purchaser sent a letter to the Independent
Committee expressing its desire to acquire the entire equity interest in the
Company at $15.00 per Share and provided the Independent Committee with a form
of merger agreement that contemplated this Offer as the first step (the
"Proposal"). On June 7, 2000 the Company Board, acting through the Independent
Committee, consented to the commencement of formal discussions between Fortress
and Health Partners and their affiliates. On June 19, 2000, Fortress and Health
Partners sent a letter to the Independent Committee stating that an informal
agreement had been reached between
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them and reiterating the offer to purchase the remaining outstanding Shares at
$15.00 per share. Various telephone discussions and meetings between Purchaser's
representatives and members of the Independent Committee and its financial and
legal advisors, Merrill Lynch and Gardner, Carton & Douglas, respectively,
ensued. During those discussions, Merrill Lynch negotiated on behalf of the
Independent Committee for Purchaser to increase the proposed Merger
Consideration in the Proposal.
On June 20, 2000, Purchaser sent a letter to the Independent Committee in
which it specifically declined to increase the Merger Consideration but offered
to eliminate the standard "no solicitation" feature contained in its draft
Merger Agreement and to replace the "break-up fee" in its proposal with a
$750,000 reimbursement provision, with the intention of reducing impediments to
the potential entrance of competing bidders. In its letter, Purchaser emphasized
the premium being paid over the market price of the Company Common Stock at the
time Purchaser's intention to purchase shares from Prime and Mr. Reschke was
first disclosed, and the apparent absence of competing proposals despite the
lapse of time since the public disclosure of Purchaser's ability to make the
offer at $15.00.
On June 22, 2000, in a telephone conversation between Purchaser and
representatives of the Independent Committee, Purchaser agreed to increase the
Merger Consideration in the Proposal from $15.00 to $15.25 per Share. Between
June 22 and June 30, representatives of Purchaser and the Independent Committee
and their respective counsel negotiated certain aspects of the Merger Agreement.
At a meeting on June 30, 2000, the Independent Committee reviewed with
counsel and its financial advisor the terms of the draft Merger Agreement, and
unanimously recommended to the Company Board that the Merger Agreement be
approved in substantially the form presented to the Company Board with such
changes as the officers of the Company executing such Merger Agreement would
evidence by their signatures. Acting on the unanimous recommendation of the
Independent Committee and the opinion of Merrill Lynch, the Company Board
unanimously (with Messrs. Edens, Doniger, Warren and Tabak, who are affiliates
of Purchaser, abstaining) approved the Merger Agreement in substantially the
form presented to the Company Board with such changes as the officers executing
such Merger Agreement on behalf of the Company would evidence by their
signatures and directed the appropriate officers of the Company to take
necessary and appropriate steps to effect the transactions contemplated by the
Merger Agreement, subject to the resolution of certain customary conditions in
the draft Merger Agreement, including principally the obtaining of certain third
party consents, the need for which would be triggered by a change in control of
the Company.
Between June 30 and July 26, 2000, the Company negotiated with an affiliate
of Senior Housing Properties Trust from which affiliates of the Company leased
four properties pursuant to a master lease agreement that had a change of
control provision that would be triggered by the completion of the Offer. On
July 26, 2000, the Company signed a definitive agreement to purchase the four
facilities that were subject to such master lease for $123 million (the "SHPT
Purchase Agreement"). The facilities to be purchased are The Hallmark, located
in Chicago, Illinois, The Springs of East Mesa, located in Mesa, Arizona, The
Gables at Brighton, located in Brighton, New York, and Park Place, located in
Spokane, Washington, which in the aggregate contain 837 units. In accordance
with the SHPT Purchase Agreement, the Company made a $12.3 million earnest money
escrow deposit, creditable against the purchase price, and the purchase must be
completed by October 31, 2000.
On July 26, 2000, the Company received a written agreement from affiliates
of Banc One to cancel warrants to purchase Company Common Stock for no
consideration, which cancellation is a condition to the consummation of the
Merger.
On July 26, 2000, Purchaser, Fortress, Acquisition Sub and the Company
entered into the Merger Agreement, and Purchaser and the Company issued a joint
press release announcing that Purchaser had agreed to acquire any and all of the
publicly held Shares of the Company and that the Company Board approved the
Offer after receiving the unanimous recommendation of the Independent Committee.
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<PAGE> 11
RECOMMENDATION OF THE INDEPENDENT COMMITTEE AND THE COMPANY BOARD; FAIRNESS OF
THE OFFER AND THE MERGER; AND OPINION OF THE INDEPENDENT COMMITTEE'S FINANCIAL
ADVISOR.
In negotiating the Stock Purchase Transaction and the Merger Agreement
pursuant to which the Offer is being made, the relationship of Fortress and
Purchaser to the Company has been essentially that of an arm's-length third
party purchaser. None of the directors on the Company Board who are affiliates
of Purchaser took any part in the discussions or deliberations on behalf of the
Company in the negotiations leading to the Merger Agreement, which discussions
and negotiations were conducted under the direction of the Independent
Committee.
On June 30, 2000, the Independent Committee unanimously determined that
each of the Offer and the Merger is fair to and in the best interest of the
stockholders of the Company (other than Purchaser) and unanimously determined to
recommend that the Company Board approve and adopt the Merger Agreement, the
Offer and the Merger and the transactions contemplated by the Merger Agreement,
and recommend to the Company's stockholders that they accept the Offer and
tender their Shares pursuant to the Offer. At a meeting held immediately
following the meeting of the Independent Committee, on June 30, 2000, the
Company Board unanimously (with Messrs. Edens, Doniger, Warren and Tabak
abstaining) determined that each of the Offer and the Merger is fair to and in
the best interests of the stockholders of the Company (other than Purchaser),
approved and adopted the Merger Agreement, the Offer and the Merger and the
transactions contemplated by the Merger Agreement, and determined to recommend
that the Company's stockholders accept the Offer and tender their Shares
pursuant to the Offer. In connection with such recommendation, the Independent
Committee received from Merrill Lynch an oral opinion (which was subsequently
confirmed in writing) to the effect that, as of such date, the amount of $15.25
per Share in cash to be received by the holders of Company Common Stock (other
than Purchaser) pursuant to the Offer and the Merger, taken as a whole, was fair
from a financial point of view to such stockholders. The description of the
steps taken by the Independent Committee in determining to approve and recommend
the Merger Agreement and the Offer and the opinion of the Independent
Committee's financial advisor are set forth in full in the Schedule 14D-9 which
is being sent to stockholders of the Company together with the offer materials.
See the Schedule 14D-9 "Item 4. The Solicitation or Recommendation" which is
specifically incorporated herein by reference. Stockholders are urged to
carefully review the Schedule 14D-9 accompanying the Offer.
POSITION OF PURCHASER REGARDING FAIRNESS OF THE OFFER AND THE MERGER
Purchaser believes that the consideration to be received by the Company's
stockholders (other than Purchaser) pursuant to the Offer and the Merger is fair
to and in the best interests of such stockholders. Purchaser bases its belief on
the following facts: (i) Purchaser was able to purchase Shares in the privately
negotiated Stock Purchase Transaction with Prime, the Company's principal
stockholder, and Mr. Reschke who was then the Company's Chairman of the Board
and Chief Executive Officer, both of which were well situated to know both the
inherent and potential value of the Company, at a price of $15.00 per Share,
which represented approximately a 40% premium to the then prevailing market
price of the Company; (ii) the Independent Committee and its advisors
successfully negotiated with Purchaser to increase the Offer Price; (iii) the
Independent Committee through arm's-length negotiation was able to eliminate
from Purchaser's Proposal a standard "no-solicitation" provision and replace the
requested break-up fee with a reimbursement provision, thereby permitting the
Company to respond freely to indications of interest from unaffiliated
third-party potential bidders and remove financial impediments to such a bid;
(iv) the Independent Committee concluded that each of the Offer and the Merger
is fair to and in the best interests of the Company; (v) notwithstanding that
the opinion of the Independent Committee's financial advisor was provided solely
for the information and assistance of the Independent Committee and that
Purchaser is not entitled to rely on such opinion, the Company Board and the
Independent Committee received an opinion from Merrill Lynch to the effect that
the $15.25 per Share in cash to be received by stockholders (other than
Purchaser) in the Offer and the Merger is fair from a financial point of view to
such stockholders; (vi) consideration of the historical and projected financial
performance of the Company and its financial results; (vii) the consideration to
be paid in the Offer represents a premium of
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<PAGE> 12
approximately 42% over the reported closing price on the last full trading day
prior to the announcement that Fortress intended to purchase shares then held by
Prime and Mr. Reschke, and a 17% premium to the average market price over the
last twelve months; (viii) the Offer and the Merger will each provide
consideration to the stockholders entirely in cash; (ix) at least since April
20, 2000, Purchaser's intention to make an Offer at $15.00 per share and the
Company's availability as an acquisition candidate has been known in the
investment community, and to Purchaser's knowledge, the Company has not received
any higher proposals for the acquisition of the Company; and (x) the other
factors referred to in the Schedule 14D-9 as having been taken into account by
the Independent Committee and the Company Board.
Purchaser did not find it practicable to assign, nor did it assign,
relative weights to the individual factors considered in reaching its conclusion
as to the fairness of the Offer. In light of the nature of the Company's
business, Purchaser did not deem net book value or liquidation value to be
relevant indicators of the value of the Shares.
The foregoing discussion of the information and factors considered and
given weight by Purchaser is not intended to be exhaustive but is believed to
include all material factors considered by Purchaser.
PURPOSE AND STRUCTURE OF THE OFFER AND THE MERGER; REASONS FOR THE OFFER AND THE
MERGER
The purpose of the Offer and the Merger is for Purchaser to increase its
ownership of the outstanding Company Common Stock from approximately 40.3% to
100%. Upon the consummation of the Merger, the Company will become a wholly
owned subsidiary of Purchaser. Purchaser presently intends to leave the
Convertible Note outstanding. The acquisition of Shares not owned by Purchaser
or its affiliates has been structured as a cash tender offer followed by a cash
merger in order to effect a prompt and orderly transfer of ownership of the
Company from the public stockholders to Purchaser and its affiliates and provide
stockholders with cash for all of their Shares. Purchaser contemplates that,
from time to time, it may seek equity contributions from outside investors in
exchange for membership interests in Purchaser.
PLANS FOR THE COMPANY AFTER THE OFFER AND THE MERGER; CERTAIN EFFECTS OF THE
OFFER
Pursuant to the Merger Agreement, upon completion of the Offer, Purchaser
intends to effect the Merger in accordance with the Merger Agreement. See
"SPECIAL FACTORS -- The Merger Agreement."
Except with respect to the transactions contemplated by the SHPT Purchase
Agreement and as otherwise described in this Offer to Purchase, Purchaser has no
current plans or proposals which relate to or would result in: (i) other than
the Merger, an extraordinary corporate transaction, such as a reorganization or
liquidation involving the Company; (ii) a sale or transfer of a material amount
of assets of the Company; (iii) any change in the management of the Company or
any change in any material term of the employment contract of any executive
officer; or (iv) any other material change in the Company's corporate structure
or business.
Nevertheless, Purchaser may initiate a review of the Company and its
assets, corporate structure, capitalization, operations, properties, policies,
management and personnel to determine what changes, if any, would be desirable
following the Merger in order to best organize and integrate the activities of
the Company. In particular, the Merger Agreement provides that, following the
Offer but prior to the effective date of the Merger, if Purchaser owns more than
fifty percent of the Shares, Purchaser is entitled to nominate for election to
the Company Board additional directors to reflect its proportionate ownership
interest in the Company's outstanding Shares and, although Purchaser has no
current plans with respect to changes in the present dividend rate and policy,
indebtedness and capitalization of the Company, Purchaser expressly reserves the
right to make any changes that it deems necessary or appropriate in light of its
review or in light of future developments.
As a result of the Offer, Purchaser's direct interest in the Company's net
book value and net earnings will increase to the extent of the number of Shares
purchased under the Offer. Following consummation of
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the Merger, Purchaser's direct interest in such items will increase to 100% and
Purchaser will be entitled to all benefits resulting from that interest,
including all income generated by the Company's operations and any future
increase in the Company's value and the right to elect all members of the
Company Board. Similarly, Purchaser will also bear the risk of losses generated
by the Company's operations and any decrease in the value of the Company after
the Merger. Upon consummation of the Merger, the Company will become a privately
held corporation. Accordingly, stockholders will not have the opportunity to
participate directly in the earnings and growth of the Company after the Merger
and will not have any right to vote on corporate matters. Similarly,
stockholders will not face the risk of losses generated by the Company's
operations or decline in the value of the Company after the Merger.
FOLLOWING THE CONSUMMATION OF THE MERGER, THE SHARES WILL NO LONGER BE
QUOTED ON THE NASDAQ. In addition, the registration of the Shares and the
obligation of the Company to file reports under the Securities Exchange Act of
1934, as amended (the "Exchange Act") will be terminated. Accordingly, following
the Merger there will be no publicly traded Company Common Stock outstanding.
See "THE TENDER OFFER -- Section 11. Certain Effects of the Offer on the Market
for the Shares." It is expected that, if Shares are not accepted for payment by
Purchaser pursuant to the Offer and the Merger is not consummated, the Company's
current management, under the general direction of the Company Board, will
continue to manage the Company as an ongoing business.
THE MERGER AGREEMENT
THE FOLLOWING IS A SUMMARY OF CERTAIN PROVISIONS OF THE MERGER AGREEMENT,
WHICH HAS BEEN FILED AS AN EXHIBIT TO THE FORM 8-K FILED BY THE COMPANY WITH THE
SEC ON JULY 28, 2000. SUCH SUMMARY IS NOT INTENDED TO BE COMPLETE AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE MERGER AGREEMENT. CAPITALIZED
TERMS NOT OTHERWISE DEFINED IN THE FOLLOWING SHALL HAVE THE MEANINGS SET FORTH
IN THE MERGER AGREEMENT.
The Offer. Pursuant to the Merger Agreement, Purchaser is obligated to
commence the Offer as promptly as practicable, but in no event prior to Tuesday,
August 1, 2000. Following the satisfaction or waiver of the conditions to the
Offer, Purchaser shall accept for payment, in accordance with the terms of the
Offer, any and all Shares which have been validly tendered and not withdrawn
pursuant to the Offer as soon as legally permitted after the commencement
thereof. The obligations of Purchaser to commence the Offer and to accept for
payment and to pay for any Shares tendered pursuant to the Offer is subject only
to the conditions specified in "THE TENDER OFFER -- Section 13. Certain
Conditions to the Offer."
The Merger Agreement provides that, without the written consent of the
Company, Purchaser shall not (i) decrease the Offer Price, (ii) decrease the
number of shares sought, (iii) change the form of consideration to be paid for
Shares pursuant to the Offer, or (iv) otherwise amend the Offer in a manner that
would adversely affect the holders of Shares (including the conditions set forth
in Annex A to the Merger Agreement). However, pursuant to the Merger Agreement,
under certain circumstances specified in the Merger Agreement, Purchaser may
extend the Offer without the consent of the Company.
The Merger. The Merger provides that, subject to the terms and conditions
of the Merger Agreement, Purchaser intends to transfer all of the Shares
purchased by it in the Offer, and all of the Shares of Common Stock held by
Purchaser prior to the Offer, to Acquisition Sub. Acquisition Sub will then be
merged with and into the Company in accordance with the applicable provisions of
the DGCL as soon as practicable after the satisfaction or waiver of the
conditions to the Merger set forth in the Merger Agreement. Following the
Merger, the Company shall be the Surviving Corporation and the separate
corporate existence of Acquisition Sub shall cease. At the Effective Time, by
virtue of the Merger and without any action on the part of any holder of Shares,
(i) each Share issued and outstanding immediately prior to the Effective Time
other than Shares held in the Company's treasury or owned by Purchaser will be
converted into and represent the right to receive the Merger Consideration, and
(ii) each share of Acquisition Sub Common Stock issued and outstanding
immediately prior to the Effective Time will be converted into one share of
Surviving Corporation Common Stock. Dissenting Shares shall not be converted
into the Merger Consideration and will only be entitled to the rights granted by
the DGCL as described in "SPECIAL FACTORS -- Dissenters' Rights."
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<PAGE> 14
The Merger Agreement also provides that: (i) the Restated Certificate of
Incorporation and the Amended and Restated Bylaws of the Company in effect upon
consummation of the Merger shall be the Restated Certificate of Incorporation
and Amended and Restated Bylaws of the Surviving Corporation, (ii) the directors
of Acquisition Sub immediately prior to the Effective Time shall be the initial
directors of the Surviving Corporation until their respective successors are
duly elected or appointed and qualified in the manner provided in the Restated
Certificate of Incorporation and Amended and Restated Bylaws of the Surviving
Corporation, and (iii) the officers of the Company immediately prior to the
Effective Time shall be the initial officers of the Surviving Corporation until
their respective successors are duly elected or appointed and qualified in the
manner provided in the Restated Certificate of Incorporation and Amended and
Restated Bylaws of the Surviving Corporation.
Stockholders Meeting. The Company has agreed in the Merger Agreement that,
if required by applicable law, the Company will (i) duly call, give notice of,
convene and hold a special meeting of stockholders as soon as practicable
following the acceptance for payment and purchase of Shares by Purchaser
pursuant to the Offer to consider and vote upon the approval and adoption of the
Merger Agreement and the Merger, (ii) prepare and file with the SEC a
preliminary proxy or information statement relating to the Merger Agreement and
the Merger, (iii) include in the proxy statement the recommendations of the
Company Board that the stockholders of the Company vote in favor of the approval
and adoption of the Merger Agreement and the Merger, and (iv) use its reasonable
best efforts to solicit from stockholders proxies in favor of the Merger and
take all other actions necessary, or, in the reasonable opinion of Purchaser,
advisable to secure any vote or consent of stockholders required by Delaware law
to effect the Merger.
Interim Operations. The Company has agreed that, prior to the Effective
Time, except as otherwise expressly contemplated by the Merger Agreement or
unless Purchaser will otherwise agree in writing after the date of the Merger
Agreement and prior to the time the directors designated by Purchaser have been
elected to the Company Board, the business of the Company and its subsidiaries
will be conducted only in the ordinary course of business and to the extent
consistent therewith. Each of the Company and its subsidiaries will use its
reasonable best efforts to preserve in all material respects its business
organization intact and to preserve the goodwill of those having business
relationships with any of them. In addition, except for matters expressly
contemplated by the Merger Agreement, from the date of the Merger Agreement to
the earlier of the Effective Time and the time the directors designated by
Purchaser are elected to the Company Board:
(i) none of the Company or any of its subsidiaries will (a) amend its
Restated Certificate of Incorporation or Amended and Restated By-laws or
similar organizational documents; (b) split, combine or reclassify any
shares of any class or series of its capital stock; (c) declare, set aside
or pay any dividend or other distribution payable in cash, stock or
property with respect to its capital stock (other than dividends from any
of its subsidiaries of the Company to the Company or any other subsidiary
of the Company); (d) issue or sell any additional shares of, or securities
convertible into or exchangeable for, or options, warrants, calls,
commitments or rights of any kind to acquire, any shares of capital stock
of any class of the Company or its subsidiaries except for issuances of
Company Common Stock upon the exercise of options under the Company's
option plans or upon the exercise of Warrants; or (e) redeem, purchase or
otherwise acquire directly or indirectly any of its capital stock, except
pursuant to the option plans;
(ii) neither the Company nor its subsidiaries shall (a) acquire, sell,
lease or dispose of any material assets, other than in the ordinary and
usual course of business and consistent with past practice; (b) incur or
modify any material indebtedness or other liability, other than in the
ordinary and usual course of business and consistent with past practice;
(c) modify or amend in any material respect or terminate any of its
material contracts or waive, release or assign any material rights or
claims, except in the ordinary course of business and consistent with past
practice; (d) assume, guarantee, endorse or otherwise become liable or
responsible (whether directly, contingently or otherwise) for the material
obligations of any other person (other than subsidiaries of the Company),
except in the ordinary and usual course of business and consistent with
past practice; (e) make any
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<PAGE> 15
material loans, advances or capital contributions to, or investments in,
any other person (other than to the wholly owned subsidiaries of the
Company); or (f) enter into any material commitment or transaction
(including, but not limited to, any capital expenditure or purchase, sale
or lease of assets or real estate);
(iii) except as may be required or contemplated by the Merger
Agreement or in the ordinary and usual course of business, the Company
shall not terminate or materially amend any of its Plans;
(iv) except as otherwise specifically provided in the Merger Agreement
or in the Schedule 14D-9, the Company shall not make any change in the
compensation payable or to become payable to any of its officers,
directors, employees, agents or consultants (other than normal recurring
increases in wages to employees who are not officers or directors or
affiliates in the ordinary course of business consistent with past
practice) or to persons providing management services, or enter into or
amend any employment, severance, consulting, termination or other agreement
(other than in the ordinary course of business consistent with past
practice) or employee benefit plan or make any loans to any of its
officers, directors, employees, affiliates, agents or consultants or make
any change in its existing borrowing or lending arrangements for or on
behalf of any of such persons pursuant to an employee benefit plan or
otherwise;
(v) neither the Company nor any of its subsidiaries will pay,
repurchase, discharge or satisfy any of its claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction in the
ordinary course of business and consistent with past practice or pursuant
to contractual requirements existing on the date of the Merger Agreement,
of claims, liabilities or obligations reflected or reserved against in, or
contemplated by, the consolidated financial statements (or the notes
thereto) of the Company and its consolidated subsidiaries;
(vi) neither the Company nor any of its subsidiaries will adopt a plan
of complete or partial liquidation, dissolution, merger, consolidation,
restructuring, recapitalization or other reorganization of the Company or
any of its subsidiaries (other than the Merger);
(vii) neither the Company nor any of its subsidiaries will change any
of the accounting methods used by it unless required by the SEC, GAAP or
applicable law;
(viii) except as provided in the Merger Agreement, neither the Company
nor any of its subsidiaries will take, or agree to commit to take, any
action that would or is reasonably likely to result in any of the
conditions to the Offer set forth in Annex A to the Merger Agreement or any
of the conditions to the Merger set forth in Article IV of the Merger
Agreement not being satisfied, or would make any representation or warranty
of the Company contained in the Merger Agreement inaccurate in any material
respect at, or as of any time prior to, the Effective Time, or that would
materially impair the ability of the Company, Purchaser or the holders of
Shares to consummate the Offer or the Merger in accordance with the terms
hereof or materially delay such consummation; and
(ix) neither the Company nor any of its subsidiaries will authorize or
propose any of the foregoing, or enter into any contract, agreement,
commitment or arrangement to do any of the foregoing.
Indemnification and Insurance. From and after the Effective Time,
Purchaser and the Surviving Corporation will jointly and severally indemnify all
directors, officers, employees and agents against all losses arising out of
their respective positions or the Merger Agreement with respect to matters
occurring before the Effective Time to the fullest extent permitted by Delaware
law, the Company's Restated Certificate of Incorporation or Amended and Restated
Bylaws, or any applicable indemnification agreements. Purchaser has agreed to
maintain in effect for six years from the Effective Time, if available, the
current directors' and officers' liability insurance policies maintained by the
Company (provided that Purchaser may substitute therefor policies of at least
the same coverage containing terms and conditions which are not materially less
favorable). In addition, Purchaser agreed that, in the event Purchaser or the
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Surviving Corporation or any of its successors or assigns: (i) consolidates with
or merges into any other person and shall not be the continuing or Surviving
Corporation or entity in such consolidation or merger or (ii) transfers or
conveys all or any substantial portion of its properties and assets to any
person, then, and in each such case, proper provision shall be made so that the
successors and assigns of such party assume the indemnification obligations of
such party as contemplated by the Merger Agreement.
Representations and Warranties. The Merger Agreement contains various
customary representations and warranties of the parties thereto including among
others, representations as to due organization and existence, capitalization,
corporate authority, no violation of charter or by-laws, debt instruments or
material agreements of the Company or applicable law resulting from the Offer
and the Merger, accuracy of the Company's public filings, including financial
statements, absence of any material adverse change in the Company's business,
absence of undisclosed liabilities or litigation, and the accuracy of
information included in certain materials in connection with the Offer and
Merger.
Conditions to the Merger. The Merger Agreement provides that the
respective obligations of Purchaser and the Company to consummate the Merger are
subject to the satisfaction or waiver (subject to applicable law) at or prior to
the Effective Time of each of the following conditions: (a) the Merger Agreement
shall have been approved and adopted by the requisite vote of the stockholders
of the Company, if required by applicable law and the Company's Restated
Certificate of Incorporation and Amended and Restated By-laws; (b) all
regulatory approvals and third party consents, if any, shall have been obtained,
except where the failure to have obtained any such approvals would not have a
material adverse effect on the Company; (c) no governmental entity or federal or
state court of competent jurisdiction shall have enacted, issued, promulgated,
enforced or entered any statute, rule, regulation, executive order, decree,
injunction or other order (whether temporary, preliminary or permanent) which is
in effect and which prohibits consummation of the Merger; and (d) Purchaser or
its affiliates shall have accepted for payment and paid for all the Shares
validly tendered and not withdrawn pursuant to the Offer. The obligations of
Purchaser to consummate the Merger are further subject to the satisfaction or
waiver of the following conditions: (x) all actions contemplated in the Merger
Agreement with respect to the options plans have been taken; (y) the
representations and warranties of the Company set forth in the Merger Agreement
shall be true in all respects on the date of the Merger Agreement and as of the
Effective Time; and (z) the Company shall have complied in all material respects
with its obligations under the terms of the Merger Agreement.
Competing Proposals. Pursuant to the Merger Agreement, the Company shall
promptly (but in any event within 24 hours) advise Purchaser in writing of any
negotiations, or any proposals or requests for non-public information received
on or after the date of the Agreement, in each case relating to any Acquisition
Proposal, the material terms and conditions thereof and the identity of the
person submitting the Acquisition Proposal. The Company shall promptly advise
Purchaser of any development relating to any inquiries, discussions,
negotiations, proposals or requests for information relating to an Acquisition
Proposal, on or after the date of the Merger Agreement. The Company shall keep
Purchaser reasonably informed of the status of any such negotiations, request or
Acquisition Proposal. The Company agrees that any non-public information
furnished to any potential acquiror will be pursuant to a customary
confidentiality agreement and a standstill agreement provided, however, that
such standstill agreement shall have terms that are no less restrictive than
those set forth in the Fortress Standstill Agreement.
The Independent Committee is not permitted to (i) withdraw or modify or
propose to withdraw or modify, in any manner adverse to Purchaser, the approval
or recommendation of the Independent Committee of the Merger Agreement, the
Offer or the Merger, (ii) approve or recommend, or propose to approve or
recommend, any Acquisition Proposal or (iii) cause the Company to enter into any
letter of intent or agreement related to any Acquisition Proposal unless, in
each case, (A) the Independent Committee determines in good faith, after
receiving advice from its financial advisor, that such Acquisition Proposal is a
Superior Proposal and (B) the Independent Committee determines in good faith,
based upon advice of its outside legal counsel, that the failure to take such
action would violate the Independent Committee's fiduciary duties under
applicable law.
14
<PAGE> 17
Termination; Fees and Expenses. The Merger Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time, whether
prior to or after approval by the stockholders of the Company:
- by mutual written consent of the Company (acting through the Independent
Committee) and Purchaser;
- by the Company (acting through the Independent Committee) or Purchaser if
(i) the Offer shall have expired in accordance with the terms of the
Merger Agreement or Purchaser shall have terminated the Offer, in each
case without any Shares being purchased pursuant thereto; provided,
however, that the right to terminate the Merger Agreement under this
provision shall not be available to any party whose failure to fulfill
any obligation under the Merger Agreement has been the cause of, or
resulted in, the failure of Purchaser to purchase the Shares pursuant to
the Offer on or promptly after the applicable expiration date; or (ii)
any court of competent jurisdiction or other governmental entity shall
have issued an order, decree, ruling or taken any other action (which
order, decree, ruling or other action the parties shall use their
respective best efforts to lift) which permanently restrains, enjoins or
otherwise prohibits the Merger and such order, decree, ruling or other
action shall have become final and nonappealable; or (iii) if the Merger
shall not have been consummated by December 15, 2000, which date may be
extended by the mutual consent of the Company and Purchaser; or
- by Purchaser if (i) due to an occurrence or circumstance, not involving a
breach by Fortress, Purchaser or Acquisition Sub of their respective
obligations under the Merger Agreement, which makes it impossible to
satisfy any of the conditions set forth in "TENDER OFFER -- Section 13.
Certain Conditions to the Offer," Purchaser shall have failed to commence
the Offer in accordance with the Merger Agreement; (ii) prior to the
purchase of Shares pursuant to the Offer, the Independent Committee shall
have withdrawn or modified, its approval or recommendation of the Offer,
the Merger or the Merger Agreement in a manner adverse to Purchaser or
shall have recommended an Acquisition proposal, or the Company shall have
executed an acquisition agreement with a person or entity other than
Purchaser or its affiliates, or the Independent Committee shall have
resolved to do any of the foregoing; or (iii) if prior to the purchase of
shares pursuant to the Offer, the Company shall have materially breached
any of its obligations under the Merger Agreement, or if any of its
representations shall have become materially untrue, in a way not cured
within ten (10) days after notice, and Fortress and Purchaser shall not
have materially breached any of their obligations under the Merger
Agreement;
- by the Company (acting through the Independent Committee) if (i) prior to
the purchase of Shares pursuant to the Offer, a third party shall have
made an Acquisition Proposal that the Independent Committee determines in
good faith, after consultation with its financial advisor, is a Superior
Proposal and a definitive agreement shall have been, or substantially
contemporaneously with such termination shall be, executed pursuant to
such Superior Proposal; or (ii) Purchaser shall have failed to commence
the Offer on or prior to fifteen business days following the date of the
initial public announcement of the Offer; provided, that the Company may
not terminate the Merger Agreement pursuant to this provision if the
cause of such failure was the Company's material breach of its
obligations under the Merger Agreement; or (iii) prior to the purchase of
shares pursuant to the Offer, Fortress, Purchaser or Acquisition Sub
shall have materially breached the Merger Agreement, or if any of their
representations shall have become materially untrue, in a way not cured
within ten (10) days after notice, and the Company shall not have
materially breached the Merger Agreement.
In the event of such termination, except as provided in the Merger
Agreement, the Merger Agreement shall become void and have no effect, and there
shall be no liability on the part of Fortress, Purchaser, Acquisition Sub or the
Company. Notwithstanding anything to the contrary discussed herein, the Merger
Agreement provides that the termination of the Merger Agreement will not relieve
any party from liability for any willful breach of the Merger Agreement.
15
<PAGE> 18
In the event that the Merger Agreement is terminated by the Company or
Purchaser as a result of the Company's acceptance of a competing acquisition
proposal from a third party, the Company shall promptly (but in any event within
five (5) business days following such termination) pay to Purchaser by wire
transfer to an account designated by Purchaser promptly following receipt of a
request therefor, an amount equal to $750,000 for fees and expenses incurred by
Purchaser in connection with the Offer, the Merger, the Merger Agreement and the
consummation of the transactions contemplated by the Merger Agreement,
including, but not limited to, the fees and expenses payable to Purchasers'
counsel, and all banks, investment banking firms, other financial institutions
and their respective agents and counsel incurred in connection with acting as
Purchaser's financial advisor with respect to, or arranging or committing to
provide or providing any financing for the transactions contemplated by the
Merger Agreement; provided, that in no event shall such fees and expenses be
payable more than once. In addition, and only in the event the Transaction
Expenses were not paid or payable, the Company shall pay Purchaser the above
fees and expenses if the Merger Agreement is terminated for any reason (other
than as a result of a breach by Purchaser that resulted in the termination of
such agreement, or a willful breach by Purchaser of its obligations hereunder)
at any time after a competing acquisition proposal has been made by a third
party that the Company has not rejected prior to such termination of the Merger
Agreement and, within six (6) months after such a termination, the Company
completes either a merger, consolidation or other business combination with any
such third party acquiror.
The Company, Purchaser and Acquisition Sub have also agreed pursuant to the
Merger Agreement to take all actions necessary to file as soon as practicable
all notifications, filings and other documents required to obtain all
governmental authorizations, approvals, consents or waivers and to respond as
promptly as practicable to any inquiries received from any governmental entity
for additional information or documentation and to respond as promptly as
practicable to all inquiries and requests received from any state Attorney
General or other governmental entity in connection therewith.
Amendments; Waivers. The Merger Agreement may be amended, modified and
supplemented in any and all respects, whether before or after any vote of the
stockholders of the Company contemplated in the Merger Agreement, by written
agreement of the Company or Purchaser, by action taken by their respective
managements at any time prior to the closing date with respect to any of the
terms contained in the Merger Agreement; provided, however, that after the
approval of the Merger Agreement by the stockholders of the Company, no such
amendment, modification or supplement shall reduce or change the Offer Price or
adversely affect the rights of the Company's stockholders other than Purchaser
hereunder without the approval of such stockholders other than Purchaser.
Reasonable Best Efforts. The Company and Purchaser have each agreed in the
Merger Agreement to use their reasonable best efforts to promptly obtain all
authorizations, approvals, consents or waivers required to consummate the
transactions contemplated by the Merger Agreement, and to cooperate with each
other in connection with the foregoing, including taking all actions necessary
to obtain such authorizations, consents and waivers and to respond as promptly
as practicable to any inquiries and requests related thereto.
DISSENTERS' RIGHTS
APPRAISAL RIGHTS CANNOT BE EXERCISED AT THIS TIME. THE INFORMATION SET
FORTH BELOW IS FOR INFORMATIONAL PURPOSES ONLY WITH RESPECT TO ALTERNATIVES
AVAILABLE TO STOCKHOLDERS IF THE MERGER IS CONSUMMATED. STOCKHOLDERS WHO WILL BE
ENTITLED TO APPRAISAL RIGHTS IN CONNECTION WITH THE MERGER WILL RECEIVE
ADDITIONAL INFORMATION CONCERNING APPRAISAL RIGHTS AND THE PROCEDURES TO BE
FOLLOWED IN CONNECTION THEREWITH BEFORE SUCH STOCKHOLDERS HAVE TO TAKE ANY
ACTION RELATING THERETO.
STOCKHOLDERS WHO SELL SHARES IN THE OFFER WILL NOT BE ENTITLED TO EXERCISE
APPRAISAL RIGHTS WITH RESPECT THERETO BUT, RATHER, WILL RECEIVE THE OFFER PRICE.
16
<PAGE> 19
Under Section 262 of the DGCL, any holder of Shares at the Effective Time
(a "Remaining Stockholder") who does not wish to accept the Merger Consideration
pursuant to the Merger has the right to seek an appraisal and be paid the "fair
value" of its Shares at the Effective Time (exclusive of any element of value
arising from the accomplishment or expectation of the Merger) judicially
determined and paid to them in cash provided that such holder complies with the
provisions of such Section 262 of the DGCL.
The following is a brief summary of the statutory procedures to be followed
by a Remaining Stockholder in order to dissent from the Merger and perfect
appraisal rights under Delaware law. This summary is not intended to be complete
and is qualified in its entirety by reference to Section 262 of the DGCL, the
text of which will be provided to Remaining Stockholders in connection with the
Merger. Any Remaining Stockholder considering demanding appraisal is advised to
consult legal counsel. Dissenters' rights will not be available unless and until
the Merger (or a similar business combination) is consummated.
Remaining Stockholders of record who desire to exercise their appraisal
rights must fully satisfy all of the following conditions. A written demand for
appraisal of Shares must be delivered to the Secretary of the Company (x) before
the taking of the vote on the approval and adoption of the Merger Agreement if
the Merger is not being effected as a Short-Form Merger but, rather is being
consummated following approval thereof at a meeting of the Company's
stockholders (a "Long-Form Merger") or (y) within twenty (20) days after the
date that the Surviving Corporation mails to the Remaining Stockholders a notice
(the "Notice of Merger") to the effect that the Merger is effective and that
appraisal rights are available (and includes in such notice a copy of Section
262 of the DGCL and any other information required thereby) if the Merger is
being effected as a Short-Form Merger without a vote or meeting of the Company's
stockholders. If the Merger is effected as a Long-Form Merger, this written
demand for appraisal of Shares must be in addition to and separate from any
proxy or vote abstaining from or against the approval and adoption of the Merger
Agreement and, neither voting against, abstaining from voting, nor failing to
vote on the Merger Agreement will constitute a demand for appraisal within the
meaning of Section 262 of the DGCL. In the case of a Long-Form Merger, any
stockholder seeking appraisal rights must hold the Shares for which appraisal is
sought on the date of the making of the demand, continuously hold such Shares
through the Effective Time, and otherwise comply with the provisions of Section
262 of the DGCL.
In the case of either a Short-Form Merger and a Long-Form Merger, a demand
for appraisal must be executed by or for the stockholder of record, fully and
correctly, as such stockholder's name appears on the stock certificates. If
Shares are owned of record in a fiduciary capacity, such as by a trustee,
guardian or custodian, such demand must be executed by the fiduciary. If Shares
are owned of record by more than one person, as in a joint tenancy or tenancy in
common, such demand must be executed by all joint owners. An authorized agent,
including an agent for two or more joint owners, may execute the demand for
appraisal for a stockholder of record; however, the agent must identify the
record owner and expressly disclose the fact that, in exercising the demand, he
is acting as agent for the record owner.
A record owner, such as a broker, who holds Shares as a nominee for others,
may exercise appraisal rights with respect to the Shares held for all or less
than all beneficial owners of Shares as to which the holder is the record owner.
In such case the written demand must set forth the number of Shares covered by
such demand. Where the number of Shares is not expressly stated, the demand will
be presumed to cover all Shares outstanding in the name of such record owner.
Beneficial owners who are not record owners and who intend to exercise appraisal
rights should instruct the record owner to comply strictly with the statutory
requirements with respect to the exercise of appraisal rights before the date of
any meeting of stockholders of the Company called to approve the Merger in the
case of a Long-Form Merger and within twenty (20) days following the mailing of
the Notice of Merger in the case of a Short-Form Merger.
Remaining Stockholders who elect to exercise appraisal rights will be
notified when to mail or deliver their written demands for appraisal in
connection with the Merger. The written demand for appraisal should specify the
stockholder's name and mailing address, the number of Shares covered by the
demand
17
<PAGE> 20
and that the stockholder is thereby demanding appraisal of such Shares. In the
case of a Long-Form Merger, the Company must, within ten days after the
Effective Time, provide notice of the Effective Time to all stockholders who
have complied with Section 262 of the DGCL and have not voted for approval and
adoption of the Merger Agreement.
In the case of a Long-Form Merger, Remaining Stockholders electing to
exercise their appraisal rights under Section 262 must not vote for the approval
and adoption of the Merger Agreement, or consent thereto in writing. Voting in
favor of the approval and adoption of the Merger Agreement, or delivering a
proxy in connection with the stockholders meeting called to approve the Merger
Agreement (unless the proxy votes against, or expressly abstains from the vote
on, the approval and adoption of the Merger Agreement), will constitute a waiver
of the stockholder's right of appraisal and will nullify any written demand for
appraisal submitted by the stockholder.
Regardless of whether the Merger is effected as a Long-Form Merger or a
Short-Form Merger, within 120 days after the Effective Time, either the Company
or any stockholder who has complied with the required conditions of Section 262
and who is otherwise entitled to appraisal rights may file a petition in the
Delaware Court of Chancery demanding a determination of the fair value of the
Shares of the dissenting stockholders. If a petition for an appraisal is timely
filed, after a hearing on such petition, the Delaware Court of Chancery will
determine which stockholders are entitled to appraisal rights and thereafter
will appraise the Shares owned by such stockholders, determining the fair value
of such Shares, exclusive of any element of value arising from the
accomplishment or expectation of the Merger, together with a fair rate of
interest to be paid, if any, upon the amount determined to be the fair value. In
determining fair value, the Delaware Court of Chancery is to take into account
all relevant factors. In Weinberger v. UOP, Inc., et al., the Delaware Supreme
Court discussed the factors that could be considered in determining fair value
in an appraisal proceeding, stating that "proof of value by any techniques or
methods which are generally considered acceptable in the financial community and
otherwise admissible in court" should be considered and that "[f]air price
obviously requires consideration of all relevant factors involving the value of
a company." The Delaware Supreme Court stated that in making this determination
of fair value the court must consider "market value, asset value, dividends,
earnings prospects, the nature of the enterprise and any other facts which were
known or which could be ascertained as of the date of merger which throw any
light on future prospects of the merged corporation . . ." The Delaware Supreme
Court has construed Section 262 of the DGCL to mean that "elements of future
value, including the nature of the enterprise, which are known or susceptible of
proof as of the date of the merger and not the product of speculation, may be
considered." However, the court noted that Section 262 provides that fair value
is to be determined "exclusive of any element of value arising from the
accomplishment or expectation of the merger."
Remaining Stockholders who in the future consider seeking appraisal should
have in mind that the fair value of their Shares determined under Section 262
could be more than, the same as, or less than the Merger Consideration if they
do seek appraisal of their Shares, and that opinions of investment banking firms
as to fairness from a financial point of view are not necessarily opinions as to
fair value under Section 262 of the DGCL. Moreover, Purchaser intends to cause
the Surviving Corporation to argue in any appraisal proceeding that, for
purposes thereof, the "fair value" of the Shares is less than that paid in the
Offer. The cost of the appraisal proceeding may be determined by the Delaware
Court of Chancery and taxed upon the parties as the Delaware Court of Chancery
deems equitable in the circumstances. Upon application of a dissenting
stockholder, the Delaware Court of Chancery may order that all or a portion of
the expenses incurred by any dissenting stockholder in connection with the
appraisal proceeding, including, without limitation, reasonable attorneys' fees
and the fees and expenses of experts, be charged pro rata against the value of
all Shares entitled to appraisal. In the absence of such a determination or
assessment, each party bears its own expenses.
Any Remaining Stockholder who has duly demanded appraisal in compliance
with Section 262 of the DGCL will not, after the Effective Time, be entitled to
vote for any purpose the Shares subject to such demand or to receive payment of
dividends or other distributions on such Shares, except for dividends or other
distributions payable to stockholders of record at a date prior to the Effective
Time.
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<PAGE> 21
At any time within sixty (60) days after the Effective Time, any former
holder of Shares shall have the right to withdraw his or her demand for
appraisal and to accept the Merger Consideration. After this period, such holder
may withdraw his or her demand for appraisal only with the consent of the
Company as the Surviving Corporation. If no petition for appraisal is filed with
the Delaware Court of Chancery within 120 days after the Effective Time,
stockholders' rights to appraisal shall cease and all stockholders shall be
entitled to receive the Merger Consideration. Inasmuch as the Company has no
obligation to file such a petition, Purchaser has no present intention to cause
or permit the Surviving Corporation to do so, any stockholder who desires such a
petition to be filed is advised to file it on a timely basis. However, no
petition timely filed in the Delaware Court of Chancery demanding appraisal
shall be dismissed as to any stockholder without the approval of the Delaware
Court of Chancery, and such approval may be conditioned upon such terms as the
Delaware Court of Chancery deems just.
Failure to take any required step in connection with the exercise of
appraisal rights may result in the termination or waiver of such rights.
19
<PAGE> 22
BENEFICIAL OWNERSHIP OF COMMON STOCK BY CERTAIN PERSONS
The following table sets forth information with respect to ownership of
Shares held by Purchaser, Health Partners, the members of the Operating
Committee of Purchaser, the directors and executive officers of Purchaser,
Fortress and the Company. The percentage ownership has been calculated on the
basis of the Company's representation in the Merger Agreement that as of July
25, 2000, 9,926,549 Shares were issued and outstanding, 5,479,452 shares of
Company Common Stock were issuable upon conversion of the Convertible Note, and
771,384 Shares of Company Common Stock were reserved for issuance upon the
exercise of outstanding options. Information regarding the share ownership of
directors and officers of the Company who are not affiliated with Purchaser is
taken from the Annex A to the Schedule 14D-9.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENTAGE OF
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED CLASS*
------------------------------------ ------------------ -------------
<S> <C> <C>
Fortress Brookdale Acquisition LLC(1)....................... 9,483,802 58.6%
1301 Avenue of the Americas New York, NY 10019
Health Partners(2).......................................... 5,479,452 33.9%
54 Thompson Street New York, NY 10012
Wesley R. Edens(3).......................................... 9,483,802 58.6%
Paul H. Warren(3)........................................... 9,483,802 58.6%
Robert I. Kauffman(3)....................................... 9,483,802 58.6%
Randal A. Nardone(3)........................................ 9,483,802 58.6%
William B. Doniger(3)....................................... 9,483,802 58.6%
Gregory F. Hughes(3)........................................ 9,483,802 58.6%
Mark H. Tabak(3)............................................ 9,483,802 58.6%
Bruce L. Gewertz(4)......................................... 4,950 **
Darryl W. Hartley-Leonard(5)................................ 7,750 **
Robert J. Rudnik(6)......................................... 167,284 1.7
Mark J. Schulte(7).......................................... 454,958 4.5%
Wayne D. Boberg(8).......................................... 8,250 **
Darryl W. Copeland, Jr.(9).................................. 209,500 2.1%
Stephan T. Beck(10)......................................... 19,500 **
Mathew F. Whitlock(11)...................................... 20,525 **
R. Stanley Young(12)........................................ 12,750 **
</TABLE>
---------------
* Assumes, for consistency, 16,177,430 Shares as set forth above.
** Less than 1%
(1) Represents Shares acquired in the Stock Purchase Transaction and shares of
Company Common Stock issuable upon conversion of the Convertible Note.
(2) Represents shares of Company Common Stock issuable upon conversion of the
Convertible Note.
(3) By virtue of their positions as members of Purchaser's Operating Committee
or as executive officers of Purchaser, Messrs. Edens, Warren, Tabak,
Kauffman, Nardone, Doniger and Hughes may be deemed to have indirect shared
beneficial ownership of Shares beneficially owned by Purchaser. Each of
these gentlemen disclaims such individual shared beneficial ownership.
(4) Includes 866 shares of Company Common Stock held directly by Dr. Gewertz
and 4,084 shares issuable upon the exercise of stock options held by Dr.
Gewertz that are exercisable as of or within 60 days of June 30, 2000.
(5) Includes 2,000 shares of Company Common Stock held directly by Mr.
Hartley-Leonard and 5,750 shares issuable upon the exercise of stock
options held by Mr. Hartley-Leonard that are exercisable as of or within 60
days of June 30, 2000.
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<PAGE> 23
(6) Includes 127,284 shares of Company Common Stock held directly by Mr. Rudnik
and 40,000 shares issuable upon the exercise of stock options held by Mr.
Rudnik that are exercisable as of or within 60 days of June 30, 2000.
(7) Includes 311,707 shares of Company Common Stock held directly by Mr.
Schulte and 143,251 shares issuable upon the exercise of stock options held
by Mr. Schulte that are exercisable as of or within 60 days of June 30,
2000.
(8) Includes 2,500 shares of Company Common Stock held directly by Mr. Boberg
and 5,750 shares issuable upon the exercise of stock options held by Mr.
Boberg that are exercisable as of or within 60 days of June 30, 2000.
(9) Includes 12,000 shares of Company Common Stock held directly by Mr.
Copeland and 197,500 shares issuable upon the exercise of stock options
held by Mr. Copeland that are exercisable as of or within 60 days of June
30, 2000. On December 6, 1999, Mr. Copeland resigned from the Company. Mr.
Copeland is included herein as a "named executive officer" pursuant to SEC
Regulation S-K, Item 402(a)(3)(iii).
(10) Includes 19,500 shares of Company Common Stock issuable upon the exercise
of stock options held by Mr. Beck that are exercisable as of or within 60
days of June 30, 2000.
(11) Includes 1,025 shares of Company Common Stock held directly by Mr. Whitlock
and 19,500 shares issuable upon the exercise of stock options held by Mr.
Whitlock that are exercisable as of or within 60 days of June 30, 2000.
(12) Includes 12,750 shares of Company Common Stock issuable upon the exercise
of stock options held by Mr. Young that are exercisable as of or within 60
days of June 30, 2000.
TRANSACTIONS AND ARRANGEMENTS CONCERNING THE SHARES
To Purchaser's knowledge, no transactions in the Shares, other than
ordinary course purchases under the Company's 401(k) savings plan, have been
effected during the past 60 days by the Company or its executive officers,
directors, affiliates or subsidiaries, by Fortress or its executive officers,
directors, affiliates or subsidiaries, or by Purchaser or its executive
officers, directors, affiliates or subsidiaries.
Since the commencement of the Company's second full fiscal year preceding
the date of this Offer to Purchase, no purchases of Shares were made by the
Company (except as disclosed in periodic reports filed by the Company with the
SEC), Purchaser or Fortress other than as set forth in this Offer to Purchase.
Except as set forth in this Offer to Purchase, neither the Company nor, to
Purchaser's knowledge, any of its affiliates, directors or executive officers or
any person controlling the Company, is a party to any contract, arrangement,
understanding or relationship with any other person relating, directly or
indirectly, to, or in connection with, the Offer with respect to any securities
of the Company (including, without limitation, 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,
guarantees of loans, guarantees against loss or the giving or withholding of
proxies, consents or authorizations). Except as described in this Offer to
Purchase, to the knowledge of Purchaser, since the second full fiscal year
preceding the date of this Offer to Purchase, no contracts or negotiations
concerning a merger, consolidation, or acquisition, a tender offer for or other
acquisition of any securities of the Company, an election of directors to the
Company Board, or a sale or other transfer of a material amount of assets of the
Company, has been entered into or has occurred between any affiliates of the
Company or between the Company or any of its affiliates and any unaffiliated
person. Except as described in this Offer to Purchase, since the initial public
offering in May 1997 the Company has not made any underwritten public offering
of the Shares that was (i) registered under the Securities Act of 1933 or (ii)
exempt from registration under the Securities Act of 1933 pursuant to Regulation
A thereunder, except for (1) the issuance and sale of 2,300,000 shares of
Company Common Stock in December 1997 (including the related 300,000 share
over-allotment option that was exercised in January 1998) and (2) the issuance
and sale of 2,000,000 shares of Company Common Stock in November 1998.
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<PAGE> 24
Except as described in this Offer to Purchase, Purchaser has been advised
by the Company that the directors and executive officers of the Company intend
to tender all Shares held by them pursuant to the Offer.
RELATED PARTY TRANSACTIONS
Other than as disclosed in this Offer to Purchase, the Company has not
engaged in any related-party transactions and arrangements with Purchaser or its
affiliates.
INTERESTS OF CERTAIN PERSONS IN THE OFFER AND THE MERGER
Indemnification. Under the Merger Agreement, the directors and officers of
the Company are entitled to certain rights of indemnification and are entitled
to be covered by directors' and officers' liability insurance to be maintained
by the Surviving Corporation or Purchaser with respect to certain matters from
and after the completion of the Merger. See "SPECIAL FACTORS -- The Merger
Agreement."
Interlocking Directors and Officers. In considering the recommendation of
the Company Board and the Independent Committee with respect to the Offer and
the Merger, stockholders should be aware that certain officers and directors of
Purchaser and its representatives and the Company have interests in the Offer
and the Merger which are described below and which may present them with certain
potential conflicts of interest. Currently, of the nine directors of the
Company, four are members of Purchaser's Operating Committee, and three of whom
are also executive officers of Purchaser.
Option Plans; Future Incentive Plans, Employment Agreements and Severance
Plans. The Merger Agreement contemplates that options issued to various
officers, directors and key employees of the Company will be accelerated in
accordance with the terms of such plans, that at the effective time of the
Merger, cash payments equal to the spread between the option exercise price and
the Offer Price will be made to the holders of such options whether or not such
options previously were vested, and that options which are exercisable at prices
in excess of the Offer Price will be cancelled. As described in the Merger
Agreement, Purchaser is required to honor all existing employment and severance
agreements. Purchaser contemplates negotiating and entering into mutually
satisfactory employment and/or severance arrangements with key employees of the
Company including the Company's chief executive officer, Mr. Mark Schulte.
Purchaser intends to retain, incentivize and compensate such individuals going
forward and may allow certain Shares beneficially owned by key management
members, including Mr. Schulte, to be converted into equity interests of the
Surviving Corporation. However, the terms of such arrangements have not yet been
determined.
The Independent Committee and the Company Board were aware of these actual
and potential conflicts of interest and considered them along with the other
matters described under "SPECIAL FACTORS -- Recommendation of the Independent
Committee and the Company Board; Fairness of the Offer and the Merger; and
Opinion of the Independent Committee's Financial Advisor."
22
<PAGE> 25
THE TENDER OFFER
1. TERMS OF THE OFFER; EXPIRATION DATE. Upon the terms and subject to the
satisfaction or waiver of the conditions of the Offer (including, if the Offer
is extended or amended, the terms and conditions of such extension or
amendment), Purchaser will accept for payment, and will pay for, any and all
Shares validly tendered prior to the Expiration Date (as hereinafter defined)
and not properly withdrawn as permitted by "THE TENDER OFFER -- Section 4.
Withdrawal Rights." The term "Expiration Date" means 12:00 midnight, New York
City time, on Tuesday, September 5, 2000, unless and until Purchaser (but
subject to the terms and conditions of the Merger Agreement) shall have extended
the period during 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 provisions of the Merger Agreement, Purchaser may waive any
or all of the conditions to its obligation to purchase Shares pursuant to the
Offer prior to the Expiration Date. If by the initial Expiration Date or any
subsequent Expiration Date any or all of the conditions to the Offer have not
been satisfied or waived, subject to the provisions of the Merger Agreement,
Purchaser may elect to (i) terminate the Offer and return all tendered Shares to
tendering stockholders, (ii) waive all of the unsatisfied conditions and,
subject to any required extension, purchase all Shares validly tendered by the
Expiration Date and not properly withdrawn or (iii) extend the Offer and,
subject to the right of stockholders to withdraw Shares until the new Expiration
Date, retain the Shares that have been tendered until the expiration of the
Offer as extended.
The Merger Agreement provides that, without the consent of the Company,
Purchaser will not (i) decrease the Offer Price, (ii) decrease the number of
Shares sought or (iii) make any other change in the terms or conditions of the
Offer which is materially adverse to the holders of Shares. Purchaser
acknowledges that (i) Rule 14e-1(c) under the Exchange Act requires Purchaser to
pay the consideration offered or return the Shares tendered promptly after the
termination or withdrawal of the Offer and (ii) Purchaser may not delay
acceptance for payment of, or payment for, any Shares upon the occurrence of any
of the conditions specified in "THE TENDER OFFER -- Section 13. Certain
Conditions to the Offer" without extending the period of time during which the
Offer is open.
Notwithstanding the foregoing, Purchaser may, without the consent of the
Company, extend the Offer beyond the initial Expiration Date in the following
events: (i) from time to time if, at the initial Expiration Date (or any
subsequent Expiration Date), any of the conditions of the Offer shall not have
been satisfied or waived until sixty (60) days from the execution of the Merger
Agreement; (ii) for any period required by any rule, regulation, interpretation
or position of the SEC or the staff thereof applicable to the Offer or any
period required by applicable law; (iii) if all the conditions of the Offer are
satisfied or waived, but the number of Shares validly tendered and not withdrawn
is less than ninety percent of the then outstanding number of Shares, for an
aggregate period not to exceed ten business days (for all such extensions); or
(iv) pursuant to an amendment to the Offer providing for a "subsequent offering
period" not to exceed twenty business days to the extent permitted under Rule
14d-11 under the Exchange Act.
Pursuant to Rule 14d-11 under the Exchange Act, Purchaser may, subject to
certain conditions, provide a subsequent offering period following the
expiration of the Offer on the Expiration Date (a "Subsequent Offering Period").
A Subsequent Offering Period is an additional period of time from three (3)
business days to twenty (20) business days in length, beginning after Purchaser
purchases Shares tendered in the Offer, during which stockholders may tender,
but not withdraw, their Shares and receive the Offer Price.
The Merger Agreement requires Purchaser to accept for payment and pay for
any and all Shares validly tendered and not properly withdrawn pursuant to the
Offer if all conditions to the Offer are satisfied or waived on the Expiration
Date.
Any such extension, delay, termination, waiver or amendment will be
followed as promptly as practicable by public announcement thereof, such
announcement in the case of an extension to be made no later than 9:00 a.m., New
York City time, on the next business day after the previously scheduled
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<PAGE> 26
Expiration Date. Subject to applicable law (including Rules 13e-3(e), l4d-4(c),
14d-6(d) and 14e-l under the Exchange Act, which require that material changes
be promptly disseminated to stockholders in a manner reasonably designed to
inform them of such changes) and without limiting the manner in which Purchaser
may choose to make any public announcement, Purchaser shall have no obligation
to publish, advertise or otherwise communicate any such public announcement
other than by issuing a press release to the Dow Jones News Service.
If Purchaser is delayed in its payment for the Shares or is unable to pay
for Shares pursuant to the Offer for any reason, then, without prejudice to
Purchaser's rights under the Offer, the Depositary may retain tendered Shares on
behalf of Purchaser, and such Shares may not be withdrawn except to the extent
tendering stockholders are entitled to withdrawal rights as described in "THE
TENDER OFFER -- Section 4. Withdrawal Rights." However, the ability of Purchaser
to delay the payment for Shares which Purchaser has accepted for payment is
limited by Rule 14d-1(c) under the Exchange Act, which requires that the bidder
pay the consideration offered or return the securities deposited by, or on
behalf of, holders or securities promptly after the termination or withdrawal of
the Offer.
If Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer, or if it waives a material condition of the
Offer, Purchaser will extend the Offer to the extent required by Rules 13e-3(e),
14d-4(c), l4d-6(d) and 14e-1 under the Exchange Act. The minimum period during
which the Offer must remain open following material changes in the terms of the
Offer or information concerning the Offer, other than a change in price or
change in percentage of securities sought, will depend upon the facts and
circumstances then existing, including the relative materiality of the changed
terms or information. In a public release, the SEC has stated its views that an
offer must remain open for a minimum period of time following a material change
in the terms of the Offer and that waiver of a material condition is a material
change in the terms of the Offer. The release states that an offer should remain
open for a minimum of five (5) business days from the date a material change is
first published or sent or given to security holders and that, if material
changes are made with respect to information not materially less significant
than the offer price and the number of shares being sought, a minimum of ten
(10) business days may be required to allow for adequate dissemination to
stockholders and investor response. For purposes of the Offer, a "business day"
means any day other than a Saturday, Sunday or United States federal holiday and
consists of the time period from 12:01 a.m. through 12:00 midnight, New York
City time. The requirement to extend the Offer will not apply to the extent that
the number of business days remaining between the occurrence of the change and
the then-scheduled Expiration Date equals or exceeds the minimum extension
period that would be required because of such amendment. If, prior to the
Expiration Date, Purchaser increases the consideration offered to holders of
Shares pursuant to the Offer, such increased consideration will be paid to all
holders whose Shares are purchased in the Offer whether or not such Shares were
tendered prior to such increase.
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. This Offer to Purchase and the related Letter of Transmittal will be
mailed to record holders of Shares whose names appear on the Company's
stockholder list and will be furnished, for subsequent transmittal to beneficial
owners of Shares, to brokers, dealers, commercial banks, trust companies, and
similar persons whose names, or the names of whose nominees, appear on the
stockholder list or, if applicable, who are listed as participants in a clearing
agency's security position listing.
2. ACCEPTANCE FOR PAYMENT OF AND PAYMENT FOR SHARES. Upon the terms and
subject to the conditions of the Offer (including, if the Offer is extended or
amended, the terms and conditions of any such extension or amendment), Purchaser
will accept for payment, and will pay for, all Shares validly tendered prior to
the Expiration Date and not properly withdrawn, as soon as legally permissible
after the Expiration Date.
In all cases, payment for Shares tendered and accepted for payment pursuant
to the Offer will be made only after timely receipt by the Depositary of (i) the
certificates evidencing such Shares (the "Certificates") or timely confirmation
(a "Book-Entry Confirmation") of a book-entry transfer of such
24
<PAGE> 27
Shares into the Depositary's account at The Depository Trust Company ("DTC")
pursuant to the procedures set forth in "THE TENDER OFFER -- Section 3.
Procedures for Tendering Shares," (ii) the Letter of Transmittal (or a 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 (as
defined below) in lieu of the Letter of Transmittal and (iii) any other
documents required by the Letter of Transmittal.
For purposes of the Offer, Purchaser will be deemed to have accepted for
payment, and thereby purchased, Shares validly tendered and not properly
withdrawn as, if and when Purchaser gives oral or written notice to the
Depositary, as agent for the tendering stockholders, of Purchaser's acceptance
for payment of such Shares pursuant to the Offer. Upon the terms and subject to
the conditions of the Offer, payment for Shares accepted for payment 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 payments from Purchaser and transmitting such payments to tendering
stockholders whose Shares have been accepted for payment. Under no circumstances
will interest on the Offer Price for Shares be paid, regardless of any delay in
making such payment.
If Purchaser has accepted for payment and paid for all Shares tendered
prior to the Expiration Date but Purchaser has not reached 90% ownership of the
Common Stock on a fully diluted basis, Purchaser intends to extend the Offer for
an aggregate period not to exceed ten business days, which period shall
constitute a Subsequent Offering Period. See "THE TENDER OFFER -- Section 1.
Terms of the Offer; Expiration Date." During the Subsequent Offering Period,
Purchaser will accept for payment and promptly pay for all Shares validly
tendered. The procedures for tendering Shares and guaranteed delivery set forth
in "THE TENDER OFFER -- Section 3. Procedures for Tendering Shares" will apply
during the Subsequent Offering Period.
If any tendered Shares are not accepted for payment for any reason pursuant
to the terms and conditions of the Offer, or if Certificates are submitted
evidencing more Shares than are tendered, Certificates evidencing unpurchased
Shares will be returned, without expense to the tendering stockholder (or, in
the case of Shares tendered by book-entry transfer into the Depositary's account
at DTC pursuant to the procedure set forth in "THE TENDER OFFER -- Section 3.
Procedures for Tendering Shares," such Shares will be credited to an account
maintained at DTC), as promptly as practicable following the expiration or
termination of the Offer.
If, on or prior to the Expiration Date, Purchaser shall increase the
consideration offered to any holders of Shares pursuant to the Offer, such
increased consideration shall be paid to all holders of Shares that are
purchased pursuant to the Offer, whether or not such Shares were tendered,
accepted for payment or paid for prior to such increase in consideration.
3. PROCEDURES FOR TENDERING SHARES. Except as set forth below, in order
for Shares to be validly tendered pursuant to the Offer, the Letter of
Transmittal (or a facsimile thereof), properly completed and duly executed,
together with any required signature guarantees (or, in the case of a book-entry
transfer, an Agent's Message in lieu of the Letter of Transmittal) and any other
documents required by the Letter of Transmittal, must be received by the
Depositary at one of its addresses set forth on the back cover of this Offer to
Purchase and either (i) the Certificates evidencing tendered Shares must be
received by the Depositary at such address or such Shares must be tendered
pursuant to the procedure for book-entry transfer described below and a
Book-Entry Confirmation must be received by the Depositary (including an Agent's
Message if the tendering stockholder has not delivered a Letter of Transmittal),
in each case on or prior to the Expiration Date, or (ii) the tendering
stockholder must comply with the guaranteed delivery procedures described below.
No alternative, conditional or contingent tenders will be accepted. The term
"Agent's Message" means a message, transmitted by electronic means to, and
received by, the Depositary and forming a part of a Book-Entry Confirmation
which states that DTC has received an express acknowledgment from the
participant in DTC tendering the Shares which are the subject of such book-entry
confirmation, that such participant has received and agrees to be bound by the
terms of the Letter of Transmittal and that Purchaser may enforce such agreement
against such participant.
25
<PAGE> 28
Book-Entry Transfer. The Depositary will establish accounts with respect
to the Shares at DTC for purposes of the Offer within two business days after
the date of this Offer to Purchase. Any financial institution that is a
participant in DTC's system may make a book-entry delivery of Shares by causing
DTC to transfer such Shares into the Depositary's account in accordance with
DTC's procedures for such transfer. However, although delivery of Shares may be
effected through book-entry transfer at DTC, either the Letter of Transmittal
(or a facsimile thereof), properly completed and duly executed, together with
any required signature guarantees, or an Agent's Message in lieu of the Letter
of Transmittal, and any other required documents, must, in any case, be received
by the Depositary at one of its addresses set forth on the back cover of this
Offer to Purchase prior to or on the Expiration Date, or the tendering
stockholder must comply with the guaranteed delivery procedure described below.
DELIVERY OF DOCUMENTS TO DTC DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
Signature Guarantees. Signatures on all Letters of Transmittal must be
guaranteed by a firm which is a member of the Security Transfer Agents Medallion
Program, the New York Stock Exchange Medallion Guarantee Program or the Stock
Exchange Medallion Program (each, an "Eligible Institution"), except in cases
where Shares are tendered (i) by a registered holder of Shares who has not
completed either the box entitled "Special Payment Instructions" or the box
entitled "Special Delivery Instructions" on the Letter of Transmittal or (ii)
for the account of an Eligible Institution. If a Certificate is registered in
the name of a person other than the signatory of the Letter of Transmittal (or a
facsimile thereof), or if payment is to be made, or a Certificate not accepted
for payment or not tendered is to be returned, to a person other than the
registered holder(s), then the 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 the Certificate, with the signature(s) on such
Certificate or stock powers guaranteed by an Eligible Institution. If the Letter
of Transmittal or stock powers are signed or any certificate is endorsed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing and, unless waived by Purchaser, proper
evidence satisfactory to Purchaser of their authority to so act must be
submitted. See Instructions 1 and 5 of the Letter of Transmittal.
Guaranteed Delivery. If a stockholder desires to tender Shares pursuant to
the Offer and the Certificates evidencing such stockholder's Shares are not
immediately available or such stockholder cannot deliver the Certificates and
all other required documents to the Depositary prior to the Expiration Date, or
such stockholder cannot complete the procedure for delivery by book-entry
transfer on a timely basis, such Shares may nevertheless be tendered, provided
that all the following conditions are satisfied:
(i) such tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided by Purchaser, is received
prior to the Expiration Date by the Depositary as provided below; and
(iii) the Certificates (or a Book-Entry Confirmation) evidencing all
tendered Shares, in proper form for transfer, in each case together with
the Letter of Transmittal (or a facsimile thereof), properly completed and
duly executed, with any required signature guarantees (or, in connection
with a book-entry transfer, an Agent's Message), and any other documents
required by the Letter of Transmittal are received by the Depositary within
three Nasdaq trading days after the date of execution of such Notice of
Guaranteed Delivery. A "trading day" is any day on which the Nasdaq is open
for business.
The Notice of Guaranteed Delivery may be delivered by hand or mail or
transmitted by telegram or facsimile transmission to the Depositary and must
include a guarantee by an Eligible Institution in the form set forth in the form
of Notice of Guaranteed Delivery made available by Purchaser.
In all cases, payment for Shares tendered and accepted for payment pursuant
to the Offer will be made only after timely receipt by the Depositary of the
Share Certificates evidencing such Shares, or a Book-Entry Confirmation of the
delivery of such Shares, and the Letter of Transmittal (or a facsimile
26
<PAGE> 29
thereof), properly completed and duly executed, with any required signature
guarantees, and any other documents required by the Letter of Transmittal.
THE METHOD OF DELIVERY OF CERTIFICATES AND ALL OTHER REQUIRED DOCUMENTS,
INCLUDING DELIVERY THROUGH DTC, IS AT THE OPTION AND RISK OF THE TENDERING
STOCKHOLDER, AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY
THE DEPOSITARY. 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.
Determination of Validity. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance for payment of any tender
of Shares will be determined by Purchaser in its sole discretion, which
determination shall be final and binding on all parties. Purchaser reserves the
absolute right to reject any and all tenders determined by it not to be in
proper form or the acceptance for payment of which may, in the opinion of its
counsel, be unlawful. Purchaser also reserves the absolute right to waive any
condition of the Offer or any defect or irregularity in the tender of any
particular Shares or any particular stockholder, whether or not similar defects
or irregularities are waived in the case of other stockholders, and Purchaser's
interpretation of the terms and conditions of the Offer will be final and
binding on all persons. No tender of Shares will be deemed to have been validly
made until all defects and irregularities have been cured or waived to the
satisfaction of Purchaser. NONE OF PURCHASER, PARENT, THE DEALER MANAGER, THE
DEPOSITARY, THE INFORMATION AGENT OR ANY OTHER PERSON WILL BE UNDER ANY DUTY TO
GIVE NOTIFICATION OF ANY DEFECTS OR IRREGULARITIES IN TENDERS OR INCUR ANY
LIABILITY FOR FAILURE TO GIVE ANY SUCH NOTIFICATION.
Other Requirements. By executing the Letter of Transmittal as set forth
above, a tendering stockholder irrevocably appoints designees of Purchaser as
such stockholder's proxies, each with full power of substitution, in the manner
set forth in the Letter of Transmittal, to the full extent of such stockholder's
rights with respect to the Shares tendered by such stockholder and accepted for
payment by Purchaser (and with respect to any and all other Shares or other
securities issued or issuable in respect of such Shares on or after the date of
this Offer to Purchase). All such proxies shall be considered coupled with an
interest in the tendered Shares. Such appointment will be effective when, and
only to the extent that, Purchaser accepts such Shares for payment. Upon such
acceptance for payment, all prior proxies given by such stockholder with respect
to such Shares will be revoked without further action, and no subsequent proxies
may be given nor any subsequent written consent executed by such stockholder
(and, if given or executed, will not be deemed to be effective) with respect
thereto. The designees of Purchaser will, with respect to the Shares for which
the appointment is effective, be empowered to exercise all voting and other
rights of such stockholder as they in their sole discretion may deem proper at
any annual or special meeting of the Company's stockholders or any adjournment
or postponement thereof, by written consent in lieu of any such meeting or
otherwise. Purchaser reserves the right to require that, in order for Shares to
be deemed validly tendered, immediately upon Purchaser's payment for such
Shares, Purchaser must be able to exercise full voting rights with respect to
such Shares.
The acceptance for payment by Purchaser of Shares pursuant to any of the
procedures described above will constitute a binding agreement between the
tendering stockholder and Purchaser upon the terms and subject to the conditions
of the Offer.
Backup Withholding. Under the "backup withholding" provisions of United
States federal income tax law, the Depositary may be required to withhold 31% of
the amount of payments made to certain stockholders of the Offer Price of Shares
purchased pursuant to the Offer. To prevent backup withholding, each stockholder
must provide the Depositary with such stockholder's correct taxpayer
identification number ("TIN") and certify that such stockholder is not subject
to backup withholding by completing the Substitute Form W-9 in the Letter of
Transmittal. If a stockholder does not provide its correct TIN or fails to
provide the certification described above, the Internal Revenue Service may
impose a penalty on the stockholder and payment of cash to the stockholder
pursuant to the Offer may be subject to backup
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<PAGE> 30
withholding. If backup withholding results in an overpayment of tax, a refund
may be obtained from the Internal Revenue Service. Certain stockholders
(including, among others, all corporations and certain foreign individuals and
entities) are not subject to backup withholding. Foreign stockholders should
generally complete and sign a Form W-8 Certificate of Foreign Status (a copy of
which may be obtained from the Depositary) in order to avoid backup withholding.
See Instruction 10 to the Letter of Transmittal.
4. WITHDRAWAL RIGHTS. Tenders of the Shares made pursuant to the Offer
are irrevocable except that such Shares may be withdrawn at any time prior to
the Expiration Date and, unless theretofore accepted for payment by Purchaser
pursuant to the Offer, may also be withdrawn at any time after September 29,
2000. If Purchaser extends the Offer, is delayed in its acceptance for payment
of Shares or is unable to accept Shares for payment pursuant to the Offer for
any reason, then, without prejudice to Purchaser's rights under the Offer, the
Depositary may, nevertheless, on behalf of Purchaser, retain tendered Shares,
and such Shares may not be withdrawn except to the extent that tendering
stockholders are entitled to withdrawal rights as described in this Section 4.
Any such delay will be accompanied by an extension of the Offer to the extent
required by law.
For a withdrawal to be effective, a written, telegraphic or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth on the back cover page of this 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 the name of
the registered holder of such Shares, if different from that of the person who
tendered such Shares. If Certificates evidencing Shares to be withdrawn have
been delivered or otherwise identified to the Depositary, then, prior to the
physical release of such Certificates, the serial numbers shown on such
Certificates must be submitted to the Depositary and the signature(s) on the
notice of withdrawal must be guaranteed by an Eligible Institution, unless such
Shares have been tendered for the account of an Eligible Institution. If Shares
have been tendered pursuant to the procedure for book-entry transfer as set
forth in "THE TENDER OFFER -- Section 3. Procedures for Tendering Shares," any
notice of withdrawal must specify the name and number of the account at DTC to
be credited with the withdrawn Shares or must otherwise comply with DTC's
procedures.
Withdrawals of tenders of Shares may not be rescinded, and Shares properly
withdrawn will thereafter be deemed not validly tendered for purposes of the
Offer. However, withdrawn Shares may be re-tendered by again following the
procedures described in "THE TENDER OFFER -- Section 3. Procedures for Tendering
Shares" at any time prior to the Expiration Date or during a Subsequent Offering
Period.
No withdrawal rights will apply to Shares tendered during a Subsequent
Offering Period and no withdrawal rights apply during the Subsequent Offering
Period with respect to Shares tendered in the Offer and accepted for payment.
All questions as to the form and validity (including time of receipt) of
any notice of withdrawal will be determined by Purchaser, in its sole
discretion, whose determination will be final and binding. None of Purchaser,
Parent, the Dealer Manager, the Depositary, the Information Agent or any other
person will be under any duty to give notification of any defects or
irregularities in any notice of withdrawal or incur any liability for failure to
give any such notification.
5. CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES. The following
is a summary of certain United States federal income tax consequences of the
Offer. This discussion is for general information only and does not address all
aspects of United States federal income taxation that may be relevant to
stockholder who tender Shares pursuant to the Offer. The discussion is based on
current provisions of the Internal Revenue Code of 1986, as amended (the
"Code"), Treasury regulations issued thereunder, and administrative and judicial
interpretations thereof, all of which are subject to change, possibly with
retroactive effect. The discussion applies only to stockholders in whose hands
the Shares are capital assets -- generally property held for investment -- and
may not apply to stockholders who received their Shares pursuant to the exercise
of employee stock options or otherwise as compensation, or to certain types of
stockholders (including, but not limited to, insurance companies, tax-exempt
organizations,
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<PAGE> 31
financial institutions or broker-dealers) who may be subject to special rules
under the United States federal income tax laws. This discussion does not
discuss the United States federal income tax consequences to a stockholder who,
for United States federal income tax purposes, is a non-resident alien
individual, a foreign corporation, a foreign partnership or a foreign estate or
trust, nor does it consider the effect of any state, local or foreign income or
other tax laws.
BECAUSE INDIVIDUAL CIRCUMSTANCES MAY DIFFER, EACH STOCKHOLDER TENDERING
SHARES PURSUANT TO THE OFFER SHOULD CONSULT HIS OWN TAX ADVISOR TO DETERMINE THE
PARTICULAR TAX EFFECTS OF THE OFFER TO SUCH STOCKHOLDER, INCLUDING THE
APPLICATION AND EFFECT OF STATE, LOCAL OR FOREIGN INCOME OR OTHER TAX LAWS,
CHANGES IN APPLICABLE TAX LAWS, AND ANY PENDING OR PROPOSED LEGISLATION.
The receipt of cash for Shares pursuant to the Offer will be a taxable
transaction for United States federal income tax purposes. In general, a
stockholder will recognize gain or loss equal to the difference between (i) the
amount of cash received and (ii) the stockholder's adjusted tax basis in the
Shares sold pursuant to the Offer. Gain or loss must be determined separately
for each block of Shares (i.e. Shares acquired at the same cost in a single
transaction) sold pursuant to the Offer. Such gain or loss will be long-term
capital gain or loss if the holding period for the Shares exceeds one year at
the time of the sale. Long-term capital gains derived by individuals are
eligible for reduced rates of taxation (generally, 20% under current law), while
short-term capital gains are taxed at the same rate as ordinary income
(currently, a 39.6% maximum rate). The deductibility of capital losses is
restricted and, in general, may only be used to reduce capital gains to the
extent thereof. However, taxpayers who are individuals may generally deduct
annually $3,000 of capital losses in excess of their capital gains.
6. PRICE RANGE OF SHARES; DIVIDENDS. The Shares are quoted and
principally traded on the Nasdaq under the symbol "BLCI." The following table
sets forth, for the quarters indicated, the high and low sales prices per Share
on Nasdaq as reported by published financial sources and the quarterly dividends
paid per Share:
<TABLE>
<CAPTION>
DIVIDEND
HIGH LOW PAID
---- --- --------
<S> <C> <C> <C>
1998:
Third Quarter............................................. $26 $16 3/4 $0
Fourth Quarter............................................ 21 19/32 13 0
1999:
First Quarter............................................. 21 1/4 14 1/2 0
Second Quarter............................................ 17 1/2 13 1/4 0
Third Quarter............................................. 15 12 0
Fourth Quarter............................................ 14 1/2 11 0
2000:
First Quarter............................................. 14 5/8 10 7/8 0
Second Quarter............................................ 14 9/16 10 3/8 0
Third Quarter (through July 31, 2000)..................... 15 1/8 14 1/8 0
</TABLE>
On July 26, 2000, the last full trading day prior to the public
announcement by the Company that it approved the Offer by Purchaser, the closing
price per Share as reported on the Nasdaq was $15.00. On July 31, 2000, the last
full trading day prior to announcement of the commencement of the Offer, the
closing price per Share as reported on the Nasdaq was $15.00.
STOCKHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR THE SHARES.
7. CERTAIN INFORMATION CONCERNING THE COMPANY. Except as otherwise set
forth herein, the information concerning the Company contained in this Offer to
Purchase, including financial information, has been furnished by the Company or
has been taken from or based upon publicly available documents and records on
file with the SEC and other public sources. Purchaser assumes no responsibility
for the accuracy or completeness of the information concerning the Company
furnished by the Company or
29
<PAGE> 32
contained in such documents and records or for any failure by the Company to
disclose events which may have occurred or may affect the significance or
accuracy of any such information but which are unknown to Purchaser.
General. The Company is a leading provider of senior independent and
assisted living services to the elderly through their facilities located in
urban and suburban major metropolitan areas.
Financial Information. Financial information relating to the Company
including the audited financial statements is contained in the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1999 (the "Form
10-K"), which is incorporated herein by reference. Additional financial and
other information is included in the Form 10-K and other documents filed by the
Company with the SEC.
The Shares are registered under the Exchange Act. The Company is subject to
the informational filing requirements of the Exchange Act and, in accordance
therewith, is required to file periodic reports, proxy statements and other
information with the SEC relating to its business, financial condition and other
matters. Information as of particular dates concerning the Company's directors
and officers, their remuneration, stock options granted to them, the principal
holders of the Company's securities and any material interest of such persons in
transactions with the Company is required to be disclosed in proxy statements
distributed to the Company's stockholders and filed with the SEC. Such reports,
proxy statements and other information can be inspected and copied at the public
reference facilities maintained by the SEC at 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549, and at the SEC's regional offices located at Seven World
Trade Center, Suite 1300, New York, New York 10048 and 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. Information regarding the public reference
facilities may be obtained from the SEC by telephoning 1-800-SEC-0330. The
Company's filings are also available to the public on the SEC Internet site
(http://www.sec.gov.). Copies of such materials may also be obtained by mail
from the Public Reference Section of the SEC at 450 Fifth Street, N.W.,
Washington, D.C. 20549 upon payment of the SEC's customary fees. Certain reports
and other information concerning the Company may also be inspected at the
offices of the Nasdaq.
8. CERTAIN INFORMATION CONCERNING FORTRESS, PURCHASER AND ACQUISITION
SUB. Fortress. Fortress is a Delaware business trust, all the beneficial
interests of which are owned by Fortress Investment Fund LLC, which was
established to make real estate-related investments. Fortress Investment Fund
LLC is a Delaware limited liability company that has over $700,000,000 in
committed uninvested equity capital.
Purchaser. Purchaser is a Delaware limited liability company formed for
the purpose of acquiring shares of Company common stock. Purchaser is owned by
Fortress and Health Partners and may in the future also be owned by certain of
their affiliates. Purchaser currently owns 4,004,350 Shares acquired in the
Stock Purchase Transaction at $15.00 per Share. Pursuant to a Contribution
Agreement dated as of July 26, 2000, Health Partners agreed to contribute the
Convertible Note in exchange for 40.7% of the membership interests in Purchaser
and Fortress agreed to contribute up to $98,933,633 in cash which, together with
its previous cash contributions used to acquire the shares in the Stock Purchase
Transaction, entitles it to the remaining 59.3% of the membership interests in
Purchaser. Following consummation of the Offer, Fortress contemplates selling a
portion of its membership interests to affiliates who are currently investors in
Fortress. In addition, Purchaser contemplates seeking additional equity capital
from Fortress, Health Partners and other private investors to facilitate the
growth of the Company.
Purchaser is governed by a five member Operating Committee, three members
of which have been appointed by Fortress, and two members of which have been
appointed by Health Partners.
Acquisition Sub. Acquisition Sub is a Delaware corporation and wholly
owned subsidiary of Purchaser which was formed solely for the purpose of
effecting the transactions contemplated by the Merger Agreement and has not
engaged in any business except in furtherance thereof.
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<PAGE> 33
The name, citizenship, business address, principal occupation or employment
and five-year employment history for each of the directors, members of the
Operating Committee and executive officers of Fortress, Purchaser and
Acquisition Sub are set forth in Schedule I hereto.
Purchaser beneficially owns 4,004,350 shares of the Company Common Stock,
representing approximately 40.3% of the outstanding Shares as of July 26, 2000
and the Convertible Note convertible into 5,479,452 Shares.
Except as described in this Offer to Purchase, (i) none of Fortress,
Purchaser, nor, to the best knowledge of Fortress and Purchaser, any of the
persons listed in Schedule I to this Offer to Purchase or any associate or
majority-owned subsidiary of Fortress or Purchaser or any of the persons so
listed beneficially owns or has any right to acquire, directly or indirectly,
any Shares and (ii) none of Fortress, Purchaser, nor, to the best knowledge of
Purchaser, any of the persons or entities referred to above nor any director,
executive officer or subsidiary of any of the foregoing has effected any
transaction in the Shares during the past 60 days.
Except as provided in the Merger Agreement or as otherwise described in
this Offer to Purchase, neither Purchaser, nor, to the best knowledge of
Purchaser, 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 the Company, including, but not limited
to, any contract, arrangement, understanding or relationship concerning the
transfer or voting of such securities, finder's fees, joint ventures, loan or
option arrangements, puts or call, guarantees of loans, guaranties against loss,
guaranties of profits, division of profits or loss or the giving or withholding
of proxies. Except as set forth in this Offer to Purchase, neither Purchaser,
nor, to the best knowledge of Purchaser, any of the persons listed on Schedule I
hereto, has had any business relationship or transaction with the Company or any
of its executive officers, directors or affiliates that is required to be
reported under the rules and regulations of the SEC applicable to the Offer.
Except as set forth in this Offer to Purchase, there have been no contacts,
negotiations or transactions between Fortress, Purchaser, Health Partners or any
of their subsidiaries or, to the best knowledge of Purchaser, any of the persons
listed in Schedule I to this Offer to Purchase, on the one hand, and the Company
or its affiliates, on the other hand, concerning a merger, consolidation or
acquisition, tender offer or other acquisition of securities, an election of
directors or a sale or other transfer of a material amount of assets.
9. SOURCE AND AMOUNT OF FUNDS. The total amount of funds required by
Purchaser to consummate the Offer and the Merger and to pay related fees and
expenses is estimated to be approximately $91 million. Fortress Investment Fund
LLC, which has over $700 million in committed uninvested equity capital, has
agreed to contribute these funds to Purchaser. The Offer is not conditioned on
any financing arrangements.
10. DIVIDENDS AND DISTRIBUTIONS. Pursuant to the Merger Agreement,
without the prior approval of Purchaser or as otherwise contemplated in the
Merger Agreement, the Company has agreed not to (i) declare, set aside, make or
pay any dividend or other distribution in respect of any of its capital stock,
except that a wholly owned subsidiary of the Company may declare and pay a
dividend to its parent, (ii) split, combine or reclassify any of its capital
stock or issue or sell any additional shares of, or securities convertible into
or exchangeable for, or options, warrants of rights of any kind to acquire any,
shares of its capital stock or of its subsidiaries, or (iii) redeem, purchase or
otherwise acquire, directly or indirectly any of its Common Stock, or authorize
or enter into an agreement to do any of the foregoing.
11. CERTAIN EFFECTS OF THE OFFER ON THE MARKET FOR THE SHARES. Effect on
the Market for the Shares. The purchase of Shares by Purchaser pursuant to the
Offer will reduce the number of Shares that might otherwise trade publicly and
will reduce the number of holders of Shares, which could adversely affect the
liquidity and market value of the remaining Shares held by the public.
Nasdaq National Market Listing. Depending upon the number of Shares
purchased pursuant to the Offer, the Shares may no longer meet the requirements
of the National Association of Securities Dealers for continued inclusion on the
Nasdaq National Market, which requires that an issuer meet certain
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<PAGE> 34
thresholds, including minimum requirements related to the number of publicly
held shares, size of the public "float," the number of round lot holders, the
number of market makers and the bid price.
If the Nasdaq were to cease to publish quotations for the Shares, it is
possible that the Shares would continue to trade in the over-the-counter market
and that price or other quotations would be reported by other sources. The
extent of the public market for such Shares and the availability of such
quotations would depend, however, upon such factors as the number of
stockholders and/or the aggregate market value of such securities remaining at
such time, the interest in maintaining a market in the Shares on the part of
securities firms, the possible termination of registration under the Exchange
Act as described below, and other factors. Purchaser cannot predict whether the
reduction in the number of Shares that might otherwise trade publicly would have
an adverse or beneficial effect on the market price for, or marketability of,
the Shares or whether it would cause future market prices to be greater or
lesser than the Offer Price.
Exchange Act Registration. The Shares are currently registered under the
Exchange Act. Registration of the Shares under the Exchange Act may be
terminated upon application of the Company to the SEC if the Shares are neither
listed on a national securities exchange nor held by 300 or more holders of
record. Termination of registration of the Shares under the Exchange Act would
substantially reduce the information required to be furnished by the Company to
its stockholders and to the SEC and would make certain provisions of the
Exchange Act no longer applicable to the Company, such as the short-swing profit
recovery provisions of Section 16(b), the requirement of furnishing a proxy
statement in connection with stockholders' meetings pursuant to Section 14(a)
and the requirements of Rule 13e-3 with respect to "going private" transactions.
Furthermore, the ability of "affiliates" of the Company and persons holding
"restricted securities" of the Company to dispose of such securities pursuant to
Rule 144 or Rule 144A promulgated under the Securities Act may be impaired or
eliminated.
IF THE NASDAQ LISTING AND THE EXCHANGE ACT REGISTRATION OF THE SHARES ARE
NOT TERMINATED PRIOR TO THE MERGER, THEN THE LISTING OF THE SHARES ON THE NASDAQ
AND THE REGISTRATION OF THE SHARES UNDER THE EXCHANGE ACT WILL BE TERMINATED
FOLLOWING THE CONSUMMATION OF THE MERGER.
Margin Regulations. The Shares are currently "margin securities" under the
regulations of the Board of Governors of the Federal Reserve System, which
status had the effect, among other things, of allowing brokers to extend credit
on the collateral of the Shares. Depending upon factors similar to those
described above regarding listing and market quotations, it is possible that,
following the Offer, the Shares would no longer constitute "margin securities"
for the purposes of the margin regulations of the Federal Reserve System and
therefore could no longer be used as collateral for loans made by brokers.
12. FEES AND EXPENSES. Except as set forth below, Purchaser will not pay
any fees or commissions to any broker, dealer or other person for soliciting
tenders of Shares pursuant to the Offer.
Prudential Securities Incorporated is acting as exclusive Dealer Manager in
connection with the Offer and will receive reasonable and customary compensation
for its service, and Purchaser has agreed to reimburse Prudential Securities for
all reasonable out-of-pocket expenses incurred by it, including the reasonable
fees and expenses of legal counsel, and to indemnify Prudential Securities
against certain liabilities and expenses in connection with its engagement,
including certain liabilities under the Federal securities laws.
Purchaser has retained Corporate Investor Communications, Inc. as the
Information Agent, and LaSalle Bank National Association as the Depositary, in
connection with the Offer. The Information Agent may contact holders of Shares
by mail, telephone, facsimile, telegraph and personal interview and may request
banks, brokers, dealers and other nominee stockholders to forward materials
relating to the Offer to beneficial owners.
As compensation for acting as Information Agent in connection with the
Offer, Corporate Investor Communications, Inc. will receive reasonable and
customary compensation for its services and will also be reimbursed for certain
out-of-pocket expenses and may be indemnified against certain liabilities and
expenses in connection with the Offer, including certain liabilities under the
Federal securities laws.
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<PAGE> 35
Purchaser will pay the Depositary reasonable and customary compensation for
their services in connection with the Offer, plus reimbursement for
out-of-pocket expenses, and will indemnify the Depositary against certain
liabilities and expenses in connection therewith, including certain liabilities
under federal securities laws. Brokers, dealers, commercial banks and trust
companies will be reimbursed by Purchaser for customary handling and mailing
expenses incurred by them in forwarding material to their customers.
13. CERTAIN CONDITIONS TO THE OFFER. Notwithstanding any other provision
of the Offer, and in addition to (and not in limitation of) Purchaser's rights
to extend and amend the Offer at any time in its sole discretion in accordance
with and, otherwise subject to, the terms of the Merger Agreement, Purchaser
shall not be required to accept for payment, or, subject to any applicable rules
and regulations of the SEC, including Rule 14e-1(c) under the Exchange Act, pay
for, and may delay the acceptance for payment of or, subject to the restriction
referred to above, the payment for, any tendered Shares, and may terminate the
Offer and not accept for payment any tendered Shares, if, at any time on or
after the date of the Merger Agreement, and before the time of acceptance of
shares for payment pursuant to the Offer, any of the following events shall
occur:
(a) there shall be threatened or pending any suit, action or
proceeding by any governmental entity (i) seeking to prohibit or impose any
material limitations on Purchaser's ownership or operation (or that of any
of their respective subsidiaries or affiliates) of all or a material
portion of its or the Company's businesses or assets, or to compel
Purchaser or its respective subsidiaries and affiliates to dispose of or
hold separate any material portion of the businesses or assets of the
Company or Purchaser and their respective subsidiaries or affiliates, in
each case taken as a whole, (ii) challenging the acquisition by Purchaser
of any Shares under the Offer, seeking to restrain or prohibit the making
or consummation of the Offer or the Merger or the performance of any of the
other transactions contemplated by this Agreement, or seeking to obtain
from the Company or Purchaser any damages that are material in relation to
the Company and its subsidiaries taken as a whole, (iii) seeking to impose
material limitations on the ability of Purchaser, or rendering Purchaser
unable, to accept for payment, pay for or purchase some or all of the
Shares pursuant to the Offer and the Merger, (iv) seeking to impose
material limitations on the ability of Purchaser effectively to exercise
full rights of ownership of the Shares, including, without limitation, the
right to vote the Shares purchased by it on all matters properly presented
to the Company's stockholders, or (v) which otherwise is reasonably likely
to have a material adverse affect on the consolidated financial condition,
businesses or results of operations of the Company and its subsidiaries,
taken as a whole;
(b) there shall be any statute, rule, regulation, judgment, order or
injunction enacted, entered, enforced, promulgated or deemed applicable to
the Offer or the Merger, other than the application to the Offer or the
Merger of applicable waiting periods under the HSR Act, that is reasonably
likely to result, directly or indirectly, in any of the consequences
referred to in clauses (i) through (v) of paragraph (a) above;
(c) there shall have occurred (i) any general suspension of trading
in, or limitation on prices for, securities in the Nasdaq, for a period in
excess of three hours (excluding suspensions or limitations resulting
solely from physical damage or interference with such exchanges not related
to market conditions), (ii) a declaration of a banking moratorium or any
suspension of payments in respect of banks in the United States (whether or
not mandatory), (iii) a commencement of a war, armed hostilities or other
international or national calamity directly or indirectly involving the
United States, (iv) any limitation (whether or not mandatory) by any United
States or foreign governmental authority on the extension of credit by
banks or other financial institutions, (v) a change in general financial
bank or capital market conditions which materially or adversely affects the
ability of financial institutions in the United States to extend credit or
syndicate loans, or (vi) in the case of any of the foregoing existing at
the time of the commencement of the Offer, a material acceleration or
worsening thereof;
(d) there shall have occurred any material adverse change (or any
development that, insofar as reasonably can be foreseen, is reasonably
likely to result in any material adverse change) in the
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<PAGE> 36
consolidated financial condition, businesses, results of operations or
prospects of the Company and its subsidiaries, taken as a whole;
(e) the Company Board of Directors or any committee thereof (i) shall
have withdrawn, modified or changed in a manner adverse to Purchaser its
approval or recommendation of the Offer, the Merger Agreement or the
Merger, (ii) shall have recommended the approval or acceptance of an
Acquisition Proposal from, or similar business combination with, a person
or entity other than Purchaser or any of its affiliates, or (iii) shall
have executed any agreement relating to an Acquisition Proposal from, or
similar business combination with, a person or entity other than Purchaser
or its affiliates;
(f) any of the representations and warranties of the Company set forth
in the Merger Agreement that are qualified as to materiality shall not be
true and correct and any such representations and warranties that are not
so qualified shall not be true and correct in any material respect, in each
case as of the date of the Merger Agreement and as of the scheduled
expiration of the Offer;
(g) the Company shall have failed to perform in any material respect
any material obligation or to comply in any material respect with any
material agreement or covenant of the Company to be performed or complied
with by it under the Merger Agreement;
(h) all consents necessary to the consummation of the Offer or the
Merger including, without limitation, consents from parties to loans,
contracts, leases or other agreements and consents from governmental
agencies, whether federal, state or local shall not have been obtained,
other than consents the failure to obtain which would not have a material
adverse effect on the Company and its subsidiaries, taken as a whole; or
(i) the Merger Agreement shall have been terminated in accordance with
its terms;
which in the sole judgment of Purchaser, in any such case, and regardless of the
circumstances giving rise to such condition, makes it inadvisable to proceed
with the Offer and/or with such acceptance for payment of or payment for Shares.
The foregoing conditions are for the sole benefit of Purchaser and, subject
to the Merger Agreement, may be asserted or may be waived by Purchaser, in whole
or in part at any time prior to the expiration of the Offer and from time to
time in the sole discretion of Purchaser. The failure by Purchaser at any time
to exercise any such rights shall not be deemed a waiver of any right and each
right shall be deemed an ongoing right which may be asserted at any time and
from time to time prior to the Expiration of the Offer.
14. CERTAIN LEGAL MATTERS.
General. Except as described in this Section 14, based on a review of
publicly available filings by the Company with the SEC and a review of certain
information furnished by the Company to Purchaser and discussions of
representatives of Purchaser with representatives of the Company, Purchaser and
the Company are not aware of any license or regulatory permit that appears to be
material to the business of the Company and that might be adversely affected by
Purchaser's acquisition of Shares pursuant to the Offer, or of any approval or
other action by any governmental, administrative or regulatory agency or
authority, domestic or foreign, that would be required for the acquisition or
ownership of Shares by Purchaser pursuant to the Offer. Should any such approval
or other action be required, Purchaser and the Company presently contemplate
that such approval or action will be sought, except as described below under
"-- State Takeover Laws." While Purchaser does not currently intend to delay
acceptance for payment of Shares tendered pursuant to the Offer pending the
outcome of any such matter, there can be no assurance that any such approval or
other action, if required, would be obtained without substantial conditions or
that adverse consequences would not result to the Company's business or that
certain parts of the Company's business would not have to be disposed of in the
event that such approval was not obtained or such other actions were not taken
in order to obtain any such approval or other action. If certain types
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of adverse action are taken with respect to the matters discussed below,
Purchaser may decline to accept for payment or pay for any Shares tendered.
State Takeover Laws. Section 203 of the DGCL, in general, prohibits a
Delaware corporation, such as the Company, from engaging in a "Business
Combination" (defined as a variety of transactions, including mergers) with an
"Interested Stockholder" (defined generally as a person that is the beneficial
owner of 15% or more of the outstanding voting stock of the subject corporation)
for a period of three years following the date that such person became an
Interested Stockholder unless, prior to the date such person became an
Interested Stockholder, the board of directors of the corporation approved
either the Business Combination or the transaction that resulted in the
stockholder becoming an Interested Stockholder. The Company does not believe
that provisions of Section 203 of the DGCL are applicable to any of the
transactions contemplated by the Merger Agreement, since the transaction whereby
Purchaser became an Interested Stockholder was approved by the Board prior to
the execution of the Stock Purchase Transaction.
A number of states have adopted laws and regulations that purport to apply
to attempts to acquire corporations that are incorporated in such states, or
whose business operations have substantial economic effects in such states, or
which have substantial assets, security holders, employees, principal executive
offices or principal places of business in such states. In EDGAR v. MITE CORP.,
the Supreme Court of the United States (the "Supreme Court") invalidated on
constitutional grounds the Illinois Business Takeover statute, which, as a
matter of state securities law, made certain corporate acquisitions more
difficult.
However, in 1987, in CTS CORP. v. DYNAMICS CORP. OF AMERICA, the Supreme
Court held that the State of Indiana may, as a matter of corporate law and, in
particular, with respect to those aspects of corporate law concerning corporate
governance, constitutionally disqualify a potential acquirer from voting on the
affairs of a target corporation without the prior approval of the remaining
stockholders. The state law before the Supreme Court was by its terms applicable
only to corporations that had a substantial number of stockholders in the state
and were incorporated there.
Purchaser does not believe that the antitakeover laws and regulations of
any state other than the State of Delaware will by their terms apply to the
Offer, and, except as set forth above with respect to Section 203 of the DGCL,
Purchaser has not attempted to comply with any state anti-takeover statute of
regulation. Purchaser reserves the right to challenge the applicability or
validity of any state law purportedly applicable to the Offer and nothing in
this Offer to Purchase or any action taken in connection with the Offer is
intended as a waiver of such right. If it is asserted that any state
antitakeover statute is applicable to the Offer and an appropriate court does
not determine that it is inapplicable or invalid as applied to the Offer,
Purchaser might be required to file certain information with, or to receive
approvals from, the relevant state authorities, and Purchaser might be unable to
accept for payment or pay for Shares tendered pursuant to the Offer or may be
delayed in consummating the Offer. In such case, Purchaser may not be obligated
to accept for payment, or pay for, any Shares tendered pursuant to the Offer.
Antitrust. Under the HSR Act and the rules promulgated thereunder by the
Federal Trade Commission (the "FTC"), certain acquisition transactions may not
be consummated unless certain information has been furnished to the FTC and the
Antitrust Division of the Department of Justice (the "DOJ") and certain waiting
period requirements have been satisfied. In connection with Purchaser's
acquisition of Shares from Prime, Fortress filed a Notification and Report Form
with respect to the acquisition of up to 100% of the Company's Shares. Early
termination of the waiting period was granted on May 15, 2000.
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15. MISCELLANEOUS.
The Offer is being made to all holders of Shares. Purchaser is not aware of
any jurisdiction 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 for payment of Shares tendered pursuant thereto, Purchaser will make
a good faith effort to comply with any such state statute or seek to have such
statute declared inapplicable to the Offer. If, after such good faith effort,
Purchaser cannot comply with any such state statute, the Offer will not be made
to (nor will tenders be accepted from or on behalf of) the 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 will be
deemed to be made on behalf of Purchaser by one or more registered brokers or
dealers licensed under the laws of such jurisdiction.
Purchaser may assign its rights under this Offer to Purchase to a wholly
owned subsidiary which agrees to assume its obligations hereunder, provided,
however, that Purchaser shall continue to remain liable for all of its
obligations hereunder.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ON BEHALF OF PARENT OR PURCHASER NOT CONTAINED IN THIS OFFER TO
PURCHASE OR IN THE RELATED LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.
Purchaser has filed with the SEC a Tender Offer Statement on Schedule TO,
together with all exhibits thereto, pursuant to Regulation M-A under the
Exchange Act (the "Exchange Act Rules"), furnishing certain additional
information with respect to the Offer. In addition, the Company has filed a
Solicitation/Recommendation Statement on Schedule 14D-9, together with all
exhibits thereto, pursuant to Rule 14d-9 of the Exchange Act Rules setting forth
its recommendation with respect to the Offer and the reasons for such
recommendations and furnishing certain additional related information. Such
Schedules and any amendments thereto, including exhibits, may be inspected and
copies may be obtained from the offices of the SEC in the manner set forth in
"THE TENDER OFFER -- Certain Information Concerning the Company" (except that
they will not be available at the regional offices of the SEC).
Fortress Brookdale Acquisition LLC
August 1, 2000
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SCHEDULE I
INFORMATION CONCERNING THE DIRECTORS AND EXECUTIVE
OFFICERS OF PURCHASER
1. MEMBERS OF THE OPERATING COMMITTEE, DIRECTORS AND EXECUTIVE OFFICERS OF
PURCHASER, FORTRESS INVESTMENT GROUP LLC AND ACQUISITION SUB.
Set forth in the table below are the name and the present principal
occupation or employment and the name, principal business and address of any
corporation or other organization in which such occupation or employment is
conducted, and the five-year employment history of each member of the Operating
Committee, director and executive officer of Purchaser, Fortress Investment
Group LLC and Acquisition Sub. Each person identified below is a United States
citizen. The principal business address of Purchaser, Fortress Investment Group
LLC and Acquisition Sub and, unless otherwise indicated, the business address of
each person identified below is 1301 Avenue of the Americas, 42nd floor, New
York, New York 10019.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND MATERIAL
NAME AND ADDRESS POSITIONS HELD DURING THE PAST FIVE YEARS
---------------- ------------------------------------------------------------
<S> <C>
WESLEY R. EDENS................... Chairman of Purchaser and a member of its Operating
Committee and Chief Executive Officer and a director of
Acquisition Sub since July 2000. Mr. Edens has been a
director of the Company since May 2000. Mr. Edens is also
CEO of Fortress since December 1, 1999; Chief Executive
Officer and Chairman of Fortress Investment Group LLC (the
"Manager") since April 1998 and Fortress Investment Corp.
("Fortress Investment") since June 1998; Chairman of the
Board of Directors of Fortress since June 1998. He
co-founded the Manager in April 1998 with Messrs. Kauffman,
Nardone and Nygaard, having previously been head of the
Global Principle Finance Group ("GPF") of UBS Securities,
LLC ("UBS"), as well as a Managing Director of UBS. Prior to
joining GPF in 1997, he was a partner and Managing Director
of BlackRock Financial Management, Inc. ("BFM") and the
Chief Operating Officer of BlackRock Asset Investors
("BAI").
PAUL H. WARREN.................... President of Purchaser and a member of its Operating
54 Thompson Street Committee and President of Acquisition Sub since July 2000.
New York, NY 10012 Mr. Warren has been a director of the Company since May
1999. Mr. Warren co-founded Capital Z Partners in 1998. From
1994 to 1998, he was a partner in Insurance Partners, L.P.
He serves as a director of Healthextras, LLC, Corporate
Health Dimensions, Provincia Salud, Provincia A.R.T.,
Digital Insurance and United Payors & United Providers, Inc.
RANDAL A. NARDONE................. Secretary of Purchaser and a member of its Operating
Committee and Secretary and a director of Acquisition Sub
since July 2000. Mr. Nardone has also been the COO and
Secretary of Fortress since December 1999; Chief Operating
Officer and Secretary of the Manager since April 1998 and
Fortress Investment since June 1998. He was previously the
head of the structured finance and contract finance
departments of GPF as well as a Managing Director of UBS.
Prior to joining UBS in 1997, he was a principal of BFM and
Managing Director of BAI. Prior to joining BlackRock, he was
a partner and a member of the executive committee at the law
firm of Thacher Proffitt & Wood.
</TABLE>
I-1
<PAGE> 40
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND MATERIAL
NAME AND ADDRESS POSITIONS HELD DURING THE PAST FIVE YEARS
---------------- ------------------------------------------------------------
<S> <C>
WILLIAM B. DONIGER................ Vice President of Purchaser and a member of its Operating
Committee and Vice President and a director of Acquisition
Sub since July 2000. Mr. Doniger has been a director of the
Company since May 2000. Mr. Doniger has also been a Managing
Director of the Manager since May 1998. He worked for
BlackRock Capital Finance LP ("BCF") from January 1996
through December 1997, and prior to that was employed as a
lawyer in the structured finance group at the law firm of
Thacher Proffitt & Wood.
MARK H. TABAK..................... Member of the Operating Committee since July 2000. Mr. Tabak
54 Thompson Street has been a director of the Company since May 1999. Managing
New York, N.Y. 10012 Partner of Healthcare Capital Partners and President and
Chief Executive Officer of International Managed Care
Advisors, Inc. From 1993 to 1996, he was the President of
AIG Managed Care Inc. Prior to joining AIG, he served as
President and Chief Executive Officer of Group Health Plan
and he was President of Health America Development
Corporation. He is also a member of the Board of Directors
of Ceres Group, Inc., ESC Medical Systems, Ltd. and United
Payors & United Providers, Inc.
GREGORY F. HUGHES................. Chief Financial Officer of Purchaser and Vice President of
Acquisition Sub since July 2000. Chief Financial Officer of
the Manager since August 1999. Served as Chief Financial
Officer for Wellsford Real Properties, Inc., a real estate
merchant banking firm which acquires, finances, develops and
operates real properties and organized and invests in
private and public real estate companies, from 1997 to 1999;
prior to assuming that position, Mr. Hughes was the Chief
Financial Officer for Wellsford Residential Property Trust,
a real estate investment trust.
ERIK P. NYGAARD................... Chief Information Officer and Treasurer of the Manager since
February 1998; Head of financial engineering department of
GPF as well as managing director of UBS from May 1997 to May
1998; Principal and Managing Director of BCF and BAI from
1994.
</TABLE>
I-2
<PAGE> 41
Manually signed facsimile copies of the Letter of Transmittal, properly
completed and duly executed, will be accepted. The Letter of Transmittal,
certificates for shares and any other required documents should be sent or
delivered by each stockholder or such stockholder's broker, dealer, commercial
bank, trust company or other nominee to the Depositary at one of the addresses
set forth below:
The Depositary for the Offer is:
LASALLE BANK NATIONAL ASSOCIATION
<TABLE>
<S> <C>
BY MAIL AND OVERNIGHT COURIER: BY HAND DELIVERY:
LaSalle Bank National Association IBJ Whitehall
135 South LaSalle Street Bank and Trust Company
Corporate Trust Operations Attn: Customer Operations
Room 1811 Receive and Delivery
Chicago, IL 60603 One State Street
Administrator: Joseph Pellicore New York, NY 10004
</TABLE>
TELEPHONE NUMBER:
(800) 246-5761
BY FACSIMILE TRANSMISSION:
(312) 904-2236
Questions or requests for assistance may be directed to the Information
Agent or the Dealer Manager at the addresses and telephone numbers set forth
below. Additional copies of this Offer to Purchase, the Letter of Transmittal,
the Notice of Guaranteed Delivery and related materials may be obtained from the
Information Agent and will be furnished promptly at Purchaser's expense.
Stockholders may also contact their broker, dealer, commercial bank, trust
company or other nominee for assistance concerning the Offer.
The Information Agent for the Offer is:
CORPORATE INVESTOR COMMUNICATIONS, INC.
111 Commerce Road
Carlstadt, NJ 07072-2586
Call Toll Free (800) 548-1027
Banks and Brokers please call (800) 346-7885
The Dealer Manager for the Offer is:
PRUDENTIAL SECURITIES INCORPORATED
One New York Plaza, 18th Floor
New York, NY 10292
Toll Free (888) 713-4198
