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DRAFT 4/27/00
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
CENTENNIAL HEALTHCARE CORPORATION
---------------------------------
(Name of Registrant as Specified In Its Charter)
------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction
applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how it
was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[X] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
$15,243
(2) Form, Schedule or Registration Statement No.:
Schedule TO
(3) Filing Party:
Hilltopper Holding Corp., Hilltopper Acquisition
Corp., Warburg, Pincus Equity Partners, L.P., J.
Stephen Eaton, Alan C. Dahl, Kent C. Fosha, Sr.,
Lawrence W. Lepley, Jr. and Centennial HealthCare
Corporation
(4) Date Filed:
March 17, 2000
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CENTENNIAL HEALTHCARE CORPORATION
400 PERIMETER CENTER TERRACE, SUITE 650
ATLANTA, GEORGIA 30346
May ___, 2000
Dear Shareholders:
You are cordially invited to attend a Special Meeting of Shareholders
(the "SPECIAL MEETING") of Centennial HealthCare Corporation ("CENTENNIAL") to
be held on May ____, 2000, at 10:00 a.m., local time, at The South Terraces
Conference Center Classroom, 115 Perimeter Center Place, Atlanta, Georgia 30346.
The purpose of this Special Meeting is to consider and vote upon the merger of
Centennial (the "MERGER"). If you vote to approve the Merger and the Merger is
consummated, you will receive $5.50 in cash for each share of Centennial common
stock, $0.01 par value per share (the "COMMON STOCK"), that you own at the
effective time of the Merger. You will not have any other equity interest in
Centennial or the surviving corporation created by the Merger.
Hilltopper Holding Corp., a Delaware corporation ("HOLDING"), formed
Hilltopper Acquisition Corp., a Georgia corporation ("ACQUISITION"), to acquire
all of the outstanding Common Stock. As the first step in its plan to acquire
all of the Common Stock, on March 17, 2000, Acquisition commenced an offer to
purchase all of the outstanding Common Stock (the "OFFER"). On May ___, 2000,
Acquisition consummated the Offer and acquired ______% of the outstanding shares
of Common Stock. As the second step, Acquisition will merge with and into
Centennial. Centennial will be the surviving corporation after the Merger and
will be a wholly owned subsidiary of Holding. After the Merger, in accordance
with the terms of the Agreement and Plan of Merger dated as of February 25, 2000
among Centennial, Holding and Acquisition (the "MERGER AGREEMENT") Centennial
will no longer have public shareholders, have its stock quoted on the Nasdaq
National Market or file periodic reports with the Securities and Exchange
Commission.
Warburg, Pincus Equity Partners, L.P. ("WPEP") formed and currently
owns all of the outstanding capital stock of Holding. Five significant
shareholders of Centennial, seven general partners of the general partner of
Welsh, Carson, Anderson & Stowe VI, L.P., one of those significant shareholders
("WCAS VI"), and four members of Centennial's senior management (collectively,
the "CONTRIBUTING SHAREHOLDERS") contributed a total of 4,710,252 shares of
Common Stock (representing some or all of their shares of Common Stock) to
Holding on May ___, 2000, one day after the consummation of the Offer and prior
to the Merger in exchange for shares of Holding preferred stock. The shares
contributed to Holding by the Contributing Shareholders represented
approximately 39.5% of the outstanding Common Stock. With the contributed
shares and the shares purchased by Acquisition in the Offer, Holding
beneficially owns approximately _____% of the Common Stock.
The Contributing Shareholders are WCAS VI, seven individual general
partners of the general partner of WCAS VI (including Andrew M. Paul, a director
of Centennial) (collectively, the "WCAS GENERAL PARTNERS"), WCAS Healthcare
Partners, L.P. ("WCAS HP"), South Atlantic Venture Fund II, Limited Partnership,
South Atlantic Venture Fund III, Limited Partnership, The Burton Partnership,
Limited Partnership (collectively, "SOUTH ATLANTIC"), Alan C. Dahl, Kent C.
Fosha, Sr., Lawrence W. Lepley, Jr. and myself (Mr. Dahl and myself being
officers and directors of Centennial, Mr. Fosha being an officer of Centennial
and Mr. Lepley being an officer of Paragon Rehabilitation, Inc., an indirect
wholly owned subsidiary of Centennial). In addition, affiliates of WPEP
(collectively, the "WP FUNDS") and affiliates of South Atlantic (the "SOUTH
ATLANTIC INVESTORS") contributed a total of $15,000,000 to Holding one day after
the consummation of the Offer in exchange for shares of Holding preferred stock.
This amount will be used to pay down a portion of Centennial's outstanding debt.
The WP Funds contributed $49,673,513 in exchange for Holding preferred stock to
pay the costs of the Offer and the Merger.
The Contributing Shareholders contributed a total of 4,710,252 shares
of Common Stock to Holding in exchange for 4,710,252 shares of Holding preferred
stock. As part of the Merger, I will receive $5.50 a share for 545,454 shares of
Common Stock that I own and am not contributing to Holding. I contributed
569,917 shares to Holding for 569,917 shares of Holding preferred stock. Mr.
Paul, a director of Centennial, will also receive as part of the Merger $5.50 a
share for 3,021 shares of Common Stock that he is not contributing to Holding.
WCAS Capital Partners II, L.P., an affiliate of WCAS VI, will receive as part of
the Merger $5.50 a share for 246,896 shares of Common Stock owned by it, which
was not tendered in the Offer.
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After the Merger, the Contributing Shareholders, the WP Funds and the
South Atlantic Investors (collectively, the "INVESTORS") will, as shareholders
of Holding, continue to have an equity interest in Centennial. The Investors
want to own Centennial because they believe that while the short-term financial
prospects of Centennial are extremely limited, these prospects over the
long-term may be good. As a private company, Centennial will be able to make
decisions that negatively affect current quarter earnings but that increase the
value of its assets or earnings over the long-term. In a public company setting,
it is difficult to make decisions that could negatively affect earnings knowing
that the result of those decisions could be a significant reduction in the per
share price if analysts' short-term earnings expectations are not met or
exceeded. If the Merger is completed, the Investors may receive substantial
benefits in the future if Centennial is profitable and as a result of its
profitable operations or favorable industry trends the value of its stock
increases in excess of the consideration in the Offer and the Merger. The
Investors have no assurance that Centennial will be profitable in the future or
that it will be able to grow through acquisitions or otherwise. The Investors
will be subject to the risks inherent in owning stock in a company subject to
changing governmental regulations that could materially and adversely effect
revenues and earnings and in holding stock of a private company with no market
for their shares.
A special committee of the board of directors of Centennial (the
"SPECIAL COMMITTEE"), consisting of two directors who are not members of or
affiliated with the Investors, was formed to consider and evaluate the Offer and
the Merger. As discussed in the enclosed Proxy Statement, the Special Committee
approved the Offer and the Merger. The Merger Agreement provides that Centennial
and its affiliates are not permitted to solicit or initiate discussions, offers
or proposals from a third party for an alternative transaction to the Merger,
unless necessary to allow the directors to satisfy their fiduciary duties to
Centennial's shareholders. Centennial may terminate the Merger Agreement if
necessary to pursue an acquisition proposal with another party that is more
favorable to Centennial's shareholders than the Merger, provided that Centennial
pay to Holding a $2 million "breakup" fee and reimburse Holding for its expenses
incurred in the Offer and the Merger up to a maximum of $1 million. The Special
Committee has unanimously recommended to Centennial's board of directors that
the Merger and related agreements be approved by Centennial's shareholders. In
connection with its evaluation of the Offer and the Merger, the Special
Committee engaged J.P. Morgan Securities, Inc. ("J.P. MORGAN") to act as its
financial advisor. J.P. Morgan rendered its opinion dated February 25, 2000 that
based upon and subject to the assumptions, limitations and qualifications set
out in that opinion, the cash merger consideration of $5.50 per share to be
received in the Merger is fair from a financial point of view to Centennial's
shareholders (other than Holding, Acquisition and the Contributing
Shareholders). The written opinion of J.P. Morgan is attached as Appendix B to
the enclosed Proxy Statement and should be read carefully and in its entirety by
you.
THE SPECIAL COMMITTEE AND THE BOARD OF DIRECTORS BELIEVE THAT THE TERMS
OF THE MERGER ARE FAIR TO AND IN THE BEST INTERESTS OF CENTENNIAL'S SHAREHOLDERS
(OTHER THAN HOLDING, ACQUISITION AND THE MEMBERS OF THE INVESTORS) AND RECOMMEND
THAT THE SHAREHOLDERS APPROVE THE MERGER.
Approval of the Merger at the Special Meeting will require the
affirmative vote of holders of a majority of the outstanding shares of Common
Stock entitled to vote at the Special Meeting. By obtaining more than a majority
of the shares of outstanding Common Stock through the Offer and taking into
account the shares contributed by the Contributing Shareholders, Acquisition
owns sufficient shares of Common Stock to approve the Merger without the vote of
any other shareholder. The accompanying Proxy Statement provides a summary of
the proposed Merger and additional information about the parties involved and
their interests. A copy of the Merger Agreement is attached to the Proxy
Statement as Appendix A.
PLEASE GIVE ALL OF THIS INFORMATION YOUR CAREFUL ATTENTION. WHETHER OR
NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, IT IS IMPORTANT THAT YOUR SHARES ARE
REPRESENTED AT THE SPECIAL MEETING. YOU ARE REQUESTED TO PROMPTLY COMPLETE, SIGN
AND DATE THE ENCLOSED PROXY CARD AND RETURN IT IN THE ENVELOPE PROVIDED, WHETHER
OR NOT YOU PLAN TO ATTEND. THIS WILL NOT PREVENT YOU FROM VOTING YOUR SHARES IN
PERSON IF YOU LATER CHOOSE TO ATTEND THE SPECIAL MEETING. IF THE MERGER IS
APPROVED BY THE SHAREHOLDERS, AS SOON AS PRACTICABLE AFTER THE EFFECTIVENESS OF
THE MERGER, YOU WILL RECEIVE
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INSTRUCTIONS FOR SURRENDERING YOUR CENTENNIAL SHARE CERTIFICATES (IN EXCHANGE
FOR $5.50 IN CASH PER SHARE) AND A LETTER OF TRANSMITTAL TO BE USED FOR THIS
PURPOSE. YOU SHOULD NOT SUBMIT YOUR SHARE CERTIFICATES FOR EXCHANGE UNTIL YOU
HAVE RECEIVED SUCH INSTRUCTIONS AND THE LETTER OF TRANSMITTAL.
Sincerely,
J. Stephen Eaton
Chairman, President and Chief Executive Officer
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CENTENNIAL HEALTHCARE CORPORATION
400 PERIMETER CENTER TERRACE, SUITE 650
ATLANTA, GEORGIA 30346
------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY ___, 2000
------------------------
Notice is hereby given that a Special Meeting of Shareholders (the
"SPECIAL MEETING") of Centennial HealthCare Corporation, a Georgia corporation
("CENTENNIAL") will be held on May ____, 2000, at 10:00 a.m., local time, at The
South Terraces Conference Center Classroom, 115 Perimeter Center Place, Atlanta,
Georgia 30346 for the following purposes:
(1) To consider and vote upon a proposal to approve an Agreement
and Plan of Merger, dated as of February 25, 2000 (the "MERGER
AGREEMENT"), pursuant to which Hilltopper Acquisition Corp., a
newly formed Georgia corporation ("ACQUISITION") and wholly
owned subsidiary of Hilltopper Holding Corp., a Delaware
corporation ("HOLDING"), will be merged (the "MERGER") with
and into Centennial and each share of Centennial common stock,
$.01 par value (the "COMMON Stock"), outstanding on the
effective date of the Merger, will be converted into the right
to receive $5.50 in cash (the "CASH MERGER CONSIDERATION"),
other than shares held by shareholders who have properly
exercised their dissenters' appraisal rights under Georgia law
and shares held by Acquisition, Holding or any subsidiary or
affiliate of Acquisition, Holding or held in Centennial's
treasury (including shares contributed before the Merger to
Holding by members of Centennial's management and other
significant shareholders and individuals). A copy of the
Merger Agreement is attached as Appendix A to, and is
described in, the accompanying Proxy Statement.
(2) To consider and act upon such other matters as may properly
come before the Special Meeting or any adjournment or
adjournments thereof.
The Board of Directors of Centennial has determined that only holders of Common
Stock of record at the close of business on May _____, 2000, will be entitled to
notice of, and to vote at, the Special Meeting or any adjournment thereof. A
form of proxy and a Proxy Statement containing more detailed information with
respect to the matters to be considered at the Special Meeting accompany and
form a part of this notice.
By order of the Board of Directors
-----------------------------------
Daryl R. Griswold
Assistant Secretary
Atlanta, Georgia
May ____, 2000
WHETHER OR NOT YOU ARE ABLE TO ATTEND THE MEETING, PLEASE SIGN, DATE
AND RETURN THE ACCOMPANYING PROXY CARD PROMPTLY IN THE ENCLOSED ENVELOPE WHICH
REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. PLEASE DO NOT SEND IN ANY
CERTIFICATES FOR YOUR SHARES AT THIS TIME.
THE MERGER HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE FAIRNESS OR MERITS OF
THE MERGER NOR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED IN
THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
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Any record shareholder shall have the right to dissent from the Merger
and to receive payment of the "fair value" of his or her shares upon compliance
with the procedures set forth in Article 13 of the Georgia Business Corporation
Code. Centennial will determine "fair value" for dissenting shares based on the
value of the shares immediately before the consummation of the Merger, excluding
any appreciation or depreciation in anticipation of the Merger. If Centennial
and the dissenting shareholder cannot agree on the "fair value" for a holder's
shares, the Superior Court of DeKalb County, Georgia will determine the "fair
value". In order to comply with Article 13, a dissenting shareholder must
deliver written notice, before the Special Meeting, of his or her intent to
demand payment for his or her shares of Common Stock. The payment demand must be
mailed or delivered to the attention of the Secretary of Centennial at 400
Perimeter Center Terrace, Suite 650, Atlanta, Georgia 30346. The written payment
demand must specify the shareholder's name and mailing address, the number of
shares of Common Stock owned, and that the shareholder is thereby demanding
payment for his or her shares. Voting against, abstaining from voting or failing
to vote on the Merger will not constitute the required demand for payment. See
"RIGHTS OF DISSENTING SHAREHOLDERS" in the Proxy Statement that accompanies this
notice and the full text of Article 13 of the Georgia Business Corporation Code,
which is attached as Appendix C and is described in the accompanying Proxy
Statement.
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CENTENNIAL HEALTHCARE CORPORATION
400 PERIMETER CENTER TERRACE, SUITE 650
ATLANTA, GEORGIA 30346
PROXY STATEMENT
FOR SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY ____, 2000
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: What will happen in the Merger?
A: In the Merger, Acquisition will be merged with and into Centennial with
Centennial being the surviving corporation (the "SURVIVING CORPORATION"). All
shares of Centennial common stock (the "Common Stock") outstanding at the time
of the Merger, other than shares held by Holding, Acquisition or any subsidiary
or affiliate of Holding, Acquisition or Centennial or in Centennial's treasury
and by shareholders who properly exercise their dissenters' appraisal rights
under Georgia law, will be converted into the right to receive a cash payment of
$5.50 a share. Before the Merger, five significant shareholders, seven
individual general partners of the general partner of one of these significant
shareholders and four members of Centennial's senior management (collectively,
the "CONTRIBUTING SHAREHOLDERS") contributed 4,710,252 shares of Common Stock,
representing some or all of their shares of Common Stock to Holding and received
4,710,252 shares of Holding preferred stock in exchange and will not receive
cash for the shares that are contributed for Holding preferred stock. The
contributed shares represented approximately 39.5% of the outstanding Common
Stock. To review the structure of the Merger in greater detail, see pages __
through __.
Q: Who will own Centennial after the Merger?
A: After the Merger, Centennial will become a privately held company indirectly
owned by investors comprised of:
- five significant shareholders of Centennial (the "SIGNIFICANT
SHAREHOLDERS"): Welsh, Carson, Anderson & Stowe VI, L.P.
("WCAS VI"); WCAS Healthcare Partners, L.P. ("WCAS HP"); South
Atlantic Venture Fund II, Limited Partnership ("SAII"); South
Atlantic Venture Fund III, Limited Partner ("SAIII"); and The
Burton Partnership, Limited Partnership ("BURTON LP" and with
SAII and SAIII, "SOUTH ATLANTIC");
- seven individual general partners of the general partner of
WCAS VI, including Andrew M. Paul, a director of Centennial
(the "WCAS GENERAL PARTNERS"):
- four members of Centennial's senior management: J. Stephen
Eaton, Chairman, President and Chief Executive Officer; Alan
C. Dahl, Director, Executive Vice President, Chief Financial
Officer and Treasurer; Kent C. Fosha, Sr., Executive Vice
President of Operations; and Lawrence W. Lepley, Jr.,
President of Centennial's indirect, wholly-owned subsidiary,
Paragon Rehabilitation, Inc. ("PARAGON");
- two affiliates of South Atlantic: South Atlantic Private
Equity Fund IV, Limited Partnership and South Atlantic Private
Equity Fund IV (QP), Limited Partnership (together, the "SOUTH
ATLANTIC INVESTORS"); and
- affiliates of Warburg, Pincus Equity Partners, L.P. ("WPEP"),
the parent of Holding: Warburg, Pincus Netherland Equity
Partners I, C.V.; Warburg, Pinus Netherlands Equity Partners
II, C.V.; and Warburg, Pincus Equity Partners Netherlands III,
C.V. (collectively, the"WP FUNDS").
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The individuals and entities identified above are referred to in this Proxy
Statement collectively as the "INVESTORS."
Q: What happened before the Merger?
A: As the first step in its acquisition of Centennial, Acquisition began a cash
tender offer on March 17, 2000 for all of the outstanding Common Stock (the
"OFFER"). The Offer closed on May ___, 2000 and Acquisition acquired __________
shares or __________% of the Common Stock for $5.50 a share. Taking into account
the shares contributed by the Contributing Shareholders and the shares purchased
by Acquisition in the Offer, Holding beneficially owns approximately _____% of
the Common Stock. The Merger Agreement allows Acquisition to complete its
acquisition of all of the Common Stock through the Merger.
Q: What risks are associated with the Merger for shareholders who are not
Investors?
A: Upon completion of the Merger, you will no longer have an equity interest in
Centennial and will no longer participate in any future earnings or growth of
Centennial. Because Holding through its ownership of Acquisition has acquired
____% of the outstanding Common Stock in the Offer and through the contribution
of shares of Common Stock by the Contributing Shareholders, Centennial will no
longer file reports with the Securities and Exchange Commission and will not
satisfy the listing requirements of the Nasdaq National Market and will no
longer have its shares listed for quotation. You may receive a greater return if
Centennial remains a public company rather than entering into the Merger
transaction. A third party other than the Investors might offer greater than
$5.50 per share in a future transaction. Also, the "fair value" of any
dissenting shares has not been determined and may be greater than $5.50 per
share. To review the effects of the Merger, see pages ___ through ___. To review
the rights of dissenting shareholders, see pages ___ through ___.
Q: Why is Centennial being acquired?
A: Centennial's Board of Directors (the "BOARD") believes that the acquisition
of Centennial is in the best interests of shareholders of Centennial other than
Holding, Acquisition and the Contributing Shareholders (the "PUBLIC
SHAREHOLDERS") and that as a private company, Centennial will have greater
operating flexibility to focus on enhancing value by emphasizing growth and
operating cash flow. To review the background and reasons for the Merger in
greater detail, see pages ___ through ___.
Q: Why was the Special Committee formed?
A: Because five of the directors of Centennial have an interest in the Merger,
the Board appointed a special committee of directors who are not members of
management or general partners of the general partner of WCAS VI, or affiliated
with the Investors (the "SPECIAL COMMITTEE") to review and evaluate the proposed
transaction. The Special Committee has determined that the Merger is fair to and
in the best interests of the Public Shareholders. To review the Special
Committee's recommendation, see pages _____ through _____.
Q: What will I receive in the Merger?
A: You will receive $5.50 in cash, without interest, for each share of Common
Stock that you own. For example: If you own 100 shares of Common Stock, upon
completion of the Merger you will receive $550.00 in cash.
Q: When do you expect the Merger to be completed?
A: We are working to complete the Merger by May ___, 2000.
Q: What are the federal tax consequences of the Merger to me?
A: The receipt of the Cash Merger Consideration by you will be a taxable
transaction for federal income tax purposes. To review the federal income tax
consequences to you in greater detail, see pages ___ through ___.
Your tax consequences will depend on your personal situation. You should consult
your tax advisors for a full understanding of the federal and state tax
consequences of the Merger to you.
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Q: What am I being asked to vote upon?
A: You are being asked to approve and adopt the Merger Agreement, which provides
for the acquisition of Centennial by Holding through the Offer and the Merger.
In the Offer, Acquisition acquired shares representing ____% of the outstanding
Common Stock. The Merger Agreement requires the vote of a majority of the
outstanding shares of Common Stock and due to Acquisition's ownership of
_____% of the outstanding Common Stock through the Offer, no shareholder other
than Acquisition must vote for the Merger in order for the Merger to be
approved. Including the shares acquired by Acquisition in the Offer and the
shares contributed by the Contributing Shareholders, Holding beneficially owns
_____% of the outstanding Common Stock. After the Merger, Centennial will become
a privately held company and you will no longer own an equity interest in
Centennial.
The Special Committee has unanimously approved and adopted the Merger Agreement
and the transactions contemplated therein, and the Board has approved and
adopted the Merger Agreement and the transactions contemplated therein, and the
Special Committee and the Board recommend voting FOR the approval and adoption
of the Merger Agreement.
Q: What do I need to do now?
A: Just indicate on your proxy card how you want to vote, then sign, date and
mail it in the enclosed envelope as soon as possible, so that your shares will
be represented at the meeting.
The Special Meeting will take place on May __, 2000 at 10:00 a.m., local time,
at The South Terraces Conference Center Classroom, 115 Perimeter Center Place,
Atlanta, Georgia 30346. You may attend the Special Meeting and vote your shares
in person, rather than voting by proxy. In addition, you may withdraw your proxy
up to and including the day of the Special Meeting and either change your vote
or attend the Special Meeting and vote in person.
Q. What if I want to change my vote?
A: If you decide to change your vote, you may revoke your proxy by sending in a
later dated proxy or by attending the Special Meeting and voting in person.
Q: If my shares are held in "street name" by my broker, will my broker vote my
shares for me?
A: Your broker will vote your shares of Common Stock only if you provide
instructions on how to vote. You should instruct your broker how to vote your
shares, following the directions your broker provides. If you do not provide
instructions to your broker, your shares will not be voted and they will be
counted as votes against the proposal to approve and adopt the Merger Agreement.
Q: Should I send in my stock certificates now?
A: No. After the Merger is completed we will send you written instructions for
exchanging your Common Stock certificates for the Cash Merger Consideration.
Q: What if I want to exercise my dissenters' rights under Georgia law?
A: To properly exercise your dissenters' rights under Georgia law and receive
"fair value" for your shares of Common Stock, you must deliver to Centennial
before the vote is taken at the Special Meeting written notice of your intent to
demand payment if the Merger is consummated and you must not vote your shares in
favor of the Merger. The notice must be delivered by the record holder of the
Common Stock. You should determine the record holder of your shares to provide
the required notice. Voting against, abstaining from voting or failing to vote
will not satisfy the written notice of demand requirement. Article 13 of the
Georgia Business Corporation Code is attached to this Proxy Statement as
Appendix C and should be read in its entirety if you decide to pursue your
dissenters' rights. "Fair value" will be based on the value of the shares
immediately before the Merger and may be more or less than $5.50 a share.
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WHO CAN HELP ANSWER YOUR QUESTIONS
If you would like additional copies of this document, or if you would
like to ask any additional questions about the Merger, you should contact:
Alan C. Dahl
Centennial HealthCare Corporation
400 Perimeter Center Terrace, Suite 650
Atlanta, Georgia 30346
Telephone: 770-698-9040
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CAUTIONARY STATEMENT CONCERNING
FORWARD-LOOKING INFORMATION
THIS PROXY STATEMENT AND OTHER STATEMENTS MADE FROM TIME TO TIME BY
CENTENNIAL, HOLDING, ACQUISITION OR THEIR REPRESENTATIVES CONTAIN
FORWARD-LOOKING STATEMENTS. THOSE STATEMENTS INCLUDE STATEMENTS REGARDING THE
INTENT, BELIEF OR CURRENT EXPECTATIONS OF CENTENNIAL, HOLDING AND ACQUISITION
AND MEMBERS OF THEIR RESPECTIVE MANAGEMENT TEAMS, AS WELL AS THE ASSUMPTIONS ON
WHICH SUCH STATEMENTS ARE BASED. SUCH FORWARD-LOOKING STATEMENTS ARE NOT
GUARANTEES OF FUTURE PERFORMANCE AND INVOLVE RISKS AND UNCERTAINTIES, AND ACTUAL
RESULTS MAY DIFFER MATERIALLY FROM THOSE CONTEMPLATED BY SUCH FORWARD-LOOKING
STATEMENTS. IMPORTANT FACTORS CURRENTLY KNOWN TO MANAGEMENT OF CENTENNIAL,
HOLDING AND ACQUISITION THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY
FROM THOSE IN FORWARD-LOOKING STATEMENTS INCLUDE, BUT ARE NOT LIMITED TO, THE
RISKS DETAILED HEREIN AND THOSE FACTORS SET FORTH FROM TIME TO TIME IN REPORTS
OF CENTENNIAL FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THE PROTECTION
OF THE LIABILITY SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS CONTAINED IN THE
PRIVATE SECURITIES REFORM ACT OF 1995 IS NOT APPLICABLE TO THE INFORMATION
CONTAINED IN THIS PROXY STATEMENT OR IN STATEMENTS INCORPORATED BY REFERENCE IN
THIS PROXY STATEMENT.
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TABLE OF CONTENTS
<TABLE>
<S> <C>
QUESTIONS AND ANSWERS ABOUT THE MERGER.................................................................................. i
WHO CAN HELP ANSWER YOUR QUESTIONS...................................................................................... iii
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION............................................................. iv
SUMMARY................................................................................................................. 1
The Companies........................................................................................................... 1
The Special Meeting..................................................................................................... 1
Record Date; Voting Power............................................................................................... 1
Vote Required........................................................................................................... 2
Recommendations......................................................................................................... 2
Opinion of Financial Advisor............................................................................................ 2
Terms of the Merger Agreement........................................................................................... 2
Share Ownership of Holding following the Merger......................................................................... 3
Accounting Treatment.................................................................................................... 4
Conflicts of Interest................................................................................................... 4
Regulatory Approvals.................................................................................................... 5
Dissenters' Appraisal Rights............................................................................................ 5
Historical Market Information........................................................................................... 8
Selected Consolidated Financial Data of Centennial...................................................................... 9
Centennial Projections.................................................................................................. 11
SPECIAL FACTORS......................................................................................................... 13
Background of the Merger................................................................................................ 13
The Special Committee's and the Board's Recommendation.................................................................. 20
Opinion of Financial Advisor............................................................................................ 25
Purpose, Alternatives and Reasons of Centennial and the Investors for the Merger........................................ 28
Position of the Investors, Holding, Acquisition and Centennial as to Fairness of the Merger............................. 29
Conflicts of Interest................................................................................................... 30
Certain Effects of the Merger........................................................................................... 35
Financing of the Merger................................................................................................. 36
Conduct of Centennial's Business After the Merger....................................................................... 36
THE SPECIAL MEETING..................................................................................................... 37
Date, Time and Place of the Special Meeting............................................................................. 37
Proxy Solicitation...................................................................................................... 37
Record Date and Quorum Requirement...................................................................................... 37
Voting Procedures....................................................................................................... 37
Voting and Revocation of Proxies........................................................................................ 38
Effective Time of the Merger and Payment for Shares..................................................................... 38
Other Matters to be Considered.......................................................................................... 38
THE MERGER.............................................................................................................. 39
Terms of the Merger Agreement........................................................................................... 39
Terms of the Subscription Agreement, Voting Agreement and Employment Agreements.........................................
Accounting Treatment.................................................................................................... 43
Estimated Fees and Expenses of the Merger............................................................................... 44
RIGHTS OF DISSENTING SHAREHOLDERS....................................................................................... 45
FEDERAL INCOME TAX CONSEQUENCES......................................................................................... 46
PRINCIPAL SHAREHOLDERS AND STOCK OWNERSHIP OF MANAGEMENT AND OTHERS..................................................... 48
CERTAIN INFORMATION CONCERNING HOLDING, ACQUISITION AND THE INVESTORS................................................... 51
INDEPENDENT AUDITORS.................................................................................................... 56
WHERE YOU CAN FIND MORE INFORMATION..................................................................................... 56
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE......................................................................... 57
SHAREHOLDER PROPOSALS................................................................................................... 58
OTHER MATTERS........................................................................................................... 58
</TABLE>
11
<PAGE> 13
<TABLE>
<S> <C>
APPENDICES
APPENDIX A Agreement and Plan of Merger................................................................................ A-1
APPENDIX B Opinion of J.P. Morgan Securities Inc....................................................................... B-1
APPENDIX C Text of Article 13 of the Georgia Business Corporation Code................................................. C-1
</TABLE>
12
<PAGE> 14
SUMMARY
This summary highlights selected information from this document and may
not contain all of the information that is important to you. For a more complete
understanding of the Merger and for a more complete description of the legal
terms of the Merger, you should read this entire document carefully, as well as
the additional documents to which we refer you, including the Merger Agreement.
See "Where You Can Find More Information" (page ___).
THE COMPANIES
Centennial HealthCare Corporation
400 Perimeter Center Terrace, Suite 650
Atlanta, Georgia 30346
(770) 698-9040
Centennial, through its subsidiaries, provides a broad range of
long-term health care services to meet the medical needs of elderly and
post-acute patients. Centennial, through its subsidiaries, operates 100 owned,
leased or managed skilled nursing facilities, with approximately 10,800
licensed, available beds, in 21 states and the District of Columbia. In
addition, through its subsidiaries, Centennial provides comprehensive
rehabilitation services and home health care services.
Hilltopper Holding Corp.
Hilltopper Acquisition Corp.
c/o E.M. Warburg, Pincus & Co., LLC
466 Lexington Avenue
New York, New York 10017
(212) 878-0600
Holding was organized by WPEP. Warburg, Pincus & Co. ("WARBURG") is the
sole general partner of WPEP. Before the Contributing Shareholders contributed
shares of Common Stock for shares of Holding preferred stock, all of the
outstanding shares of Holding were owned by WPEP. Acquisition agreed with the
members of the Investors who contributed shares of Common Stock for, or
purchased shares of, Holding preferred stock, to acquire the public stock of
Centennial through the Merger. Holding organized and owns all of the outstanding
shares of Acquisition.
THE SPECIAL MEETING (PAGE ___)
The Special Meeting will be held on May __, 2000, at 10:00 a.m., local
time, at The South Terraces Conference Center Classroom, 115 Perimeter Center
Place, Atlanta, Georgia 30346. At the Special Meeting, Centennial shareholders
will be asked to consider and vote upon a proposal to approve and adopt the
Merger Agreement.
RECORD DATE; VOTING POWER (PAGE ___)
Holders of record of Common Stock at the close of business on April
___, 2000 (the "RECORD DATE") are entitled to notice of and to vote at the
Special Meeting. As of such date, there were ________ shares of Common Stock
issued and outstanding held by approximately ____ holders of record. Holders of
record of Common Stock on the Record Date are entitled to one vote per share on
any matter that may properly come before the Special Meeting.
VOTE REQUIRED (PAGE ___)
Approval by the Centennial shareholders of the proposal to approve and
adopt the Merger Agreement will require the affirmative vote of a majority of
the shares of Common Stock outstanding on the Record Date. Through the Offer,
Acquisition has acquired ______% of the shares of Common Stock outstanding on
the Record Date and will vote all of its shares in favor of the Merger.
Including the shares contributed to Holding by the Contributing Shareholders and
through its ownership of Acquisition, Holding beneficially owns _____% of the
Common Stock.
13
<PAGE> 15
Acquisition will satisfy the majority vote requirement without the need for any
other shareholder to vote in favor of the Merger. A failure to vote or a vote to
abstain will have the effect of a vote against the Merger.
RECOMMENDATIONS (PAGE ___)
Because five of the Centennial directors have a material financial
interest in the transactions contemplated by the Merger Agreement, the Board
appointed the Special Committee to review and evaluate the proposed transaction.
The Special Committee unanimously recommended to the Board that the Merger
Agreement be approved and recommended to the shareholders of Centennial.
Following the unanimous recommendation of the Special Committee, the Board
unanimously determined that the Merger, the Merger Agreement and the
transactions contemplated thereby were fair to and in the best interests of the
Public Shareholders and recommended that the Public Shareholders approve the
Merger Agreement. The Special Committee and the Board recommend that the Public
Shareholders vote "For" the approval of the Merger Agreement. You also should
refer to the factors that the Special Committee and the Board considered in
determining whether to approve and adopt the Merger Agreement beginning on page
___.
OPINION OF FINANCIAL ADVISOR (PAGE ___)
J.P. Morgan, a nationally recognized investment banking firm which
served as financial advisor to the Special Committee, has rendered an opinion
dated February 25, 2000, to the Special Committee that the Cash Merger
Consideration is fair from a financial point of view to the Public Shareholders.
A copy of the fairness opinion, setting forth the information reviewed,
assumptions made and matters considered, is attached to this Proxy Statement as
Appendix B. You should read the fairness opinion of J.P. Morgan in its entirety.
TERMS OF THE MERGER AGREEMENT (PAGE ___)
The Merger Agreement is attached to this Proxy Statement as Appendix A.
You should read the Merger Agreement in its entirety. It is the legal document
that governs the Merger.
General. The Merger Agreement provides that Acquisition will be merged with and
into Centennial, with Centennial being the Surviving Corporation. As a result of
the Merger, the shareholders of Centennial will receive $5.50 in cash, without
interest, for each share of Common Stock that they own, other than shares held
by shareholders who properly exercise their dissenters' appraisal rights and
shares held by Acquisition and Holding or any subsidiary or affiliate of
Acquisition or Holding or Centennial or in Centennial's treasury (including
shares that were contributed to Holding prior to the Merger by the Contributing
Shareholders).
Conditions to the Merger. The completion of the Merger depends upon the
satisfaction of a number of conditions, including:
- consummation of the Offer;
- approval of the Merger Agreement by the holders of a majority
of the outstanding shares of Common Stock;
- receipt of all necessary orders and consents of governmental
authorities and the expiration of any regulatory waiting
periods;
- accuracy of the representations and warranties of the parties;
- absence of certain litigation;
- absence of the occurrence of any event having a material
adverse effect on the business of Centennial.
Each party may, at its option, waive the satisfaction of any condition to such
party's obligations under the Merger Agreement. [EVEN IF THE SHAREHOLDERS
APPROVE THE MERGER, THERE CAN BE NO ASSURANCE THAT THE MERGER WILL BE
CONSUMMATED.]
14
<PAGE> 16
No Solicitation. Until consummation or abandonment of the Merger, Centennial
and its affiliates are not permitted to initiate or solicit any discussions,
offers or proposals from or, subject to the Board's fiduciary duties as advised
by counsel, continue or participate in any negotiations or discussions with, a
third party with respect to a merger, consolidation, sale or similar transaction
involving Centennial or any of its subsidiaries (each a "SUPERIOR PROPOSAL").
Termination. Either Centennial or Holding may terminate the Merger Agreement and
abandon the Merger under certain circumstances, including if:
- if Centennial and Holding mutually consent;
- legal constraints or prohibitions issued by a governmental
entity prevent the consummation of the Merger; or
- the other party breaches in a material manner any of its
representations, warranties or covenants under the Merger
Agreement and, if curable, such breach is not cured within 10
business days after written notice of such breach.
In addition, if the Board determines in good faith by a majority vote, after
consulting with its financial advisors and based on the advice of outside legal
counsel to Centennial, that a Superior Proposal with another party is more
favorable to Centennial's shareholders than the Merger, Centennial may terminate
the Merger Agreement if necessary to pursue the alternative Superior Proposal or
Centennial may terminate the Merger Agreement if the Board or the Special
Committee withdraws, or adversely modifies, its approval or recommendation of
the Merger. Upon such a termination, Centennial must pay Acquisition a "break
up" fee of $2 million and reimburse Acquisition for its expenses up to a maximum
of $1 million.
Fees and Expenses. Centennial and Acquisition will pay their own fees, costs and
expenses incurred in connection with the Merger Agreement if the Merger is not
consummated. However, Centennial will pay Acquisition the break up fee and
expenses reimbursement, under certain circumstances, including if Centennial
approves, enters into or consummates a Superior Proposal with another party or
if the Board or the Special Committee withdraws its recommendation of the
Merger. If the Merger is consummated, Centennial will pay, at the effective time
of the Merger, all of its own fees and expenses and fees and expenses incurred
by Holding and Acquisition, including the fees and expenses of counsel,
accountants, investment bankers and other advisors and experts.
SHARE OWNERSHIP OF HOLDING FOLLOWING THE MERGER (PAGE __)
- The Management Group. J. Stephen Eaton, Chairman of the Board,
President and Chief Executive Officer of Centennial ("EATON");
Alan C. Dahl, Executive Vice President, Chief Financial
Officer and Treasurer and a director of Centennial ("DAHL");
Kent C. Fosha, Sr., Executive Vice President of Centennial
("FOSHA"); and Lawrence W. Lepley, Jr., President of
Centennial's Paragon Rehabilitation, Inc. subsidiary
("LEPLEY"), will contribute an aggregate of 754,904 shares of
Common Stock for shares of Series A Convertible Preferred
Stock, $.01 par value, of Holding (the "SERIES A PREFERRED
STOCK"). Shares of Common Stock owned by Mr. Eaton but not
contributed for shares of Series A Preferred Stock will be
converted into the right to receive $5.50 per share in the
Merger for an aggregate consideration of $2,999,997. After the
Merger, the management group will own an aggregate equity
interest in Holding of approximately 5.2% or 754,904 shares of
Holding preferred stock. The Board will reserve 2,585,451
shares of Holding common stock representing approximately 15%
of the equity of Holding (calculated on a fully diluted basis)
at the closing of the Merger for options to be granted to the
members of the management group and other officers and key
employees of Centennial.
- The WP Funds. The WP Funds are purchasing 9,031,548 shares of
Series A Preferred Stock at a price of $5.50 per share for a
total $49,673,514. After the Merger, the WP Funds will own an
aggregate equity interest in Holding of approximately 61.6% of
the Holding preferred stock.
15
<PAGE> 17
- South Atlantic. South Atlantic will contribute an aggregate of
1,183,677 shares of Common Stock for 1,183,677 shares of
Series B Non-Voting Convertible Preferred Stock, $.01 par
value (the "SERIES B PREFERRED STOCK"), of Holding. In
addition, the South Atlantic Investors are purchasing 909,091
shares of Series B Preferred Stock at a price of $5.50 per
share for a total of $5,000,000. After the Merger, South
Atlantic and the South Atlantic Investors will own an
aggregate equity interest in Holding of approximately 14.3% of
the Holding preferred stock.
- WCAS. WCAS VI , WCAS HP and the WCAS General Partners; (WCAS
VI, WCAS HP and the WCAS General Partners collectively,
"WCAS") will contribute an aggregate of 2,762,671 shares of
Common Stock for 2,762,671 shares of Series B Preferred Stock
of Holding. After the Merger, WCAS will own an aggregate
equity interest in Holding of approximately 18.9% of Holding
preferred stock.
Series A Preferred Stock will be convertible into shares of
Holding's voting common stock and Series B Preferred Stock
will be convertible into non-voting common stock. The
non-voting common stock is convertible at the option of the
holder into voting common stock (i) upon the sale or transfer
of the non-voting common stock to any person or entity other
than WCAS VI, South Atlantic or any of their affiliates; or
(ii) if after giving effect to such conversion, the holder
would not own shares of voting common stock representing more
than 10% of the voting common stock and Series A Preferred
Stock then outstanding.
ACCOUNTING TREATMENT (PAGE ___)
Acquisition believes that the Merger will be accounted for as a
"purchase" under the purchase method in accordance with generally accepted
accounting principles.
CONFLICTS OF INTEREST (PAGE ___)
- The Management Group. Messrs. Eaton, Dahl, Fosha and Lepley
have interests in the Merger that are different from, or in
addition to, yours as a Centennial shareholder. They will
continue to have an equity interest in the Surviving
Corporation through their ownership of Holding preferred stock
and the ultimate value of this interest could exceed $5.50 per
share. If the Merger is consummated, Mr. Eaton will be
designated as a member of the board of directors of the
Surviving Corporation and Holding and Messrs. Eaton, Dahl,
Fosha and Lepley will remain as senior management of the
Surviving Corporation pursuant to amended and restated
employment agreements that provide for two year rolling
severance and noncompete periods (three years for Mr. Eaton).
In addition, if the Merger is consummated, options to purchase
Holding common stock will be made available to Messrs. Eaton,
Dahl, Fosha and Lepley and other officers and key employees.
Indemnification arrangements and directors' and officers'
liability insurance for existing directors and officers of
Centennial will be continued by the Surviving Corporation
after the Merger. See "The Merger - Terms of the Subscription
Agreement, Voting Agreement and Employment Agreements" (page
___).
- WCAS. In the Merger, Andrew M. Paul, one of the WCAS General
Partners and a director of Centennial, will receive $5.50 per
share for 3,021 shares of Common Stock that he does not
contribute for shares of Holding preferred stock. WCAS Capital
Partners II, L.P. ("WCAS CP"), an affiliate of WCAS, will
receive in the Merger $5.50 per share for 246,896 shares of
Common Stock owned by it.
- Other Directors. Bertil Nordin is a director of Centennial and
a special limited partner of a South Atlantic affiliate. Mr.
Nordin is a special limited partner in a limited partnership
that invested in a South Atlantic affiliate holding Common
Stock. James Hoover is a director of Centennial and a former
partner and current limited partner of the general partner of
WCAS VI, as well as a general partner of the sole general
partner of WCAS CP. Mr. Hoover is also affiliated with Dauphin
Capital Partners, which approached the WP Funds about
participating in the Offer and the Merger but ultimately did
not participate.
16
<PAGE> 18
- The Special Committee. The members of the Special Committee
were paid $37,500 each for serving on the committee and
received $1,000 for each committee meeting attended.
REGULATORY APPROVALS (PAGE ___)
Centennial is required to make filings with or obtain approvals from
regulatory authorities in connection with the Merger. These consents and
approvals include approval of the Federal Trade Commission, the Department of
Justice, and certain state regulatory authorities. An application and notice was
filed with the Federal Trade Commission and the Department of Justice by
Acquisition on March 13, 2000 and by Centennial on March 23, 2000 and the
waiting period has expired. [ALL OTHER NECESSARY APPLICATIONS AND NOTICES HAVE
BEEN FILED OR ARE IN THE PROCESS OF BEING FILED.]
[CENTENNIAL CANNOT PREDICT WHETHER OR WHEN CENTENNIAL WILL OBTAIN ALL
REQUIRED REGULATORY APPROVALS OR THE TIMING OF THESE APPROVALS.]
DISSENTERS' APPRAISAL RIGHTS (PAGE ___)
Any shareholder of Centennial who does not vote in favor of the
proposal to approve the Merger Agreement and who strictly complies with the
applicable provisions of Article 13 of the Georgia Business Corporation Code has
the right to dissent and be paid cash for the "fair value" for such holder's
shares of Common Stock, which may be more than, the same as, or less than the
Cash Merger Consideration of $5.50 a share. "Fair value" will be determined
based on the value of the dissenting shares immediately before the effective
time of the Merger without any appreciation or depreciation in anticipation of
the Merger. If Centennial and a dissenting shareholder are unable to agree upon
the "fair value" for the holder's shares of Common Stock, the Superior Court of
DeKalb County, Georgia will determine the "fair value". To perfect these
appraisal rights with respect to the Merger, you must follow the required
procedures precisely, which include the requirement to give written notice to
Centennial before the Special Meeting of your intent to demand payment. The
applicable provisions of Article 13 are attached to this Proxy Statement as
Appendix C.
17
<PAGE> 19
HISTORICAL MARKET INFORMATION
The Common Stock is traded on the Nasdaq National Market (symbol:
CTEN). The following table sets forth the high and low closing bid quotations
for each quarterly period for Centennial's two most recent fiscal years and for
the current fiscal year to date.
<TABLE>
<CAPTION>
CALENDAR YEAR HIGH LOW
- ------------- ---- ---
<S> <C> <C>
1998:
First Quarter............................................................................................. $25 1/8 $19 5/8
Second Quarter............................................................................................ $25 $16 7/16
Third Quarter............................................................................................. $20 3/8 $7 1/2
Fourth Quarter............................................................................................ $15 1/2 $7 3/8
1999:
First Quarter $15 9/16 $8
Second Quarter............................................................................................ $10 $1
Third Quarter............................................................................................. $5 17/32 $2 5/8
Fourth Quarter............................................................................................ $3 9/16 $2 7/32
2000:
First Quarter $5 9/32 $4
Second Quarter (through April 26, 2000) $5 1/2 $4
</TABLE>
On February 24, 2000, the last full trading day prior to the public
announcement of the terms of the Offer and the Merger, the reported closing
price per Share on the Nasdaq National Market was $2 15/16 per share. On March
16, 2000, the last full trading day prior to the commencement of the Offer, the
reported closing price per share on the Nasdaq National Market was 55/32 per
share. On May ___, 2000, the high and low bid quotations per share were $______
and $______ and there were _____ shareholders of record of the Common Stock.
Since its inception, Centennial has not paid any cash dividends on its
Common Stock. Under the Merger Agreement, Centennial has agreed not to pay any
dividends on the Common Stock prior to the closing of the Merger. Under
Centennial's current senior credit facility, the distribution of dividends would
require lender consent. In addition, applicable laws generally limit the ability
of Centennial's subsidiaries to pay dividends to the extent that required
regulatory capital would be impaired, which in turn further limits Centennial's
ability to pay dividends.
In July 1997, Centennial completed an underwritten initial public
offering of 4,600,000 shares of Common Stock (including the underwriters'
exercise of their over-allotment option). The offering price per share was
$16.00 and Centennial received net proceeds of approximately $66.8 million.
18
<PAGE> 20
SELECTED CONSOLIDATED FINANCIAL DATA OF CENTENNIAL
Certain selected consolidated historical financial data of Centennial,
derived from its audited financial statements is set forth below. The selected
financial data should be read in conjunction with the Consolidated Financial
Statements of Centennial, related notes and other financial information
incorporated by reference into this Proxy Statement.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
------------
1999 1998
--------- ---------
<S> <C> <C>
REVENUES:
Net patient service revenues ........................................................... $ 368,655 $ 342,203
Management fees and other revenues ..................................................... 9,874 15,442
--------- ---------
Total revenues ............................................................ 378,529 357,645
--------- ---------
EXPENSES:
Facility operating expenses ............................................................ 322,051 275,489
Lease expense .......................................................................... 33,309 22,946
Corporate administrative costs ......................................................... 26,445 21,515
Depreciation and amortization .......................................................... 12,588 9,292
Loss on closure of nursing facility .................................................... -- 4,010
Terminated merger transaction costs .................................................... (2,583) 3,619
Provision for asset revaluation ........................................................ 14,530 12,152
--------- ---------
Total Operating Expenses .................................................. 406,340 349,023
--------- ---------
(27,811) 8,622
--------- ---------
OTHER INCOME (EXPENSE):
Interest income ........................................................................ 1,479 2,011
Interest expense ....................................................................... (12,050) (9,165)
--------- ---------
Total Other income (expense) ............................................. (10,570) (7,154)
--------- ---------
(38,382) 1,468
Provision for income taxes (income tax benefit) .......................................... (13,165) 1,504
Loss before minority interest and cumulative effect of change in
accounting method ........................................................................ (25,217) (36)
Minority interest in net income of subsidiary, net of income taxes ....................... (226) (279)
--------- ---------
Loss before cumulative effect of change in accounting method ............................. (29,443) (315)
Cumulative effect of change in accounting method, net of income taxes .................... (427) --
--------- ---------
Net Loss ................................................................................. $ (25,870) $ (315)
========= =========
Per common share information (diluted):
Loss before cumulative effect of change in accounting method ........................... $ (2.13) $ (0.03)
Cumulative effect of change in accounting method ......................................... (0.04) --
--------- ---------
Net Loss ................................................................................. $ (2.17) $ (0.03)
--------- ---------
Weighted average number of common and common stock equivalents outstanding
(diluted) ............................................................................... 11,923 12,078
========= =========
</TABLE>
19
<PAGE> 21
<TABLE>
<CAPTION>
1999 1998
---- ----
AS OF DECEMBER 31,
------------------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital ........................................................................ $ 25,698 $ 57,125
Total assets ........................................................................... 264,345 285,332
Long-term debt, less current maturities ................................................ 108,076 112,849
Net shareholders' equity ............................................................... 87,813 113,683
</TABLE>
RATIO OF EARNINGS TO FIXED CHARGES:
<TABLE>
<CAPTION>
12/31/98 12/31/99
-------- --------
<S> <C> <C>
Ratio of earnings to fixed charges........................................... 1.0 0.15
BOOK VALUE PER SHARE:
<CAPTION>
12/31/98 12/31/99
<S> <C> <C>
9.53 7.36
</TABLE>
CENTENNIAL PROJECTIONS
Certain Projections of Centennial. In the course of discussions giving rise to
the Merger Agreement, representatives of Centennial furnished to Holding's
representatives certain business and financial information that was not publicly
available, including certain financial projections for fiscal years 2000, 2001,
2002 and 2003. The non-public information provided by Centennial included
projections developed over a period of time by Centennial of its future
operations performance and were delivered in preliminary and final versions
(together, "CENTENNIAL'S PROJECTIONS"). Centennial does not as a matter of
course publicly disclose projections as to future revenues or earnings.
Centennial's Projections were prepared by management solely for Centennial's
internal purposes and were not prepared for publication or with a view to
complying with the published guidelines of the Commission regarding projections
or with the American Institute of Certified Public Accountants guide for
Prospective Financial Statements, and such information is being included in this
Proxy Statement solely because it was furnished to us in connection with the
discussions giving rise to the Merger Agreement. The independent accountants of
Centennial have neither examined nor compiled the financial information set
forth below and, accordingly, do not express an opinion or any other form of
assurance with respect thereto. The reports of such independent accountants
incorporated by reference in this Proxy Statement relate to the historical
financial information of Centennial and do not extend to the following financial
information and should not be read to do so.
Centennial's Projections set forth below necessarily reflect numerous
assumptions with respect to general business and economic conditions and other
matters, many of which are inherently uncertain or beyond Centennial's or the
Investors' control, may not be apparent on the face of the assumptions and do
not take into account any changes in Centennial's operations or capital
structure which may result from the Offer and the Merger. In addition, factors
such as industry performance and regulatory and financial conditions, which are
difficult to project, may cause Centennial's Projections or the underlying
assumptions to be inaccurate. It is not possible to predict whether the
assumptions made in preparing the projected financial information will be valid.
Accordingly, there can be no assurance that Centennial's Projections will be
realized, and actual results may prove to be materially higher or lower than
those contained in the projections. The inclusion of this information should not
be regarded as an indication that Centennial or anyone else who received this
information considered it a reliable predictor of future events, and this
information should not be relied on as such. None of the Investors or any of
their respective representatives assumes any responsibility for the validity,
20
<PAGE> 22
reasonableness, or completeness of the projected financial information, and
Centennial has made no representation regarding such information.
The preliminary projections were prepared in November 1999 and were
based upon estimates of year ending December 31, 1999 revenues and expenses. The
final projections were revised for actual unaudited year ended December 31, 1999
revenues and expenses, reductions in revenues and expenses resulting from
Centennial selling three facilities and terminating its lease of a fourth
facility in the fourth quarter of 1999 and discontinuing selected non-essential
lines of business, actual cost cuts relating to the implementation of a new
Medicare prospective payment system contained in the Balanced Budget Act of 1997
which was enacted in August 1997 ("PPS"), revised projections of anticipated
Medicare rate increases resulting from the recent legislation adding back a
portion of the Medicare spending reductions through the implementation of PPS,
revised growth rate assumptions for both revenues and expenses and revised
interest rate assumptions.
The major assumptions made by Centennial with respect to the
preliminary Centennial's Projections were as follows: revenues increased by 5.3%
to 5.6% per year beginning in 2000; operating expenses were estimated at
approximately 77% of revenue; corporate overhead was estimated at approximately
6% of revenue; the interest rate on current debt was estimated at 8.8%; and an
effective tax rate of 36% to 37% was utilized.
<TABLE>
<CAPTION>
2000 2001 2002 2003
---- ---- ---- ----
PRELIMINARY
(IN MILLIONS)
<S> <C> <C> <C> <C>
Revenues.............................................................. $400.5 $421.8 $445.5 $470.2
Earnings Before Interest, Taxes, Depreciation Amortization and Rent... 70.0 73.5 77.4 81.6
Income Before Income Taxes............................................ 16.3 20.1 24.3 30.2
Net Income............................................................ 9.9 12.3 15.0 18.7
</TABLE>
In preparing the final Centennial's Projections that were completed in
February 2000, Centennial made the following changes to the preliminary Company
Projections: adjustments were made to reflect the sale of three facilities owned
by Centennial and the termination of the lease of one facility leased by
Centennial in late 1999; revenues increased by approximately 4% per year
beginning in 2000; operating expenses were estimated at approximately 76% of
revenue; corporate overhead was estimated at approximately 6.4% of revenue; the
average interest rate on current debt was increased to 9.7%; and the effective
tax rate was increased to approximately 41%.
<TABLE>
<CAPTION>
2000 2001 2002 2003
---- ---- ---- ----
FINAL
(IN MILLIONS)
<S> <C> <C> <C> <C>
Revenues.............................................................. $385.1 $400.1 $416.3 $433.1
Earnings Before Interest, Taxes, Depreciation Amortization and Rent... 67.0 71.9 74.6 77.3
Income Before Income Taxes............................................ 8.5 14.5 18.0 23.3
Net Income............................................................ 5.0 8.6 10.7 13.8
</TABLE>
SPECIAL FACTORS
BACKGROUND OF THE MERGER
General. In 1998, changes in the capital markets began to impede Centennial's
growth strategy. Centennial had historically grown in size and profitability
primarily through acquisitions. From the beginning of 1998, acquisition
21
<PAGE> 23
prices increased and, during the second half of the year, changes in the capital
markets made debt and equity financing more difficult to obtain. Both of these
factors made acquisitions more difficult.
In addition, Centennial's growth strategy has been affected by the
implementation of PPS. Prior to PPS, Centennial's skilled nursing care
facilities operated under a "cost based" Medicare reimbursement system. PPS is a
program for implementing an estimated $16 billion of reductions in Medicare
spending over five years for skilled nursing care facilities such as those
operated by Centennial. In late 1999, approximately $2 billion of these
reductions were restored.
PPS payments are based on per diem rates as payment for all services to
the covered residents of a facility. Under PPS, each covered Medicare resident
of a skilled nursing facility is classified into 1 of 44 Resource Utilization
Groups ("RUG") categories based upon the resident's clinical condition, extent
of services needed and functional status. Periodic reassessment of residents is
required on a set schedule to determine whether the resident is in the correct
RUG category, as well as when a resident's condition changes. A facility
receives payment under Medicare based upon each resident's RUG category, there
being a separate rate for each RUG category. As a result, accurate
classification of each resident into his or her appropriate RUG category is
crucial to the facility receiving the appropriate payment for services provided
to that resident. Overall, the rates received by Centennial at its facilities
under PPS are less than rates previously received by Centennial under the "cost
based" reimbursement system, and the per diem rates paid for a resident in a
particular RUG category does not necessarily cover the cost of care for that
resident.
In June 1998, management commenced a comprehensive internal study of
the effects of PPS on Centennial's results for the first five months of 1998 on
a pro forma basis as if PPS was fully effective in 1998. The preliminary results
of that study indicated that even if Centennial was successful in reducing
ongoing costs to match revenue reductions under PPS, the implementation of PPS
would cause Centennial to incur significant additional training, implementation
and other costs and expenses of approximately $2.5 million in the last half of
1998 and approximately $3.0 million in the first half of 1999 that could not be
recovered from revenues. These costs and expenses included additional staffing
at the facilities and corporate offices to assist in classifying residents into
proper RUG categories, travel costs associated with sending trainers to the
facilities and personnel from the facilities to the corporate offices of
Centennial to provide and receive training in classifying residents into proper
RUG categories, training in the requirements of PPS and inefficiencies
associated with the implementation of a new, radically different reimbursement
program at both the facility and corporate office levels.
PPS became fully effective for Centennial in January 1999. Management
initially believed that PPS would not have an adverse effect on earnings when
fully implemented because the decreased revenues under PPS would be offset by
anticipated cost reductions. To realize these anticipated costs reductions,
Centennial had to seek substantial cost savings from third party suppliers, as
well as from its own subsidiaries providing rehabilitation therapy services to
Centennial's skilled nursing care facilities. Although Centennial has made
progress in obtaining these cost reductions, it has taken longer than
anticipated to realize the benefit of such reductions and, to date, Centennial
has not obtained all anticipated cost reductions. Centennial is continuing to
seek such cost reductions both internally and from third party suppliers. During
the second half of 1998 and the first half of 1999, Centennial incurred
significant additional training, implementation and other costs and expenses
associated with PPS.
PPS continued to have a material effect on Centennial and its results
of operations throughout 1999 and into 2000. As stated above, to date,
Centennial has not been able to obtain all anticipated cost reductions necessary
to make the earnings effect of PPS neutral. Other factors, including the
continuing tight labor market (which has driven up labor costs), increases in
liability, health and workers compensation insurance rates and rising interest
rates, have also increased Centennial's cost of doing business.
The changing environment, which began in 1998 and continued through
1999, led management to evaluate various alternatives for the future of
Centennial. While management expected that strategic acquisition opportunities
for Centennial to grow would continue to exist, these opportunities would
require significant capital that, if available in the current market, would be
more expensive or dilutive to the value of Centennial in this economic
environment. Centennial would not be able to produce year-to-year growth rates
in revenue in line with historical levels that included acquisitions. In
addition, Centennial's lenders could prevent acquisition growth due to covenants
in Centennial's credit facility that prohibit Centennial from incurring
additional debt or entering into additional leases. Centennial also faced
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uncertainty concerning its ability to reduce costs sufficiently, and management
believed that this uncertainty might further depress Centennial's stock price.
Each of these factors led management to the conclusion that it was in the best
interest of Centennial's shareholders to consider strategic alternatives for
Centennial.
Events Leading to the Merger. In September 1998, following a drop in the per
share price of Centennial's common stock from $14.75 in August 1998 to $7.50,
representatives of WCAS VI and its affiliates (collectively, "WELSH CARSON") and
BT Alex. Brown Incorporated met to discuss the possibility of an acquisition of
Centennial by Welsh Carson. On September 22, 1998, Welsh Carson commenced a
legal and regulatory due diligence review of Centennial, and, on September 25,
1998, Welsh Carson delivered to Centennial a non-binding expression of interest
to acquire Centennial through a cash exchange for the outstanding shares of
Common Stock (the "SHARES"). The proposal was conditioned on management
participating in the transaction as investors and officers of the surviving
corporation. The Board formed a special committee to consider the expression of
interest by Welsh Carson. The special committee retained Kilpatrick Stockton,
LLP ("KILPATRICK STOCKTON") as its legal counsel and J.P. Morgan as its
financial advisor. The special committee negotiated a merger agreement and
recommended the transaction to the Board and on October 22, 1998, the Board
accepted the offer of $16 per share by Welsh Carson, approved the merger
proposal and entered into the merger agreement with Welsh Carson.
On March 26, 1999, Centennial received an investigatory subpoena from
the Office of Inspector General, Department of Health & Human Services (the
"OIG") seeking records relating to the allocation of nurse staffing costs. On
April 2, 1999, Welsh Carson terminated the merger agreement as a result of this
pending investigation.
After the termination of the merger agreement with Welsh Carson,
Centennial continued to work with SunTrust Equitable Securities ("SUNTRUST
EQUITABLE") (which had participated in the representation of Centennial during
the transaction with Welsh Carson) in seeking strategic opportunities for
Centennial. SunTrust Equitable will receive a fee of $2.1 million upon the
consummation of the Merger for assisting Centennial in seeking strategic
opportunities. E.M. Warburg, Pincus & Co., LLC ("WARBURG PINCUS") then
approached SunTrust Equitable about the possibility of acquiring Centennial. On
April 27, 1999, Warburg Pincus and Centennial entered into a confidentiality
agreement whereby Centennial agreed to provide certain information to Warburg
Pincus to enable it to evaluate a potential transaction with Centennial.
Centennial entered into this confidentiality agreement with Warburg Pincus
because the same factors that led Centennial to determine that the merger
agreement with Welsh Carson was the best alternative for the future of
Centennial continued to affect Centennial at that time. These factors, as well
as additional new factors, including the lack of capital to enable Centennial to
grow through strategic acquisition opportunities, increasing debt costs as a
result of increasing interest rates, increasing labor costs, the delay in
obtaining all anticipated cost reductions necessary for PPS to have no adverse
effect on Centennial's earnings, the deterioration of the financial condition of
several other long-term care providers (which drove most capital sources from
the sector and contributed to the tightening of Centennial's credit arrangements
with its existing lenders) and substantial modifications of the financial
covenants in Centennial's credit facility after the termination of the merger
agreement with Welsh Carson that placed Centennial in danger of default under
that credit facility in the future.
Centennial engaged in preliminary discussions with Warburg Pincus about
an acquisition of Centennial; however, the ongoing investigation of Centennial
by the OIG deterred Warburg Pincus from making a proposal to acquire Centennial
at that time. In July 1999, Warburg Pincus and Centennial discussed other
investment structures, including a joint venture that would acquire facilities
to be managed by Centennial. Warburg Pincus did not pursue this proposal because
it was concerned that its interests would not be aligned with the interests of
Centennial if Centennial was unable to contribute capital to the proposed joint
venture.
In late September 1999, following additional review by its counsel and
additional due diligence regarding the OIG investigation, Warburg Pincus
discussed the possibility of acquiring all of the outstanding shares of
Centennial and taking Centennial private. Over the next few months, Warburg
Pincus engaged in a review and analysis of Centennial and SunTrust Equitable
provided initial financial modeling for a going private acquisition.
In October 1999, South Atlantic, a holder of approximately ten percent
of the outstanding shares of Centennial's stock, approached Centennial about
contributing additional equity to Centennial to either fund an acquisition
vehicle or engage in a going private transaction. On October 25, 1999,
Centennial entered into a confidentiality agreement with South Atlantic. South
Atlantic ultimately determined it could not provide enough capital
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for either of the proposed transactions. Throughout this time, Centennial also
had discussions with other parties unaffiliated with either Warburg Pincus or
South Atlantic about potential funding of acquisition vehicles in joint venture
or contractual type relationships. None of these discussions led to a specific
proposal.
In November 1999, after its initial review of Centennial, Warburg
Pincus indicated its interest in making a proposal to Centennial. Warburg Pincus
proposed a structure in which management would contribute all or part of their
respective interests in Centennial into the surviving corporation and continue
to serve as management in the surviving corporation. Warburg Pincus indicated
that it would permit, but not require, WCAS VI, the WCAS VI General Partners,
WCAS HP and South Atlantic to contribute all or part of their interests in
Centennial into the surviving corporation. Warburg Pincus intended to acquire
the remaining outstanding shares of Common Stock in a tender offer or cash
merger transaction.
On November 17, 1999, at the regularly scheduled quarterly Board
meeting, the Board discussed the indicated interest of Warburg Pincus. The Board
concluded that it would be willing to consider a proposal from Warburg Pincus if
it indicated a serious interest in acquiring Centennial at a price that provided
the shareholders of Centennial a substantial premium over the current market
price of the Shares. On November 30, 1999, the Board and management met with
Warburg Pincus to discuss its interest in Centennial. At this meeting, Warburg
Pincus indicated that subject to completion of due diligence it would consider
an offer of $5.00 a share for all of the outstanding shares of Common Stock.
After discussion, the Board concluded that it would not pursue a transaction
with Warburg Pincus at the indicated price.
Warburg Pincus reviewed the Board's response and responded that it
would consider an offer of $5.25 per share for all of the outstanding shares of
Common Stock and requested an exclusive due diligence period to undertake a more
thorough review of Centennial prior to making a formal proposal. On December 6,
1999, the Board met to discuss Warburg Pincus' response and its valuation of
Centennial. The Board noted that $5.25 per share represented a substantial
premium over the then-current market price of $3.0625 and that the proposed
transaction could provide the shareholders of Centennial with liquidity for
their investments. The Board noted the impact that recent legislation restoring
approximately $2 billion of the $16 billion in spending cuts to the long-term
sector of the healthcare industry could have on Centennial. The Board noted that
the proposed structure of the transaction would result in Centennial being a
private company and that shareholders not affiliated with management, WCAS VI,
the WCAS General Partners, WCAS HP and South Atlantic would not have the
opportunity to participate in the future growth of Centennial. The Board
addressed the need to appoint a special committee of disinterested directors to
represent the shareholders in considering any formal proposal by Warburg Pincus.
The Board concluded that it was not willing to grant the exclusivity period
based on a $5.25 per share offer. SunTrust Equitable communicated the Board's
position to Warburg Pincus.
Warburg Pincus responded by stating that it would consider $5.50 per
share, together with a $15 million equity contribution to Centennial to cover
transaction expenses and to assist Centennial in paying down a portion of its
debt. On December 13, 1999, the Board met to consider whether to grant Warburg
Pincus the exclusivity period at this level of interest. The Board considered
the substantial premium over the then current market price, and determined that
the 30-day exclusivity period would be justified at this level of interest in
Centennial. The Board decided that the exclusivity period would only prohibit
Centennial from soliciting a competing proposal and would not prohibit
Centennial from responding to a proposal from a third party. The Board voted
unanimously to grant Warburg Pincus a 30-day exclusivity period for its due
diligence review. The Board again discussed the need to have a special committee
negotiate with Warburg Pincus if it submitted a formal proposal. On December 14,
1999, Centennial granted Warburg Pincus a 30-day exclusivity period for due
diligence, which expired on January 13, 2000.
On January 6, 2000, the Board met to discuss forming a special
committee to negotiate any proposal made by Warburg Pincus or any third party.
The Board reviewed each director's affiliations and possible interests in a
transaction with Warburg Pincus. WCAS VI, the WCAS VI General Partners, WCAS HP,
management and South Atlantic would have an interest in the transaction if
Warburg Pincus allowed WCAS VI, the WCAS VI General Partners, WCAS HP,
management and South Atlantic to exchange their Shares for equity interests in
the surviving corporation. Mr. Charles D. Nash was the only director without any
interest in the proposed transaction. The Board considered that while a special
committee comprised of only one disinterested director is permissible, it would
be preferable for the special committee to be comprised of more than one
director. The Board decided to fill the existing vacancy on the Board with a
disinterested director who would be eligible to serve on the Special Committee.
A special
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meeting of the Board was scheduled to fill the vacancy on the Board
and form the Special Committee to review the Warburg Pincus discussions and any
further acquisition proposals.
At the January 12, 2000 meeting, the Board appointed Bob L. Wood as a
director to fill the vacancy on the Board and named Charles D. Nash and Bob L.
Wood as members of the Special Committee. Mr. Wood has no interest in the
proposed transaction or any current affiliation with any member of the
Investors. Prior to joining the Board, Mr. Wood had served as president and
chief executive officer of Nations Healthcare, Inc., a company in which WCAS VI
held a _____% interest until April 1999. Andrew Paul, a director of Centennial,
served as Chairman of the Board of Nations Healthcare until April 1999. The
Special Committee was authorized to review and evaluate the proposal by Warburg
Pincus, and, if considered reasonable in light of all circumstances and the
recommendation of its advisors, to explore additional offers and to recommend to
the Board those actions that the Special Committee believed, in the exercise of
its business judgment, to be in the best interests of Centennial and its
shareholders. The Board further authorized the Special Committee to establish
such procedures, review such information and engage such financial advisors and
legal counsel as it deemed appropriate and necessary to fully and adequately
make determinations and to conduct negotiations with Warburg Pincus regarding
the terms of the proposed transaction and to otherwise fulfill its duties. The
Board also agreed that because of the time and energy involved in reviewing the
transaction, the members of the Special Committee should receive a fixed fee of
$37,500 each, with an additional $1,000 each for each meeting held by the
Special Committee.
At the end of the exclusivity period with Warburg Pincus, Citicorp
Venture Capital, Ltd. ("CITICORP") approached Centennial about a possible
acquisition of Centennial. On January 26, 2000, Centennial and Citicorp entered
into a confidentiality agreement. Citicorp proposed an equity investment of $25
million in Centennial to be used to retire some of Centennial's debt and gain
leverage to buy additional facilities.
The Special Committee engaged Kilpatrick Stockton as its legal counsel
to advise it regarding its duties in connection with a possible sale of
Centennial. On January 17, 2000, the Special Committee and its legal counsel met
to discuss various matters, including, among others, the qualifications of the
members of the Special Committee to serve on the Special Committee, the
qualification of Kilpatrick Stockton to serve as counsel to the Special
Committee, developments at Centennial during the past year (including the naming
of new independent auditors), the structure of the Special Committee, the
potential interest of Citicorp in a transaction with Centennial, the terms of
engagement for the Special Committee's financial advisors and the procedures to
be followed in analyzing any offer from Warburg Pincus to acquire Centennial.
Counsel also advised the Special Committee concerning the Special Committee's
legal responsibilities and the legal principles applicable to, and the legal
consequences of, actions taken by the Special Committee with respect to the
offer by Warburg Pincus.
At that time, the Special Committee selected J.P. Morgan to serve as
its financial advisor for the purpose of advising the Special Committee and
assisting it in negotiations with Warburg Pincus, and to deliver a fairness
opinion to the Special Committee in connection with the proposed transaction.
The Special Committee instructed J.P. Morgan to commence its investigation and
analysis of the value of Centennial.
From January 17 to February 24, 2000, J.P. Morgan reviewed financial
and other information concerning Centennial, including Centennial's audited and
interim financial statements, Centennial's Projections, Centennial's internal
study of the effects of PPS on Centennial, and other information concerning
Centennial described in "Special Factors-Opinion of the Financial Advisor." J.P.
Morgan also met with members of management, as well as Centennial's current
independent auditors.
On January 19 and 20, 2000, the Special Committee met with members of
management, J.P. Morgan, Kilpatrick Stockton and Centennial's current
independent auditors to review the financial position of Centennial and its
competitors, and Centennial's operations and financial statements. Management
made a presentation to, and answered questions from, the Special Committee and
its advisors concerning the ongoing investigation of Centennial by the OIG,
indicating that there was significant uncertainty concerning Centennial's
potential liability and the timing of any possible resolution of the
investigation. The Special Committee also received a detailed summary of the
contacts to date between Centennial and Warburg Pincus at these meetings.
Management also discussed the financial and operating implications of
PPS since its implementation. Management discussed Centennial's earlier views of
the effects that PPS would have on Centennial's revenues and
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expenses, the actual effects to date, and the anticipated impact on Centennial
and its financial condition in the future. In addition to a general discussion,
management specifically discussed in detail such actual and anticipated effects
on each line item of Centennial's income statement, and the assumptions inherent
in Centennial's Projections. Management noted that Centennial's Projections
included no acquisitions by Centennial, due to the lack of capital with which to
pursue acquisitions under Centennial's lines of credit and the fact that the
availability of additional credit in the near-future was unlikely. Management
also described the efforts of Centennial's financial advisors in searching for
financing of additional acquisitions during the previous six to eight months,
without success.
Management indicated that the implementation of PPS had resulted in
significant operating losses for most industry participants, and that
Centennial's EBITDAR margins had decreased by approximately 7% for the nine
month period ended September 30, 1999 compared to the twelve-month period ended
December 31, 1998. Management also indicated that moving from a "cost plus"
Medicare reimbursement system to PPS had required significant reengineering of
the manner in which companies in Centennial's industry segment tracked
reimbursable activities at the point of care in nursing facilities, and that
these efforts had required significant training costs. Management reported that
participants in this industry segment were perceived by the financial community
as facing continued operating and earnings challenges in transitioning to PPS,
and that this situation had affected the market price of the shares of these
companies, including the Common Stock.
On January 25, 2000, the Special Committee met with Kilpatrick Stockton
and J.P. Morgan to discuss the latest developments between Warburg Pincus and
Centennial, and Centennial's initial contacts with Citicorp concerning a
potential transaction. After a discussion of the status of both potential
transactions, Kilpatrick Stockton summarized its conversations with Willkie Farr
& Gallagher ("WILLKIE FARR"), legal counsel to Warburg Pincus, concerning the
timing, structure and process for a potential transaction. Among other matters,
the Special Committee discussed with its legal and financial advisors
Centennial's disclosure obligations, the importance of Centennial being able to
perform an effective market check in connection with any transaction, the
necessary and preferred vote levels for Centennial's public shareholders to
approve a potential transaction, the possible restructuring of Centennial's
credit facility and lender consents, whether such restructuring and consents
would be a condition to the potential offer by Warburg Pincus, and the need for
more information concerning the OIG investigation in order for J.P. Morgan to
complete its valuation work.
Between January 26 and February 10, 2000, the Special Committee met
several times to discuss developments with Warburg Pincus and Citicorp. On
January 27, 2000, after a report on the preliminary discussions with Citicorp in
which it indicated a desire to undertake a diligence investigation to determine
whether to pursue a potential transaction with Centennial, the Special Committee
agreed to direct Centennial to provide Citicorp with access to Centennial
information and records at least equal to the level afforded to Warburg Pincus.
The Special Committee also discussed whether to direct Centennial to speak to
members of its lending group concerning a potential acquisition, ultimately
deciding to direct management to begin such discussions by addressing a
potential acquisition of Centennial in a neutral and generic manner, rather than
with regard to a potential transaction with Warburg Pincus as this approach
would allow the lenders to focus on the possibility of a competing bidder which
might request a similar amendment.
Between February 7 and February 11, 2000, Citicorp conducted its due
diligence review of Centennial to determine whether it had an interest in
pursuing a transaction other than its proposed equity investment of $25 million.
On February 11, 2000, the Special Committee received a preliminary
draft of a merger agreement from Willkie Farr, who indicated that the draft was
being circulated prior to delivery of any offer from Warburg Pincus in order to
expedite the Special Committee's review of the agreement's basic terms, and to
allow Centennial time to prepare disclosure schedules should Warburg Pincus
decide to make an offer. Although the draft merger agreement did not contain
pricing terms, the Special Committee evaluated the agreement based on the
Special Committee's expectation that Warburg Pincus would make an offer at a
price reflecting a premium to the then-current market price.
On February 15, 2000, the Special Committee met with Kilpatrick
Stockton and J.P. Morgan to discuss issues raised by the draft merger agreement
received from Willkie Farr. The Special Committee discussed in detail the
desirability of retaining the flexibility to entertain competing offers from
other interested potential acquirors, should those acquirors approach Centennial
with a competing offer. The Special Committee believed that this flexibility to
entertain competing offers would simulate an auction environment and encourage
any interested acquirors to come forward. In order to retain this flexibility,
the Special Committee directed Kilpatrick Stockton to seek terms in the
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merger agreement which would minimize the termination fees Centennial would have
to pay if it terminated the merger agreement to pursue a competing proposal, and
which would permit Centennial to publicly announce its ability to entertain
competing proposals, even if Centennial could not otherwise initiate or solicit
them.
Among other items discussed, the Special Committee also agreed to
propose that the transaction be conditioned on the approval of it by a
supermajority of Centennial's shareholders, and that Warburg Pincus accept the
risk of the ongoing OIG investigation and only be allowed to terminate its offer
in the event of a "material worsening" of the investigation.
On February 15, 2000, J.P. Morgan reported on Centennial's two-day
diligence meetings with Citicorp's legal and financial advisors. J.P. Morgan
reported that Citicorp had indicated a preliminary interest (without making an
offer) in pursuing an investment in Centennial of between $30 and $40 million,
in exchange for convertible preferred stock of Centennial. J.P. Morgan further
reported, however, that before Centennial or the Special Committee could address
such preliminary interest, Citicorp chose to terminate the discussions, and that
Citicorp indicated that there was no particular issue or concern that had caused
it to do so.
In addition, the J.P. Morgan team led a discussion of its valuation
analysis of Centennial. It reviewed in detail the written background materials
previously provided to the Special Committee. Among other issues, J.P. Morgan
discussed (i) the lack of comparable transactions with which to compare a
proposed offer from Warburg Pincus, (ii) a discounted cash flow analysis of the
transaction (including the cost of capital); and (iii) an analysis of public
company trading multiples.
After the delivery of the draft merger agreement, the Special
Committee's advisors held numerous discussions with Wilkie Farr regarding
various provisions in the draft merger agreement.
On February 16, 2000, the Special Committee discussed with management
the likelihood that earnings for the fourth quarter of 1999 would be lower than
anticipated by Centennial and financial analysts. Management specifically
discussed events which occurred during the past several months leading to these
results, including, among others, the sale of three of Centennial's facilities
and the termination of a lease for a fourth facility, declines in census at
Centennial's facilities, continued increased labor costs, revaluations of
Centennial assets and the termination of several third-party management
contracts. Management then detailed the effects of those and other events on
Centennial's operations. Management also answered questions from the Special
Committee and its advisors.
On February 21, 2000, the Special Committee focused on four key issues
related to the draft merger agreement, as follows:
- OIG Investigation. The Special Committee decided to try to
cause Warburg Pincus to assume the risk of the investigation
based on information currently available to it and to only be
permitted to terminate the transaction if there was a
"material worsening" of the investigation prior to closing of
the transaction.
- Termination Fee. The Special Committee concluded that it would
be desirable if the termination fee were less than the fee in
the acquisition transaction proposed in 1998.
- Expenses. The Special Committee concluded that it was
reasonable for Centennial to reimburse some of Warburg Pincus'
expenses should the proposed merger agreement be terminated to
pursue another transaction, based on the lengthy period of
time that Warburg Pincus had devoted to, and the extensive use
of its advisors in, its diligence investigation of Centennial.
However, the Special Committee believed that these expenses
should be limited or capped in some manner.
- Credit Facility. The Special Committee directed management to
poll the remaining members of Centennial's lending group to
determine whether they would agree to renegotiate Centennial's
credit facility in connection with any offer received.
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The Special Committee also discussed other issues related to the
proposed merger agreement, including, among others, the proposed "drop dead"
date for consummation of the proposed transaction and the ability of Centennial
to make a public announcement that it had the ability the receive proposals from
other bidders.
From February 22 through February 24, 2000, Willkie Farr, Kilpatrick
Stockton, J.P. Morgan, Centennial and King & Spalding, counsel to Centennial,
continued negotiations at Willkie Farr's offices in New York. Kilpatrick
Stockton and J.P. Morgan reported back to the Special Committee on several
occasions throughout that period, receiving instructions from the Special
Committee on various issues, including, among others, the timing for the
transaction, the description of a "material worsening" of the OIG investigation,
other conditions and termination events, the content of a press release
announcing the offer, the "no-shop" clause, Centennial's fiduciary "out" and the
amount of the termination fees and expense reimbursement.
On February 11, 2000, WCAS VI, South Atlantic and members of management
received drafts of the Contribution Agreement and the Voting Agreement (as
defined below). Over the next two weeks, representatives of Warburg Pincus and
Willkie Farr negotiated the terms of these agreements with representatives of
the Contributing Shareholders and their counsel.
On February 24, 2000, the Contributing Shareholders, the WP Funds, the
South Atlantic Investors and Holding entered into the Subscription Agreement.
The Subscription Agreement provides for the Contributing Shareholders to
contribute some or all of their Shares to Holding for Holding preferred stock
and for the WP Funds and the South Atlantic Investors to contribute an aggregate
of $54,673,513 for shares of Holding preferred stock.
On February 24, 2000, the Special Committee met to discuss the
remaining open issues, including, among others, the termination fees and
expenses to be reimbursed by Centennial. After the market closed,
representatives of Holding contacted Kilpatrick Stockton to deliver Holding's
offer to acquire Centennial. The offer consisted of a cash tender offer to be
made by Acquisition followed by a merger at a cash purchase price of $5.50 per
share, a termination fee of $2,000,000 and a maximum reimbursement of $1,000,000
for out-of-pocket expenses.
The Special Committee then met with Kilpatrick Stockton and J.P. Morgan
to discuss the offer, including the latest proposals to address the remaining
open issues. Representatives of Kilpatrick Stockton reviewed again with the
members of the Special Committee their legal duties in connection with the
consideration of the offer. Representatives of J.P. Morgan discussed with the
Special Committee the analyses they had performed to produce a range of implied
values for the Common Stock, based on materials previously provided to the
Special Committee. The Special Committee also discussed with J.P. Morgan its
finding in connection with J.P. Morgan's due diligence investigation of
Centennial and its other background discussions, and questioned J.P. Morgan
concerning the assumptions made in connection with its analyses and the facts on
which these analyses were based. J.P. Morgan explained to the Special Committee
the assumptions, methodologies and relative limits of its analyses.
J.P. Morgan indicated that based on the discussions with Holding's
representatives, it believed that the $5.50 per share offer was Holding's best
available offer. Because this price was consistent with and supported by J.P.
Morgan's valuation methodologies as a whole, J.P. Morgan indicated that it would
be able to deliver an opinion that the $5.50 per share price was fair to the
shareholders of Centennial (other than Holding, Acquisition and the Contributing
Shareholders) from a financial point of view. The Special Committee discussed
the $5.50 per share offer in detail, and the concern that if the Special
Committee did not accept the offer, the shareholders of Centennial (other than
Holding, Acquisition and the Contributing Shareholders) might not have the
opportunity to consider a transaction that offered a substantial premium for
their shares.
Based in part on J.P. Morgan's oral opinion delivered and the valuation
analyses presented by J.P. Morgan to the Special Committee during the February
24 meeting, the Special Committee's belief that the $5.50 per share price was
the best offer available and the other factors described in "Special Factors-The
Special Committee's and the Board's Recommendation," the Special Committee
unanimously decided to recommend to the Board the approval and adoption of the
Merger Agreement, the Offer and the Merger.
On February 25, 2000, prior to the opening of trading, the Board met to
receive the report of the Special Committee. At this meeting, Mr. Stockton of
Kilpatrick Stockton and Mr. Nash as chairman of the Special Committee gave the
report of the Special Committee in which the Special Committee unanimously
recommended to the Board that
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the Board accept the $5.50 offer and approve and adopt the Merger Agreement. At
the Board meeting, J.P. Morgan also summarized its presentation given to the
Special Committee on February 24 for the Board, and reaffirmed its opinion that
the $5.50 per share offer was fair to the shareholders of Centennial (other than
Holding, Acquisition and the Contributing Shareholders) from a financial point
of view and delivered its written opinion to that effect. After considerable
discussion, the Board approved the Merger Agreement and resolved to recommend
the approval of the Merger Agreement, the Offer and the Merger to the
shareholders of Centennial.
Concurrently with the execution of the Merger Agreement, on February
25, 2000, Holding, Acquisition, the Contributing Shareholders and WCAS CP
entered into the Voting Agreement (the "VOTING AGREEMENT"). The Voting Agreement
requires the Contributing Shareholders and WCAS CP to vote their Shares in favor
of the Merger and against other proposals unless the Merger Agreement is
terminated. The Contributing Shareholders will contribute their shares to
Holding one day after the consummation of the Offer and prior to the Special
Meeting and will not vote the contributed shares at the Special Meeting.
THE SPECIAL COMMITTEE'S AND THE BOARD'S RECOMMENDATION
The Board formed the Special Committee to review and evaluate the
proposed transaction because it appeared that all of the directors except Mr.
Nash and a newly appointed member, Mr. Wood, would have a substantial financial
interest in the proposed transaction or pre-existing financial relationship with
Warburg Pincus. The Special Committee unanimously recommended to the Board that
the Merger Agreement be approved and that the Offer and the Merger be
recommended to the shareholders of Centennial. Following the unanimous
recommendation of the Special Committee, the Board approved the Merger Agreement
and recommended that the shareholders of Centennial tender their shares pursuant
to the Offer and approve the Merger. In connection with the foregoing, the
Special Committee and the Board determined that the Offer, the Merger, the
Merger Agreement and the transactions contemplated thereby were fair to, and in
the best interests of the Public Shareholders. All of the non-employee directors
approved the Merger Agreement, the Offer and the Merger. In connection with
their recommendations, the Special Committee and the Board each adopted the
analyses and findings of the Special Committee's financial advisor, J.P. Morgan,
and the Board adopted the analyses and findings of the Special Committee. THE
SPECIAL COMMITTEE AND THE BOARD RECOMMENDED THAT THE PUBLIC SHAREHOLDERS ACCEPT
THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER AND VOTE FOR THE
APPROVAL OF THE MERGER AGREEMENT.
The Special Committee met on 16 occasions between January 17, 2000 and
the date of this Proxy Statement, in person or by telephone conference, to
consider developments relating to a possible sale of Centennial. The Special
Committee was assisted in its deliberations by its financial advisor, J.P.
Morgan, and its legal counsel, Kilpatrick Stockton. At a meeting held on
February 24, 2000, the Special Committee determined that the Offer, the Merger,
the Merger Agreement and the transactions contemplated thereby were fair to, and
in the best interests of the Public Shareholders and recommended that the Board
approve the Merger Agreement. The Special Committee is unaware of any
development since its February 24, 2000 meeting that would affect its
determination, and reconfirms, as of the date of this Proxy Statement, its
determination that the Offer, the Merger, the Merger Agreement and the
transactions contemplated thereby are fair to, and in the best interests of the
Public Shareholders. Based on the foregoing, the Board also reconfirms, as of
the date of this Proxy Statement, its determination that the Offer, the Merger,
the Merger Agreement and the transactions contemplated thereby are fair to, and
in the best interests of the Public Shareholders.
The material factors the Special Committee evaluated in connection with
the Merger are described below. Except as noted below, the Special Committee
considered the following factors to be positive factors supporting its
determination that the Offer, the Merger, the Merger Agreement and the
transactions contemplated thereby are fair to, and in the best interests of the
Public Shareholders:
- There is significant near-term uncertainty in the long-term
care sector. The implementation of PPS has resulted in
significant operating losses for most industry participants.
Centennial's EBITDAR margins decreased by approximately 7% for
the nine month period ended September 30, 1999 compared to the
twelve month period ended December 31, 1998. Since September
1999, four of the six largest nursing home providers have
filed for bankruptcy protection. Further, many industry
participants are currently being investigated for alleged
Medicare overpayments. As a result of the operating impact of
PPS and the ongoing government investigations, stock prices of
Centennial and
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its competitors were trading at less than 25% of their
24-month highs as of February 24, 2000, the date on which the
Special Committee approved the Offer.
- Centennial's acquisition strategy would be difficult to
implement as a public company due to the limited availability
of financing in the public markets at this time. Historically,
only a small part of Centennial's revenue growth has come from
its existing facilities. Based on historic trends, management
believes that there is limited potential for significant
increase in revenues at Centennial's existing facilities. As a
result, acquisitions represent the most viable method of
increasing Centennial's revenues. Without acquisitions, it can
be anticipated that Centennial's revenues and earnings will
not grow as significantly as they have in the past, and that
Centennial's share price will continue to reflect this reduced
growth rate.
However, Centennial's credit facility restricts its ability
to add new facilities through either acquisitions or leases.
Centennial will need additional debt and equity financing to
pursue a growth strategy through acquisitions. The reluctance
by Centennial's current lenders to advance additional funds
for acquisitions is indicative of the difficulty that can be
reasonably anticipated in arranging necessary additional debt
and equity financing.
The Special Committee was advised by J.P. Morgan that the
availability of debt and equity financing in the public
markets may be limited as a result of the uncertainty
surrounding the long-term care sector and Centennial's reduced
stock price would likely make acquisitions using stock more
expensive and dilutive to earnings because Centennial would
have to issue a greater number of shares to raise the same
amount of equity necessary for its acquisitions. In this
connection, the Special Committee considered that Centennial
may be managed more effectively as a private company not
subject to pressures from public shareholders and market
professionals to maintain and grow earnings per share. The
Special Committee believes that as a private company
Centennial would have greater flexibility to consider business
strategies that have long-term benefits (including
acquisitions which are often dilutive in the short term), but
that would adversely impact earnings per share and the market
price of the Common Stock in the short term if Centennial were
public. As a private company, Centennial would also have
greater flexibility to wait for the financing markets to
improve, because Centennial would not be subject to the
pressures on a public company to maintain and grow revenues on
a quarterly and annual basis.
- On March 26, 1999, Centennial received an investigatory
subpoena from the OIG requesting records in connection with an
investigation of possible improper claims for payment under
Title XVIII (Medicare) of the Social Security Act. The request
related to records for the period January 1, 1994 through
December 31, 1998, concerning certain of Centennial's internal
policies, and relating to certain long-term care facilities
operated by Centennial. The investigation centers upon
allegations that certain skilled nursing facilities improperly
allocated nursing time between Medicare and non-Medicare
patients. Although Centennial is vigorously defending this
matter, depending on the outcome, a settlement of such matter
could result in substantial liability for Centennial. At this
time, neither the amount nor timing of any potential liability
can be estimated with any reasonable certainty. However, it is
possible that resolution of this investigation could have a
material adverse effect on Centennial's cash flow, results of
operations and consolidated financial position, and on the
public trading price for the Shares.
- Centennial remains under significant liquidity pressures on a
day-to-day operating basis. In June 1999, Centennial amended
its credit facility. As part of the new agreement, Centennial
transferred $5.7 million of availability under the synthetic
lease portion of its credit facility to the revolver portion.
The amendment, coupled with previous 1998 amendments to the
synthetic lease facility, increased Centennial's interest rate
to 3.0% over LIBOR from 1.75% over LIBOR and accelerated
amortization of principal, or reduction in availability, of
$5.7 million on December 31, 1999, $11.0 million on December
31, 2000, and $22 million during each of the years ending
December 31, 2001 and 2002. As of December 31, 1999,
Centennial had $82 million outstanding under the revolver
portion of its credit facility. Although Centennial has
remained in compliance with the covenants of the credit
facility through the date of this Proxy Statement, it was
required to
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sell three facilities and terminate the lease on a fourth
facility during the fourth quarter of 1999 to meet its
amortization payments, and, if the Merger is not consummated,
likely would be required to sell additional facilities or
raise capital by other means to meet its scheduled
amortization payments. The financial covenants in the credit
facility become more restrictive during 2000 and early 2001
and Centennial is at risk that it may not be able to comply
with those financial covenants.
- Centennial continues to experience operational uncertainties
relating to the implementation of PPS and other market
factors, including increasing labor costs, increasing
liability and workers compensation insurance costs, increasing
interest rates and the inability to obtain all anticipated
cost reductions.
- Its belief that it was unlikely another bidder would make a
definitive proposal that would result in a transaction
providing greater value to the Public Shareholders, and its
conclusion that provisions of the Merger Agreement permitting
the Board, in the exercise of its fiduciary duties, to
consider competing bids, to announce its ability to consider
such bids in a press release, and the reasonable termination
fees imposed on Centennial if the Board were to accept an
alternative proposal, would facilitate any competing bid. In
addition, the Special Committee believed that the Per Share
Amount was the highest price that could be obtained from
Acquisition, and considered the possibility that Acquisition
would withdraw its bid if its proposal was used to attempt to
generate higher bids from third parties. The Special Committee
was advised by J.P. Morgan that the group of potential bidders
for Centennial was relatively small. This view was reinforced
by the lack of any serious interest in acquiring Centennial by
any person other than Warburg Pincus after Centennial's
previous acquisition proposal was terminated in April 1999.
- J.P. Morgan's oral opinion delivered to the Special Committee
on February 24, 2000, reconfirmed in writing as of February
25, 2000, that the $5.50 in cash to be received by the Public
Shareholders was fair to such holders from a financial point
of view. The full text of the written opinion of J.P. Morgan,
which sets forth assumptions made, matters considered and
limitations on the review undertaken in connection with its
opinion, is attached hereto as Annex A and is incorporated
herein by reference. The Special Committee and the Board
adopted the analyses and findings of J.P. Morgan in their
determination that the Merger is fair to the Public
Shareholders. Centennial's shareholders are urged to and
should read the opinion in its entirety. In reaching its
opinion as to the fairness of the Merger, J.P. Morgan employed
generally accepted valuation methods. These methods included
an analysis of public company trading multiples, which implied
a value for the Common Stock of $1.75 to $4.00 per share; a
discounted cash flow analysis, which indicated a range of
equity values between $2.00 and $6.00 per share; and a
selected transaction analysis, which suggested an estimated
range of equity values of between $2.60 and $6.00 per share.
These analyses are all more fully described in "Special
Factors-The Special Committee's and the Board's
Recommendation."
- The Merger Agreement does not provide for unreasonable
termination fees and expense reimbursement obligations which
would have the effect of unreasonably discouraging competing
bids and, subject to the satisfaction of specified conditions,
the Board would be able to withdraw or modify its
recommendation to the shareholders regarding the Merger and
enter into an agreement with respect to a more favorable
transaction with a third party, if such a transaction becomes
available prior to the consummation of the Merger. In
addition, the Merger Agreement allows Centennial to indicate
in its press release announcing the execution of the Merger
Agreement that Centennial may respond to unsolicited proposals
from alternative bidders, and the lack of a time limit on the
Board's ability to consider alternative proposals allows the
Board to effectively consider such proposals up until the
consummation of the Offer. See "The Merger - Terms of the
Merger Agreement."
- The Merger Agreement requires that there have been tendered
and not withdrawn Shares, which when taken together with the
Shares, if any, beneficially owned by Holding, represent more
than 68.5% of the outstanding shares of Common Stock on a
fully diluted basis, as a condition to the Merger. After
giving effect to the 545,454 shares held by Mr. Eaton and
246,896 shares held by WCAS CP which will not be tendered in
the Offer, Public Shareholders holding at least 54% of the
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shares of Common Stock held by the Public Shareholders in the
aggregate will have to tender their shares in the Offer in
order to satisfy the minimum condition that Holding
beneficially own at least 68.5% of the Common Stock (the
"Minimum Condition"). The tender of shares by the Public
Shareholders evidences their approval of the transactions
contemplated by the Merger Agreement. The Special Committee
believed that the Minimum Condition was an important safeguard
in light of the significant percentage of shares of Common
Stock held by the Contributing Shareholders.
- On February 18, 2000, one week prior to the announcement of
the Merger, the Common Stock had closed at $2.97 per share,
and the $5.50 per share to be received by the Public
Shareholders in the Offer and the Merger represented an 85%
premium over such price (as well as the 87% premium over the
$2.94 per share closing price on February 24, 2000). In
addition, J.P. Morgan's analyses of the premiums paid in
comparable merger transactions indicated that the average
premiums paid over the target stock prices one week prior to
the announcement date was 31%.
- The Merger Agreement does not condition Acquisition's
obligations to consummate the Merger on Acquisition's or
Holding's ability to obtain financing for the Merger. Holding
has represented in the Merger Agreement that it has or will
have available to it funds sufficient to satisfy its and
Acquisition's obligation to consummate the Offer and the
Merger.
- The shareholders who may not support the Merger have the
ability to obtain "fair value" for their Common Stock if they
do not tender their shares in the Offer and properly perfect
and exercise their appraisal rights under Georgia law. Georgia
law provides shareholders with the opportunity to exercise
appraisal rights and to seek a determination in court of the
fair value of their Shares if they are dissatisfied with the
consideration offered in the Merger.
Potentially negative factors considered by the Special Committee were
the actual or potential conflicts of interest to which Messrs. Eaton and Dahl
and their affiliates are subject in connection with the Merger, as follows:
- The Special Committee considered that Holding has given
members of Centennial's senior management an opportunity to
contribute all or a substantial portion of their equity
investments in Centennial for an investment in Holding. As a
result, the members of Centennial senior management will own
shares of Holding Series A Preferred Stock representing
approximately 5.2% of Holding's outstanding capital stock. The
Special Committee considered that the contribution of a
substantial portion of current equity investment in Centennial
would indicate a level of confidence in Centennial's prospects
that might be inconsistent with the Special Committee's
assessment of the risks associated with Centennial's future,
but the Special Committee noted that members of Centennial's
senior management believed that Centennial would likely have
better access to capital as a private company controlled by a
party such as Acquisition with better access to private
capital. The Special Committee also considered that as a
private company Centennial could operate free from the
pressures of public shareholders and securities analysts to
report predictable growth in earnings from quarter to quarter.
- The Special Committee considered that members of Centennial's
senior management would enter into employment agreements with
the Surviving Corporation amending their existing employment
agreements with Centennial, and that such employment
agreements would provide for the payment to them of base
salaries, possible annual cash bonuses and potential severance
benefits. The Special Committee also considered that members
of senior management will receive options to purchase shares
of Holding common stock at $5.50 per share.
In view of the variety of factors considered in connection with its
evaluation of the Merger Agreement, the Special Committee found it impracticable
to, and did not, quantify, rank or otherwise assign relative weights to the
factors considered or determine that any factor was of particular importance in
reaching its determination that the Merger is fair to, and in the best interests
of, the Public Shareholders. Rather, the Special Committee viewed its
recommendations as being based upon its judgment, in light of the totality of
the information presented and considered, of the overall effect of the Merger
and the transactions contemplated thereby on the Public Shareholders compared to
any alternative transaction and the likely effect of rejecting the Merger
proposal.
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The Special Committee noted that the Contributing Shareholders have
agreed to contribute approximately 39.5% of the outstanding Common Stock prior
to the Merger. The Special Committee also considered that the obligation of
Centennial to consummate the Merger is conditioned upon the tender by holders of
Common Stock, which when taken together with the Common Stock, if any,
beneficially owned by Holding, represent more than 68.5% of the outstanding
Common Stock on a fully diluted basis.
THE BOARD UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS TENDER THEIR
SHARES PURSUANT TO THE OFFER AND APPROVE THE MERGER AGREEMENT AND THE
MERGER
FAIRNESS OF THE MERGER
The Special Committee believes that the procedure that was followed in
determining the purchase price to be paid to the shareholders of Centennial was
fair to, and in the best interest of the Public Shareholders. The seven person
Board (a majority of whom are Contributing Shareholders or their affiliates),
appointed as the only members of the Special Committee two non-employee
directors who were not Contributing Shareholders or affiliates of the WP Funds,
and granted the Special Committee exclusive authority on behalf of the Board to
review, evaluate and negotiate the proposed transactions. The Merger Agreement
negotiated by the Special Committee contains provisions that would enable the
Board to withdraw or modify its recommendation to the Public Shareholders
regarding the Offer and the Merger and to enter into an agreement with respect
to a more favorable transaction with a third party, and contains provisions
(without which the Special Committee believes Acquisition would not have entered
into the Merger Agreement) imposing upon Centennial termination fee and expense
reimbursement obligations that, in the view of the Special Committee, are
reasonable and would not have the effect of unreasonably discouraging competing
bids. Further, the Public Shareholders may decide not to tender their shares in
the Offer and dissent from the Merger and be paid cash for the "fair value" of
their shares as determined in accordance with Georgia law. In addition, the
Merger is structured to require the tender of shares, which when taken together
with the shares, if any, beneficially owned by Holding, represent more than
68.5% of the outstanding shares of Common Stock on a fully diluted basis, as a
condition of the Merger. The Special Committee believes, as of the date of this
Proxy Statement and for this and the reasons set forth above, that the Merger is
procedurally fair to the Public Shareholders.
The Special Committee believes that the Merger is procedurally and
substantively fair to the Public Shareholders because (i) the Special Committee
(comprised of directors who are not Contributing Shareholders, their affiliates
or affiliates of the WP Funds) was authorized to review, evaluate and negotiate
the proposed Merger; (ii) the Special Committee retained J.P. Morgan, an
unaffiliated financial advisor, to act solely on behalf of the Public
Shareholders and render an opinion as to the fairness of the Merger from a
financial point of view; (iii) the Merger Agreement allows the Board to withdraw
its recommendation to the shareholders and does not prohibit Centennial from
entering into an alternative transaction; (iv) the Merger requires the tender by
holders of shares of Common Stock, which when taken together with the Common
Stock, if any, beneficially owned by Holding, represent more than 68.5% of the
outstanding shares on a fully diluted basis; and (v) all of the non-employee
directors approved the Merger.
Based on the foregoing, the Special Committee unanimously determined
that the Offer, the Merger, the Merger Agreement and the transactions
contemplated thereby were fair to, and in the best interests of the Public
Shareholders and recommended to the Board approval of the Merger Agreement and
that the Offer, the Merger and the Merger Agreement be recommended to the
shareholders of Centennial. The Board approved the Offer, the Merger and the
Merger Agreement on February 25, 2000 and has reconfirmed, as of the date of
this Proxy Statement, that the Merger is fair to, and in the best interests of
the Public Shareholders.
All of the directors of Centennial other than the members of the
Special Committee may be considered to have an interest in the Offer and the
Merger. Accordingly, the Board based its determination that the terms of the
Offer are procedurally and substantively fair to the Public Shareholders
primarily upon the conclusions of the Special Committee described above, the
J.P. Morgan opinion and the other factors described above for the Special
Committee and adopted the analyses of the Special Committee and J.P. Morgan.
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OPINION OF FINANCIAL ADVISOR
At the meeting of the Special Committee on February 24, 2000, J.P.
Morgan rendered its oral opinion to the Special Committee that, as of such date,
the cash consideration to be paid to the Public Shareholders in the proposed
tender offer and subsequent merger (the "TRANSACTION") was fair, from a
financial point of view, to the Public Shareholders. J.P. Morgan confirmed its
February 24, 2000 oral opinion by delivering its written opinion, dated as of
February 25, 2000, to the Special Committee to the same effect. No limitations
were imposed by the Special Committee upon J.P. Morgan with respect to the
investigations made or procedures followed by it in rendering its opinions.
The full text of the written opinion of J.P. Morgan dated February 25,
2000, which sets forth the assumptions made, matters considered and limits on
the review undertaken, is attached as Appendix B to this Proxy Statement and is
incorporated herein by reference. Centennial's shareholders are urged to read
the opinion in its entirety. J.P. Morgan's written opinion is addressed to the
Special Committee, is directed only to the cash consideration to be paid to the
Public Shareholders pursuant to the transaction and does not constitute a
recommendation to any shareholder of Centennial as to whether such shareholder
should tender its shares of Common Stock in the Offer. The summary of the
opinion of J.P. Morgan set forth in this Proxy Statement is qualified in its
entirety by reference to the full text of such opinion.
In arriving at its opinion, J.P. Morgan reviewed, among other things:
the Merger Agreement; the audited financial statements of Centennial for the
fiscal year ended December 31, 1998, and the unaudited financial statements of
Centennial for the periods ended March 31, June 30, September 30, and December
31, 1999; current and historical market prices of Common Stock; publicly
available information including Form 10-Ks and Form 10-Qs concerning other
companies engaged in businesses comparable to those of Centennial (such as
Advocat, Beverly Enterprises, Extendicare Services, Genesis Health Ventures and
HCR Manor Care), and the reported market prices for other companies' securities
deemed comparable; publicly available terms of transactions involving companies
comparable to Centennial and the consideration paid for such companies; the
terms of other business combinations deemed relevant by J.P. Morgan; and the
internal financial analyses and forecasts prepared by Centennial and its
management and agreements with respect to outstanding indebtedness or
obligations of Centennial. J.P. Morgan also held discussions with members of the
management of Centennial and its outside auditors with respect to aspects of the
Merger, the past and current operations of Centennial, the financial condition
and future prospects and operations of Centennial and other matters believed
necessary or appropriate to J.P. Morgan's inquiry. In addition, J.P. Morgan
discussed with Centennial's internal and external counsel the status and
potential impact of the pending OIG investigation, and reviewed such other
financial studies and analyses and considered such other information as it
deemed appropriate for the purposes of its opinion.
J.P. Morgan relied upon and assumed, without independent verification,
the accuracy and completeness of all information that was publicly available or
that was furnished to it by Centennial or otherwise reviewed by J.P. Morgan, and
J.P. Morgan has not assumed any responsibility or liability therefor. J.P.
Morgan has not conducted any valuation or appraisal of any assets or
liabilities, nor have any valuations or appraisals been provided to J.P. Morgan.
In relying on financial analyses and forecasts provided to J.P. Morgan, J.P.
Morgan assumed that they were reasonably prepared based on assumptions
reflecting the best currently available estimates and judgments by management as
to the expected future results of operations and financial condition of
Centennial to which such analyses or forecasts relate. J.P. Morgan also assumed
that the Transaction would have the tax consequences described in this Proxy
Statement and in discussions with, and materials furnished to J.P. Morgan by,
representatives of Centennial, and that the other transactions contemplated by
the Merger Agreement would be consummated as described in the Merger Agreement
and this Proxy Statement.
Centennial's Projections furnished to J.P. Morgan for Centennial were
prepared by management. Centennial does not publicly disclose internal
management projections of the type provided to J.P. Morgan in connection with
J.P. Morgan's analysis of the Transaction, and such projections were not
prepared with a view toward public disclosure. Centennial's Projections were
based on numerous variables and assumptions that are inherently uncertain and
may be beyond the control of management, including, without limitation, factors
related to general economic and competitive conditions and prevailing interest
rates. Accordingly, actual results could vary significantly from those set forth
in such projections. For further discussion of Centennial's Projections, see
"Centennial's Projections."
J.P. Morgan's opinion is based on economic, market and other conditions
as in effect on, and the information made available to J.P. Morgan as of, the
date of such opinion. Subsequent developments may affect the written opinion
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dated as of February 25, 2000 and J.P. Morgan does not have any obligation to
update, revise, or reaffirm such opinion. J.P. Morgan expressed no opinions as
to the price at which the Common Stock will trade at any future time.
In accordance with customary investment banking practice, J.P. Morgan
employed generally accepted valuation methods in reaching its opinion. The
following is a summary of the material financial analyses utilized by J.P.
Morgan in connection with providing its opinion:
Public Trading Multiples. Using publicly available information, J.P. Morgan
compared selected financial data of Centennial with similar data for selected
publicly traded companies engaged in businesses which J.P. Morgan judged to be
analogous to Centennial. The companies selected by J.P. Morgan were Advocat,
Beverly Enterprises, Extendicare, Genesis Health Ventures, and HCR Manor Care.
These companies were selected, among other reasons, because they are in the same
line of business as Centennial. J.P. Morgan gave more weight to Beverly
Enterprises and HCR Manor Care because they are of substantially similar quality
as Centennial. For each comparable company, publicly available financial
performance for the quarter ended September 30, 1999 was measured and then
converted to an annualized basis. J.P. Morgan adjusted the Beverly and HCR Manor
Care mean values for each multiple, specifically: firm value to last-quarter
annualized (LQA) earnings before interest, taxes, depreciation, amortization and
rent (EBITDAR) and earnings before interest, taxes, depreciation and
amortization (EBITDA), and equity value to 2000 and 2001 projected earnings.
These multiples were then applied to Centennial's EBITDAR, EBITDA and projected
earnings, respectively, yielding a range of implied equity values for the Common
Stock of approximately $1.75 to $4.00 per share. The valuation does not take
into account any diminution in value from a potential OIG settlement.
Discounted Cash Flow. J.P. Morgan conducted a discounted cash flow analysis for
the purpose of determining the fully diluted equity value per share for the
Common Stock. J.P. Morgan calculated the unlevered free cash flows that
Centennial is expected to generate during fiscal years 2000 through 2007 based
on Centennial's Projections and a sensitivity case adjusted by J.P. Morgan to
reflect more moderate EBITDAR margins reflecting fourth quarter 1999
performance. These unlevered cash flows for the period from fiscal year 2000
through 2007 were $18.4 million, $18.4 million, $20.4 million, $22.3 million,
$24.0 million, $26.1 million, $27.3 million and $29.2 million using the higher
EBITDAR margins (as set out in Centennial's Projections), and $13.4 million,
$13.2 million, $14.9 million, $16.5 million, $17.8 million, $19.6 million, $20.4
million and $22.1 million using the more moderate EBITDAR margins. J.P. Morgan
also calculated a range of terminal values of Centennial at the end of the eight
year period ending 2007 by applying exit EBITDA multiples ranging from 4.0 to
8.0. The unlevered free cash flows and the range of terminal EBITDA values were
then discounted to present values using a range of discount rates from 10% to
20% which were chosen by J.P. Morgan based upon an analysis of the weighted
average cost of capital of Centennial and current expected returns for the
long-term care sector. The present value of the unlevered free cash flows and
the range of terminal asset values were then adjusted for Centennial's September
30, 1999 excess cash and total debt. Based on adjusted management projections
and discount rate and EBITDA multiple sensitivities, the discounted cash flow
analysis indicated a range of equity values of between $2.00 and $6.00 per share
of the Common Stock on the basis of Centennial as a stand-alone entity. The
valuation does not take into account any diminution in value from a potential
OIG settlement.
Selected Transaction Analysis. Using publicly available information, J.P. Morgan
examined selected transactions with respect to precedent long-term care industry
acquisitions, as well as selected going-private transactions. J.P. Morgan did
not choose to use long-term care industry transaction multiples because these
transactions were announced prior to the market decline of the long-term care
sector took place at the beginning of July 1998. No appropriate transactions
occurred after this market downturn to include in this analysis. Accordingly,
J.P. Morgan believed that long-term care acquisitions prior to July 1998 were of
limited relevance to its evaluation of Centennial. J.P. Morgan reviewed the
premiums paid in going-private transactions of similar size in unrelated
industries, specifically, RB Capital's acquisition of Rock Bottom Restaurants,
the acquisition of Haskel International by an Investors and Capstar Radio's
acquisition of Triathlon Broadcasting. J.P. Morgan applied a premium of 50% to
Centennial's implied public market trading range and arrived at an estimated
range of equity values for the Common Stock of between $2.60 and $6.00 per
share. The valuation does not take into account any diminution in value from a
potential OIG settlement.
The summary set forth above does not purport to be a complete
description of the analyses or data presented by J.P. Morgan but accurately
summarizes the procedures, findings and recommendations of J.P. Morgan. The
preparation of a fairness opinion is a complex process and is not necessarily
susceptible to partial analysis or summary description. J.P. Morgan believes
that the summary set forth above and its analyses must be considered as a whole
and
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that selecting portions thereof, without considering all of its analyses, could
create an incomplete view of the processes underlying its analyses and opinion.
J.P. Morgan based its analyses on assumptions that it deemed reasonable,
including assumptions concerning general business and economic conditions and
industry-specific factors. The other principal assumptions upon which J.P.
Morgan based its analyses are set forth above under the description of each such
analysis. J.P. Morgan's analyses are not necessarily indicative of actual values
or actual future results that might be achieved, which values may be higher or
lower than those indicated. Moreover, J.P. Morgan's analyses are not and do not
purport to be appraisals or otherwise reflective of the prices at which
businesses actually could be bought or sold.
As a part of its investment banking business, J.P. Morgan and its
affiliates are continually engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, investments for passive
and control purposes, negotiated underwritings, secondary distributions of
listed and unlisted securities, private placements, and valuations for estate,
corporate and other purposes. J.P. Morgan was selected to advise the Special
Committee and deliver a fairness opinion with respect to the Merger on the basis
of such experience.
For services rendered in connection with the transaction and the
delivery of its opinion, Centennial paid J.P. Morgan a fee of $500,000 upon
execution of its engagement letter, dated February 9, 2000, and is obligated to
pay J.P. Morgan an additional fee of $1,500,000 upon the earlier of the
termination of the engagement or July 1, 2000. Centennial is also obligated to
pay J.P. Morgan a fee of $300,000 for the opinion delivered by J.P. Morgan on
February 25, 2000. In addition, Centennial has agreed to reimburse J.P. Morgan
for its expenses incurred in connection with its services, including the fees
and disbursements of counsel, and will indemnify J.P. Morgan against certain
liabilities, including liabilities arising under the Federal securities laws.
J.P. Morgan was engaged by Centennial in September 1998 to deliver a
fairness opinion in connection with the proposed transaction with WCAS VI and
its affiliates prior to its services in connection with the Merger. J.P. Morgan
was entitled to a fee of $2 million in connection with the proposed WCAS VI
transaction. Payment of the fees described above for the Merger will satisfy
Centennial's obligations with respect to the proposed WCAS VI transaction. J.P.
Morgan and its affiliates maintain banking and other business relationships with
Warburg Pincus and its affiliates, and have advised, financed and undertaken
capital markets transactions with such entities, for which it receives customary
fees. J.P. Morgan advised Warburg Pincus and its affiliates on the initial
public offering of Earthweb in 1998 and on Earthweb's secondary offering in
1999. J.P. Morgan received less than $1 million in fees from its relationships
with Warburg Pincus in each of 1998 and 1999. These fees were the result of the
arms' length negotiations. In 1998, J.P. Morgan provided the following services
to private investment partnerships affiliated with WCAS VI and WCAS HP: advising
on the sale of Control Data's software business, providing credit, holding
securities, arranging derivative swaps and providing pension fund services. In
1999, J.P. Morgan provided the following services to private investment
partnerships affiliated with WCAS VI and WCAS HP: lead managing the bank
facility for Alliance Data Systems and advising on its equity investment in
Winstar Communications. J.P. Morgan received less than $5 million in fees from
its relationships with the WCAS Group and other affiliated private investment
partnerships in 1998 and 1999. These fees were the result of the arms' length
negotiations. J.P. Morgan has not provided services to South Atlantic in 1998 or
1999. In the ordinary course of their businesses, J.P. Morgan and its affiliates
may actively trade the debt and equity securities of Centennial for their own
accounts or for the accounts of customers and, accordingly, they may at any time
hold long or short positions in such securities.
PURPOSE, ALTERNATIVES AND REASONS OF CENTENNIAL AND THE INVESTORS FOR THE MERGER
Purpose. The purpose of the Offer and the Merger is for Holding to acquire
control of, and the entire equity interest in, Centennial. The Offer, as the
first step in the acquisition of Centennial, was intended to facilitate the
acquisition of all outstanding Common Stock. The purpose of the Merger is to
acquire all of the outstanding Common Stock not purchased pursuant to the Offer
or otherwise. After consummation of the Offer, a meeting of Centennial's
shareholders is required under the Georgia Business Corporation Code (the
"GBCC") or Centennial's Amended and Restated Articles to approve the Merger;
however, Acquisition currently owns sufficient shares to approve the Merger
without the vote of any other shareholder.
Alternatives. Centennial has historically grown through strategic acquisitions
in the healthcare industry. Several external factors have restricted the ability
of Centennial to continue to grow in this manner. Such factors include changes
in the capital markets which have made debt and equity financing more difficult
to obtain, changes in the
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<PAGE> 38
healthcare industry which led to the tightening of Centennial's credit
agreement, increased costs of operations as a result of PPS, and the dilutive
effect that acquisitions in the current economic environment would have on
Centennial's stock value. Each of these factors led management to the conclusion
that it was in the best interest of Centennial's shareholders for Centennial to
be a private company.
Centennial considered various alternatives to the Merger. In October
1999, South Atlantic, a holder of approximately 10% of the Common Stock,
approached Centennial about contributing additional equity to Centennial to
either fund an acquisition vehicle or engage in a going private transaction. The
proposed investment by South Atlantic was not significant enough to accomplish
either of these objectives and would have been highly dilutive to current
shareholder value and therefore was not a viable option for Centennial.
Centennial was also approached by Citicorp regarding an investment in
Centennial. Citicorp proposed an equity investment of $25 million in Centennial
to be used to retire some of Centennial's debt and to purchase additional
facilities.
Centennial also had discussions with other parties unaffiliated with
the WP Funds about potential funding of acquisition vehicles in joint venture or
contractual type relationships. None of these discussions lead to a specific
proposal. For further discussion regarding specific proposals received by
Centennial, see "Special Factors-Background of the Merger."
Reasons. Each of the Investors and Centennial believes that it is in
Centennial's best interests to operate as a privately held entity. Without the
constraint of the public market's emphasis on quarterly earnings, Centennial
will have greater operating flexibility to focus on enhancing long-term value by
emphasizing growth (both internally and through acquisitions) and operating cash
flow. The Investors and Centennial believe that an emphasis on long-term growth
rather than short-term earnings could eventually result in greater business and
capital market opportunities than would be available to Centennial if remaining
publicly held. In addition, they believe that as a privately held entity,
Centennial will be able to make decisions that may negatively affect quarterly
earnings but that may increase the value of Centennial's assets or earnings over
the long-term. In a public company setting, it is difficult to make decisions
that could negatively affect earnings when the result of those decisions could
significantly reduce per share price, if analysts' short-term earnings
expectations are not met or exceeded.
In addition, after the Merger, Centennial will no longer be subject to
the reporting requirements of the Securities Exchange Act of 1934, as amended
(the "EXCHANGE ACT"), which will allow Centennial to eliminate the time devoted
by its management and certain other employees to matters which relate
exclusively to Centennial being a publicly held company. "Going-private" will
also reduce certain other costs which relate to being a public company,
including the costs of certain accounting, auditing and Commission counsel
activities, the cost of preparing, printing and mailing corporate reports and
proxy statements, the expense of a transfer agent and the cost of investor
relations activities.
These assessments are based upon publicly available information regarding
Centennial and the Investors' due diligence investigation or knowledge of
Centennial and the Investors' experience in investing in or managing companies
in the healthcare industry and public companies generally. While the Investors
believe that there will be significant opportunities associated with the
investment in Centennial, they realize that there are also substantial and
significant risks that such opportunities may not be fully realized. The primary
risks to the Investors relate to the unknown long-term effects of PPS and other
possible governmental healthcare spending reductions, the uncertainty concerning
whether Centennial's growth strategy will succeed and Centennial's substantial
indebtedness, including capital leases, of approximately $355 million.
Effects. As a result of the Offer and the Merger, the entire equity interest in
Centennial will be owned by the Investors through their ownership of Holding.
The Public Shareholders will no longer have any interest in, and will not be
shareholders of, Centennial, and therefore, will not participate in Centennial's
future earnings and potential growth. Instead, the Public Shareholders will have
the right to receive $5.50 in cash, without interest, for each share held (other
than shares for which appraisal rights have been perfected).
To the extent that the Contributing Shareholders receive shares of
Holding preferred stock for their shares, they will have the ability to
participate in Centennial's future earnings and potential growth and will have
the ability to
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benefit from any corporate opportunities that may be pursued by Centennial in
the future. However, to the extent that the Contributing Shareholders receive
shares of Holding preferred stock for their shares of Common Stock, they will
also bear the risk of any decreases in the value of Centennial.
An equity investment in Holding following the Merger will involve
substantial risk resulting from the limited liquidity of any such investment and
the leverage resulting from Centennial's existing leverage and any other
indebtedness required to fund the capital expenditures and acquisitions
necessary to execute Centennial's business strategy. Nonetheless, if Centennial
successfully executes its business strategy, the value of such an equity
investment could be considerably greater than the original cost thereof.
In addition, the Common Stock will no longer be traded on the Nasdaq
National Market and price quotations for sales of shares in the public market
will no longer be available. The registration of the Common Stock under the
Exchange Act will terminate and Centennial will no longer file periodic or
annual reports. Centennial's officers, directors and the owners of more than 10%
of the Common Stock will no longer be subject to the short-swing profit
provisions of Section 16(b) of the Exchange Act.
Plans for Centennial. Pursuant to the Merger Agreement, upon completion of the
Offer, Holding intends to effect the Merger in accordance with the terms and
conditions of the Merger Agreement.
The Merger Agreement provides that, effective upon the consummation of
the Offer, Holding will be entitled to designate a number of directors (rounded
up to the nearest whole number) to the Board in proportion to the percentage of
the total number of outstanding Shares owned by Holding and its affiliates.
Except for the transactions contemplated by the Merger Agreement, the
Investors have no current plans or proposals which relate to or would result in:
(a) an extraordinary corporate transaction, such as a merger, reorganization or
liquidation involving Centennial; (b) a sale or transfer of a material amount of
assets of Centennial; (c) any change in the management or any change in any
material term of the employment contract of any executive officer (except as
discussed in "Special Factors-Conflicts of Interest"); or (d) any other material
change in Centennial's corporate structure or business.
Nevertheless, the Investors may initiate a review of Centennial 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 best to organize and coordinate the activities of
Centennial and Holding. Furthermore, in connection with its ongoing review of
Centennial's long term strategy, the Investors may, in the future, consider
transactions such as the disposition or acquisition of material assets,
alliances, joint ventures, other forms of co-operation with third parties or
other extraordinary transactions affecting Centennial or its operations.
POSITION OF THE HOLDING, ACQUISITION, WPEP, WARBURG, THE WP FUNDS, MANAGEMENT
AND CENTENNIAL AS TO FAIRNESS OF THE MERGER
Through its ownership of the Common Stock contributed to it by the Contributing
Shareholders and Acquisition's purchase of Common Stock pursuant to the Offer,
Holding beneficially owns approximately ____% of the outstanding Common
Stock. As a result, Holding and its affiliates, including Warburg, may be deemed
to be "affiliates" of Centennial. Rule 13e-3 of the Exchange Act governs
"going-private" transactions by certain issuers and their affiliates.
Accordingly, in compliance with Rule 13e-3, Centennial, Holding, Acquisition,
the WP Funds, Warburg, WPEP and Messrs. Eaton, Dahl, Fosha and Lepley
(collectively, "MANAGEMENT") may be required to consider the fairness of the
Offer and the Merger to the Public Shareholders.
Centennial, Holding, Acquisition , Warburg, WPEP, the WP Funds and
Management believe the Merger to be substantively and procedurally fair to the
Public Shareholders. Centennial, Holding, Acquisition, Warburg, WPEP, the WP
Funds and Management have considered the J.P. Morgan opinion (see, "Opinion of
Financial Advisor" below), in addition to the following factors:
- The fact that the Board and the Special Committee concluded
that the Offer and the Merger are fair to and in the best
interests of, the Public Shareholders.
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- Acquisition obtained ____% of the outstanding Common Stock in
the Offer.
- The historical and projected financial performance of
Centennial and its financial results.
- The Cash Merger Consideration represents an 87% premium over
the closing price for the Shares on February 24, 2000, the
last full trading day prior to announcement of the $5.50
Merger and is all cash consideration.
- The ability of Public Shareholders who do not tender their
Common Stock in the Offer and object to the Merger to obtain
"fair value" for their shares if they properly exercise their
appraisal rights under the GBCC.
- The Merger is not subject to a financing condition.
- The terms of the Merger Agreement were determined through
arm's-length negotiations between the Special Committee and
its legal and financial advisors, on the one hand, and
representatives of Holding, on the other hand. These terms
were negotiated before Holding or Acquisition beneficially
owned any Common Stock.
- The Contributing Shareholders have significant control of the
Common Stock and could significantly influence a disposition
of Centennial.
- Centennial's liquidity situation, which does not currently
allow for opportunities to grow Centennial through
acquisitions.
- Notwithstanding that the J.P. Morgan opinion was provided
solely for the information and assistance of the Special
Committee and that Centennial, Holding, Acquisition, Warburg,
the WP Funds and Management are not entitled to rely on such
opinion, the fact that the Special Committee received an
opinion from J.P. Morgan that the $5.50 per Share in cash to
be received by the Public Shareholders in the Merger is fair
to such holders from a financial point of view.
Centennial, Holding, Acquisition, Warburg, WPEP, the WP Funds and
Management have reviewed the factors considered by the Board in support of its
decision as described above, and had no basis to question their consideration of
or reliance on these factors. None of Centennial, Holding, Acquisition, Warburg,
WPEP, the WP Funds and Management find it practicable to assign specific
relative weights to the foregoing factors in reaching its opinion as to the
fairness of the Offer and the Merger to the Public Shareholders.
CONFLICTS OF INTEREST
In considering the recommendations of the Board and the Special
Committee with respect to the Merger, you should be aware that officers and
directors of Centennial, as well as other Contributing Shareholders, have
interests in connection with the Offer and the Merger which may present them
with actual or potential conflicts of interest as described below. The Special
Committee and the Board were aware of these interests and considered them among
the other matters described in "Special Factors-Special Committee's and the
Board's Recommendation."
WCAS VI, WCAS HP and the WCAS General Partners together owned
approximately 23% of the Common Stock and South Atlantic owned approximately
10%. WCAS VI, WCAS HP and South Atlantic entered into the Subscription Agreement
pursuant to which they contributed to Holding their Common Stock for Series B
Preferred Stock. WCAS VI, WCAS HP, WCAS CP and South Atlantic also entered into
the Voting Agreement pursuant to which they agreed to support the Offer and the
Merger. Pursuant to the Merger, Acquisition will acquire 246,895 Shares owned by
WCAS CP. See "The Merger - Terms of the Subscription Agreement, Voting Agreement
and Employment Agreements."
Mr. Eaton is Chairman, President and Chief Executive Officer of
Centennial and owned approximately 9.4% of the Common Stock. Mr. Eaton entered
into the Subscription Agreement pursuant to which he contributed to Holding
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<PAGE> 41
569,917 shares of Common Stock for 569,917 shares of Holding Series A Preferred
Stock. Pursuant to the Merger, Acquisition will acquire for $5.50 a share
545,454 shares of Common Stock owned by Mr. Eaton for aggregate consideration of
$2,999,997. Mr. Eaton also entered into the Voting Agreement pursuant to which
he agreed to support the Offer and the Merger. Mr. Eaton will continue as a
director and as a member of management in the Surviving Corporation pursuant to
a new employment agreement which will take effect upon consummation of the
Merger and provide for severance payments, stock repurchase rights and
non-compete periods. See "The Merger - Terms of the Subscription Agreement,
Voting Agreement and Employment Agreements."
Mr. Dahl is Executive Vice President, Chief Financial Officer and
Treasurer of Centennial. Mr. Dahl entered into the Subscription Agreement
pursuant to which he contributed to Holding his Common Stock for Series A
Preferred Stock. Mr. Dahl also entered into the Voting Agreement pursuant to
which he agreed to support the Offer and the Merger. Mr. Dahl will continue as a
member of management in the Surviving Corporation pursuant to a new employment
agreement which will take effect upon consummation of the Merger and provide for
severance payments and non-compete periods. Mr. Dahl owned less than one percent
of the Common Stock. See "The Merger - Terms of the Subscription Agreement,
Voting Agreement and Employment Agreements."
Mr. Paul is a director of Centennial and a general partner of the
general partner of WCAS VI and other entities affiliated with WCAS VI. Mr. Paul
entered into the Subscription Agreement pursuant to which he contributed to
Holding 9,686 shares of Common Stock for Series B Preferred Stock. Mr. Paul also
entered into the Voting Agreement pursuant to which he agreed to support the
Offer and the Merger. Pursuant to the Merger, Acquisition will acquire for $5.50
per share 3,021 shares of Common Stock owned by Mr. Paul. Mr. Paul has no
affiliation with management. See "The Merger - Terms of the Subscription
Agreement, Voting Agreement and Employment Agreements."
Mr. Nordin is a director of Centennial and a special limited partner of
a South Atlantic affiliate. Mr. Nordin is a special limited partner in a limited
partnership which invested in a South Atlantic fund holding an interest in
Centennial. The South Atlantic Investors purchased 908,091 shares of Series B
Preferred Stock. South Atlantic entered into the Subscription Agreement pursuant
to which it contributed to Holding its shares of Common Stock for Series B
Preferred Stock. Mr. Nordin has no affiliation with management. Mr. Nordin
owned less than one percent of the Common Stock.
Mr. Hoover is a director of Centennial and a former general partner and
current limited partner of the general partners of WCAS VI, as well as a general
partner of the respective sole general partners of WCAS CP and Welsh, Carson,
Anderson & Stowe V, L.P (which is an affiliate of WCAS VI). Mr. Hoover is also
affiliated with Dauphin Capital Partners, which approached Warburg Pincus about
participating in the proposed transaction but ultimately did not participate.
Mr. Hoover has no affiliation with management. Mr. Hoover owned less than one
percent of the Shares. See "The Merger - Terms of the Subscription Agreement;
Voting Agreement and Employment Agreements."
Mr. Fosha is Executive Vice President of Operations of Centennial. Mr.
Fosha entered into the Subscription Agreement pursuant to which he contributed
to Holding his Common Stock for Series A Preferred Stock. Mr. Fosha also entered
into the Voting Agreement pursuant to which he agreed to support the Offer and
the Merger. Mr. Fosha will continue as a member of management in the Surviving
Corporation pursuant to a new employment agreement which will take effect upon
consummation of the Merger and provide for severance payments and non-compete
periods. Mr. Fosha owned less than one percent of the Common Stock. See "The
Merger Terms of the Subscription Agreement, Voting Agreement and Employment
Agreements."
Mr. Lepley is President of Paragon. Mr. Lepley entered into the
Subscription Agreement pursuant to which he contributed to Holding his Common
Stock for Series A Preferred Stock. Mr. Lepley also entered into the Voting
Agreement pursuant to which he agreed to support the Offer and the Merger. Mr.
Lepley will continue as a member of management in the Surviving Corporation
pursuant to a new employment agreement which will take effect upon consummation
of the Merger and provide for severance payments and non-compete periods. Mr.
Lepley owned less than one percent of the Common Stock. See "The Merger - Terms
of the Subscription Agreement;, Voting Agreement and Employment Agreements." Mr.
Lepley's wife owned 26,500 shares of common stock that she tendered in the
offer.
On February 25, 2000, upon execution of the Merger Agreement, Messrs.
Eaton, Dahl and Fosha entered into new employment agreements with Centennial
which will replace their existing employment agreements upon
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consummation of the Merger. In addition, Mr. Lepley entered into a new
employment agreement with Paragon which will replace his existing employment
agreement upon consummation of the Merger. For further discussion of the terms
of each of these employment agreements, see "The Merger - Terms of the
Subscription Agreement, Voting Agreement and Employment Agreements."
Options. Following the Merger, Holding intends to grant to Messrs. Eaton, Dahl,
Fosha and Lepley, and to other members of management and key employees, options
to purchase an aggregate of 2,585,451 shares of Holding common stock (the "NEW
OPTIONS"). The shares issuable on exercise of the New Options will represent 15%
of the shares of Holding common stock outstanding immediately after the Merger
(assuming the conversion of all preferred stock into common stock). The exercise
price of the New Options will be $5.50 per share.
Mr. Eaton is expected to be granted New Options to purchase
approximately 1.2 million shares of Holding common stock, of which 420,000 will
be immediately exercisable and the balance of which will invest in four annual
equal installments on the anniversaries of the date of grant. Each of Messrs.
Dahl, Fosha and Lepley will be granted options to purchase 160,000 shares of
Holding common stock, of which 20% will be immediately exercisable, with the
balance vesting in four annual equal installments on the anniversaries of the
date of grant. For further discussion, see "The Merger - Terms of the
Subscription Agreement, Voting Agreement and Employment Agreements."
The Merger Agreement requires Centennial (and after the Merger, the
Surviving Corporation) for a period of six years following the consummation of
the Merger to provide indemnification, to the full extent permitted by
applicable law, to the current and former officers, directors, employees,
fiduciaries, and agents of Centennial against liabilities (including reasonable
attorneys' fees) arising out of or pertaining to the Offer or the Merger. The
Surviving Corporation is required to provide officers' and directors' liability
insurance covering Centennial's officers and directors who are currently covered
by Centennial's officers' and directors' insurance for a period of two years,
but is not required to expend annually more than 150% of the current cost of
such coverage. For a more detailed discussion of the indemnification and
insurance provisions of the Merger Agreement, see "The Merger - Terms of the
Merger Agreement."
Following consummation of the Merger, the executive officers of
Centennial will continue as the executive officers of Holding and the Surviving
Corporation, and Mr. Eaton will serve on the Board of Directors of Holding and
the Surviving Corporation. It is anticipated that all current employees of
Centennial and its subsidiaries will continue in their same capacities after the
Merger.
The Management Group. After consummation of the Offer, each of Messrs. Eaton,
Dahl, Fosha and Lepley owns shares of Holding preferred stock and, after the
consummation of the Merger, will have vested options to purchase shares of
Holding common stock (representing approximately 7.4% of such shares expected to
be then issued and outstanding on a fully diluted basis assuming exercise of all
options then outstanding and conversion of all preferred stock). Mr. Eaton's
shares of Common Stock that are not exchanged for Series A Preferred Stock will
be converted into the right to receive the same Cash Merger Consideration as
shares of Common Stock held by other shareholders of Centennial.
At the closing of the Merger, all outstanding options to purchase
Common Stock will have vested and will be cashed out in accordance with the
terms of the Merger Agreement. All options that are not exercised will be
canceled in accordance with the terms of the Merger Agreement. See "The Merger -
Terms of the Subscription Agreement, Voting Agreement and Employment
Agreements." As of February 25, 2000, there were options outstanding to purchase
an aggregate of 819,875 shares of Common Stock at a weighted average exercise
price of $16.88 per share, of which 8,276 shares have an exercise price per
share of less than $5.50.
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The following table sets forth information as of the date of this Proxy
Statement as to the shares of Common Stock held by the Investors or their
affiliates for which Cash Merger Consideration will be received upon
consummation of the Merger.
<TABLE>
<CAPTION>
INVESTORS SHARES NOT AMOUNT OF
CONTRIBUTED TO CASH TO BE
HOLDING RECEIVED FOR
-------------- SHARES NOT
CONTRIBUTED
------------
<S> <C> <C>
J. Stephen Eaton ......................................................................... 545,454 $2,999,997
Andrew M. Paul ........................................................................... 3,021 $ 16,615
WCAS Capital Partners II, L.P. ........................................................... 246,896 $1,357,928
</TABLE>
CERTAIN EFFECTS OF THE MERGER
As a result of the Merger, the entire equity interest in Centennial
will be owned by the Investors through their ownership of Holding preferred
stock. The Public Shareholders will no longer have any interest in, and will not
be shareholders of, Centennial, and therefore will not participate in any future
earnings and potential growth of Centennial. Instead, the Public Shareholders
will have the right to receive $5.50 in cash, without interest, for each share
held (other than shares in respect of which appraisal rights have been
perfected).
The Special Committee believes that the principal benefits of the
Merger to the Public Shareholders arise from the opportunity to receive cash
value for the Common Stock, which is substantial in light of the market price of
the Common Stock one week prior to the announcement of the Merger and the
anticipated future difficulty in pursuing Centennial's acquisition strategy. See
"Special Factors" - The Special Committee's and the Board's Recommendation." The
Special Committee believes that the principal detriments of the Merger to the
Public Shareholders arise from their inability to participate in any future
earnings or potential growth of Centennial following the consummation of the
Merger, and from the expectation that the receipt of Cash Merger Consideration
for their shares of Common Stock in the Merger will be taxable transaction for
federal income tax purposes. To the extent that the Investors receives shares of
Holding preferred stock in exchange for their shares of Common Stock, they will
have the ability to participate in any future earnings and potential growth of
Centennial and will have the ability to benefit from any corporate opportunities
that may be pursued by Centennial in the future. To the extent that the
Investors receives shares of Holding preferred stock in exchange for their
shares of Common Stock, they will also bear the risk of any decreases in the
value of Centennial. The principal benefits of the Merger to Centennial are
discussed under "Special Factors - The Special Committee's and the Board's
Recommendation."
An equity investment in Holding following the Merger involves
substantial risk resulting from the limited liquidity of any such investment and
the leverage resulting from the future borrowings that will be required to fund
the capital expenditures and acquisitions necessary to execute Centennial's
business strategy. Nonetheless, if Centennial successfully executes its business
strategy, the value of such an equity investment could be considerably greater
than the original cost thereof. See "Special Factors - Conflicts of Interest."
In addition, the Common Stock will no longer be traded on the Nasdaq
National Market and price quotations for sales of shares in the public market
will no longer be available. The registration of the Common Stock under the
Exchange Act will terminate and Centennial will no longer file periodic or
annual reports. Centennial's officers, directors and ten percent owners will no
longer be subject to the short-swing profit provisions of Section 16(b) of the
Exchange Act.
FINANCING OF THE MERGER
It is estimated that approximately $55 million will be required to
consummate the Offer and the Merger and pay related fees and expenses and pay
down current indebtedness. The Merger is not subject to a financing contingency,
and the WP Funds and South Atlantic Investors have committed to make cash
investments of up to an
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aggregate of $55 million for such purpose. See "Special Factors - Special
Committee's and the Board's Recommendation". Approximately $46 million of this
investment by the WP Funds and South Atlantic Investors will be used to
consummate the Offer and the Merger and pay related fees and expenses. The
balance of this investment will be used to pay down indebtedness currently
outstanding under Centennial's credit facility. Centennial will have the right
to reborrow the amount paid down under the credit facility. It is currently
contemplated such future borrowings will be used primarily for the general
corporate purposes.
CONDUCT OF CENTENNIAL'S BUSINESS AFTER THE MERGER
The Investors are continuing to evaluate Centennial's business,
practices, operations, properties, corporate structure, capitalization,
management and personnel to determine what changes, if any, will be desirable.
Subject to the foregoing, the Investors expects that after the Merger the
day-to-day business and operations of Centennial will be conducted substantially
as they are currently being conducted by Centennial. The Investors do not
currently intend to dispose of any assets of Centennial other than in the
ordinary course of business.
The Investors currently anticipate that a separate wholly-owned
Centennial subsidiary may acquire additional skilled nursing facilities. The
Investors anticipate making additional equity contributions to Holding, which
will ultimately be contributed to this acquisition subsidiary. These equity
contributions will be used, together with debt financing and working capital
obtained through this subsidiary, to acquire skilled nursing facilities that
Centennial will then manage.
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THE SPECIAL MEETING
DATE, TIME AND PLACE OF THE SPECIAL MEETING
The Special Meeting will be held on May ___, 2000, at 10:00 a.m.,
local time, at The South Terraces Conference Center Classroom, 115 Perimeter
Center Place, Atlanta, Georgia 30346.
PROXY SOLICITATION
Your proxy is being solicited by Centennial pursuant to this Proxy
Statement. All expenses incurred in connection with solicitation of the
enclosed proxy will be paid by Centennial. Officers, directors and regular
Centennial employees, who will receive no additional compensation for their
services, may solicit proxies by telephone or personal call. Centennial has
requested brokers and nominees who hold stock in their names to furnish this
proxy material to their customers and Centennial will reimburse such brokers
and nominees for their related out-of-pocket expenses. This Proxy Statement and
the accompanying proxy card are being mailed to shareholders on or about May
___, 2000.
RECORD DATE AND QUORUM REQUIREMENT
The Common Stock is the only outstanding voting security of
Centennial. The Board has fixed the close of business on May ___, 2000 as the
Record Date for the determination of shareholders entitled to notice of, and to
vote at, the Special Meeting and any adjournment or adjournments thereof. Each
holder of record of Common Stock at the close of business on the Record Date is
entitled to one vote for each share then held on each matter submitted to a
vote of shareholders. At the close of business on the Record Date, there were
11,923,618 shares of Common Stock issued and outstanding held by ____ holders
of record.
The holders of a majority of the outstanding shares entitled to vote
at the Special Meeting must be present in person or represented by proxy to
constitute a quorum for the transaction of business. Abstentions are counted as
present for purposes of determining the presence or absence of a quorum for the
transaction of business.
VOTING PROCEDURES
Approval of the Merger Agreement, which is attached as Appendix A
hereto, will require the affirmative vote of the holders of a majority of the
outstanding shares of Common Stock entitled to vote at the Special Meeting.
Acquisition, through its ownership of ___% of the outstanding Common Stock
acquired in the Offer, has sufficient shares to approve the Merger without the
vote of any other shareholder. Holding, through the contribution by the
Contributing Shareholders of 4,710,252 shares of Common Stock and its ownership
of Acquisition, beneficially owns _____% of the outstanding Common Stock. A
failure to vote or a vote to abstain will have the same legal effect as a vote
cast against approval. Brokers and, in many cases, nominees will not have
discretionary power to vote on the proposal to be presented at the Special
Meeting. Accordingly, beneficial owners of shares of Common Stock should
instruct their brokers or nominees how to vote.
Under Georgia law, holders of Common Stock who do not vote in favor of
the Merger Agreement and who comply with certain notice requirements and other
procedures will have the right to dissent and to be paid cash for the "fair
value" of their shares as finally determined under such procedures, which may
be more or less than the consideration to be received by other shareholders of
Centennial under the terms of the Merger Agreement. Failure to follow such
procedures precisely may result in loss of appraisal rights. See "Rights of
Dissenting Shareholders."
VOTING AND REVOCATION OF PROXIES
A shareholder giving a proxy has the power to revoke it at any time
before it is exercised by (i) filing with the Secretary of Centennial an
instrument revoking it, (ii) submitting a duly executed proxy bearing a later
date or (iii) voting in person at the Special Meeting. Subject to such
revocation, all shares represented by each properly executed proxy received by
the Secretary of Centennial will be voted in accordance with the instructions
indicated thereon, and if no instructions are indicated, will be voted to
approve the Merger and in such manner as the persons named on the enclosed
proxy card in their discretion determine upon such other business as may
properly come before the Special Meeting or any adjournment thereof.
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The shares represented by the accompanying proxy card and entitled to
vote at the Special Meeting will be voted if the proxy card is properly signed,
dated and received by the Secretary of Centennial prior to the Special Meeting.
EFFECTIVE TIME OF THE MERGER AND PAYMENT FOR SHARES
The effective time of the Merger, which shall be the date and time of
filing of the Certificate of Merger with the Secretary of State of the State of
Georgia (the "EFFECTIVE TIME"), is currently expected to occur as soon as
practicable after the Special Meeting, subject to approval of the Merger
Agreement at the Special Meeting and satisfaction or waiver of the other terms
and conditions of the Merger Agreement. Detailed instructions with regard to
the surrender of Common Stock certificates, together with a letter of
transmittal, will be forwarded to shareholders by Centennial's paying agent,
ChaseMellon Shareholder Service LLC (the "PAYING AGENT"), promptly after the
Effective Time. Shareholders should not submit their certificates to the Paying
Agent until they have received such materials. The Paying Agent will send
payment of the Cash Merger Consideration to shareholders as promptly as
practicable following receipt by the Paying Agent of their certificates and
other required documents. No interest will be paid or accrued on the cash
payable upon the surrender of certificates. Shareholders should not send any
certificates at this time. See "The Merger - Conditions."
OTHER MATTERS TO BE CONSIDERED
The Board is not aware of any other matter which will be brought
before the Special Meeting. If, however, other matters are presented, proxies
will be voted at the discretion of the holders of such proxies.
THE MERGER
TERMS OF THE MERGER AGREEMENT
The Merger Agreement. The following is a summary of the material provisions of
the Merger Agreement. This summary is qualified in its entirety by reference to
the Merger Agreement which is incorporated herein by reference and is attached
to this Proxy Statement as Appendix A. Defined terms used herein and not
defined herein have the meanings assigned to those terms in the Merger
Agreement.
The Offer. The Merger Agreement provides that Acquisition
will commence the Offer and that, upon the terms and subject to prior
satisfaction or waiver of the conditions set forth in the Offer as
described in Section 13 (including, if the Offer is extended or
amended, the terms and conditions of any extension or amendment),
Acquisition will accept for payment, and pay for, all Shares validly
tendered pursuant to the Offer and not withdrawn on or prior to the
Expiration Date.
Directors. Pursuant to the Merger Agreement, after
Acquisition has purchased any Shares pursuant to the Offer, and from
time to time thereafter, as Shares are acquired by Acquisition,
Holding has the right to designate such number of directors, rounded
up to the next whole number, on the Board as will give Holding,
subject to compliance with Section 14(f) of the Exchange Act,
representation on the Board equal to at least that number of directors
which equals the product of the total number of directors on the Board
(giving effect to the directors appointed or elected pursuant to this
sentence and including current directors serving as officers of
Centennial) multiplied by the percentage that the aggregate number of
Shares beneficially owned by Holding or any affiliate of Holding
(including for purposes hereof such Shares as are accepted for payment
pursuant to the Offer, but excluding Shares held by Centennial or any
of its Subsidiaries) bears to the number of Shares outstanding. At
each such time, Centennial will also cause (i) each committee of the
Board, (ii) if requested by Holding, the board of directors of each of
the Subsidiaries and (iii) if requested by Holding, each committee of
such board, to include persons designated by Holding constituting the
same percentage of each such committee or board as Holding's designees
constitute on the Board. Centennial has agreed, upon request by
Holding, to promptly increase the size of the Board or exercise its
best efforts to secure the resignations of such number of directors as
is necessary to enable Holding's designees to be elected to the Board
in accordance with the above terms and to cause Holding's designees to
be so elected; provided, however, that if at any time or from time to
time there are fewer than two independent directors, the other
directors will elect
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to the Board such number of persons so that the total of such persons
and remaining Independent Directors serving on the Board is at least
two.
The Merger. The Merger Agreement provides that, after the
completion of the Offer and the satisfaction or waiver of certain
conditions, Acquisition will be merged with and into Centennial and
Centennial will be the Surviving Corporation. On the Effective Date of
the Merger, each outstanding Share (other than Shares owned by
Holding, Acquisition or any subsidiary or affiliate of Holding,
Acquisition or Centennial, or held in the treasury of Centennial, or
held by shareholders who properly exercise dissenters' rights under
the GBCC, if any) will, by virtue of the Merger and without action by
the holder thereof, be canceled and converted into the right to
receive an amount in cash equal to the Per Share Amount.
Centennial has approved and consented to the Offer and the
Board, at a meeting duly called and held on February 25, 2000, at
which all of the directors were present, and acting on the unanimous
recommendation of the Special Committee, duly and unanimously: (i)
approved and adopted the Merger Agreement and the transactions
contemplated thereby, including the Offer and the Merger; (ii)
recommended that you accept the Offer, tender your Shares pursuant to
the Offer and, if you do not tender your Shares in the Offer, that you
approve the Merger Agreement and the transactions contemplated
thereby, including the Merger; (iii) determined that the Merger
Agreement and the transactions thereby, including the Offer and the
Merger, are fair to and in your best interests; and (iv) took all
action necessary to render the limitations on business combinations
contained in Part 2 of Article 11 of the GBCC inapplicable to the
Merger Agreement and the transactions contemplated thereby.
Charter, Bylaws, Directors and Officers. The Certificate of
Incorporation and By-Laws of Acquisition in effect immediately prior
to the Effective Time will be the Certificate of Incorporation and
By-Laws of the Surviving Corporation until amended, subject to the
provisions of the Merger Agreement which provide that all rights to
indemnification now existing in favor of directors and officers of
Centennial and its subsidiaries, as provided in their respective
charters or by-laws, will survive the Merger and continue in full
force and effect for a period of not less than the statute of
limitations applicable to such matters.
The directors of Acquisition, immediately prior to the
Effective Time, will be the initial directors of the Surviving
Corporation, and the officers of Centennial, immediately prior to the
Effective Time, will be the initial officers of the Surviving
Corporation.
Conversion of Shares. At the Effective Time, by virtue of the
Merger and without any action on the part of Acquisition, Centennial
or the holder of any of the following securities:
(a) Each share of Common Stock issued and
outstanding immediately before the Effective Time (other than
any Shares to be canceled pursuant to Section 2.6(b) of the
Merger Agreement and any Dissenting Shares) will be canceled
and extinguished and be converted into the right to receive
the Per Share Amount in cash payable to the holder thereof,
without interest, upon surrender of the certificate
representing such Share. Each holder of a certificate
representing any such Shares will cease to have any rights
with respect thereto, except the right to receive the Per
Share Amount, without interest, upon the surrender of such
certificate in accordance with the terms of this Proxy
Statement.
(b) Each share of Common Stock held in the
treasury of Centennial and each Share owned by Holding or any
direct or indirect wholly owned subsidiary of Holding or of
Centennial immediately before the Effective Time, will be
canceled and extinguished and no payment or other
consideration will be made with respect thereto.
(c) Each share of common stock, $.01 par value,
of Acquisition issued and outstanding immediately before the
Effective Time will thereafter represent one validly issued,
fully paid and nonassessable share of common stock, $.01 par
value, of the Surviving Corporation.
Centennial has agreed to take all actions necessary to
provide that, prior to or upon consummation of the Merger, each then
outstanding option to purchase Common Stock (the "OPTIONS") granted
under any of
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Centennial's stock option plans (collectively, the "OPTION PLANS"),
and any and all other outstanding options, stock warrants and stock
rights will be canceled and will be of no further force or effect.
However, with respect to any Options as to which the Per Share Amount
exceeds the applicable per share exercise price, Holding will,
promptly following the Effective Time, pay (or cause to be paid) to
the holders of such Options an amount in cash equal to, with respect
to each such Option, the product of (1) the amount by which (x) the
Per Share Amount exceeds (y) the applicable per share exercise price
and (2) the number of shares subject to such Option at the time of
such cancellation. Such amount will be subject to reduction by
applicable tax withholding.
Except as provided herein or as otherwise agreed to by the
parties, Centennial will cause the Option Plans to terminate as of the
Effective Time and the provisions in any other plan, program or
arrangement, providing for the issuance or grant by Centennial or any
of its subsidiaries of any interest in respect of the capital stock of
Centennial or any of its subsidiaries will be deleted as of the
Effective Time.
Centennial has indicated that all the Option Plans provide
that either (i) Centennial can take the actions described above
without obtaining the consent of any holders of Options or (ii) if
such consent is required, Centennial has agreed to obtain such
consents and provide evidence thereof to Holding at least 10 days
prior to the initial expiration of the Offer.
Representations and Warranties. In the Merger Agreement,
Centennial has made customary representations and warranties to
Holding and Acquisition with respect to, among other matters, its
organization and qualification, capitalization, authority, consents
and approvals, public filings, financial statements, absence of any
material adverse effect on Centennial, information to be included in
the Offer Documents, brokers, employee benefit matters, litigation,
tax matters, compliance with law, environmental matters, intellectual
property, real property, Y2K, material contracts, related party
transactions, inapplicability of state takeover statutes and the vote
required, if any, by Centennial shareholders to approve the Merger.
Each of Holding and Acquisition has made customary representations and
warranties to Centennial with respect to, among other matters, its
organization, qualifications, authority, information to be included in
the Offer Documents, consents and approvals, operations of
Acquisition, brokers, financial wherewithal and ownership of Shares.
Conduct of Business Pending the Merger. The Merger Agreement
obligates Centennial and its Subsidiaries, from the date of the Merger
Agreement until the earlier of the Effective Time and the date on
which the majority of Centennial's directors are designees of Holding
or Acquisition or until the earlier termination of the Merger
Agreement, to conduct their operations only in the ordinary and usual
course of business and consistent with past practice and obligates
Centennial and its Subsidiaries to use all reasonable efforts to
preserve substantially intact their business organizations, to keep
available the services of their present officers and employees and to
preserve the present relationships with those persons and entities
having significant business relationships with Centennial and its
Subsidiaries, except such as would not have any change in or effect on
the business of Centennial that is or would be reasonably expected to
be materially adverse to any of the condition (financial or
otherwise), business, properties, assets, liabilities or results of
operations of Centennial and its Subsidiaries taken as a whole, except
as disclosed to Holding and Acquisition in the disclosure letter to
the Merger Agreement (a "MATERIAL ADVERSE EFFECT"). Centennial is
obligated to promptly advise Holding and Acquisition in writing of any
material change in its or any of its Subsidiaries' condition
(financial or otherwise), properties, customer or supplier
relationships, assets, liabilities or results of operations. The
Merger Agreement also contains specific restrictive covenants as to
certain activities of Centennial prior to the date on which the
majority of Centennial's directors are designees of Holding or
Acquisition, which provide that Centennial will not (and will not
permit any of its Subsidiaries to) take certain actions without the
prior written consent of Holding, including, among other things and
subject to certain exceptions, issuing or selling its securities,
redeeming or repurchasing securities, changing its capital structure,
making material acquisitions or dispositions, entering into or
amending material contracts, incurring indebtedness, settling
litigation or claims, increasing compensation or adopting new benefit
plans, taking any action that may result in the Offer conditions not
being satisfied and permitting certain other material events or
transactions.
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No Solicitation. In the Merger Agreement, Centennial has
agreed not to, and to cause its Subsidiaries and the officers,
directors, employees, agents and representatives of Centennial or any
of its Subsidiaries (collectively, the "CENTENNIAL REPRESENTATIVES")
not to (i) solicit or initiate, or encourage, directly or indirectly,
any inquiries regarding or the submission of, any Takeover Proposal
(as defined below), (ii) participate in any discussions or
negotiations regarding, or furnish to any Person any information or
data with respect to, or take any other action to knowingly facilitate
the making of any proposal that constitutes, or may reasonably be
expected to lead to, any Takeover Proposal or (iii) enter into any
agreement with respect to any Takeover Proposal or approve or resolve
to approve any Takeover Proposal; provided, however, that nothing
contained in the Merger Agreement will prohibit Centennial or the
Board from (A) taking and disclosing to the shareholders a position
with respect to a tender or exchange offer by a third party pursuant
to Rules 14d-9 and 14e-2 promulgated under the Exchange Act or (B)
making such disclosure to the shareholders as, in the good faith
judgment of the Board, after receiving advice from outside counsel, is
required under applicable law, provided that Centennial can not,
except as permitted by Section 5.2(b) of the Merger Agreement,
withdraw or modify, or propose to withdraw or modify, its approval or
recommendation of the Merger Agreement or the transactions
contemplated thereby, including the Offer or the Merger, or approve or
recommend, or propose to approve or recommend any Takeover Proposal,
or enter into any agreement with respect to any Takeover Proposal.
Centennial has agreed that it will, and will cause the Centennial
Representatives to, immediately cease any existing activities,
discussions or negotiations with any parties conducted previously with
respect to any of the foregoing, and it will promptly request that
each Person who has previously executed a confidentiality agreement in
connection with such Person's consideration of a Takeover Proposal
return all confidential information previously furnished to such
Person by or on behalf of Centennial. Notwithstanding the foregoing,
prior to the time of acceptance of Shares for payment pursuant to the
Offer, Centennial may furnish information concerning its business,
properties or assets to any Person or group pursuant to
confidentiality agreements with terms and conditions similar to the
Confidentiality Agreement, dated April 27, 1999 (the "CONFIDENTIALITY
AGREEMENT"), between Centennial and Warburg Pincus (provided that such
confidentiality agreements may not include any provision granting any
such Person or group an exclusive right to negotiate with Centennial),
and may negotiate and participate in discussions and negotiations with
such Person or group concerning a Takeover Proposal if: (x) such
Person or group has submitted an unsolicited bona fide written
proposal which is, or is reasonably likely to result in, a Superior
Proposal; and (y) the Board determines in good faith, based upon
advice of outside counsel, that such action is required to discharge
its fiduciary duties to you under the GBCC. Centennial will not
release any third party from, or waive any provision of, any such
confidentiality agreement or any other confidentiality or standstill
agreement to which Centennial is a party.
Centennial will promptly notify Holding of the existence of
any proposal, discussion, negotiation or inquiry received by
Centennial, and Centennial will immediately communicate to Holding the
terms of any proposal, discussion, negotiation or inquiry which it may
receive (and will promptly provide to Holding copies of any written
materials received by Centennial in connection with such proposal,
discussion, negotiation or inquiry) and the identity of the Person
making such proposal or inquiry or engaging in such discussion or
negotiation. Centennial will promptly provide to Holding any
non-public information concerning Centennial provided to any other
Person which was not previously provided to Holding. Centennial will
keep Holding fully informed of the status and details (including
amendments or proposed amendments) to any such Takeover Proposal.
As used herein and in the Merger Agreement, the following terms have
the meanings set forth below:
"SUPERIOR PROPOSAL" means an unsolicited bona fide written
proposal by a Third Party to acquire, directly or indirectly, for
consideration consisting solely of cash and/or marketable securities,
all the Shares then outstanding or all or substantially all of the
assets of Centennial, and (i) otherwise on terms which the Board
determines in good faith to be more favorable to you than the Offer
and the Merger (based on a written opinion of Centennial's independent
financial advisor that the value of the consideration provided for in
such proposal exceeds the value of the consideration provided for in
the Offer and the Merger), (ii) for which financing, to the extent
required, is then committed, (iii) which, in the good faith reasonable
judgment of the Board is reasonably likely to be consummated without
undue delay and (iv) which is subject to no more conditions than those
set forth in Annex I to the Merger Agreement.
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"TAKEOVER PROPOSAL" means any inquiry, proposal or offer,
whether in writing or otherwise, from a Third Party to acquire
beneficial ownership (as determined under Rule 13d-3 of the Exchange
Act) of all or a material portion of the assets of Centennial or any
of its Subsidiaries or 15% or more of any class of equity securities
of Centennial or any of the Subsidiaries pursuant to a merger,
consolidation or other business combination, sale of shares of capital
stock, sale of assets, tender offer, exchange offer or similar
transaction with respect to either Centennial or any of the
Subsidiaries, including any single or multi-step transaction or series
of related transactions, which is structured to permit such Third
Party to acquire beneficial ownership of any material portion of the
assets of, or 15% or more of the equity interest in either Centennial
or any of the Subsidiaries.
"THIRD PARTY" means any Person or group other than Holding,
Acquisition or any affiliate thereof.
Indemnification; Directors' and Officers' Insurance. In the
Merger Agreement, Holding and Acquisition have agreed that all rights
to indemnification existing in favor of the present or former
directors, officers and employees of Centennial or any of its
Subsidiaries as provided in Centennial's Amended and Restated Articles
or Bylaws, or the articles of organization, bylaws or similar
documents of any of Centennial's subsidiaries as in effect at the date
of the Merger Agreement with respect to matters occurring prior to the
Effective Time will survive the Merger and continue in full force and
effect for a period of not less than the statutes of limitations
applicable to such matters. Holding has agreed to cause the Surviving
Corporation to comply fully with these obligations and may not amend,
repeal or otherwise modify the Certificate of Incorporation and
By-Laws of the Surviving Corporation for six years after the Effective
Time in any manner that would adversely affect the rights of
individuals who as of the date of the Merger Agreement were directors,
officers, employees, fiduciaries, agents of Centennial or otherwise
entitled to indemnification under the Centennial's Amended and
Restated Articles, By-Laws or indemnification agreements. In addition,
the Certificate of Incorporation of the surviving corporation will
include provisions providing for advancement of expenses to such
Indemnified Parties (as defined below) in accordance with Centennial's
Amended and Restated Articles and in accordance with the GBCC.
Subject to the limitations on indemnification contained in
the GBCC, Centennial has agreed, to the fullest extent permitted under
applicable law and regardless of whether the Merger becomes effective,
to indemnify and hold harmless, and after the Effective Time, the
Surviving Corporation will for a period of six years following the
Effective Time, to the fullest extent permitted under applicable law,
indemnify and hold harmless, each director, officer, employee,
fiduciary and agent of Centennial or any Subsidiary and their
respective subsidiaries and affiliates including, without limitation,
officers and directors serving as such on the date hereof
(collectively, the "INDEMNIFIED PARTIES") against any costs or
expenses (including reasonable attorneys' fees), judgments, fines,
losses, claims, damages, liabilities and amounts paid in settlement in
connection with any claim, action, suit, proceeding or investigation
arising out of or pertaining to any of the transactions contemplated
hereby, including without limitation liabilities arising under the
Securities Act of 1933, as amended, or the Exchange Act in connection
with the Offer or the Merger, and in the event of any such claim,
action, suit, proceeding or investigation (whether arising before or
after the Effective Time), (i) Centennial or the Surviving Corporation
will pay the reasonable fees and expenses of counsel selected by the
Indemnified Parties, which counsel will be reasonably satisfactory to
Centennial or the Surviving Corporation, promptly as statements
therefor are received, and (ii) Centennial and the Surviving
Corporation will cooperate in the defense of any such matter. For two
years after the Effective Time, the Surviving Corporation is required
to maintain or obtain officers' and directors' liability insurance
covering the Indemnified Parties who are currently covered by
Centennial's officers and directors liability insurance policy on
terms not less favorable than those in effect on the date hereof in
terms of coverage and amounts; provided, however, that if the
aggregate annual premiums for such insurance at any time during such
period exceed the per annum rate of premium paid by Centennial for
such insurance as of the date of the Merger Agreement, then the
Surviving Corporation will provide the maximum coverage that will then
be available at an annual premium equal to 150% of such per annum rate
as of the date of the Merger Agreement. The Surviving Corporation will
continue in effect the indemnification provisions currently provided
by the Amended and Restated Articles and By-Laws of Centennial for a
period of not less than six years following the Effective Time.
Neither Centennial nor the Surviving Corporation will have any
obligation to indemnify any Indemnified Party against any cost,
expense, judgment, fine, loss, claim, damage, liability or settlement
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amount found to have resulted solely from such Indemnified Person's
own gross negligence or willful misconduct.
Conditions to the Consummation of the Merger. The respective
obligations of each party to effect the Merger are subject to the
satisfaction on or prior to the Effective Time of the following
conditions: (i) Acquisition must make, or cause to be made, the Offer
and must purchase, or cause to be purchased, the Shares pursuant to
the Offer; (ii) the Merger and the Merger Agreement must be approved
and adopted by the requisite vote of the shareholders of Centennial,
if required by the GBCC or the Centennial's Amended and Restated
Articles; (iii) no statute, rule, regulation, judgment, writ, decree,
order or injunction has been promulgated, enacted, entered or
enforced, and no other action has been taken, by any Governmental
Entity that in any of the foregoing cases has the effect of making
illegal or directly or indirectly restraining, prohibiting or
restricting the consummation of the Merger; and (iv) any waiting
period applicable to the Merger under the HSR Act has expired or have
been terminated.
The obligations of Holding and Acquisition to effect the
Merger are further subject to the satisfaction on or prior to the
Effective Time of the following additional conditions: (i) the
representations and warranties of Centennial set forth in the Merger
Agreement that are qualified by reference to materiality or a Material
Adverse Effect are true and correct, and any such representations and
warranties that are not so qualified are true and correct in all
material respects, in each case as if such representations and
warranties were made at the Effective Time; (ii) Centennial has
performed in all material respects all obligations and complied in all
material respects with all agreements and covenants of Centennial to
be performed or complied with by it under the Merger Agreement at or
prior to the Effective Time; and (iii) all governmental consents,
orders and approvals required for the consummation of the Merger
(including, without limitation, all such consents, orders and
approvals as are necessary to prevent any Authorization from being
revoked, suspended or otherwise adversely affected, and to prevent any
penalty from being imposed) have been obtained and are in effect.
The obligations of Centennial to effect the Merger are
further subject to the satisfaction on or prior to the Effective Time
of the following additional conditions: (i) The representations and
warranties of Holding and Acquisition set forth in the Merger
Agreement that are qualified by reference to materiality or a Material
Adverse Effect are true and correct, and any such representations and
warranties that are not so qualified are true and correct in all
material respects, in each case as if such representations and
warranties were made at the Effective Time; and (ii) Holding and
Acquisition have performed in all material respects all obligations
and complied in all material respects with all agreements and
covenants of each of Holding and Acquisition to be performed or
complied with by it under this Agreement at or prior to the Effective
Time.
Termination. The Merger Agreement provides that it may be
terminated and the Merger may be abandoned at any time prior to the
Effective Time, whether before or after approval of matters presented
in connection with the Merger by you:
(a) By the mutual written consent of Holding and
Centennial; or
(b) By either of Holding or Centennial if any
Governmental Entity issues an order, decree or ruling or takes any
other action (which order, decree or ruling or other action each party
to the Merger Agreement will use its reasonable best efforts to have
vacated or reversed), in each case permanently restraining, enjoining
or otherwise prohibiting the transactions contemplated by the Merger
Agreement and such order, decree, ruling or other action has become
final and non-appealable.
(c) By Centennial:
(i) if Centennial approves a Superior Proposal
in accordance with Section 5.2(b) of the Merger Agreement,
provided Centennial complies with all provisions thereof,
including the notice provisions therein, and that it makes
simultaneous payment of the Expenses and the Termination Fee;
or
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(ii) if Holding or Acquisition terminates the
Offer or the Offer expires without Holding or Acquisition, as
the case may be, purchasing any Shares pursuant thereto;
provided that Centennial may not so terminate the Merger
Agreement if Centennial is in material breach of the Merger
Agreement; or
(iii) if Holding, Acquisition or any of their
affiliates fail to commence the Offer on or prior to 15
business days following the date of the initial public
announcement of the Offer; provided that Centennial may not
so terminate the Merger Agreement if Centennial is in
material breach of the Merger Agreement; or
(iv) if Holding or Acquisition breaches in any
material respect any of its representations, warranties,
covenants or other agreements contained in the Merger
Agreement which breach or failure to perform is incapable of
being cured or has not been cured by the earlier of (x) ten
business days following written notice thereof to Holding
from Centennial and (y) the scheduled expiration of the
Offer; or
(v) if the Offer has not expired or been
terminated on or before June 30, 2000; provided, however,
that if on such date any applicable waiting period under the
HSR Act has not expired or been terminated, or certain other
conditions exist, such date will be extended to July 30, 2000
(such date, as it may be extended the "Termination Date");
provided further, that Centennial may not so terminate the
Merger Agreement if Centennial is in material breach of the
Merger Agreement.
(d) By Holding or Acquisition:
(i) if prior to the purchase of the Shares
pursuant to the Offer, the Board withdraws, or modifies or
changes in a manner adverse to Holding or Acquisition its
approval or recommendation of the Offer, the Merger
Agreement, the Merger, the Subscription Agreement or the
Voting Agreement or approves a Takeover Proposal; or
(ii) if Holding or Acquisition terminates the
Offer without Holding or Acquisition purchasing any Shares
thereunder, provided that Holding or Acquisition may not so
terminate the Merger Agreement if Holding or Acquisition is
in material breach of the Merger Agreement; or
(iii) if, due to an occurrence that if occurring
after the commencement of the Offer would result in a failure
to satisfy any of the conditions set forth in Annex I to the
Merger Agreement, Holding, Acquisition, or any of their
affiliates fails to commence the Offer on or prior to 15
business days following the date of the initial public
announcement of the Offer; or
(iv) any Person or "group" (as defined in
Section 13(d)(3) of the Exchange Act), other than Holding,
Acquisition or their affiliates or any group of which any of
them is a member acquires beneficial ownership (as determined
pursuant to Rule 13d-3 promulgated under the Exchange Act) of
15 or more of the Shares; or
(v) if Centennial receives a Takeover Proposal
from any Person (other than Holding or Acquisition), and the
Board takes a neutral position or makes no recommendation
with respect to such Takeover Proposal after a reasonable
amount of time (and in no event more than 30 days following
such receipt) has elapsed for the Board to review and make a
recommendation with respect to such Takeover Proposal; or
(vi) if Centennial, or any of the Centennial
Representatives, takes any of the actions described in
clauses (i) or (ii) of Section 5.2(a) of the Merger Agreement
(regarding soliciting Takeover Proposals and participating in
discussions or furnishing information with respect to
Takeover Proposals), and such action is not permitted by the
Merger Agreement; or
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<PAGE> 53
(vii) if Centennial breaches in any material
respect any of its representations, warranties, covenants or
other agreements contained in the Merger Agreement (other
than the covenants and agreements in clauses (i) and (ii) of
Section 5.2(a) of the Merger Agreement) which breach or
failure to perform is incapable of being cured or has not
been cured by the earlier of (x) ten business days following
written notice thereof to Centennial from Holding and (y) the
scheduled expiration of the Offer; or
(viii) if the Offer has not expired or been
terminated on or before the Termination Date; provided that
Holding or Acquisition may not so terminate the Merger
Agreement if the Holding or Acquisition is in material breach
of the Merger Agreement.
Effect of Termination. (a) In the event that the Merger
Agreement is terminated by either Centennial or Holding or Acquisition
as provided above, the Merger Agreement will forthwith become void and
have no effect, without any liability or obligation on the part of
Holding, Acquisition or Centennial. However, the provisions of the
Merger Agreement regarding termination and expenses will survive
termination, and termination will not relieve any party from liability
for breaches of its representations, warranties or covenants contained
in the Merger Agreement.
(b) If (x) Holding or Acquisition terminates the Merger
Agreement pursuant to clause (d)(i), (d)(v) or (d)(vi) above or (y)
Centennial terminates the Merger Agreement pursuant to clause (c)(i)
above, then in each case, Centennial will pay, or cause to be paid to
Holding, at the time of termination, an amount equal to $2 million
(the "TERMINATION FEE") plus Expenses; provided that in no event will
Centennial be obligated to pay more than $1 million in Expenses. In
addition, if the Merger Agreement is terminated by Holding pursuant to
clause (d)(ii) or (d)(viii) above or by Centennial pursuant to clause
(c)(ii) or (c)(v) above and at the time of such termination, Holding
is not in material breach of the Merger Agreement and the Minimum
Condition has not been satisfied, then Centennial will pay to Holding,
at the time of termination, the Expenses, and, if Centennial will
thereafter, within 12 months after such termination, enter into an
agreement with respect to a Takeover Proposal, then Centennial will
pay the Termination Fee concurrently with entering into any such
agreement.
Amendment. To the extent permitted by applicable law, the
Merger Agreement may be amended by action taken by or on behalf of the
Board and the board of directors of Holding and Acquisition, subject
in the case of Centennial to the approval of the Continuing Directors,
at any time before or after adoption of the Merger Agreement by you
but, after any such approval by you, no amendment may be made which
decreases the Merger Consideration or which adversely affects your
rights under the Merger Agreement without your approval. Any amendment
to the Merger Agreement must be in writing.
Dissenters' Rights. No dissenters' rights are available in
connection with the Offer; however, shareholders not tendering in the
Offer will have dissenters' rights under the GBCC to dissent and
demand appraisal of, and to receive payment in cash of the fair value
of, their Shares in connection with the Merger.
TERMS OF THE SUBSCRIPTION AGREEMENT, VOTING AGREEMENT AND EMPLOYMENT AGREEMENTS
The Subscription Agreement. On February 24, 2000, Holding entered into the
Subscription Agreement with the WP Funds, the South Atlantic Investors and the
Contributing Shareholders. The following summary of the Subscription Agreement
is qualified in its entirety by reference to the Subscription Agreement, a copy
of which is incorporated herein by reference and copies or forms of which have
been filed with the Commission as exhibits to the Tender Offer Statement on
Schedule TO (the "SCHEDULE TO").
Pursuant to the Subscription Agreement, the WP Funds purchased an
aggregate of 9,031,548 shares of Series A Preferred Stock for a purchase price
of $5.50 per share in cash, or an aggregate purchase price of $49,718,614, and
the South Atlantic Investors purchased an aggregate of 909,091 shares of Series
B Preferred Stock for a purchase price of $5.50 per share in cash, or an
aggregate purchase price of $5,000,000, in each case on terms set forth in the
Subscription Agreement. The shares of Series A Preferred Stock will be
convertible into voting common stock and the shares of Series B Preferred Stock
will be convertible into non-voting common stock. The shares of Holding
non-voting common stock will be convertible, at the option of the holder, into
shares of Voting Common Stock (i) upon
52
<PAGE> 54
a sale or transfer of such Non-Voting Common Stock to any person or entity
other than WCAS VI, South Atlantic or any of their affiliates or (ii) if, after
giving effect to such conversion, such holder would not own shares of voting
common stock (including any shares issuable upon conversion) representing 10%
or more of the voting common stock and Series A Preferred Stock then
outstanding.
Also pursuant to the Subscription Agreement, the Contributing
Shareholders contributed 4,710,252 shares of Common Stock to Holding for an
aggregate of 4,710,252 shares of Series A Preferred Stock or Series B Preferred
Stock, on the terms set forth in the Subscription Agreement. The Subscription
Agreement valued the shares at $5.50 per share. Based on the 11,923,618 shares
of Common Stock outstanding, the contributed shares represented approximately
39.5% of the outstanding Common Stock.
The purchases and contributions of shares contemplated under the
Subscription Agreement occurred on May _____, 2000, one business day after the
date on which Acquisition accepted for payment the Shares tendered in the
Offer, and deposited with the depositary funds sufficient to purchase such
shares. Concurrently with the closing of those purchases and contributions,
Holding and the Investors entered into a stockholders agreement and a
registration rights agreement. The stockholders agreement contains various
rights and restrictions, including tag-along and drag-along rights, rights of
first refusal and other restrictions on transfer, in connection with such
parties' ownership of equity securities of Holding following the Merger. In
addition, the stockholders agreement contains provisions regarding the
constitution of the Board of Directors, including provisions permitting Warburg
Pincus to designate a specified number of directors, which varies according to
its ownership percentage of Holding common stock.
Under the registration rights agreement, Holding granted the
Contributing Shareholders, the WP Funds and the South Atlantic Investors
certain rights to register their shares of Holding common stock under the
Securities Act.
The Voting Agreement. In connection with the Merger Agreement, the Contributing
Shareholders and WCAS CP entered into the Voting Agreement with Acquisition and
Holding on February 25, 2000. The following summary of the Voting Agreement is
qualified in its entirety by reference to the Voting Agreement, a copy of which
is incorporated herein by reference and copies or forms of which have been filed
with the Commission as exhibits to the Schedule TO.
Pursuant to the Voting Agreement, among other things, the Contributing
Shareholders and WCAS CP agreed (i) to vote all shares beneficially owned by
them (the "SUBJECT SHARES") in favor of the Merger Agreement and the Merger and
against any Superior Proposal and any other proposal for action or agreement
that would result in a breach of any covenant, representation or warranty or
any other obligation or agreement of Centennial under the Merger Agreement,
(ii) to waive any dissenters' rights such holders may have in connection with
the Merger, (iii) not to solicit or initiate, or encourage, directly or
indirectly, any inquiries regarding the submission of any Superior Proposal,
(iv) not to participate in any discussions or negotiations regarding, or
furnish to any person any information or data with respect to, or take any
other action to knowingly facilitate the making of any proposal that
constitutes, or may reasonably be expected to lead to, any Superior Proposal,
(v) not to enter into any agreement with respect to any Takeover Proposal or
approve or resolve to approve any Superior Proposal, (vi) not to transfer the
shares of Common Stock owned by them, (vii) to constitute and appoint Holding
and Acquisition as their true and lawful proxies in connection with the Merger
and the Merger Agreement and (viii) not to tender any shares owned by them
pursuant to the Offer. Based on 11,923,618 shares of Common Stock outstanding
on February 25, 2000, the Subject Shares in the aggregate represented
approximately 46.5% of the total outstanding Common Stock.
Executive Employment Agreements. Concurrent with execution of the Merger
Agreement, Messrs. Eaton, Dahl and Fosha entered into new employment agreements
(the "NEW AGREEMENTS") with Centennial and Mr. Lepley entered into a New
Agreement with Paragon which, as of the Effective Time, would supersede and
replace in all respects the executives' current employment agreements. In the
event the Merger Agreement is terminated, each of the New Agreements would be
void and the executives' current employment agreements would remain in full
force and effect.
Mr. Eaton's New Agreement provides that, after the Effective Time, he
would serve as President, Chief Executive Officer and Chairman of Centennial
and Chairman of Holding. The New Agreement does not contain a fixed term of
employment. Mr. Eaton would receive an annual base salary during the term of
employment of $386,000, subject to adjustment upon annual review, and would
have an annual target bonus of 25% of his base salary. Mr. Eaton's actual bonus
would be determined in part by reference to Centennial's performance during the
relevant period. Mr. Eaton would be entitled to participate in Centennial's
pension, health and welfare plans and receive welfare
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<PAGE> 55
benefits such as life insurance and long-term disability insurance. If Mr.
Eaton's employment were to be terminated by Centennial for any reason other
than for "Cause" (as defined in his New Agreement) or if Mr. Eaton were to
resign for "Good Reason" within 24 months following a "Change in Control" (as
those terms are defined in his New Agreement), (i) Centennial would continue to
pay to Mr. Eaton his monthly salary for a period of 36 months following the
date of termination; (ii) Mr. Eaton's options to purchase shares of Holding
common stock would become 100% vested and immediately exercisable as of the
date of termination; and (iii) Mr. Eaton could require Holding or its successor
to purchase up to 50% of the shares of Holding stock (or the stock of any
acquirer into which such Holding stock was converted) held by Mr. Eaton. Mr.
Eaton would also have the option described in clause (iii) above in the event
of a Change in Control or if no public market were to exist for Holding stock
(or an acquirer's stock, if applicable) held by Mr. Eaton or the average daily
trading volume for Holding stock (or an acquirer's stock, if applicable) was
less than 100,000 shares. Further, Mr. Eaton could require Holding to purchase
up to 50% of the shares of Holding stock held by him, at a price of $5.50 per
share, if his employment were to be terminated by Centennial without Cause
prior to a Change in Control and within 12 months of the date of his New
Agreement. Mr. Eaton would also be entitled to a "Tax Reimbursement Payment"
(as defined in his New Agreement) in the event any amount or benefit paid or
distributed to Mr. Eaton pursuant to the New Agreement were or became subject
to an Excise Tax (as defined in his New Agreement).
Mr. Dahl's New Agreement contains substantially the same terms as
those found in Mr. Eaton's New Agreement. Material differences in Mr. Dahl's
New Agreement are as follows: (i) Mr. Dahl would serve as Executive Vice
President and Chief Financial Officer of Centennial; (ii) Mr. Dahl would
receive an annual base salary during the term of employment of $238,000; (iii)
Centennial would continue to pay to Mr. Dahl his monthly salary for a period of
24 months following the date of termination in the event he was terminated
without Cause or resigns for Good Reason within 12 months following a Change in
Control (as those terms are defined in his New Agreement); (iv) Mr. Dahl would
not have the right to require Holding (or any acquirer) to purchase any of the
Holding stock held by him; and (v) Mr. Dahl would not be entitled to a Tax
Reimbursement Payment.
Mr. Fosha's New Agreement contains substantially the same terms as
those found in Mr. Dahl's New Agreement, except that Mr. Fosha would serve as
Executive Vice President of Operations of Centennial.
Mr. Lepley's New Agreement contains substantially the same terms as
those found in Mr. Dahl's New Agreement, except that (i) Mr. Lepley's New
Agreement would be with Paragon; (ii) Mr. Lepley would serve as President and
Chief Executive Officer of Paragon; and (iii) Mr. Lepley would receive an
annual base salary during the term of employment of $225,000.
New Options. Following the Merger, Holding intends to grant to Messrs. Eaton,
Dahl, Fosha and Lepley, and to other members of management and other key
employees, options to purchase an aggregate of approximately 2.6 million shares
of Holding common stock. The shares issuable on exercise of the New Options
will represent 15% of the shares of Holding common stock outstanding
immediately after the Merger (assuming the conversion of all preferred stock
into common stock). The exercise price of the New Options will be $5.50 per
share.
Mr. Eaton is expected to be granted New Options to purchase
approximately 1.2 million shares of Holding common stock, of which
approximately 420,000 will be immediately exercisable and the balance of which
will invest in four annual equal installments on the anniversaries of the date
of grant. Each of Messrs. Dahl, Fosha and Lepley will be granted options to
purchase 160,000 shares of Holding common stock, of which 20% will be
immediately exercisable, with the balance vesting in four annual equal
installments on the anniversaries of the date of grant.
ACCOUNTING TREATMENT
Acquisition believes that the Merger will be accounted for as a
"purchase" under the purchase method in accordance with generally accepted
accounting principles.
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<PAGE> 56
ESTIMATED FEES AND EXPENSES OF THE MERGER
Estimated fees and expenses incurred or to be incurred by the
Surviving Corporation(1) are approximately as follows:
Advisory fees and expenses(2)..................................................
Legal fees and expenses(3).....................................................
Accounting fees and expenses...................................................
Hart-Scott-Rodino filing fee...................................................
Depositary and paying agent fees and expenses..................................
Proxy solicitation fees and expenses...........................................
Securities and Exchange Commission filing fee..................................
Printing and mailing costs.....................................................
Miscellaneous expenses.........................................................
Total........................................................................
- -----------
(1) Includes fees and expenses of the Offer and the Merger.
(2) Includes the fees and expenses of $2.3 million to J.P. Morgan, $2.1
million to SunTrust Equitable Securities.
(3) Includes the estimated fees and expenses of counsel for Centennial,
the Special Committee and the WP Funds.
RIGHTS OF DISSENTING SHAREHOLDERS
Holders of Shares that do not tender their Shares in the Offer are
entitled to appraisal rights in the Merger under Article 13 of the GBCC.
Article 13 is reprinted in its entirety as Appendix C to this Proxy Statement.
All references in Article 13 and in this summary to a "shareholder" are to the
record holder or beneficial owner of the Shares as to which appraisal rights
are asserted. A person having a beneficial interest in Shares that are held of
record in the name of another person, such as a broker or nominee, must act
promptly to cause the record holder to follow the steps summarized below
properly and in a timely manner to perfect whatever appraisal rights the
beneficial owner may have.
The following discussion is not a complete statement of the law
relating to appraisal rights and is qualified in its entirety by reference to
Appendix C to the Schedule TO. THIS DISCUSSION AND APPENDIX C TO THE SCHEDULE
TO SHOULD BE REVIEWED CAREFULLY BY ANY HOLDER WHO WISHES TO EXERCISE STATUTORY
APPRAISAL RIGHTS OR WHO WISHES TO PRESERVE THE RIGHT TO DO SO BECAUSE FAILURE
TO COMPLY STRICTLY WITH THE PROCEDURES SET FORTH HEREIN AND THEREIN WILL RESULT
IN THE LOSS OF APPRAISAL RIGHTS.
Each shareholder intending to elect appraisal rights as to the fair
market value of the shares must first demand "payment" for such shares from
Centennial. Demanding payment for such shares shall constitute a request for
payment for the shares at a per share value that is different from the $5.50
consideration contemplated by the Merger Agreement. Each shareholder electing
to demand payment for his shares shall deliver to Centennial the written notice
of the shareholder's intent to demand payment for his Shares. The demand must
reasonably inform Centennial of the identity of the shareholder and that the
shareholder intends thereby to demand payment for the Shares. Voting against,
abstaining from voting or failing to vote on the Merger will not constitute a
demand for payment within the meaning of Article 13. However, any shareholder
electing to demand payment will not be granted payment under Article 13 if such
shareholder has voted in favor of the Merger.
The payment demand must be mailed or delivered to the attention of
Secretary of Centennial at 400 Perimeter Center Terrace, Suite 650, Atlanta,
Georgia 30346. The written payment demand must specify the shareholder's name
and mailing address, the number of Shares owned, and that the shareholder is
thereby demanding payment for his or her Shares.
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<PAGE> 57
If the Merger is approved by satisfying any required vote or if no
vote is necessary, upon consummation of the Offer, shareholders who have
demanded payment will receive, no later than ten days after the Effective Time,
a dissenters' notice that states where a payment demand is to be sent, where
and when certificates for shares must be deposited, and will set the date by
which Centennial must receive the payment demand. The date by which Centennial
must receive the payment demand must be not fewer than thirty nor more than
sixty days after the delivery of the dissenters' notice. A shareholder must
comply with the terms of the dissenters' notice in order to receive payment for
the Shares other than that contemplated by the Merger Agreement.
Within ten days from the later of the receipt of the payment demand or
the Effective Time, Centennial must offer to each dissenter the amount
Centennial has determined to be the fair market value of the Shares. Fair
market value will be determined based on the value of the Dissenting Shares
immediately before the Effective Time of the Merger without any appreciation or
depreciation in anticipation of the Merger. The shareholder will then have
thirty days to accept or decline the offer by Centennial. Failure to respond to
the offer within such period is deemed an acceptance. If the shareholder
accepts Centennial's offer by written notice to Centennial within the
thirty-day period, payment shall be made to the shareholder within sixty days
of the later of the making of the offer or the Effective Time. If the
shareholder disagrees with such value, including interest to be received, or
the shareholder does not receive his certificates or the release of transfer
restrictions upon Centennial's failure to consummate the Merger, the
shareholder may notify Centennial of his estimate of the fair value of the
Shares, including interest, in writing.
If the demand for payment remains unsettled sixty days after the
receipt of the demand for payment by Centennial, Centennial shall file a
petition in the Superior Court of DeKalb County (the "COURT") demanding a
determination of the value of the Shares and accrued interest of the dissenting
shareholders. All dissenting shareholders shall be made parties to the
proceeding. If a petition for an appraisal is timely filed, the Court, in a
nonjury equitable proceeding, will appraise the Shares owned by the dissenting
shareholders, determining the fair value of such Shares together with a fair
rate of interest to be paid, if any, upon the amount determined to be the fair
value. If Centennial does not timely file the petition, Centennial must pay to
each dissenter whose demand remains unsettled the amount demanded.
Shareholders considering seeking appraisal should be aware that the
"fair value" of their Shares determined under Article 13 could be more than,
the same as or less than the Per Share Amount, and that the opinion of J.P.
Morgan as to fairness, from a financial point of view, is not an opinion as to
fair value under Article 13. The cost of the appraisal proceeding will be
determined by the Court and may be assessed against the parties as the Court
deems equitable in the circumstances. The Court may order that all or a portion
of the attorneys' fees incurred by any dissenting shareholder in connection
with the appraisal proceeding be charged pro rata against the value of all
Shares of Common Stock entitled to appraisal.
If Centennial does not consummate the Merger within sixty days after
the date set by Centennial for the demand for payment and the depositing of the
certificates, Centennial must return the certificates and shall release any
transfer restrictions on any uncertificated shares.
THE FOREGOING SUMMARY OF THE RIGHTS OF DISSENTING SHAREHOLDERS UNDER
THE GBCC DOES NOT PURPORT TO BE A COMPLETE STATEMENT OF THE PROCEDURES TO BE
FOLLOWED BY SHAREHOLDERS DESIRING TO EXERCISE ANY DISSENTERS' RIGHTS UNDER THE
GBCC. THE PRESERVATION AND EXERCISE OF DISSENTERS' RIGHTS REQUIRE STRICT
ADHERENCE TO THE APPLICABLE PROVISIONS OF THE GBCC.
FEDERAL INCOME TAX CONSEQUENCES
The following discussion summarizes the material federal income tax
considerations relevant to the Merger that are generally applicable to holders
of Common Stock. This discussion is based on currently existing provisions of
the Internal Revenue Code of 1986, as amended (the "CODE"), existing and
proposed Treasury Regulations thereunder and current administrative rulings and
court decisions, all of which are subject to change. Any such change, which may
or may not be retroactive, could alter the tax consequences to the holders of
Common Stock as described herein. Special tax consequences not described below
may be applicable to particular classes of taxpayers, including financial
institutions, broker-dealers, persons who are not citizens or residents of the
United States or who are foreign
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<PAGE> 58
corporations, foreign partnerships or foreign estates or trusts, persons who
will own stock of Centennial (actually or constructively, under certain
constructive ownership rules in the Internal Revenue Code) after the Merger,
and holders who acquired their stock through the exercise of an employee stock
option or otherwise as compensation.
The receipt of the Cash Merger Consideration in the Merger by holders
of Common Stock will be a taxable transaction for federal income tax purposes.
Each holder's gain or loss per share of Common Stock will be equal to the
difference between $5.50 and the holder's basis in that particular share of the
Common Stock. Such gain or loss generally will be a capital gain or loss. In
the case of individuals, trusts and estates, such capital gain will be subject
to a maximum federal income tax rate of 20% for shares of Common Stock held for
more than 12 months prior to the date of disposition.
A holder of Common Stock may be subject to backup withholding at the
rate of 31% with respect to Cash Merger Consideration received pursuant to the
Merger, unless the holder (a) is a corporation or comes within certain other
exempt categories and, when required, demonstrates this fact or (b) provides a
correct taxpayer identification number ("TIN"), certifies concerning no loss of
exemption from backup withholding and otherwise complies with applicable
requirements of the backup withholding rules. To prevent the possibility of
backup federal income tax withholding on payments made with respect to shares
of Common Stock pursuant to the Merger, each holder must provide the Paying
Agent with his correct TIN by completing a Form W-9 or Substitute Form W-9. A
holder of Common Stock who does not provide Centennial with his or her correct
TIN may be subject to penalties imposed by the Internal Revenue Service (the
"IRS"), as well as backup withholding. Any amount withheld under these rules
will be creditable against the holder's federal income tax liability.
Centennial (or its agent) will report to the holders of Common Stock and the
IRS the amount of any "reportable payments," as defined in Section 3406 of the
Code, and the amount of tax, if any, withheld with respect thereto.
THE FOREGOING TAX DISCUSSION IS INCLUDED FOR GENERAL INFORMATION ONLY
AND IS BASED UPON PRESENT LAW. THE FOREGOING DISCUSSION DOES NOT DISCUSS TAX
CONSEQUENCES UNDER THE LAWS OF STATES OR LOCAL GOVERNMENTS OR ANY OTHER
JURISDICTION OR TAX CONSEQUENCES TO CATEGORIES OF SHAREHOLDERS THAT MAY BE
SUBJECT TO SPECIAL RULES, SUCH AS FOREIGN PERSONS, TAX-EXEMPT ENTITIES,
INSURANCE COMPANIES, FINANCIAL INSTITUTIONS AND DEALERS IN STOCKS AND
SECURITIES. THE FOREGOING DISCUSSION MAY NOT BE APPLICABLE TO A SHAREHOLDER WHO
ACQUIRED HIS OR HER SHARES OF COMMON STOCK PURSUANT TO THE EXERCISE OF STOCK
OPTIONS OR OTHERWISE AS COMPENSATION. EACH HOLDER OF COMMON STOCK SHOULD
CONSULT SUCH HOLDER'S OWN TAX ADVISOR CONCERNING THE SPECIFIC TAX CONSEQUENCES
OF THE MERGER TO SUCH HOLDER, INCLUDING THE APPLICATION AND EFFECT OF FEDERAL,
STATE, LOCAL AND OTHER TAX LAWS AND THE POSSIBLE EFFECT OF CHANGES IN SUCH TAX
LAWS.
PRINCIPAL SHAREHOLDERS AND STOCK OWNERSHIP OF
MANAGEMENT AND OTHERS
The following table sets forth certain information with respect to the
beneficial ownership of the Common Stock as of May ___, 2000 by: (i) each
person known to Centennial to beneficially own more than 5% of the Common
Stock, (ii) each director of Centennial, (iii) each of the Investors, (iv) the
chief executive officer and the four other most highly compensated executive
officers, and (v) all executive officers and directors of Centennial as a
group.
<TABLE>
<CAPTION>
NAME OF BENEFICIAL OWNER AMOUNT AND NATURE PERCENTAGE OF
- ------------------------ OF BENEFICIAL OWNERSHIP COMMON STOCK
------------------------ -------------
<S> <C> <C>
Holding(1)(2)............................................... 4,710,252 21.1%
Acquisition(1)(2)...........................................
WCAS CP(1)(3)............................................... 246,896 2.0
Andrew M. Paul(1)(3)........................................ 3,021 *
J. Stephen Eaton(1)(4)...................................... 545,454 4.6
Kent C. Fosha, Sr.(1)(4).................................... 0 *
Alan C. Dahl(1)(4).......................................... 0 *
Lawrence W. Lepley, Jr.(1)(4)............................... 0 *
Bertil D. Nordin(4)......................................... 0 *
Charles D. Nash(4).......................................... 0 *
James B. Hoover(5).......................................... 0 *
Bob L. Wood(4).............................................. 0 *
South Atlantic Venture Fund II, Limited Partnership(6)...... 0 *
All executive officers and directors as a group
(9 persons)................................................ 548,475 4.6
</TABLE>
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<PAGE> 59
- -----------
* Less than 1%
(1) Based on the terms of the Subscription Agreement dated February 24,
2000.
(2) The principal executive offices of Holding are located at 466
Lexington Avenue, New York, New York 10017.
(3) The shareholder's address is 320 Park Avenue, New York, New York
10022.
(4) The shareholder's address is 400 Perimeter Center Terrace, Suite 650,
Atlanta, Georgia 30346.
(5) The shareholder's address is Dauphin Capital Partners, 108 Forest
Avenue, Locust Valley, New York 11560.
(6) The shareholder's address is 614 West Bay Street, Suite 200, Tampa,
Florida 33606-2704.
CERTAIN INFORMATION CONCERNING HOLDING, ACQUISITION, WARBURG, WPEP,
THE WP FUNDS AND MANAGEMENT
Holding. Holding is a newly formed Delaware corporation organized by WPEP. The
principal executive offices of Holding are located at 466 Lexington Avenue, New
York, New York 10017. The current directors of Holding are Joel Ackerman and
David Wenstrup. The current officers of Holding are Joel Ackerman, President
and Treasurer, and David Wenstrup, Vice President and Secretary.
Acquisition. Acquisition is a newly formed Georgia corporation organized by
WPEP for the purpose of effecting the Merger. The principal executive offices
of Acquisition are located at 466 Lexington Avenue, New York, New York 10017.
The directors of Acquisition are Joel Ackerman and David Wenstrup. The officers
of Acquisition are Joel Ackerman, President and Treasurer, and David Wenstrup,
Vice President and Secretary.
WPEP. The principal business of WPEP, a Delaware limited partnership, is that
of a private investment partnership. The principal executive offices of WPEP
are located at 466 Lexington Avenue, New York, New York 10017. The sole general
partner of WPEP is Warburg, a New York general partnership.
Warburg, Pincus Netherlands Equity I, C.V. The principal business of Warburg,
Pincus Netherlands Equity I, C.V., a Netherlands limited partnership, is that
of a private investment partnership. The principal executive offices of
Warburg, Pincus Netherlands Equity I, C.V. are 466 Lexington Avenue, New York,
New York 10017. The sole general partner of Warburg, Pincus Netherlands Equity
I, C.V. is Warburg.
Warburg, Pincus Netherlands Equity II, C.V. The principal business of Warburg,
Pincus Netherlands Equity II, C.V., a Netherlands limited partnership, is that
of a private investment partnership. The principal executive offices of
Warburg, Pincus Netherlands Equity II, C.V. are 466 Lexington Avenue, New York,
New York 10017. The sole general partner of Warburg, Pincus Netherlands Equity
II, C.V. is Warburg.
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<PAGE> 60
Warburg, Pincus Netherlands Equity III, C.V. The principal business of Warburg,
Pincus Netherlands Equity III, C.V., a Netherlands limited partnership, is that
of a private investment partnership. The principal executive offices of
Warburg, Pincus Netherlands Equity III, C.V. are 466 Lexington Avenue, New
York, New York 10017. The sole general partner of Warburg, Pincus Netherlands
Equity III, C.V. is Warburg.
Warburg. The principal business of Warburg is that of a private investment
partnership. The principal executive offices of Warburg are 466 Lexington
Avenue, New York, New York 10017.
Management. The members of Management are Messrs. Eaton, Dahl, Fosha and Lepley.
The business address for each member of Management is the principal executive
offices of Centennial, 400 Perimeter Center Terrace, Suite 650, Atlanta, Georgia
30346. Each member of Management is a citizen of the United States.
J. Stephen Eaton is a resident of the United States and his principal
occupation is Chairman of the Board, President, and Chief Executive Officer of
Centennial, in which capacities he has served since founding Centennial in
1989. Mr. Eaton's business address is 400 Perimeter Center Terrace, Suite 650,
Atlanta, Georgia 30346. From 1982 to 1988, Mr. Eaton served in various
executive positions, including Vice President, of Consolidated Resources
Corporation of America and its successors ("CRCA"). When Centennial acquired
CRCA in 1990, CRCA served as the general partner of private and public limited
partnerships that owned in excess of 31 long-term care and assisted living
facilities. Mr. Eaton also serves as a director of Saint Joseph's Mercy Care
Corporation, a non-profit corporation based in Atlanta, Georgia which provides
mobile health services to the homeless and other underserved populations, and
of Saint Joseph's Health System, a major tertiary care hospital and health
system in Atlanta, Georgia.
Alan C. Dahl is a resident of the United States and his principal
occupation is Executive Vice President, Chief Financial Officer, Treasurer and
Director of Centennial. Mr. Dahl has served in these capacities since January
1996. Mr. Dahl's business address is 400 Perimeter Center Terrace, Suite 650,
Atlanta, Georgia 30346. From February 1991 to December 1995, he served as
senior vice president. Mr. Dahl has been involved in health care finance for
the past 12 years. Mr. Dahl was previously senior vice president of Southmark
Public Syndications, Inc., a subsidiary of Southmark Corporation. Mr. Dahl, a
certified public accountant, also worked in the tax department at Arthur Young
& Corporation.
Kent C. Fosha is a resident of the United States and his principal
occupation is Executive Vice President of Operations of Centennial. His
principal business address is 400 Perimeter Center Terrace, Suite 650, Atlanta,
Georgia 30346.
Lawrence W. Lepley, Jr. is a resident of the United States and his
principal occupation is President of Paragon Rehabilitation, Inc., an indirect
wholly owned subsidiary of Centennial. His business address is 3100 West End
Avenue, Suite 470, Nashville, Tennessee, 37203.
INDEPENDENT AUDITORS
The financial statements of Centennial as of December 31, 1999 and for
the year then ended, incorporated by reference in this Proxy Statement, have
been audited by Arthur Andersen LLP, independent public accountants, as stated
in their report.
The financial statements of Centennial as of December 31, 1998 and
1997 and for the years then ended, incorporated by reference in this Proxy
Statement, have been audited by PricewaterhouseCoopers LLP, independent
accountants, as stated in their reports.
A representative of Arthur Andersen LLP will be at the Special Meeting
to answer appropriate questions from shareholders and will have the opportunity
to make a statement if so desired.
WHERE YOU CAN FIND MORE INFORMATION
Centennial files annual, quarterly and current reports, proxy
statements and other information with the Commission. You may read and copy any
reports, statements or other information that Centennial files at the
59
<PAGE> 61
Commission's public reference rooms in Washington, D.C., New York, New York and
Chicago, Illinois. Please call the Commission at 1-800-SEC-0330 for further
information on the public reference rooms. Centennial public filings are also
available to the public from commercial document retrieval services and at the
Internet World Wide Web site maintained by the Commission at http://
www.sec.gov. Reports, proxy statements and other information concerning
Centennial also may be inspected at the offices of the National Association of
Securities Dealers, Inc., 1735 K Street, N.W., Washington, D.C. 20006.
The Commission allows Centennial to "incorporate by reference"
information into this document, which means that Centennial can disclose
important information to you by referring you to another document filed
separately with the Commission. The information incorporated by reference is
deemed to be a part of this document, except for any information superseded by
information contained directly in this document. This document incorporates by
reference certain documents that Centennial has previously filed with the
Commission. These documents contain important business information about
Centennial and its financial condition.
Centennial may have sent to you some of the documents incorporated by
reference, but you can obtain any of them through Centennial or the Commission
or the Commission's Internet World Wide Web site described above. Documents
incorporated by reference are available from Centennial without charge,
excluding all exhibits unless specifically incorporated by reference as an
exhibit to this document. Shareholders may obtain documents incorporated by
reference in this document by requesting them in writing or by telephone at the
following address:
CENTENNIAL HEALTHCARE CORPORATION
400 Perimeter Center Terrace, Suite 650
Atlanta, Georgia 30076
Telephone: (770) 698-9040
Attention: Shareholder Relations
Centennial, Holding, Acquisition, Warburg, WPEP and Management have
filed a Schedule TO with the Commission with respect to the Offer and Merger.
The Schedule TO, including any amendments and exhibits filed or incorporated by
reference as a part thereof, are available for inspection or copying as set
forth above. Statements contained in this Proxy Statement or in any document
incorporated herein by reference as to the contents of any contract or other
document referred to herein or therein are not necessarily complete and in each
instance reference is made to such contract or other document filed as an
exhibit to the Schedule TO or such other document, and each such statement
shall be deemed qualified in its entirety by such reference.
IF YOU WOULD LIKE TO REQUEST DOCUMENTS FROM CENTENNIAL PLEASE DO SO AT
LEAST FIVE BUSINESS DAYS BEFORE THE DATE OF THE SPECIAL MEETING IN ORDER TO
RECEIVE TIMELY DELIVERY OF SUCH DOCUMENTS PRIOR TO THE SPECIAL MEETING.
You should rely only on the information contained or incorporated by
reference in this document to vote your shares at the Special Meeting.
Centennial has not authorized anyone to provide you with information that is
different from what is contained in this document. This document is dated May
_____, 2000. You should not assume that the information contained in this
document is accurate as of any date other than that date, and the mailing of
this document to shareholders does not create any implication to the contrary.
This Proxy Statement does not constitute a solicitation of a proxy in any
jurisdiction where, or to or from any person to whom, it is unlawful to make
such proxy solicitation in such jurisdiction.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed with the Commission by
Centennial are incorporated by reference in this Proxy Statement:
(i) Centennial's Annual Report on Form 10-K for the
fiscal year ended December 31, 1998;
(ii) Centennial's Quarterly Report on Form 10-Q for
quarter ended March 31, 1998;
(iii) Centennial's Quarterly Report on Form 10-Q for
quarter ended June 30, 1998;
60
<PAGE> 62
(iv) Centennial's Quarterly Report on Form 10-Q for
quarter ended September 30, 1998;
(v) Centennial's Quarterly Report on Form 10-Q/A for
quarter ended September 30, 1998;
(vi) Centennial's Annual Report on Form 10-Q for quarter
ended March 31, 1999;
(vii) Centennial's Annual Report on Form 10-Q/A for
quarter ended March 31, 1999;
(viii) Centennial's Annual Report on form 10-Q for quarter
ended June 30, 1999;
(ix) Centennial's Current Report on Form 10-Q/A for
quarter ended June 30, 1999;
(x) Centennial's Current Report on Form 10-Q for quarter
ended September 30, 1999;
(xi) Centennial's Current Report on Form 10-Q/A for
quarter ended September 30, 1999;
(xii) Centennial's Annual Report on Form 10-K for the
fiscal year ended December 31, 1999; and
(xiii) Centennial's Current Report on Form 8-K filed on
March 10, 2000;.
All documents filed by Centennial with the Commission pursuant to
Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act after the date hereof
and prior to the date of the Special Meeting shall be deemed to be incorporated
by reference herein and shall be a part hereof from the date of filing of such
documents. Any statements contained in a document incorporated by reference
herein or contained in this Proxy Statement shall be deemed to be modified or
superseded for purposes hereof to the extent that a statement contained herein
(or in any other subsequently filed document which also is incorporated by
reference herein) modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed to constitute a part hereof except
as so modified or superseded.
OTHER MATTERS
Management knows of no other business to be presented at the Special
Meeting. If other matters do properly come before the meeting, or any
adjournment or adjournments thereof, it is the intention of the persons named
in the proxy to vote on such matters according to their best judgment unless
the authority to do so is withheld in such proxy.
SHAREHOLDER PROPOSALS
Pursuant to the consummation of the Offer, Centennial will be a
majority owned subsidiary of Holding and will not be subject to the rules and
regulations of the Exchange Act, including the proxy rules.
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APPENDIX A
AGREEMENT AND PLAN OF MERGER
62
<PAGE> 64
APPENDIX A
================================================================================
CENTENNIAL HEALTHCARE CORPORATION,
HILLTOPPER HOLDING CORP.
and
HILLTOPPER ACQUISITION CORP.
------------------------------
AGREEMENT AND PLAN OF MERGER
------------------------------
------------------------------
Dated as of February 25, 2000
------------------------------
================================================================================
<PAGE> 65
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C> <C> <C>
ARTICLE I. THE TENDER OFFER...................................................................................2
SECTION 1.1. The Offer ..............................................................................2
SECTION 1.2. Company Action..........................................................................4
SECTION 1.3. Directors ..............................................................................5
ARTICLE II. THE MERGER........................................................................................7
SECTION 2.1. The Merger .............................................................................7
SECTION 2.2. Effective Time..........................................................................7
SECTION 2.3. Effect of the Merger....................................................................7
SECTION 2.4. Subsequent Actions......................................................................7
SECTION 2.5. Articles of Incorporation; By-Laws; Directors and Officers..............................8
SECTION 2.6. Conversion of Securities................................................................8
SECTION 2.7. Dissenting Shares.......................................................................9
SECTION 2.8. Surrender of Shares; Stock Transfer Books..............................................10
SECTION 2.9. Stock Plans ...........................................................................11
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE PARENT AND PURCHASER......................................12
SECTION 3.1. Corporate Organization.................................................................12
SECTION 3.2. Authority Relative to this Agreement...................................................12
SECTION 3.3. No Conflict; Required Filings and Consents.............................................12
SECTION 3.4. Financing Arrangements.................................................................13
SECTION 3.5. No Prior Activities....................................................................13
SECTION 3.6. Brokers ...............................................................................13
SECTION 3.7. Offer Documents; Proxy Statement.......................................................14
SECTION 3.8. Company Stock .........................................................................14
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF THE COMPANY....................................................14
SECTION 4.1. Organization and Qualification; Subsidiaries...........................................14
SECTION 4.2. Capitalization.........................................................................16
SECTION 4.3. Authority Relative to this Agreement...................................................17
SECTION 4.4. No Conflict; Required Filings and Consents.............................................18
SECTION 4.5. SEC Filings; Financial Statements......................................................18
SECTION 4.6. Absence of Certain Changes or Events...................................................20
SECTION 4.7. Litigation ............................................................................21
SECTION 4.8. Employee Benefit Plans.................................................................21
SECTION 4.9. Properties ............................................................................24
SECTION 4.10. Intellectual Property..................................................................25
SECTION 4.11. Insurance ............................................................................26
SECTION 4.12. Environmental.........................................................................26
SECTION 4.13. Governmental Authorizations and Regulations...........................................28
SECTION 4.14. Condition of Facilities...............................................................30
SECTION 4.15. Material Contracts....................................................................31
SECTION 4.16. Conduct of Business...................................................................33
SECTION 4.17. Fraud and Abuse.......................................................................33
</TABLE>
(i)
<PAGE> 66
<TABLE>
<S> <C> <C> <C>
SECTION 4.18. Health Professional's Financial Relationships; Disqualified Individuals;..............34
SECTION 4.19. Taxes ................................................................................35
SECTION 4.20. Labor Relations.......................................................................37
SECTION 4.21. Transactions with Affiliates..........................................................37
SECTION 4.22. Offer Documents; Proxy Statement......................................................38
SECTION 4.23. Brokers ..............................................................................38
SECTION 4.24. Control Share Acquisition.............................................................39
SECTION 4.25. Y2K Compliance........................................................................39
SECTION 4.26. Disclosure ...........................................................................39
ARTICLE V. CONDUCT OF BUSINESS PENDING THE MERGER............................................................40
SECTION 5.1. Conduct of Business by the Company Pending the Closing.................................40
SECTION 5.2. No Solicitation........................................................................42
ARTICLE VI. ADDITIONAL AGREEMENTS............................................................................45
SECTION 6.1. Proxy Statement........................................................................45
SECTION 6.2. Meeting of Shareholders of the Company.................................................45
SECTION 6.3. Compliance with Law....................................................................46
SECTION 6.4. Notification of Certain Matters........................................................46
SECTION 6.5. Access to Information..................................................................46
SECTION 6.6. Public Announcements...................................................................47
SECTION 6.7. Reasonable Best Efforts; Cooperation...................................................47
SECTION 6.8. Agreement to Defend and Indemnify......................................................47
SECTION 6.9. State Takeover Laws....................................................................49
ARTICLE VII. CONDITIONS OF MERGER............................................................................49
SECTION 7.1. Conditions for Each Party's Obligations to Effect the Merger...........................49
SECTION 7.2. Conditions for Obligations of Parent and Purchaser.....................................50
ARTICLE VIII. TERMINATION, AMENDMENT AND WAIVER..............................................................51
SECTION 8.1. Termination ...........................................................................51
SECTION 8.2. Effect of Termination..................................................................53
ARTICLE IX. GENERAL PROVISIONS...............................................................................54
SECTION 9.1. Non-Survival of Representations, Warranties and Agreements.............................54
SECTION 9.2. Notices ...............................................................................54
SECTION 9.3. Expenses ..............................................................................55
SECTION 9.4. Certain Definitions....................................................................55
SECTION 9.5. Headings ..............................................................................56
SECTION 9.6. Severability ..........................................................................56
SECTION 9.7. Entire Agreement; No Third-Party Beneficiaries.........................................56
SECTION 9.8. Assignment ............................................................................56
SECTION 9.9. Governing Law ........................................................................56
SECTION 9.10. Amendment ............................................................................56
SECTION 9.11. Waiver ...............................................................................56
SECTION 9.12. Counterparts .........................................................................57
</TABLE>
(ii)
<PAGE> 67
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of February 25, 2000
(the "Agreement"), among Centennial HealthCare Corporation, a Georgia
corporation (the "Company"), Hilltopper Holding Corp., a Delaware corporation
("Parent"), and Hilltopper Acquisition Corp., a Georgia corporation and an
indirect wholly owned subsidiary of Parent ("Purchaser").
W I T N E S S E T H:
WHEREAS, the Boards of Directors of the Company and Purchaser
have each determined that it is in the best interests of their respective
shareholders for Purchaser to acquire the Company upon the terms and subject to
the conditions set forth herein; and
WHEREAS, in furtherance thereof, it is proposed that Purchaser
will make a cash tender offer (the "Offer") to acquire all shares (the "Shares")
of the issued and outstanding common stock, $.01 par value, of the Company (the
"Company Common Stock") for $5.50 per share of Company Common Stock or such
higher price as may be paid in the Offer (the "Per Share Amount"), net to the
seller in cash; and
WHEREAS, also in furtherance of such acquisition, the Boards
of Directors of the Company, Purchaser and Parent have each approved the merger
of Purchaser with and into the Company (the "Merger") following the Offer in
accordance with the Georgia Business Corporation Code (the "Georgia Code") and
upon the terms and subject to the conditions set forth herein; and
WHEREAS, on February 24, 2000, certain shareholders of the
Company (the "Contributing Shareholders") entered into a Subscription and
Contribution Agreement with Parent and certain affiliates of Parent (the
"Subscription Agreement"), pursuant to which each such Contributing Shareholder
has, among other things, agreed to contribute some or all of its Shares to
Parent in exchange for shares of stock of Parent upon the terms set forth in the
Subscription Agreement; and
WHEREAS, as an inducement and a condition to Parent's and
Purchaser's entering into this Agreement, contemporaneously with the execution
and delivery of this Agreement, the Contributing Shareholders have entered into
a Voting Agreement with Parent and Purchaser (the "Voting Agreement"), pursuant
to which each such Contributing Shareholder has, among other things,(x) agreed
not to tender its Shares in the Offer and (y) granted to Parent a proxy with
respect to the voting of such Shares, in each case upon the terms and subject to
the conditions set forth in the Voting Agreement; and
WHEREAS, the Board of Directors of the Company (the "Board of
Directors"), based on the recommendation of a special
<PAGE> 68
committee (the "Special Committee") of the Board of Directors comprised solely
of directors unaffiliated with the Contributing Shareholders, has approved this
Agreement, the Subscription Agreement and the Voting Agreement and has
determined that the consideration to be paid for each Share in the Offer and the
Merger is fair to the holders of such Shares and to recommend that the holders
of such Shares accept the Offer and approve this Agreement and the transactions
contemplated hereby.
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements herein contained, and intending to be legally
bound hereby, the Company, Parent and Purchaser hereby agree as follows:
ARTICLE I.
THE TENDER OFFER
SECTION 1.1. THE OFFER.
(a) Provided that this Agreement shall not have been
terminated in accordance with Section 8.1 hereof and none of the events set
forth in Annex I hereto shall have occurred and be existing, Purchaser or a
direct or indirect subsidiary of Parent as designated by Parent shall commence
(within the meaning of Rule 14d-2 under the Securities Exchange Act of 1934 (the
"Exchange Act") the Offer as promptly as reasonably practicable following the
execution of this Agreement, but in any event within 15 business days following
the date of this Agreement. The obligation of Parent to accept for payment any
Shares tendered shall be subject to the satisfaction of those conditions set
forth in Annex I. Parent expressly reserves the right from time to time, subject
to Sections 1.1(b) and 1.1(d) hereof, to waive any such condition, to increase
the Per Share Amount, or to make any other changes in the terms and conditions
of the Offer. The Per Share Amount shall be net to the seller in cash, subject
to reduction only for any applicable Federal back-up withholding or stock
transfer taxes payable by the seller. The Company agrees that no Shares held by
the Company or any of its Subsidiaries (as defined below) will be tendered
pursuant to the Offer.
(b) Without the prior written consent of the Company, Parent
shall not (i) decrease the Per Share Amount or change the form of consideration
payable in the Offer, (ii) decrease the number of Shares sought, (iii) amend or
waive satisfaction of the Minimum Condition (as defined in Annex I) or (iv)
impose additional conditions to the Offer or amend any other term of the Offer
in any manner adverse to the holders of Shares. Upon the terms and subject to
the conditions of the Offer, Purchaser will accept for payment and purchase, as
soon as permitted under the terms of the Offer, all Shares validly tendered and
not withdrawn prior to the expiration of the Offer.
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<PAGE> 69
(c) The Offer shall be made by means of an offer to purchase
(the "Offer to Purchase") having only the conditions set forth in Annex I
hereto. As soon as practicable on the date the Offer is commenced, Parent and
Purchaser shall file with the Securities and Exchange Commission (the "SEC") a
Tender Offer Statement on Schedule TO (together with all amendments and
supplements thereto, the "Schedule TO") and, if necessary, jointly file with
Target a Transaction Statement on Schedule 13E-3 (together with all amendments
and supplements thereto, the "Schedule 13E-3") with respect to the Offer that
will comply in all material respects with the provisions of all applicable
Federal securities laws, and will contain (including as an exhibit) or
incorporate by reference the Offer to Purchase and forms of the related letter
of transmittal and summary advertisement (which documents, together with any
supplements or amendments thereto, and any other SEC schedule or form which is
filed in connection with the Offer and related transactions, are referred to
collectively herein as the "Offer Documents"). Parent and Purchaser agree
promptly to correct the Schedule TO and the Offer Documents and to cooperate
with Target to amend the Schedule 13E-3 if and to the extent that such documents
shall have become false or misleading in any material respect (and the Company,
with respect to written information supplied by it specifically for use in the
Schedule TO, Schedule 13E-3 or the Offer Documents, shall promptly notify Parent
of any required corrections of such information and shall cooperate with Parent
and Purchaser with respect to correcting such information) and to supplement the
information provided by it specifically for use in the Schedule TO, Schedule
13E-3 or the Offer Documents to include any information that shall become
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading, and Parent and Purchaser further
agree to take all steps necessary to cause the Schedule TO or Schedule 13E-3, as
so corrected or supplemented, to be filed with the SEC and the Offer Documents,
as so corrected or supplemented, to be disseminated to holders of Shares, in
each case as and to the extent required by applicable Federal securities laws.
The Company and its counsel shall be given a reasonable opportunity to review
and comment on any Offer Documents before they are filed with the SEC.
(d) The Offer to Purchase shall provide for an initial
expiration date of 20 business days (as defined in Rule 14d-1 under the Exchange
Act) from the date of commencement. Purchaser agrees that it shall not terminate
or withdraw the Offer or extend the expiration date of the Offer unless at the
expiration date of the Offer the conditions to the Offer described in Annex I
hereto shall not have been satisfied or earlier waived. If at the expiration
date of the Offer, the conditions to the Offer described in Annex I hereto shall
not have been satisfied or earlier waived, Parent may, from time to time extend
the expiration date of the Offer until the date such conditions are satisfied or
earlier waived and Parent becomes obligated to accept for payment and pay for
Shares tendered pursuant to the
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<PAGE> 70
Offer, but in no event shall such extensions extend beyond the Termination Date
(as defined below). Notwithstanding the foregoing, Purchaser may, without the
consent of the Company, (i) extend the expiration date of the Offer (as it may
be extended) for any period required by applicable rules and regulations of the
SEC in connection with an increase in the consideration to be paid pursuant to
the Offer and (ii) extend the expiration date of the Offer (as it may be
extended) for up to ten business days, if on such expiration date the conditions
for the Offer described on Annex I hereto shall have been satisfied or earlier
waived, but the number of Shares that have been validly tendered and not
withdrawn, when added to the Shares, if any, beneficially owned by Parent
represents less than 90 percent of the then issued and outstanding Shares on a
fully diluted basis.
SECTION 1.2. COMPANY ACTION.
(a) The Company hereby approves of and consents to the Offer
and represents and warrants that the Board of Directors, at a meeting duly
called and held on February 25, 2000, at which all of the Directors were
present, and acting on the unanimous recommendation of the Special Committee,
duly and unanimously: (i) approved and adopted this Agreement, the Subscription
Agreement and the Voting Agreement and the transactions contemplated hereby and
thereby, including the Offer and the Merger; (ii) recommended that the
shareholders of the Company accept the Offer, tender their Shares pursuant to
the Offer and approve this Agreement and the transactions contemplated hereby,
including the Merger; (iii) determined that this Agreement and the transactions
contemplated hereby, including the Offer and the Merger, are fair to and in the
best interests of the shareholders of the Company; and (iv) took all action
necessary to render the limitations on business combinations contained in Part 2
of Article 11 of the Georgia Code inapplicable to this Agreement, the
Subscription Agreement and the Voting Agreement and the transactions
contemplated hereby and thereby. The Company further represents and warrants
that J.P. Morgan Securities Inc. ("J.P. Morgan") as financial advisor to the
Special Committee, delivered to the Special Committee and the Board of Directors
a written opinion, dated as of February 25, 2000, to the effect that the Per
Share Amount to be received by the shareholders (other than Parent, Purchaser
and the Contributing Shareholders) of the Company pursuant to the Offer and the
Merger is fair to such shareholders from a financial point of view.
(b) The Company hereby agrees to file with the SEC, as
promptly as practicable after the filing by Parent and Purchaser of the Schedule
TO with respect to the Offer, a Tender Offer Solicitation/Recommendation
Statement on Schedule 14D-9 (together with any amendments or supplements
thereto, the "Schedule 14D-9") and the Schedule 13E-3 that (i) will comply in
all material respects with the provisions of all applicable Federal securities
laws and (ii) will include the opinion of J.P. Morgan referred to in Section
1.2(a) hereof. The Schedule 14D-9 and the Offer
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<PAGE> 71
Documents shall contain the recommendations of the Board of Directors described
in Section 1.2(a) hereof. The Company agrees promptly to correct the Schedule
14D-9 or the Schedule 13E-3 if and to the extent that it shall become false or
misleading in any material respect (and each of Parent and Purchaser, with
respect to written information supplied by it specifically for use in the
Schedule 14D-9 or the Schedule 13E-3, shall promptly notify the Company of any
required corrections of such information and cooperate with the Company with
respect to correcting such information) and to supplement the information
contained in the Schedule 14D-9 or the Schedule 13E-3 to include any information
that shall become necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading, and the Company
shall take all steps necessary to cause the Schedule 14D-9 or the Schedule 13E-3
as so corrected to be filed with the SEC and disseminated to the Company's
shareholders to the extent required by applicable Federal securities laws.
Parent and its counsel shall be given a reasonable opportunity to review and
comment on the Schedule 14D-9 before it is filed with the SEC.
(c) In connection with the Offer, the Company shall promptly
upon execution of this Agreement furnish Parent with mailing labels containing
the names and addresses of all record holders of Shares, non-objecting
beneficial owners list and security position listings of Shares held in stock
depositories, each as of a recent date, and shall promptly furnish Parent with
such additional information, including updated lists of shareholders, mailing
labels and security position listings, and such other information and assistance
as Parent or its agents may reasonably request for the purpose of communicating
the Offer to the record and beneficial holders of Shares.
SECTION 1.3. DIRECTORS. Promptly upon the purchase by
Purchaser of any Shares pursuant to the Offer, and from time to time thereafter
as Shares are acquired by Purchaser, Parent shall be entitled to designate such
number of directors, rounded up to the next whole number, on the Board of
Directors as will give Parent, subject to compliance with Section 14(f) of the
Exchange Act, representation on the Board of Directors equal to at least that
number of directors which equals the product of the total number of directors on
the Board of Directors (giving effect to the directors appointed or elected
pursuant to this sentence and including current directors serving as officers of
the Company) multiplied by the percentage that the aggregate number of Shares
beneficially owned by Parent or any affiliate of Parent (including for purposes
of this Section 1.3 such Shares as are accepted for payment pursuant to the
Offer, but excluding Shares held by the Company or any of its Subsidiaries)
bears to the number of Shares outstanding. At each such time, the Company will
also cause (i) each committee of the Board of Directors, (ii) if requested by
Parent, the board of directors of each of the Subsidiaries and (iii) if
requested by Parent, each committee of such board to include persons designated
by Parent
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<PAGE> 72
constituting the same percentage of each such committee or board as Parent's
designees constitute on the Board of Directors. The Company shall, upon request
by Parent, promptly increase the size of the Board of Directors or exercise its
best efforts to secure the resignations of such number of directors as is
necessary to enable Parent's designees to be elected to the Board of Directors
in accordance with the terms of this Section 1.3 and shall cause Parent's
designees to be so elected; PROVIDED, HOWEVER, that, in the event that Parent's
designees are appointed or elected to the Board of Directors, until the
Effective Time (as defined in Section 2.2 hereof) the Board of Directors shall
have at least two directors who are directors on the date hereof and who are
neither officers of the Company, Contributing Shareholders nor designees,
shareholders, affiliates or associates (within the meaning of the Federal
securities laws) of Parent or any Contributing Shareholder (such directors, the
"Independent Directors"); PROVIDED FURTHER, that if at any time or from time to
time there are fewer than two Independent Directors, the other directors shall
elect to the Board of Directors such number of persons who shall be neither
officers of the Company, Contributing Shareholders nor designees, shareholders,
affiliates or associates of Parent or any Contributing Shareholder so that the
total of such persons and remaining Independent Directors serving on the Board
of Directors is at least two. Any such person elected to the Board of Directors
pursuant to the second proviso of the preceding sentence shall be deemed to be
an Independent Director for purposes of this Agreement. Subject to applicable
law, the Company shall promptly take all action necessary pursuant to Section
14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder in order to
fulfill its obligations under this Section 1.3 and shall include in the Schedule
14D-9 mailed to shareholders promptly after the commencement of the Offer (or an
amendment thereof or an information statement pursuant to Rule 14f-1 if Parent
has not theretofore designated directors) such information with respect to the
Company and its officers and directors as is required under Section 14(f) and
Rule 14f-1 in order to fulfill its obligations under this Section 1.3. Parent
will supply the Company any information with respect to itself and its nominees,
officers, directors and affiliates required by Section 14(f) and Rule 14f-1.
Notwithstanding anything in this Agreement to the contrary, following the time
directors designated by Parent constitute a majority of the Board of Directors
and prior to the Effective Time, the affirmative vote of a majority of the
Independent Directors shall be required to (i) amend or terminate this Agreement
on behalf of the Company, (ii) exercise or waive any of the Company's rights or
remedies hereunder, (iii) extend the time for performance of Parent's
obligations hereunder or (iv) take any other action by the Company in connection
with this Agreement required to be taken by the Board of Directors.
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<PAGE> 73
ARTICLE II.
THE MERGER
SECTION 2.1. THE MERGER. At the Effective Time (as defined in
Section 2.2) and subject to and upon the terms and conditions of this Agreement
and the Georgia Code, Purchaser shall be merged with and into the Company, the
separate corporate existence of Purchaser shall cease, and the Company shall
continue as the surviving corporation. The Company as the surviving corporation
after the Merger hereinafter sometimes is referred to as the "Surviving
Corporation."
SECTION 2.2. EFFECTIVE TIME. As promptly as practicable after
the satisfaction or waiver of the conditions set forth in ARTICLE VII, the
parties hereto shall cause the Merger to be consummated by filing Articles of
Merger, in accordance with Section 14-2-1105 of the Georgia Code, with the
Secretary of State of the State of Georgia, in such form as required by, and
executed in accordance with the relevant provisions of, the Georgia Code (the
time of such filing being the "Effective Time").
SECTION 2.3. EFFECT OF THE MERGER. At the Effective Time, the
effect of the Merger shall be as provided in the applicable provisions of the
Georgia Code. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time all the property, rights, privileges, powers and
franchises of the Company and Purchaser shall vest in the Surviving Corporation,
and all debts, liabilities and duties of the Company and Purchaser shall become
the debts, liabilities and duties of the Surviving Corporation.
SECTION 2.4. SUBSEQUENT ACTIONS. If, at any time after the
Effective Time, the Surviving Corporation shall consider or be advised that any
deeds, bills of sale, assignments, assurances or any other actions or things are
necessary or desirable to vest, perfect or confirm of record or otherwise in the
Surviving Corporation its right, title or interest in, to or under any of the
rights, properties or assets of either of the Company or Purchaser acquired or
to be acquired by the Surviving Corporation as a result of, or in connection
with, the Merger or otherwise to carry out this Agreement, the officers and
directors of the Surviving Corporation shall be authorized to execute and
deliver, in the name and on behalf of either the Company or Purchaser, all such
deeds, bills of sale, assignments and assurances and to take and do, in the name
and on behalf of each of such corporations or otherwise, all such other actions
and things as may be necessary or desirable to vest, perfect or confirm any and
all right, title and interest in, to and under such rights, properties or assets
in the Surviving Corporation or otherwise to carry out this Agreement.
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SECTION 2.5. ARTICLES OF INCORPORATION; BY-LAWS; DIRECTORS AND
OFFICERS.
(a) Unless otherwise determined by Parent before the Effective
Time, at the Effective Time the Articles of Incorporation of Purchaser, as in
effect immediately before the Effective Time, shall be the Articles of
Incorporation of the Surviving Corporation until thereafter amended as provided
by law and such Articles of Incorporation.
(b) The By-Laws of Purchaser, as in effect immediately before
the Effective Time, shall be the By-Laws of the Surviving Corporation until
thereafter amended as provided by law, the Articles of Incorporation of the
Surviving Corporation and such By-Laws.
(c) The directors of Purchaser immediately before the
Effective Time will be the initial directors of the Surviving Corporation, and
the officers of the Company immediately before the Effective Time will be the
initial officers of the Surviving Corporation, in each case until their
successors are elected or appointed and qualified. If, at the Effective Time, a
vacancy shall exist on the Board of Directors or in any office of the Surviving
Corporation, such vacancy may thereafter be filled in the manner provided by
law.
SECTION 2.6. CONVERSION OF SECURITIES. At the Effective Time,
by virtue of the Merger and without any action on the part of Purchaser, the
Company or the holder of any of the following securities:
(a) Each share of Company Common Stock issued and outstanding
immediately before the Effective Time (other than any Shares to be canceled
pursuant to Section 2.6(b) and any Dissenting Shares (as defined in Section
2.7(a)) shall be canceled and extinguished and be converted into the right to
receive the Per Share Amount in cash payable to the holder thereof, without
interest, upon surrender of the certificate representing such Share. Each holder
of a certificate representing any such Shares shall cease to have any rights
with respect thereto, except the right to receive the Per Share Amount, without
interest, upon the surrender of such certificate in accordance with Section 2.8
hereof.
(b) Each share of Company Common Stock held in the treasury of
the Company and each Share owned by Parent or any direct or indirect wholly
owned subsidiary of Parent or of the Company immediately before the Effective
Time shall be canceled and extinguished and no payment or other consideration
shall be made with respect thereto.
(c) Each share of common stock, $.01 par value, of Purchaser
issued and outstanding immediately before the Effective Time shall thereafter
represent one validly issued, fully paid
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and nonassessable share of common stock, $.01 par value, of the Surviving
Corporation.
SECTION 2.7. DISSENTING SHARES.
(a) Notwithstanding any provision of this Agreement to the
contrary, Shares that are outstanding immediately prior to the Effective Time
and that are held by any shareholder who has delivered to the Company, prior to
the vote of shareholders, if any, required by Section 6.2 hereof, a written
notice in accordance with Article 13 of the Georgia Code of such shareholder's
intent to demand payment for such shareholder's Shares if the Merger is effected
and who shall have not voted such Shares in favor of the approval and adoption
of this Agreement (collectively, the "Dissenting Shares") shall not be converted
into the right to receive cash pursuant to Section 2.6, but the holders of such
Dissenting Shares shall be entitled to payment of the fair value of such
dissenting shares in accordance with the provisions of Article 13 of the Georgia
Code; PROVIDED, HOWEVER, that if such shareholder shall waive such shareholder's
right to demand and obtain payment under Article 13 of the Georgia Code or a
court of competent jurisdiction shall determine that such shareholder is not
entitled to the relief provided by said Article 13, then the right of such
holder of Dissenting Shares to be paid the fair value of such shareholders
Dissenting Shares shall cease and such Dissenting Shares shall thereupon be
deemed to have been converted into, as of the Effective Time, the right to
receive cash pursuant to Section 2.6(a) hereof, without any interest thereon,
upon surrender of the certificate or certificates representing such Shares.
(b) The Company shall give Parent (i) prompt notice of any
notice or other instruments received by the Company pursuant to Article 13 of
the Georgia Code and (ii) the opportunity to direct all negotiations and
proceedings with respect to demands for payment for Dissenting Shares. The
Company shall not voluntarily offer to make or make any payment with respect to
any demands for payment for Dissenting Shares and shall not, except with the
prior written consent of Parent, settle or offer to settle any such demands.
(c) Dissenting Shares, if any, shall be canceled after the
payment of fair value in respect thereto has been made to the holder of such
shares pursuant to the Georgia Code.
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SECTION 2.8. SURRENDER OF SHARES; STOCK TRANSFER BOOKS.
(a) Before the Effective Time, the Company shall designate a
bank or trust company to act as agent for the holders of Shares (the "Exchange
Agent") to receive the funds necessary to make the payments contemplated by
Section 2.6. Parent shall, from time to time, deposit, or cause to be deposited,
in trust with the Exchange Agent for the benefit of holders of Shares funds in
amounts and at times necessary for the payments under Section 2.8(b) to which
such holders shall be entitled at the Effective Time pursuant to Section 2.6.
Such funds shall be invested by the Exchange Agent as directed by Parent. Any
net profits resulting from, or interest or income produced by, such investments
shall be payable as directed by Parent.
(b) Each holder of a certificate or certificates representing
any Shares canceled upon the Merger pursuant to Section 2.6(a) may thereafter
surrender such certificate or certificates to the Exchange Agent, as agent for
such holder, to effect the surrender of such certificate or certificates on such
holder's behalf for a period ending six months after the Effective Time.
Purchaser agrees that promptly after the Effective Time it shall cause the
distribution to holders of record of Shares as of the Effective Time of
appropriate materials to facilitate such surrender. Upon the surrender of
certificates representing the Shares, Parent shall cause the Exchange Agent to
pay the holder of such certificates in exchange therefor cash in an amount equal
to the Per Share Amount multiplied by the number of Shares represented by such
certificate. Until so surrendered, each such certificate (other than
certificates representing Dissenting Shares and certificates representing Shares
held by Parent or in the treasury of the Company) shall represent solely the
right to receive the aggregate Per Share Amount relating thereto.
(c) If payment of cash in respect of canceled Shares is to be
made to a Person other than the Person in whose name a surrendered certificate
or instrument is registered, it shall be a condition to such payment that the
certificate or instrument so surrendered shall be properly endorsed or shall be
otherwise in proper form for transfer and that the Person requesting such
payment shall have paid any transfer and other taxes required by reason of such
payment in a name other than that of the registered holder of the certificate or
instrument surrendered or shall have established to the satisfaction of Parent
or the Exchange Agent that such tax either has been paid or is not payable.
(d) At the Effective Time, the stock transfer books of the
Company shall be closed and there shall not be any further registration of
transfers of shares of any shares of capital stock thereafter on the records of
the Company. If, after the Effective Time, certificates for Shares are presented
to the
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Surviving Corporation, they shall be canceled and exchanged for cash as provided
in Section 2.6(a). No interest shall accrue or be paid on any cash payable upon
the surrender of a certificate or certificates which immediately before the
Effective Time represented outstanding Shares.
(e) Promptly following the date which is six months after the
Effective Time, the Exchange Agent shall deliver to Parent all cash,
certificates and other documents in its possession relating to the transactions
contemplated hereby, and the Exchange Agent's duties shall terminate.
Thereafter, each holder of a certificate representing Shares (other than
certificates representing Dissenting Shares and certificates representing Shares
held by Parent or in the treasury of the Company) may surrender such certificate
to Parent and (subject to applicable abandoned property, escheat and similar
laws) receive in consideration thereof the aggregate Per Share Amount relating
thereto, without any interest or dividends thereon.
(f) The Per Share Amount paid in the Merger shall be net to
the holder of Shares in cash, subject to reduction only for any applicable
federal back-up withholding or, as set forth in Section 2.8(c), stock transfer
taxes payable by such holder.
SECTION 2.9. STOCK PLANS.
(a) The Company shall take all actions necessary to provide
that, prior to or upon consummation of the Merger, each then outstanding option
to purchase shares of Company Common Stock (the "Options") granted under any of
the Company's stock option plans referred to in Section 4.2, each as amended
(collectively, the "Option Plans"), and any and all other outstanding options,
stock warrants and stock rights, whether or not granted pursuant to such stock
option plans, whether or not then exercisable or vested, shall be canceled and
shall be of no further force or effect; PROVIDED, HOWEVER, that with respect to
any Options as to which the Per Share Amount exceeds the applicable per share
exercise price, Parent shall promptly following the Effective Time pay (or cause
to be paid) to the holders of such Options an amount in cash equal to, with
respect to each such Option, the product of (1) the amount by which (x) the Per
Share Amount exceeds (y) the applicable per share exercise price, and (2) the
number of shares subject to the Option at the time of such cancellation. Such
amount shall be subject to reduction by applicable tax withholding.
(b) Except as provided herein or as otherwise agreed to by the
parties, the Company shall cause the Option Plans to terminate as of the
Effective Time and the provisions in any other plan, program or arrangement,
providing for the issuance or grant by the Company or any of its subsidiaries of
any interest in respect of the capital stock of the Company or any of its
Subsidiaries shall be deleted as of the Effective Time.
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(c) The Company represents and warrants that all the Option
Plans provide that either (i) the Company can take the actions described in
Section 2.9(a) without obtaining the consent of any holders of Options or (ii)
if such consent is required, the Company will obtain such consents and provide
evidence thereof to Parent at least 10 days prior to the initial expiration of
the Offer.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF THE
PARENT AND PURCHASER
Parent and Purchaser represent and warrant to the Company as
follows:
SECTION 3.1. CORPORATE ORGANIZATION. Each of Parent and
Purchaser is a corporation duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation and has the requisite
corporate power and authority and any necessary governmental authority and
approvals to own, operate or lease the properties that it purports to own,
operate or lease and to carry on its business as it is now being conducted.
SECTION 3.2. AUTHORITY RELATIVE TO THIS AGREEMENT. Parent and
Purchaser have the necessary corporate power and authority to enter into this
Agreement and to carry out their obligations hereunder. The execution and
delivery of this Agreement by Parent and Purchaser and the consummation by
Parent and Purchaser of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Parent and Purchaser
and no other corporate proceeding is necessary for the execution and delivery of
this Agreement by Parent or Purchaser, the performance by Parent or Purchaser of
their respective obligations hereunder and the consummation by Parent or
Purchaser of the transactions contemplated hereby. This Agreement has been duly
executed and delivered by Parent and Purchaser and constitutes a legal, valid
and binding obligation of each such corporation, enforceable against each of
them in accordance with its terms.
SECTION 3.3. NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery of this Agreement by Parent and
Purchaser do not, and the performance of this Agreement and the transactions
contemplated hereby by Parent and Purchaser will not, (i) conflict with or
violate any law, regulation, court order, judgment or decree applicable to
Parent or Purchaser or by which any of their property is bound or affected, (ii)
violate or conflict with either the Articles of Incorporation or By-Laws or
other organizational documents of either Parent or Purchaser, or (iii) result in
any breach of or
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constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination or
cancellation of, or result in the creation of a lien or encumbrance on any of
the property or assets of Parent or Purchaser pursuant to, any contract,
instrument, permit, license or franchise to which Parent or Purchaser is a party
or by which Parent or Purchaser or any of its property is bound or affected,
except for, in the case of clause (i), conflicts, violations, breaches or
defaults which would not prevent or materially delay the consummation of any of
the transactions contemplated by this Agreement.
(b) Except for (i) applicable requirements, if any, of the
Exchange Act, (ii) the pre-merger notification requirements of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), (iii) the filing and recordation of appropriate merger documents as
required by the Georgia Code, and (iv) filings as may be required by any
applicable "blue sky" laws and/or the rules of the National Association of
Securities Dealers, Inc., neither Parent nor Purchaser is required to submit any
notice, report or other filing with any federal, state or local government or
any court, administrative or regulatory agency or commission or other
governmental authority or agency, domestic or foreign (a "Governmental Entity"),
in connection with the execution, delivery or performance of this Agreement or
the consummation of the transactions contemplated hereby. Except as set forth in
Schedule 3.3, no waiver, consent, approval or authorization of any Governmental
Entity, is required to be obtained or made by either Parent or Purchaser in
connection with its execution, delivery or performance of this Agreement.
SECTION 3.4. FINANCING ARRANGEMENTS. Parent has or will have
available to it funds sufficient to purchase the Shares in accordance with the
terms of this Agreement, pay the amount to which holders of Shares become
entitled upon consummation of the Offer and the Merger and pay all of the fees
and expenses it will incur in connection therewith.
SECTION 3.5. NO PRIOR ACTIVITIES. Except for obligations or
liabilities incurred in connection with its incorporation or organization or the
negotiation and consummation of this Agreement and the transactions contemplated
hereby (including any financing), Purchaser has not incurred any obligations or
liabilities, and has not engaged in any business or activities of any type or
kind whatsoever or entered into any agreements or arrangements with any Person
or entity.
SECTION 3.6. BROKERS. No broker, finder or investment banker
is entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by and on behalf of Parent or Purchaser.
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SECTION 3.7. OFFER DOCUMENTS; PROXY STATEMENT. None of the
information supplied by Parent, its officers, directors, representatives, agents
or employees (the "Parent Information"), for inclusion in the Proxy Statement
(as defined in Section 4.22), or in any amendments thereof or supplements
thereto, will, on the date the Proxy Statement is first mailed to shareholders,
at the time of the Company Shareholders' Meeting (as defined in Section 4.22) or
at the Effective Time, contain any statement which, at such time and in light of
the circumstances under which it will be made, will be false or misleading with
respect to any material fact, or will omit to state any material fact necessary
in order to make the statements therein not false or misleading or necessary to
correct any statement in any earlier communication with respect to the
solicitation of proxies for the Company Shareholders' Meeting which has become
false or misleading. Neither the Offer Documents nor any amendments thereof or
supplements thereto will, at any time the Offer Documents or any such amendments
or supplements are filed with the SEC or first published, sent or given to the
Company's shareholders, contain any untrue statement of a material fact or omit
to state any material fact necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading.
Notwithstanding the foregoing, Parent and Purchaser do not make any
representation or warranty with respect to any information that has been
supplied by the Company or its accountants, counsel or other authorized
representatives for use in any of the foregoing documents. The Offer Documents
and any amendments or supplements thereto will comply as to form in all material
respects with the provisions of the Exchange Act and the rules and regulations
thereunder.
SECTION 3.8. COMPANY STOCK. Prior to the date hereof, neither
Parent nor Purchaser owns any shares of Company Common Stock.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and
Purchaser as follows:
SECTION 4.1. ORGANIZATION AND QUALIFICATION; SUBSIDIARIES. (a)
Each of the Company and its corporate Subsidiaries (as defined in Section
4.1(d)) (the "Corporate Subsidiaries") is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation and has the requisite corporate power and authority and any
necessary governmental authority and approvals to own, operate or lease the
properties that it purports to own, operate or lease and to carry on its
business as it is now being conducted, and is duly qualified or licensed as a
foreign corporation to do business, and is in good standing, in each
jurisdiction where the character of its properties owned,
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operated or leased or the nature of its activities makes such qualification or
licensing necessary, except for such failure which, when taken together with all
other such failures, would not have a Material Adverse Effect. For purposes of
this Agreement, "Material Adverse Effect" means any change in or effect on the
business of the Company or any of the Subsidiaries that is or is reasonably
likely to be materially adverse to the business, operations, properties
(including intangible properties and leased, owned or managed properties),
condition (financial or otherwise), prospects, assets, liabilities or regulatory
status of the Company and the Subsidiaries, taken as a whole; provided that a
Material Adverse Effect shall not include any change or effect arising solely
from the public announcement of any matters disclosed in the Schedules hereto.
(b) Each of the Company's partnership Subsidiaries (the
"Partnership Subsidiaries") is a partnership or limited partnership duly
organized and validly existing under the laws of the state of its organization,
and is duly licensed or qualified and, to the extent applicable, in good
standing, to do business as a foreign partnership, and is authorized to do
business, in each other jurisdiction in which the character or location of the
properties owned, leased, managed or operated by such entity or the nature of
the business transacted by it makes such licensing or qualification necessary,
except where the failure to be so licensed or qualified, when taken together
with all other such failures, would not have a Material Adverse Effect.
(c) A true and complete list of all the Subsidiaries, together
with the jurisdiction of incorporation or organization of each Subsidiary, the
jurisdictions in which each Subsidiary is licensed or qualified to do business
and the percentage of each Subsidiary's outstanding capital stock or other
equity interests owned by the Company or another Subsidiary, is set forth in
Schedule 4.1 hereto.
(d) For purposes of this Agreement, (x) "Subsidiary" means any
corporation or other legal entity of which the Company (either alone or through
or together with any other Subsidiary) (i) owns, directly or indirectly, more
than 50% of the stock or other equity interests the holders of which are
generally entitled to vote for the election of the board of directors or other
governing body of such corporation or other legal entity, or (ii) in the case of
partnerships, serves as a general partner, or (iii) in the case of a limited
liability company, serves as managing member or owns a majority of the equity
interests, or (iv) otherwise has the ability to elect a majority of the
directors, trustees or managing members thereof, (y) "Provider" means any
nursing home, hospital, home health agency, rehabilitation therapy provider,
subacute care facility or unit, assisted living facility or unit, independent
living facility or unit, or other provider of medical services or products
owned, leased or managed by the Company or any Subsidiary, and (z) "Proprietary
Provider" means each Provider owned or leased (as
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tenant) by the Company or any Subsidiary, and "Managed Provider" means each
Provider managed by the Company or any Subsidiary. Except as expressly otherwise
provided herein, each reference in this Agreement to the Company or a Subsidiary
shall be deemed to include any Proprietary Provider that is owned or leased by
such entity, whether or not so expressed, including, by way of example and not
of limitation, references to contracts and commitments entered into, or
purported to be entered into, in the name of any such Proprietary Provider and
licenses or other property or assets held by, or purported to be held by, any
such Proprietary Provider.
SECTION 4.2. CAPITALIZATION. (a) The authorized capital stock
of the Company consists of: (i) 50,000,000 shares of Company Common Stock and
(ii) 50,000,000 shares of preferred stock, $.01 par value per share, of the
Company (the "Company Preferred Stock"). As of the date hereof, (A) 11,923,618
shares of Company Common Stock were issued and outstanding, all of which were
duly authorized, validly issued, fully paid and nonassessable and not subject to
preemptive rights, (B) no shares of Company Preferred Stock were outstanding,
(C) 155,948 shares of Company Common Stock were reserved for issuance upon the
exercise of outstanding Options under the Company's 1994 Employee Stock Option
Plan, (D) 383,162 shares of Company Common Stock were reserved for issuance upon
the exercise of outstanding Options under the Company's 1996 Executive Stock
Plan and (E) 64,341 shares of Company Common Stock were reserved for issuance
upon the exercise of outstanding Options under the Company's 1996 Employee Stock
Option Plan and (F) 1,390,000 shares of Company Common Stock were reserved for
issuance upon the exercise of outstanding Options under the Company's 1997 Stock
Plan. Except as set forth in Schedule 4.2(a) or in this Section 4.2(a): (x)
there are no other options, calls, warrants or rights, agreements, arrangements
or commitments of any character obligating the Company or any of its
Subsidiaries to issue, deliver or sell any shares of capital stock of or other
equity interests in the Company or any of the Subsidiaries; (y) there are no
bonds, debentures, notes or other indebtedness of the Company having the right
to vote (or convertible into, or exchangeable for, securities having the right
to vote) on any matters on which shareholders of the Company may vote; and (z)
there are no shareholders agreements, voting trusts or other agreements or
understandings to which the Company is a party or by which it is bound relating
to the voting, registration or disposition of any shares of the capital stock of
the Company (including any such agreements or understandings that may limit in
any way the solicitation of proxies by or on behalf of the Company from, or the
casting of votes by, the shareholders of the Company with respect to the Merger)
or granting to any person or group of persons the right to elect, or to
designate or nominate for election, a director to the Board of Directors. Except
as set forth in Schedule 4.2(a), there are no programs in place or outstanding
contractual obligations of the Company or any of the Subsidiaries (1) to
repurchase, redeem or otherwise acquire any
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shares of capital stock of the Company or (2) to vote or to dispose of any
shares of the capital stock of any of the Subsidiaries.
(b) All the outstanding capital stock of each of the
Corporate Subsidiaries and all the outstanding partnership (general or limited)
units or other interests of each of the Partnership Subsidiaries are duly
authorized, validly issued, fully paid and nonassessable and not subject to
preemptive rights and, except as set forth in Schedule 4.1, is owned by the
Company or a Subsidiary free and clear of any liens, security interests,
pledges, agreements, claims, charges or encumbrances of any nature whatsoever.
There are no existing options, calls, warrants or other rights, agreements
arrangements or commitments of any character relating to the issued or unissued
capital stock or other equity interests or securities of any Subsidiary. Except
for the Subsidiaries and except as set forth in Schedule 4.2(b), the Company
does not directly or indirectly own any equity or similar interest in, or any
interest convertible into or exchangeable or exercisable for, any equity or
similar interest in any other corporation, partnership, joint venture or other
business association or entity. Except as set forth in Schedule 4.2(b), neither
the Company nor any Subsidiary is under any current or prospective obligation to
make a capital contribution or investment in or loan to, or to assume any
liability or obligation of, any corporation, partnership, joint venture or
business association or entity.
SECTION 4.3. AUTHORITY RELATIVE TO THIS AGREEMENT.
(a) The Company has the necessary corporate power and
authority to enter into this Agreement and, subject to obtaining any necessary
shareholder approval of the Merger, to carry out its obligations hereunder. The
execution and delivery of this Agreement by the Company and the consummation by
the Company of the transactions contemplated hereby have been duly authorized by
all necessary corporate action on the part of the Company (including without
limitation the unanimous approval of the Special Committee), subject to the
approval of the Merger by the Company's shareholders, if required, in accordance
with the Georgia Code. This Agreement has been duly executed and delivered by
the Company and constitutes a legal, valid and binding obligation of the
Company, enforceable against it in accordance with its terms. The affirmative
vote of the holders of a majority of the shares of Company Common Stock entitled
to vote approving this Agreement, if required, is the only vote of the holders
of any class or series of the Company's capital stock necessary to approve this
Agreement, the Subscription Agreement and the Voting Agreement and the
transactions contemplated hereby.
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SECTION 4.4. NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) Except as set forth in Schedule 4.4 hereto, the execution
and delivery of this Agreement by the Company does not, and the performance of
such agreement by the Company will not, (i) conflict with or violate any law,
regulation, court order, judgment or decree applicable to the Company or any of
the Subsidiaries or by which its or any of their property is bound or affected,
(ii) violate or conflict with the Articles of Incorporation or By-Laws or
equivalent organizational documents of the Company or any Subsidiary, or (iii)
result in any breach of or constitute a default (or an event which with notice
or lapse of time or both would become a default) under, or result in any, or
give rise to any rights of termination, cancellation or acceleration of any
obligations or any loss of any material benefit under or, result in the creation
of a lien or encumbrance on any of the properties or assets (whether owned,
leased or managed) of the Company or any of the Subsidiaries pursuant to, any
agreement, contract, instrument, permit, license or franchise to which the
Company or any of the Subsidiaries is a party or by which the Company or any of
the Subsidiaries or its or any of their property (whether owned, leased or
managed) is bound or affected, except for, in the case of clause (i), conflicts,
violations, breaches or defaults which, individually or in the aggregate, would
not be reasonably likely to (x) have a Material Adverse Effect, (y) impair, in
any material respect, the ability of the Company to perform its obligations
under this Agreement or (z) prevent or materially delay the consummation of the
transactions contemplated by this Agreement, the Subscription Agreement or the
Voting Agreement.
(b) Except for (i) applicable requirements, if any, of the
Exchange Act, (ii) the pre-merger notification requirements of the HSR Act,
(iii) the filing and recordation of appropriate merger or other documents as
required by the Georgia Code, (iv) filings as may be required by any "blue sky"
laws of various states and/or the rules of the National Association of
Securities Dealers, Inc., and (v) as set forth in Schedule 4.4 hereto, the
Company and each of the Subsidiaries are not required to submit any notice,
report or other filing with any Governmental Entity, in connection with the
execution, delivery or performance of this Agreement or the consummation of the
transactions contemplated hereby. Except as set forth in Schedule 4.4 hereto, no
waiver, consent, approval or authorization of any Governmental Entity, is
required to be obtained or made by the Company in connection with its execution,
delivery or performance of this Agreement or the consummation of the
transactions contemplated hereby.
SECTION 4.5. SEC FILINGS; FINANCIAL STATEMENTS.
(a) The Company has filed all forms, reports and documents
(including all exhibits thereto) required to be filed with the SEC since July 2,
1997, and (except for preliminary
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materials) has made available to Parent, in the form filed with the SEC, its (i)
Annual Reports on Form 10-K for the fiscal years ended December 31, 1998 and
December 31, 1997, respectively, (ii) Quarterly Reports on Form 10-Q for the
fiscal quarters ended March 31, 1999, June 30, 1999 and September 30, 1999,
(iii) all proxy statements relating to the Company's meetings of shareholders
(whether annual or special) held since July 2, 1997 and (iv) all other reports
or registration statements filed by the Company with the SEC since July 2, 1997
(collectively, the "SEC Reports"). The SEC Reports (i) at the time filed
complied in all material respects with the requirements of the Securities Act of
1933, as amended (the "Securities Act"), or the Exchange Act, as the case may
be, and (ii) did not at the time they were filed contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. None of the
Subsidiaries is required to file any statements or reports with the SEC pursuant
to Sections 13(a) or 15(d) of the Exchange Act.
(b) The consolidated financial statements contained in the SEC
Reports were prepared in accordance with generally accepted accounting
principles applied on a consistent basis throughout the periods involved (except
as may be indicated in the notes thereto) and fairly presented the consolidated
financial position of the Company and its Subsidiaries as at the respective
dates thereof and the consolidated results of operations and changes in
financial position of the Company and its Subsidiaries for the periods
indicated, except that the unaudited interim financial statements were or are
subject to normal and recurring year-end adjustments (which in the aggregate are
not material in amount) and except as set forth in Schedule 4.5(b).
(c) Set forth in Schedule 4.5(c) is a true and correct copy of
the unaudited consolidated financial statements of the Company and its
Subsidiaries as at December 31, 1999 and for the year then ended (collectively,
the "Interim Financial Statements"). The interim balance sheet included in the
Interim Financial Statements (the "Interim Balance Sheet") was prepared in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods involved and fairly presented the consolidated
financial position of the Company and its Subsidiaries as at the respective
dates thereof and the consolidated results of operations and changes in
financial position of the Company and its Subsidiaries for the periods
indicated.
(d) Except as (i) set forth in Schedule 4.5(d) or (ii)
disclosed in any SEC Report filed prior to the date of this Agreement, and
except for liabilities and obligations incurred in the ordinary course of
business consistent with past practice since the date of the most recent
consolidated balance sheet
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included in the SEC Reports filed and publicly available prior to the date of
this Agreement, the Company and the Subsidiaries have no material liabilities of
any nature (whether accrued, absolute, contingent or otherwise).
SECTION 4.6. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except (i)
as expressly permitted or otherwise provided in this Agreement, (ii) as set
forth in the SEC Reports filed prior to the date of this Agreement, (iii) as set
forth in the Interim Financial Statements, or (iv) as set forth in Schedule 4.6
hereto, since December 31, 1998, the business of the Company and the
Subsidiaries has been conducted in the ordinary course consistent with past
practice and there has not been:
(a) any Material Adverse Effect;
(b) any damage, destruction or loss (whether or not covered by
insurance) with respect to any of the assets of the Company, any of its
Subsidiaries or any Managed Provider having a Material Adverse Effect;
(c) any redemption or other acquisition of Company Common
Stock by the Company or any of the Subsidiaries or any declaration or payment of
any dividend or other distribution in cash, stock or property with respect to
Company Common Stock, except for purchases heretofore made pursuant to the terms
of the Company's employee benefit plans;
(d) any change by the Company in accounting methods,
principles or practices;
(e) any revaluation by the Company of any asset (including,
without limitation, any writing down of the value of inventory or writing off of
notes or accounts receivable), other than in the ordinary course of business
consistent with past practice;
(f) any entry by the Company, any Subsidiary or, to the
knowledge of the Company, any Managed Provider into any commitment or
transaction material to the Company and the Subsidiaries taken as a whole, other
than commitments or transactions entered into in the ordinary course of business
consistent with past practice;
(g) any increase in or establishment of any bonus, insurance,
severance, deferred compensation, pension, retirement, profit sharing, stock
option (including, without limitation, the granting of stock options, stock
appreciation rights, performance awards or restricted stock awards) stock
purchase or other employee benefit plan, or any other increase in the
compensation payable or to become payable to any directors, officers or key
employees of the Company or any Subsidiary, except in the ordinary course of
business consistent with past practice;
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(h) any entry by the Company or any Subsidiary into any
employment, consulting, severance, termination or indemnification agreement with
any director, officer or key employee of the Company or any Subsidiary or any
entry into any such agreement with any other person;
(i) (i) any settlement or compromise by the Company, any
Subsidiary or, to the knowledge of the Company, any Managed Provider of any
claim, litigation or other legal proceeding, other than in the ordinary course
of business consistent with past practice in an amount not involving more than
$100,000 or (ii) any payment, discharge or satisfaction by the Company or any
Subsidiary of any other claims, liabilities or obligations (absolute, accrued,
asserted or unasserted, contingent or otherwise), other than (A) in the ordinary
course of business and consistent with past practice or (B) with respect to any
other such claims, liabilities or obligations reflected or reserved against in,
or contemplated by, the consolidated financial statements (or the notes thereto)
of the Company; or
(j) any agreement, in writing or otherwise, by the Company or
any Subsidiary to take any of the actions described in this Section 4.6 or, to
the knowledge of the Company, by any Managed Provider to take any of the actions
described in Sections 4.6(b), (f) or (i), except as expressly contemplated by
this Agreement.
SECTION 4.7. LITIGATION. Except as disclosed in Schedule 4.7
hereto, there are no claims, actions, suits, proceedings or investigations
pending or, to the knowledge of the Company, threatened against or involving the
Company, any of its Subsidiaries or any Provider, or any properties or rights of
the Company or any of its Subsidiaries, by or before any Governmental Entity or
arbitrator which (i) might result in the loss of any Authorization (as defined
in Section 4.13(a)) necessary to continue the business of any Provider in
substantially the same manner as it has heretofore operated, (ii) might result
in the imposition upon the Company or any Subsidiary of fines, penalties,
judgments or other costs in excess of $100,000 (after giving effect to amounts
covered by insurance), or (iii) are reasonably likely to have a Material Adverse
Effect. Except as set forth in Schedule 4.7, as of the date hereof, neither the
Company nor any of its Subsidiaries or any Provider nor any of their property is
subject to any judgment in excess of $100,000, order, injunction or decree.
SECTION 4.8. EMPLOYEE BENEFIT PLANS.
(a) (i) Schedule 4.8(a) sets forth a list of all "employee
benefit plans", as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), and all other employee benefit or
executive compensation arrangements, perquisite programs or payroll practices,
including, without limitation, any such arrangements
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or payroll practices providing severance pay, sick leave, vacation pay, salary
continuation for disability, retirement benefits, deferred compensation, bonus
pay, incentive pay, stock options (including those held by Directors, employees,
and consultants), hospitalization insurance, medical insurance, life insurance,
scholarships or tuition reimbursements, that are maintained by the Company, any
Subsidiary or any entity within the same "controlled group" as the Company or
Subsidiary, within the meaning of Section 4001(a)(14) of ERISA (a "Company ERISA
Affiliate") or to which the Company, any Subsidiary or Company ERISA Affiliate
is obligated to contribute thereunder for current or former employees of the
Company, any Subsidiary or Company ERISA Affiliate (the "Company Employee
Benefit Plans").
(ii) Schedule 4.8(a)(ii) sets forth, with respect to
each Option that is outstanding under the Option Plans as of the date
hereof, the name of the holder of such Option, the number of shares of
Company Common Stock subject to such Option and the exercise price per
share of such Option.
(b) Neither the Company, any Subsidiary nor any Company ERISA
Affiliate has an obligation to contribute to any "multiemployer plan", as
defined in Section 4001(a)(3) of ERISA that is subject to Title IV of ERISA (a
"Multiemployer Plan"). Neither the Company, any Subsidiary nor any Company ERISA
Affiliate has withdrawn in a complete or partial withdrawal from any
Multiemployer Plan, nor has any of them incurred any liability due to the
termination or reorganization of any Multiemployer Plan.
(c) None of the Company Employee Benefit Plans is a "single
employer plan", as defined in Section 4001(a)(15) of ERISA, that is subject to
Title IV of ERISA. Neither the Company, any Subsidiary nor any Company ERISA
Affiliate has incurred any outstanding liability under Section 4062 of ERISA to
the Pension Benefit Guaranty Corporation or to a trustee appointed under Section
4042 of ERISA. Neither the Company, any Subsidiary nor any Company ERISA
Affiliate has engaged in any transaction described in Section 4069 of ERISA.
Neither the Company nor any Subsidiary maintains, or is required, either
currently or in the future, to provide medical benefits to employees, former
employees or retirees after their termination of employment, other than pursuant
to the Consolidated Omnibus Budget Reconciliation Act of 1985.
(d) Except as set forth in Schedule 4.8(d), each Company
Employee Benefit Plan that is intended to qualify under Section 401 of Internal
Revenue Code of 1986, as amended (the "Code"), and each trust maintained
pursuant thereto, has been determined to be exempt from federal income taxation
under Section 501 of the Code by the IRS, and, to the Company's knowledge,
nothing has occurred with respect to the operation of any such Company Employee
Benefit Plan that would cause the loss
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of such qualification or exemption or the imposition of any material liability,
penalty or tax under ERISA or the Code.
(e) All contributions (including all employer contributions
and employee salary reduction contributions) required to have been made under
any of the Company Employee Benefit Plans to any funds or trusts established
thereunder or in connection therewith have been made in all material respects by
the due date thereof.
(f) There has been no material violation of ERISA or the Code
with respect to the filing of applicable reports, documents and notices
regarding the Company Employee Benefit Plans with the Secretary of Labor or the
Secretary of the Treasury or the furnishing of required reports, documents or
notices to the participants or beneficiaries of the Company Employee Benefit
Plans.
(g) None of the Company, the Subsidiaries, nor to the
Company's knowledge, the officers of the Company or any of the Subsidiaries or
any trustee or administrator of any Company Employee Benefit Plans, has engaged
in a "prohibited transaction" (as defined in Section 406 of ERISA or Section
4975 of the Code) or any other breach of fiduciary responsibility that could
subject the Company, any of the Subsidiaries or any officer of the Company or
any of the Subsidiaries to any material tax or penalty on prohibited
transactions imposed by such Section 4975 or to any material liability under
Section 502(i) or (1) of ERISA.
(h) The Company does not currently have in force any
Company-owned life insurance policies.
(i) Except as set forth in Schedule 4.8(i), neither the
Company nor any of the Subsidiaries is a party to any contract, agreement or
other arrangement which could result in the payment of amounts that could be
nondeductible by reason of Section 162(m) or Section 280G of the Code.
(j) True, correct and complete copies of the following
documents, with respect to each of the Company Benefit Plans, have been
delivered or made available to Parent by the Company: (i) all Company Employee
Benefit Plans and related trust documents, and amendments thereto; (ii) the most
recent Forms 5500 and (iii) summary plan descriptions.
(k) There are no pending actions, claims or lawsuits which
have been asserted, instituted or, to the Company's knowledge, threatened,
against the Company Employee Benefit Plans, the assets of any of the trusts
under such plans or the plan sponsor or the plan administrator, or against any
fiduciary of the Company Employee Benefit Plans with respect to the operation of
such plans (other than routine benefit claims).
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(l) Except as set forth in Schedule 4.8(l), all Company
Employee Benefit Plans subject to ERISA or the Code have been maintained and
administered, in all material respects, in accordance with their terms and with
all provisions of ERISA and the Code, respectively, (including rules and
regulations thereunder) and other applicable federal and state laws and
regulations and all employees required to be included as participants by the
terms of such plans have been properly included.
Section 4.9. PROPERTIES
(a) Except as set forth in Schedule 4.9(a), the Company and
each of the Subsidiaries has good and marketable title to, or a valid leasehold
interest in, all its properties and assets, free and clear of all liens and
other encumbrances. All tangible personal property, fixtures and equipment which
comprise the assets of the Company and the Subsidiaries, or are otherwise used
in connection with its respective businesses, are in a good state of repair
sufficient for normal operation (ordinary wear and tear excepted) and operating
condition.
(b) Schedule 4.9(b) sets forth a true and complete list and
description of (i) all real property and interests in real property owned in fee
by the Company or any Subsidiary ("Owned Real Property") and (ii) each lease or
sublease relating to Leased Real Property (as defined below) that involves
annual expenditures by the Company or any Subsidiary of $100,000 or more
(collectively, the "Company Material Leases").
(c) Except as set forth in Schedule 4.9(c), there are no
violations of any law, ordinance or regulation (including, without limitation,
any building, planning or zoning law, ordinance or regulation) relating to any
of the real property or interests in real property leased by the Company or any
Subsidiary, as lessee or lessor (the "Leased Real Property"), or relating to any
of the Owned Real Property, or in any case to any buildings or other
improvements thereon (including, without limitation, plumbing, heating,
ventilation, air conditioning, electrical and lighting systems and equipment)
which are reasonably likely to materially and adversely affect the business of
any Proprietary Provider. Except as set forth in Schedule 4.9(c), neither the
Company nor any Subsidiary has assigned its interest under any Company Material
Lease, or subleased all or any part of the space demised thereby, to any third
party.
(d) The Company has, or has caused to be, made available to
Parent true and complete copies of the Company Material Leases and any and all
ancillary documents pertaining thereto (including, but not limited to, all
amendments, consents for alterations and documents recording variations and
evidence of commencement dates and expiration dates). With respect to each of
the Company Material Leases, (i) such lease or sublease is legal, valid,
binding, enforceable and in full force and
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effect, except to the extent that its enforceability may be limited by
bankruptcy, insolvency, reorganization, fraudulent conveyance, fraudulent
transfer, moratorium or other laws relating to or affecting creditors' rights
generally and by general principles of equity, (ii) except as otherwise set
forth in Schedule 4.9(d), such lease or sublease will not cease to be legal,
valid, binding, enforceable and in full force and effect on terms identical to
those currently in effect as a result of the consummation of the transactions
contemplated by this Agreement, the Subscription Agreement or the Voting
Agreement, nor will the consummation of such transactions constitute a breach or
default under such lease or sublease or otherwise give the landlord a right to
terminate such lease or sublease and (iii) neither the Company nor any
Subsidiary knows of, or has given or received notice of, any violation or
default thereunder (nor, to the knowledge of the Company, does there exist any
condition which with the passage of time or the giving of notice or both would
result in such a violation or default thereunder).
(e) All improvements on real property constructed by or on
behalf of the Company or any Subsidiary, to the knowledge of the Company, were
constructed in compliance with applicable laws, ordinances and regulations
(including, but not limited to, any building or zoning laws, ordinances and
regulations) affecting such Owned Real Property or Leased Real Property.
SECTION 4.10. INTELLECTUAL PROPERTY.
(a) Except as set forth in Schedule 4.10, each of the Company
and the Subsidiaries owns, or is licensed or otherwise possesses rights to use
all patents, trademarks and service marks (registered or unregistered), trade
names, domain names, computer software and copyrights and applications and
registrations therefor (collectively, the "Intellectual Property Rights") that
are used in the business of the Company and the Subsidiaries as currently
conducted.
(b) Schedule 4.10 sets forth a list of all patents, patent
applications, trademark and service mark applications and registrations,
registered copyrights and material trade names and common law trademarks owned
anywhere in the world by the Company or any of the Subsidiaries.
(c) Schedule 4.10 sets forth a list of all material licensing
agreements to which the Company or any of its Subsidiaries is a party relating
to the ownership or use of the Intellectual Property Rights.
(d) Each of the Company and the Subsidiaries owns or has right
to use the Intellectual Property Rights sufficient to allow it to conduct, and
continue to conduct, its business as currently conducted in all material
respects, and the consummation of the transactions contemplated hereby will not
alter or impair such ability in any respect.
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(e) Except as set forth in Schedule 4.10, (i) to the knowledge
of the Company, there are no pending oppositions, cancellations, invalidity
proceedings, interferences or re-examination proceedings with respect to the
Intellectual Property Rights; (ii) neither the Company nor any of the
Subsidiaries has received notice from any other person or entity pertaining to
or challenging the right of the Company or any of its Subsidiaries to use or
register any of the Intellectual Property Rights; and (iii) to the knowledge of
the Company, neither the Company nor any of the Subsidiaries has any pending
claim, and no Person is violating or infringing the rights of the Company and
the Subsidiaries, in connection with the Intellectual Property Rights.
SECTION 4.11. INSURANCE. Schedule 4.11 sets forth a true and
complete list of all insurance policies carried by, or covering the Company and
the Subsidiaries with respect to their businesses, assets and properties,
together with, in respect of each such policy, the name of the insurer, the
policy number, the type of policy, the amount of coverage and the deductible.
True and complete copies of each such policy have previously been made available
to Parent. All such policies are in full force and effect, and no notice of
cancellation has been given with respect to any such policy. All premiums due on
such policies have been paid in a timely manner and the Company and the
Subsidiaries have complied in all material respects with the terms and
provisions of such policies. The insurance coverage provided by such policies is
customary for the industries in which the Company and the Subsidiaries operate.
SECTION 4.12. ENVIRONMENTAL.
Except as set forth in Schedule 4.12:
(a) The Company and the Subsidiaries are and have been in
compliance in all material respects with all applicable Environmental Laws, have
obtained all Environmental Permits and are in compliance with their
requirements, and have resolved all past non-compliance of which the Company is
aware with Environmental Laws and Environmental Permits without any pending,
on-going or future obligation, cost or liability.
(b) Neither the Company nor any of the Subsidiaries has (i)
placed, held, located, released, transported or disposed of any Hazardous
Substances on, under, from or at any of the Company's or any of the
Subsidiaries' properties (whether owned, leased or managed) or any other
properties, other than in a manner that could not, in all such cases taken
individually or in the aggregate, reasonably be expected to result in a Material
Adverse Effect, (ii) any knowledge or reason to know of the presence or threat
of release of any Hazardous Substances on, under or at any of the Company's or
any of the Subsidiaries' properties or any other property but arising from the
Company's or any of the Subsidiaries' current or former properties or
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operations, other than in a manner that could not reasonably be expected to
result in a Material Adverse Effect, or (iii) received any written notice (A) of
any violation of or liability under any Environmental Laws, (B) of the
institution or pendency of any suit, action, claim, proceeding or investigation
by any Governmental Entity or any third party in connection with any such
violation or liability, (C) requiring the response to or remediation of
Hazardous Substances at or arising from any of the Company's or any of the
Subsidiaries' current or former properties or operations or any other
properties, (D) alleging noncompliance by the Company or any of the Subsidiaries
with the terms of any Environmental Permit in any manner reasonably likely to
require material expenditures or to result in material liability or (E)
demanding payment for response to or remediation of Hazardous Substances at or
arising from any of the Company's or any of the Subsidiaries' current or former
properties or operations or any other properties;
(c) No Environmental Law imposes any obligation upon the
Company or the Subsidiaries arising out of or as a condition to any transaction
contemplated by this Agreement, including any requirement to modify or to
transfer any permit or license, any requirement to file any notice or other
submission with any Governmental Entity, the placement of any notice,
acknowledgment or covenant in any land records, or the modification of or
provision of notice under any agreement, consent order or consent decree. No
lien or other encumbrance has been placed upon any of the Company's or the
Subsidiaries' properties (whether owned, leased or managed) under any
Environmental Law;
(d) The Company and the Subsidiaries have made available to
Parent copies of any environmental assessment or audit report (including all
records maintained for required environmental compliance) or other similar
studies or analyses in the possession of the Company or the Subsidiaries
relating to any real property currently or formerly owned, leased, managed or
occupied by the Company or the Subsidiaries.
(e) As used in this Agreement, the following terms have the
meanings set forth below:
(i) "Environmental Law" means any law, now or
hereafter in effect and as amended, and any judicial or administrative
interpretation thereof, including any judicial or administrative order,
consent decree or judgment, relating to pollution or protection of the
environment, health or safety or natural resources, including, without
limitation, those relating to the use, handling, transportation,
treatment, storage, disposal, release or discharge of Hazardous
Substances.
(ii) "Environmental Permit" means any permit,
approval, identification number, license or other
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authorization required under any applicable Environmental Law.
(iii) "Hazardous Substances" means (a) petroleum and
petroleum products, by-products or breakdown products, radioactive
materials, asbestos-containing materials and polychlorinated biphenyls,
and (b) any other chemicals, materials or substances regulated as toxic
or hazardous or as a pollutant, contaminant or waste under any
applicable Environmental Law.
SECTION 4.13. GOVERNMENTAL AUTHORIZATIONS AND REGULATIONS.
(a) Except as set forth in Schedule 4.13, the Company and each
Subsidiary has complied and are currently in compliance with each law, ordinance
or governmental or regulatory rule or regulation, whether federal, state, local
or foreign to which such entity's business, operations, assets or properties is
subject ("Regulations"), except for items of non-compliance (i) which were
identified on a survey report with respect to such Provider, are being cured by
the applicable Provider pursuant to a plan of correction accepted by the
applicable governmental authority, and will not result in the loss or suspension
of, or other action affecting, any Authorization (as defined below) of the
applicable Provider, (ii) are not reasonably likely to materially and adversely
affect the business of any Provider, and (iii) which would not, individually or
in the aggregate, have a Material Adverse Effect. Except as set forth in
Schedule 4.13, each of the Company and the Subsidiaries (or, where required
under applicable law, to the knowledge of the Company, the Managed Providers)
owns, holds, possesses or lawfully uses in the operation of its business all
applicable Authorizations, other than Authorizations which (i) are not necessary
to continue the operation of the business of such Provider in substantially the
same manner as it currently operates and has operated heretofore, or (ii) if not
owned, held, possessed or lawfully used by the Company or such Subsidiary (or by
the applicable Managed Provider), would not, individually or in the aggregate,
have a Material Adverse Effect. As used herein, "Authorizations" means all
licenses, permits, certificates of need, qualifications, registrations,
certifications, provider agreements and other authorizations of any governmental
authority which are required under applicable Regulations for a Provider to
conduct its business and obtain payment for services and goods provided by it
under the Federal Medicare program, the state Medicaid program for each state in
which such Provider operates (the "Applicable Medicaid Programs"), and any other
governmental programs for payment of health care services or goods in which such
Provider purports to participate, other than any of the foregoing which are not
material to the business and operations of the relevant Provider, the Company or
any Subsidiary.
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Except as set forth in Schedule 4.13, all of the
Authorizations owned, held, possessed or lawfully used by the Company or its
Subsidiaries (or, where required under applicable law, to the knowledge of the
Company, the Managed Providers) are valid and in good standing,
non-probationary, non-provisional and in full force and effect. Except as set
forth in Schedule 4.13, none of the Providers is subject to any governmental
restrictions on its operations (e.g., due to prior survey deficiencies) which
adversely affects the conduct of its business, other than restrictions which
apply to all providers of the services or goods furnished by such Provider in
the relevant jurisdiction. Except as set forth in Schedule 4.13, there are no
actions or proceedings to revoke, withdraw, terminate or suspend any
Authorization, neither the Company nor any of its Subsidiaries has received any
notice or other communication threatening any of the foregoing (other than
notices and communications which have been withdrawn or otherwise resolved), nor
does the Company have any knowledge of any reason why any Authorization is
likely not to be renewed by the applicable governmental authority in the
ordinary course.
(b) Other than as set forth in Schedule 4.13, all claims for
payment for services rendered or products sold or supplied by the Company and
its Subsidiaries which have been made to any third-party payor (including,
without limitation, the Federal Medicare program, the Medicaid programs for the
states in which a Provider operates, and any applicable commercial insurance
company, health maintenance organization or preferred provider organization)
(collectively, "Payors"), have been prepared and filed in accordance with all
applicable Regulations and requirements of the Payor, and all such claims have
been prepared in an accurate and complete manner and timely submitted to the
appropriate Payor, except in each case for items of non-compliance (i) which are
not reasonably likely to result in the loss of any Authorization, (ii) are
reasonably likely not to materially and adversely affect the business of any
Provider, and (iii) which would not, individually or in the aggregate, have a
Material Adverse Effect. The Company and/or the Subsidiaries have paid or made
provision to pay through proper recordation any net liability for overpayments
received from any Payor and any similar obligations with respect to any Payor,
in compliance with all applicable Regulations and the requirements of the Payor,
except for items of non-compliance (i) which are not reasonably likely to result
in the loss of any Authorization, (ii) are reasonably likely not to materially
and adversely affect the business of any Provider, and (iii) which would not,
individually or in the aggregate, have a Material Adverse Effect. Without
limitation of the foregoing, except as set forth in Schedule 4.13 hereto neither
the Company nor any of its Subsidiaries has submitted any claim for payment to
any Payor in violation of any applicable Federal, state or local false claim or
fraud law or regulation, including without limitation the Federal False Claims
Act, 31 U.S.C. Section 3729.
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The Company and its Subsidiaries have made available to Parent
or its counsel true and complete copies of all cost reports requested by same,
together with all relevant schedules, correspondence, notices of program
reimbursement, audit reports, settlement agreements and similar materials
relating thereto. The Company and its Subsidiaries have timely filed all
required cost reports with respect to the Medicare program and each state
Medicaid program in which any of the Providers participates. Schedule 4.13 sets
forth for each Provider the years for which cost reports remain to be settled,
specifying the Payor at issue and the status of the matter, including
identification of any pending reimbursement appeals.
(c) Schedule 4.13 sets forth a complete and accurate
statement, for each Facility (as defined below), of (i) the bed categories for
(e.g., nursing beds, skilled nursing beds, rehabilitation hospital beds) for
which such Facility is licensed or qualified to participate under the Medicare
program and the Applicable Medicaid Programs, (ii) the number of beds in each
such category, (iii) the number of beds in each such category that are available
for use in such Facility, and (iv) the number of patients as of February 9, 2000
admitted in each Facility (A) who as of such date qualify for Medicare and whose
stay at the Facility is being paid for under Part A of the Medicare program, (B)
who qualify for the Applicable Medicaid Program and whose stay at the Facility
is being paid for by the Applicable Medicaid Program, (C) whose stay at the
Facility is being paid for by another governmental Payor (e.g., the Veteran's
Administration or CHAMPUS), and (D) whose stay at the Facility is being paid for
by the patient, the patient's relatives or another non-Payor private party. As
used herein "Facility" means each nursing facility, hospital, assisted living
facility, independent living facility or other inpatient Provider owned, leased
or managed by the Company or its Subsidiaries.
SECTION 4.14. CONDITION OF FACILITIES. Except as set forth in
Schedule 4.14, to the knowledge of the Company, each of the Facilities is in a
good state of repair and condition, there are no dangerous conditions or defects
existing upon or in any of the Facilities, and there are no structural defects
in any Facility that could adversely affect the operation of such Facility as
conducted presently and in the past.
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SECTION 4.15. MATERIAL CONTRACTS.
(a) Except as set forth in the SEC Reports filed prior to the
date of this Agreement, in Schedule 4.15 or otherwise expressly provided in this
Agreement, neither the Company nor any of the Subsidiaries is a party to or
bound by:
(i) any "material contract" (as defined in Item
601(b)(10) of Regulation S-K of the SEC);
(ii) any contract or agreement for the purchase or
lease (as lessee) of materials or personal property from any supplier
or for the furnishing of services to the Company or any Subsidiary that
involves or is likely to involve future aggregate payments by the
Company or any of the Subsidiaries of more than (x) $300,000 or (y)
$100,000 in any year;
(iii) any contract or agreement for the sale, license
or lease (as lessor) by the Company or any Subsidiary of services,
materials, products, supplies or other assets, owned or leased by the
Company or the Subsidiaries, that involves or is likely to involve
future aggregate payments to the Company or any of the Subsidiaries of
more than (x) $300,000 or (y) $100,000 in any year
(iv) any contract, agreement or instrument relating
to or evidencing indebtedness for borrowed money of the Company or any
Subsidiary;
(v) any non-competition agreement or any other
agreement or obligation which purports to limit in any respect the
manner in which, or the localities in which, the business of the
Company or the Subsidiaries may be conducted;
(vi) any agreement with any present or former
affiliates of the Company;
(vii) any partnership, joint venture, strategic
alliance or cooperation agreement (or any agreement similar to any of
the foregoing);
(viii) any voting or other agreement governing how
any Shares shall be voted;
(ix) any agreement with any shareholders of the
Company;
(x) any agreement with any Managed Provider,
including without limitation any such management agreement, employee
lease agreement, billing services agreement, option agreement or
evidence of indebtedness; or
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(xi) any contract or other agreement which would
prohibit or materially delay the consummation of the Merger or any of
the transactions contemplated by this Agreement.
The foregoing contracts and agreements to which the Company or any Subsidiary
are parties or are bound are collectively referred to herein as "Company
Material Contracts."
(b) Each Company Material Contract is valid and binding on the
Company (or, to the extent a Subsidiary is a party, such Subsidiary) and is in
full force and effect, and the Company and each Subsidiary have performed, in
all material respects, all obligations required to be performed by them to date
under each Company Material Contract, except where such noncompliance,
individually or in the aggregate, would not have a Material Adverse Effect. The
Company has, or has caused to be, made available to Parent or its counsel true
and complete copies of the Company Material Contracts requested by same and any
and all ancillary documents pertaining thereto (including, but not limited to,
all amendments and waivers). Except as otherwise set forth in Schedule 4.15(b),
each Company Material Contract will not cease to be legal, valid, binding,
enforceable and in full force and effect on terms identical to those currently
in effect as a result of the consummation of the transactions contemplated by
this Agreement (except to the extent that its enforceability may be limited by
bankruptcy, insolvency, reorganization, fraudulent conveyance, fraudulent
transfer, moratorium or other laws relating to or affecting creditors' rights
generally and by general principles of equity), nor will the consummation of
such transactions constitute a breach or default under such lease or sublease or
otherwise give the landlord a right to terminate such lease or sublease. Except
as set forth in Schedule 4.15(b), neither the Company nor any Subsidiary knows
of, or has given or received notice of, any violation or default under (nor, to
the knowledge of the Company, does there exist any condition which with the
passage of time or the giving of notice or both would result in such a violation
or default under) any Company Material Contract.
(c) Except as disclosed in the SEC Reports filed prior to the
date of this Agreement or in Schedule 4.15 or as expressly provided for in this
Agreement, neither the Company nor any of the Subsidiaries is a party to any
oral or written (i) employment or consulting agreement that cannot be terminated
on thirty days' or less notice, (ii) agreement with any officer or other key
employee of the Company or any of the Subsidiaries the benefits of which are
contingent or vest, or the terms of which are materially altered, upon the
occurrence of a transaction involving the Company or any the Subsidiaries of the
nature contemplated by this Agreement, the Subscription Agreement or the Voting
Agreement, (iii) agreement with respect to any officer or other key employee of
the Company or any of the Subsidiaries providing any term of employment or
compensation guarantee or (iv) stock or stock purchase plan (other than the
Option Plans),
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any of the benefits of which will be increased, or the vesting of the benefits
of which will be accelerated, by the occurrence of any of the transactions
contemplated by this Agreement, the Subscription Agreement or the Voting
Agreement or the value of any of the benefits of which will be calculated on the
basis of any of such transactions.
SECTION 4.16. CONDUCT OF BUSINESS.
Except as set forth in Schedule 4.16, the business and
operations of the Company and the Subsidiaries are not being conducted in
default or violation of any term, condition or provision of (i) their respective
Articles of Incorporation or By-Laws or similar organizational documents, or
(ii) any note, bond, mortgage, indenture, contract, agreement, lease or other
instrument or agreement of any kind to which the Company or any of the
Subsidiaries is now a party or by which the Company or any of the Subsidiaries
or any of their respective properties or assets may be bound, except, with
respect to the foregoing clause (ii), defaults or violations that would not,
individually or in the aggregate, have a Material Adverse Effect.
SECTION 4.17. FRAUD AND ABUSE. Except as set forth in Schedule
4.17, neither the Company nor any Subsidiary or affiliate thereof or any of
their respective partners, officers and directors, or, to the knowledge of the
Company, any person who provides professional services on behalf of or under
agreements with the Company, any Subsidiary or any affiliate has engaged in any
activities which are prohibited under the federal Medicare or federal or state
Medicaid statutes, including, without limitation, 42 U.S.C. Sections 1320a-7,
1320a-7a and 1320a-7b, the federal CHAMPUS statute, 10 U.S.C. Section 1071 et
seq., the Federal Civil False Claims Act, 31 U.S.C. Section 3729 et seq., or the
regulations promulgated pursuant to such statutes or which are prohibited by
rules of professional conduct, including but not limited to the following:
(a) knowingly and willfully making or causing to be made false
statement or representation of a material fact in any application for any
benefit or payment;
(b) knowingly and willfully making or causing to be made any
false statement or representation of a material fact for use in determining
rights to any benefit or payment;
(c) presenting or causing to be presented a claim for services
under Medicare, any state Medicaid program, CHAMPUS or any other Federal health
care program (as used herein, such term shall have the meaning specified in 42
U.S.C. Section 1320a-7b(f)) that is for an item or service that is known or
could be known to be (i) not provided as claimed, or (ii) false or fraudulent;
(d) failing to disclose knowledge by a claimant of the
occurrence of any event affecting the initial or continued right
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to any benefit or payment on its own behalf or on behalf of another, with intent
to fraudulently secure such benefit or payment;
(e) knowingly and willfully offering, paying, soliciting or
receiving any remuneration (including any kickback, bribe or rebate), directly
or indirectly, overtly or covertly, in cash or in kind (i) in return for
referring an individual to a person for the furnishing or arranging for the
furnishing of any item or service for which payment may be made in whole or in
party by CHAMPUS, Medicare, any state Medicaid program, or any other Federal
health care program, or (ii) in return for purchasing, leasing or ordering or
arranging for or recommending purchasing, leasing or ordering any good,
Provider, service or item for which payment may be made in whole or in part by
CHAMPUS, Medicare, any state Medicaid program or any other Federal health care
program; or
(f) knowingly and willfully making or causing to be made or
inducing or seeking to induce the making of any false statement or
representation (or omitting to state a fact required to be stated therein or
necessary to make the statements contained therein not misleading) of a material
fact with respect to (i) the conditions or operations of a Provider in order
that the Provider may qualify for certification under CHAMPUS, Medicare, a state
Medicaid program or another Federal health care program, or (ii) information
required to be provided under Section 1124A of the Social Security Act (42
U.S.C. Section 1320a-3).
SECTION 4.18. HEALTH PROFESSIONAL'S FINANCIAL RELATIONSHIPS;
DISQUALIFIED INDIVIDUALS. (a) The operations of the Company and the Subsidiaries
are and at all times have been in compliance with all applicable Regulations
regarding health professional self-referrals, including without limitation 42
U.S.C. Section 1395nn (commonly known as the "Stark Statute") and 42 U.S.C.
Section 1396b.
(b) Except as set forth in Schedule 4.18, none of the Company,
any of its Subsidiaries or, to the knowledge of the Company, any Managed
Provider, nor their respective officers, directors, trustees, partners, members,
managers, employees or contractors, has been charged with or convicted of any
Medicare, Medicaid or other Federal health care program-related offense, or has
been debarred, excluded or suspended from participation in Medicare, Medicaid or
any other Federal health care program, or is currently listed on the General
Services Administration list of parties excluded from Federal procurement
programs and non-procurement programs. Except as set forth in Schedule 4.18, to
the knowledge of the Company and its Subsidiaries, none of the Company, any of
its Subsidiaries or any Managed Provider, nor their respective officers,
directors, trustees, partners, members, managers, employees or contractors, has
been investigated for any Medicare, Medicaid or other Federal health care
program-related offense, or is currently under sanction,
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exclusion or investigation (civil or criminal) by any Federal or state
enforcement, regulatory, administrative or licensing authority.
SECTION 4.19. TAXES.
(a) Except as set forth in Schedule 4.19, all Tax Returns (as
defined below) by or on behalf of the Company or any Subsidiary or any
affiliated, combined or unitary group of which the Company or any Subsidiary is
or was a member have been duly and timely filed with the appropriate taxing
authorities and were, in all material respects, true, complete and correct.
(b) Except as set forth in Schedule 4.19, the Company and each
Subsidiary has paid to the appropriate taxing authority on its behalf, within
the time and in the manner prescribed by law, all material Taxes (as defined
below) for which it is liable.
(c) The Company and each Subsidiary has established on its
books and records adequate reserves for the payment of all Taxes for which it is
liable which are not yet due and payable, and with respect to any such Taxes
which have been proposed, assessed or asserted against them.
(d) The Company and each Subsidiary has complied in all
respects with all applicable laws, rules and regulations relating to the payment
and withholding of Taxes for which it is liable (including, without limitation,
withholding of such Taxes pursuant to sections 1441 and 1442 of the Code or
similar provisions under any state, local or foreign laws, and has, within the
time and in the manner prescribed by law, withheld and paid over to the
appropriate taxing authorities all amounts required to be so withheld and paid
over under all applicable domestic and foreign laws.
(e) Except as set forth in Schedule 4.19, neither the Company
nor any Subsidiary has requested any extension of time within which to file any
Tax Return in respect of any taxable year, which Tax Return has not since been
filed.
(f) Except as set forth in Schedule 4.19, there are no
outstanding waivers or comparable consents that have been given by the Company
or any Subsidiary or with respect to any Tax Return of the Company or any
Subsidiary regarding the application of any statute of limitations with respect
to any Taxes or Tax Returns of the Company or any such Subsidiary.
(g) Except as set forth in Schedule 4.19 (which shall set
forth the nature of the proceeding, the type of return, the deficiencies
claimed, asserted, proposed or assessed and the amount thereof, and the taxable
year in question), no United States federal, state, local or foreign audits,
investigations, other administrative proceedings or court proceedings are
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presently pending against the Company or any Subsidiary that could materially
affect the liability for Taxes of the Company or any Subsidiary or against the
Company or any Subsidiary with regard to any Taxes or Tax Returns of the Company
or any Subsidiary and no notification has been received by the Company or any
Subsidiary that such an audit, investigation or other proceeding is pending or
threatened.
(h) The Company and each Subsidiary (i)are members of an
affiliated group of corporations within the meaning of section 1504(a) of the
Code; and such affiliated group filed a consolidated return with respect to
United States federal income taxes and (ii) neither the Company nor any
Subsidiary has liability for the Taxes of any person (other than members of the
affiliated group described in clause (i) of this Section 4.19(h)) under Treasury
Regulations section 1.1502-6 (or a similar or corresponding provision of state,
local, or foreign law);
(i) Except as set forth in Schedule 4.19, there are no
encumbrances for Taxes upon the assets or properties of the Company or any
Subsidiary except for statutory encumbrances for Taxes not yet due.
(j) Neither the Company or any Subsidiary is a party to, is
bound by or has an obligation under any Tax sharing agreement, Tax
indemnification agreement, Tax allocation agreement or similar contract or
arrangement (including any agreement, contract or arrangement providing for the
sharing or ceding of credits or losses) or has a potential liability or
obligation to any person as a result of or pursuant to any such agreement,
contract, arrangement or commitment.
(k) Except as set forth in Schedule 4.19, neither the Company
nor any Subsidiary is a party to any agreement, plan, contract or arrangement
that would result, individually or in the aggregate, in the payment of any
"excess parachute payments" within the meaning of section 280G of the Code or
similar provision or other law.
(l) Except as set forth in Schedule 4.19, no jurisdiction
where the Company or any Subsidiary has not filed a Tax Return has made a claim
that the Company or such Subsidiary is required to file a Tax Return in such
jurisdiction.
(m) The Company and each Subsidiary have previously delivered
or made available to Purchaser complete and accurate copies of each of (i) all
audit reports, letter rulings and technical advice memoranda relating to United
States federal, state, local or foreign Taxes due with respect to the income or
business of the Company or any Subsidiary, (ii) all income Tax Returns filed
with any taxing authority (or the relevant portions of any combined,
consolidated, or unitary Tax Return filed in any jurisdiction of which the
Company or any Subsidiary is a member, including, without limitation,
information relating to the
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computation of taxable income) filed by or on behalf of the Company or any
Subsidiary in the last six years, (iii) any closing agreement, settlement
agreement or similar agreement or arrangement entered into by or on behalf of
the Company or any Subsidiary with any taxing authority, and (iv) any Tax
sharing agreement, Tax indemnification agreement or similar contract or
arrangement entered into by or on behalf of the Company or any Subsidiary.
(n) For purposes of this Agreement, "Taxes" shall mean all
taxes, charges, fees, levies or other assessments, including, without
limitation, all net income, gross income, gross receipts, sales, use, AD
VALOREM, goods and services, capital, transfer, franchise, profits, license,
withholding, payroll, employment, employer health, excise, severance, stamp,
occupation, real and personal property, social security, estimated, recording,
gift, value assessed, windfall profits or other taxes, customs duties, fees,
assessments or charges of any kind whatsoever, whether computed on a separate,
consolidated, unitary, combined or other basis, together with any interest,
fines, penalties, additions to tax or other additional amounts imposed by any
taxing authority (domestic or foreign). For purposes of this Agreement, "Tax
Return" shall mean any return, declaration, report, estimate, information or
other document (including any documents, statements or schedules attached
thereto) required to be filed with any federal, state, local or foreign tax
authority with respect to Taxes.
SECTION 4.20. LABOR RELATIONS. Except as set forth in the SEC
Reports or Schedule 4.20: (i) each of the Company and the Subsidiaries is, and
has at all times been, in material compliance with all applicable laws, rules,
regulations and orders respecting employment and employment practices, terms and
conditions of employment, wages, hours or work and occupational safety and
health, and is not engaged in any unfair labor practices as defined in the
National Labor Relations Act or other applicable law; (ii) there is no labor
grievance, arbitration, strike, slowdown, stoppage or lockout pending, or, to
the knowledge of the Company, threatened against or affecting the Company or any
of the Subsidiaries; (iii) neither the Company nor any of its Subsidiaries is a
party to or bound by any collective bargaining or similar agreement with any
union or other labor organization or is engaged in any labor negotiations with
any labor union; (iv) there are no proceedings pending between the Company and
any of the Subsidiaries or any of their respective employees before any federal
or state agency; and (v) to the knowledge of the Company, there are no
activities or proceedings of any labor union to organize any non-union employees
of the Company or any of the Subsidiaries.
SECTION 4.21. TRANSACTIONS WITH AFFILIATES. Except as
disclosed in Schedule 4.21 or the SEC reports filed prior to the date of this
Agreement, no present or former affiliate of the Company has, or since December
31, 1998 has had, (i) any interest
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in any property (whether real, personal or mixed and whether tangible or
intangible) used in or pertaining to any of the businesses of the Company or any
of the Subsidiaries, (ii) has had business dealings or a material financial
interest in any transaction with the Company or any of the Subsidiaries (other
than compensation and benefits received in the ordinary course of business as an
employee or director of the Company or any of the Subsidiaries) or (iii) an
equity interest or any other financial or profit interest in any Person that has
had business dealings or a material financial interest in any transaction with
the Company or any of the Subsidiaries.
SECTION 4.22. OFFER DOCUMENTS; PROXY STATEMENT. The Schedule
14D-9 and the Schedule 13E-3 will comply in all material respects with the
Exchange Act and the rules and regulations thereunder. Neither the Schedule
14D-9, the Schedule 13E-3 nor any of the information relating to the Company or
its affiliates provided by or on behalf of the Company specifically for
inclusion in the Schedule TO, the Schedule 13E-3 or the Offer Documents will, at
the respective times the Schedule 14D-9, the Schedule TO and the Offer Documents
or any amendments or supplements thereto are filed with the SEC and are first
published, sent or given to shareholders of the Company, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements made therein, in
light of the circumstances under which they were made, not misleading. No
representation is made by the Company with respect to written information
supplied by Parent or Purchaser specifically for inclusion in the Schedule 14D-9
or the Schedule 13E-3. The proxy statement to be sent to the shareholders of the
Company in connection with the meeting of the Company's shareholders to consider
the Merger (the "Company Shareholders' Meeting") or the information statement to
be sent to such shareholders, as appropriate (such proxy statement or
information statement, as amended or supplemented, is herein referred to as the
"Proxy Statement"), will comply in all material respects with the applicable
requirements of the Exchange Act and the rules and regulations thereunder,
except that no representation or warranty is being made by the Company with
respect to Parent Information. The Proxy Statement will not, at the time the
Proxy Statement (or any amendment or supplement thereto) is filed with the SEC
or first sent to shareholders, at the time of the Company Shareholders Meeting
or at the Effective Time, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading.
SECTION 4.23. BROKERS. No broker, finder or investment banker
(other than SunTrust Equitable Securities and J.P. Morgan) is entitled to any
brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by and
on behalf of
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the Company. The Company has heretofore furnished to Parent true and complete
copies of all agreements and other arrangements between the Company and SunTrust
Equitable Securities and J.P. Morgan.
SECTION 4.24. CONTROL SHARE ACQUISITION. Neither Parts 2 nor 3
of Article 11 of the Georgia Code nor any other "fair price", "moratorium",
"control share acquisition", "interested shareholder" or similar antitakeover
statute or regulation enacted under Georgia law applicable to the Company or any
of its Subsidiaries is applicable to the Offer, the Merger, this Agreement, the
Subscription Agreement or the Voting Agreement or any of the transactions
contemplated by this Agreement, the Subscription Agreement or the Voting
Agreement.
SECTION 4.25. Y2K COMPLIANCE. Except as set forth in the SEC
Reports, all items, products, software, components and systems used in and
material to the operation of the business of the Company and the Subsidiaries,
which incorporate the processing of dates or date-related data (including, but
not limited to, representing, calculating, comparing and sequencing), including,
but not limited to, computer systems, infrastructure items, software
applications, hardware and related equipment and utilities, developed, in whole
or part, by the Company or any of the Subsidiaries are currently Y2K-compliant.
Except as set forth in Schedule 4.22, the Company has obtained commitments that
all vendors that are material to the Company and the Subsidiaries are
Y2K-compliant.
SECTION 4.26. DISCLOSURE. No representation or warranty by the
Company in this Agreement and no statement contained in any document (including,
without limitation, the Schedules hereto), certificate, or other writing
furnished or to be furnished by the Company to Parent pursuant to the provisions
hereof or in connection with the transactions contemplated hereby, contains or
will contain any untrue statement of material facts or omits or will omit to
state any material fact necessary, in light of the circumstances under which it
was made, in order to make the statements herein or therein not misleading.
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ARTICLE V.
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 5.1. CONDUCT OF BUSINESS BY THE COMPANY PENDING THE
CLOSING. From the date of this Agreement to the Effective Time, except as
expressly contemplated by this Agreement, the Company shall, and shall cause
each of the Subsidiaries to (i) carry on its respective businesses in the
ordinary course, (ii) use all reasonable best efforts to preserve intact its
current business organizations and keep available the services of its current
officers and key employees, (iii) use all reasonable best efforts to preserve
its relationships with customers, suppliers, third party payors and other
Persons with which it has business dealings, (iv) comply in all material
respects with all laws and regulations applicable to it or any of its
properties, assets or business and (v) maintain in full force and effect all
Authorizations necessary for such business. Without limiting the generality of
the foregoing, except as (x) expressly contemplated by this Agreement or (y)
set forth in Schedule 5.1, the Company shall not, and shall cause each of the
Subsidiaries not to:
(a) amend its Articles of Incorporation or By-Laws or similar
organizational documents or change the number of directors constituting its
entire board of directors;
(b) (i)(A) declare, set aside or pay any dividend or other
distribution payable in cash, stock or property with respect to its capital
stock or other equity interests, except that a wholly owned Subsidiary may
declare and pay a dividend or make advances to its parent or the Company or (B)
redeem, purchase or otherwise acquire, directly or indirectly, any of its
capital stock or other securities; (ii) issue, sell, pledge, dispose of or
encumber any (A) additional shares of its capital stock or other equity
interests, (B) securities convertible into or exchangeable for, or options,
warrants, calls, commitments or rights of any kind to acquire, any shares of
its capital stock or other equity interests, or (C) of its other securities,
other than Shares issued upon the exercise of Options outstanding on the date
hereof in accordance with the Option Plans as in effect on the date hereof; or
(iii) split, combine or reclassify any of its outstanding capital stock or
other equity interests;
(c) acquire or agree to acquire (A) by merging or
consolidating with, or by purchasing a substantial portion of the assets of, or
by any other manner, any business or any corporation, partnership, joint
venture, association or other business organization or division thereof
(including entities which are Subsidiaries) or (B) any assets, including real
estate, in excess of $100,000, except purchases in the ordinary course of
business consistent with past practice;
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(d) authorize or make any single capital expenditure in
excess of $50,000 or capital expenditures in excess of $500,000 in the
aggregate;
(e) except in the ordinary course of business, amend or
terminate any Company Material Contract, or waive, release or assign any
material rights or claims;
(f) transfer, lease, license, sell, mortgage, pledge, dispose
of, or encumber any property or assets other than in the ordinary course of
business and consistent with past practice;
(g) (i) enter into or amend any employment or severance
agreement with or, except in accordance with the existing policies of the
Company, grant any severance or termination pay to any officer, director or key
employee of the Company or any Subsidiary; or (ii) hire or agree to hire any
new or additional key employees or officers;
(h) except as required to comply with applicable law, (A)
adopt, enter into, terminate, amend or increase the amount or accelerate the
payment or vesting of any benefit or award or amount payable under any Company
Employee Benefit Plan or other arrangement for the current or future benefit or
welfare of any director, officer or current or former employee, (B) increase in
any manner the compensation or fringe benefits of, or pay any bonus to, any
director, officer or, other than in the ordinary course of business consistent
with past practice, employee, (C) pay any benefit not provided for under any
Benefit Plan, (D) grant any awards under any bonus, incentive, performance or
other compensation plan or arrangement or Company Employee Benefit Plan
(including the grant of stock options, stock appreciation rights, stock based
or stock related awards, performance units or restricted stock, or the removal
of existing restrictions in any Company Employee Benefit Plans or agreements or
awards made thereunder) or (E) take any action to fund or in any other way
secure the payment of compensation or benefits under any employee plan,
agreement, contract or arrangement or Company Employee Benefit Plan;
(i) (i) incur or assume any long-term debt, or except in the
ordinary course of business in amounts consistent with past practice, incur or
assume any short-term indebtedness; (ii) incur or modify any material
indebtedness or other liability; (iii) assume, guarantee, endorse or otherwise
become liable or responsible (whether directly, contingently or otherwise) for
the obligations of any other Person, except in the ordinary course of business
and consistent with past practice; (iv) make any loans, advances or capital
contributions to, or investments in, any other Person (other than to wholly
owned Subsidiaries or customary loans or advances to employees in accordance
with past practice); (v) settle any claims other than in the ordinary course of
business, in accordance with past practice, and without
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admission of liability; or (vi) enter into any material commitment or
transaction;
(j) make, revoke or change the accounting methods, including
accounting methods with respect to Taxes, used by it unless required by
generally accepted accounting principles;
(k) make any Tax election or settle or compromise any Tax
liability;
(l) (i) settle or compromise any claim, litigation or other
legal proceeding, other than in the ordinary course of business consistent with
past practice in an amount not involving more than $100,000 or (ii) pay,
discharge or satisfy any other claims, liabilities or obligations (absolute,
accrued, asserted or unasserted, contingent or otherwise), other than the
payment, discharge or satisfaction of (A) any such other claims, liabilities or
obligations, in the ordinary course of business and consistent with past
practice, or (B) of any such other claims, liabilities or obligations reflected
or reserved against in, or contemplated by, the consolidated financial
statements (or the notes thereto) of the Company;
(m) except in the ordinary course of business consistent with
past practice, waive the benefits of, or agree to modify in any manner, any
confidentiality, standstill or similar agreement to which the Company or any
Subsidiary is a party;
(n) permit any insurance policy naming the Company or any
Subsidiary as a beneficiary or a loss payable payee to be canceled or
terminated without notice to Parent, except in the ordinary course of business
and consistent with past practice;
(o) take or omit to take any action which would make any of
the representations or warranties of the Company contained in this Agreement
untrue and incorrect in any material respect as of the date when made if such
action had then been taken or omitted, or would result in any of the conditions
set forth in Annex I hereto or the conditions set forth in Article VII hereof
not being satisfied; or
(p) enter into an agreement, contract, commitment or
arrangement to do any of the foregoing, or to authorize, recommend, propose or
announce an intention to do any of the foregoing.
SECTION 5.2. NO SOLICITATION. (a) The Company shall not, and
it shall cause the Subsidiaries and the officers, directors, employees, agents
and representatives of the Company or any of the Subsidiaries (collectively,
the Company Representatives) not to, (i) solicit or initiate, or encourage,
directly or indirectly, any inquiries regarding or the submission of, any
Takeover Proposal (as defined below), (ii) participate in any discussions or
negotiations regarding, or furnish to any
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Person any information or data with respect to, or take any other action to
knowingly facilitate the making of any proposal that constitutes, or may
reasonably be expected to lead to, any Takeover Proposal or (iii) enter into
any agreement with respect to any Takeover Proposal or approve or resolve to
approve any Takeover Proposal; PROVIDED, HOWEVER, that nothing contained in
this Section 5.2 or any other provision hereof shall prohibit the Company or
the Board of Directors from (A) taking and disclosing to the Company's
shareholders a position with respect to a tender or exchange offer by a third
party pursuant to Rules 14d-9 and 14e-2 promulgated under the Exchange Act or
(B) making such disclosure to the Company's shareholders as, in the good faith
judgment of the Board of Directors, after receiving advice from outside
counsel, is required under applicable law, provided that the Company may not,
except as permitted by Section 5.2(b), withdraw or modify, or propose to
withdraw or modify, its approval or recommendation of this Agreement, the
Subscription Agreement or the Voting Agreement or the transactions contemplated
hereby or thereby, including the Offer or the Merger, or approve or recommend,
or propose to approve or recommend any Takeover Proposal, or enter into any
agreement with respect to any Takeover Proposal. Upon execution of this
Agreement, the Company shall, and it shall cause the Company Representatives
to, immediately cease any existing activities, discussions or negotiations with
any parties conducted heretofore with respect to any of the foregoing, and it
shall promptly request that each Person who has heretofore executed a
confidentiality agreement in connection with such Person's consideration of a
Takeover Proposal return all confidential information heretofore furnished to
such Person by or on behalf of the Company. Notwithstanding the foregoing,
prior to the time of acceptance of Shares for payment pursuant to the Offer,
the Company may furnish information concerning its business, properties or
assets to any Person or group pursuant to confidentiality agreements with terms
and conditions similar to the Confidentiality Agreement, dated April 27, 1999
(the "Confidentiality Agreement"), between the Company and E.M. Warburg, Pincus
& Co., LLC ("Warburg") (provided that such confidentiality agreements may not
include any provision granting any such Person or group an exclusive right to
negotiate with the Company), and may negotiate and participate in discussions
and negotiations with such Person or group concerning a Takeover Proposal if:
(x) such Person or group has submitted an unsolicited bona fide written
proposal which is, or is reasonably likely to result in, a Superior Proposal;
and (y) the Board of Directors determines in good faith, based upon advice of
outside counsel, that such action is required to discharge the Board's
fiduciary duties to the Company's shareholders under the Georgia Code. The
Company shall not release any third party from, or waive any provision of, any
such confidentiality agreement or any other confidentiality or standstill
agreement to which the Company is a party.
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The Company will promptly notify Parent of the existence of
any proposal, discussion, negotiation or inquiry received by the Company, and
the Company will immediately communicate to Parent the terms of any proposal,
discussion, negotiation or inquiry which it may receive (and will promptly
provide to Parent copies of any written materials received by the Company in
connection with such proposal, discussion, negotiation or inquiry) and the
identity of the Person making such proposal or inquiry or engaging in such
discussion or negotiation. The Company will promptly provide to Parent any
non-public information concerning the Company provided to any other Person
which was not previously provided to Parent. The Company will keep Parent fully
informed of the status and details (including amendments or proposed
amendments) to any such Takeover Proposal.
As used in this Agreement, the following terms have the
meanings set forth below:
"Superior Proposal" means an unsolicited bona fide written
proposal by a Third Party to acquire, directly or indirectly, for consideration
consisting solely of cash and/or marketable securities, all the Shares then
outstanding or all or substantially all of the assets of the Company, and (i)
otherwise on terms which the Board of Directors determines in good faith to be
more favorable to the Company's shareholders than the Offer and the Merger
(based on a written opinion of the Company's independent financial advisor that
the value of the consideration provided for in such proposal exceeds the value
of the consideration provided for in the Offer and the Merger), (ii) for which
financing, to the extent required, is then committed, (iii) which, in the good
faith reasonable judgment of the Board of Directors of the Company, is
reasonably likely to be consummated without undue delay and (iv) which is
subject to no more conditions than those set forth in Annex I hereto.
"Takeover Proposal" means any inquiry, proposal or offer,
whether in writing or otherwise, from a Third Party to acquire beneficial
ownership (as determined under Rule 13d-3 of the Exchange Act) of all or a
material portion of the assets of the Company or any of its Subsidiaries or 15%
or more of any class of equity securities of the Company or any of the
Subsidiaries pursuant to a merger, consolidation or other business combination,
sale of shares of capital stock, sale of assets, tender offer, exchange offer
or similar transaction with respect to either the Company or any of the
Subsidiaries, including any single or multi-step transaction or series of
related transactions, which is structured to permit such Third Party to acquire
beneficial ownership of any material portion of the assets of, or 15% or more
of the equity interest in either the Company or any of the Subsidiaries.
"Third Party" means any Person or group other than Parent,
Purchaser or any affiliate thereof.
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(b) Except as set forth in this Section 5.2(b), neither the
Board of Directors nor any committee thereof shall (i) withdraw or modify, or
propose to withdraw or modify, in a manner adverse to Parent or Purchaser, the
approval or recommendation by the Board of Directors or any such committee of
this Agreement, the Subscription Agreement or the Voting Agreement or the
transactions contemplated hereby or thereby, including the Offer or the Merger,
(ii) approve or recommend, or propose to approve or recommend, any Takeover
Proposal or (iii) enter into any agreement with respect to any Takeover
Proposal. Notwithstanding the foregoing, prior to the time of acceptance for
payment of Shares pursuant to the Offer, the Board of Directors may withdraw or
modify its approval or recommendation of this Agreement or the Subscription
Agreement or the transactions contemplated hereby or thereby, including the
Offer or the Merger, approve or recommend a Superior Proposal, or enter into an
agreement with respect to a Superior Proposal, in each case if (A) the Company
shall have received a Superior Proposal which is pending at the time the
Company determines to take such action, (B) the Board of Directors shall have
determined in good faith, based upon advice of outside counsel, that such
action is required to discharge the Board of Director's fiduciary duties to the
Company's stockholders under the Georgia Code, (C) at least five business days
shall have passed following Parent's receipt of written notice from the Company
advising Parent that the Board of Directors has received a Superior Proposal
which it intends to accept, specifying the material terms and conditions of
such Superior Proposal, identifying the Person making such Superior Proposal,
but only if the Company shall have caused its financial and legal advisors to
negotiate in good faith with Parent to make such adjustments to the terms and
conditions of this Agreement as would enable the Company to proceed with the
transactions contemplated herein on such adjusted terms and (D) concurrently
with taking such action the Company shall have terminated this Agreement
pursuant to and in accordance with Section 8.1(c)(i) hereof.
ARTICLE VI.
ADDITIONAL AGREEMENTS
SECTION 6.1. PROXY STATEMENT. As promptly as practicable
after the consummation of the Offer and if required by the Exchange Act, the
Company shall prepare and file with the SEC, and shall use all reasonable
efforts to have cleared by the SEC, and promptly thereafter shall mail to
shareholders, the Proxy Statement. The Proxy Statement shall contain the
recommendation of the Board of Directors that the Company's shareholders
approve this Agreement and the Merger. Parent will cooperate with the Company
in preparing such Proxy Statement.
SECTION 6.2. MEETING OF SHAREHOLDERS OF THE COMPANY. Following
the consummation of the Offer, the Company shall promptly take all action
necessary in accordance with the Georgia
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Code and its Articles of Incorporation and By-Laws to convene the Company
Shareholders' Meeting, if such meeting is required. The shareholder vote
required for approval of the Merger will be no greater than that set forth in
the Georgia Code. The Company shall use its best efforts to solicit from
shareholders of the Company proxies in favor of the Merger and shall take all
other action necessary or, in the reasonable opinion of Parent, advisable to
secure any vote of shareholders required by the Georgia Code to effect the
Merger. Notwithstanding the foregoing, if Purchaser or any other subsidiary of
Parent shall acquire at least 90 percent of the outstanding Shares on a fully
diluted basis, and provided that the conditions set forth in Article VII shall
have been satisfied or waived, the Company shall, at the request of Parent,
take all necessary and appropriate action to cause the Merger to become
effective as soon as practicable after such acquisition, without the approval
of the shareholders of the Company, in accordance with Section 14-2-1104 of the
Georgia Code.
SECTION 6.3. COMPLIANCE WITH LAW. Each of the Company, Parent
and Purchaser will comply in all material respects with all applicable laws and
with all applicable rules and regulations of any Governmental Entity in
connection with its execution, delivery and performance of this Agreement and
the transactions contemplated hereby.
SECTION 6.4. NOTIFICATION OF CERTAIN MATTERS. The Company
shall give prompt notice to Parent of (i) the occurrence, or non-occurrence of
any event whose occurrence, or non-occurrence would be likely to cause either
(A) any representation or warranty contained in this Agreement to be untrue or
inaccurate in any respect at any time from the date hereof to the Effective
Time or (B) any condition set forth in Annex I to be unsatisfied in any
material respect at any time from the date hereof to the date Parent purchases
Shares pursuant to the Offer and (ii) any failure of the Company, or any of its
officers, directors, employees or agents, to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder; provided, however, that the delivery of any notice pursuant to this
Section 6.4 shall not limit or otherwise affect the remedies available
hereunder to Parent.
SECTION 6.5. ACCESS TO INFORMATION. From the date hereof to
the Effective Time, the Company shall, and shall cause its Subsidiaries,
officers, directors, employees, auditors and agents to, afford the officers,
employees and agents of Parent and Purchaser reasonable access at all
reasonable times to its officers, employees, agents, properties, offices and
other facilities and to all books and records, and shall promptly furnish
Parent and Purchaser with (a) all financial, operating and other data and
information as Parent or Purchaser, through its officers, employees or agents,
may reasonably request and (b) a copy of each report, schedule and other
document filed or received by the Company or any of the Subsidiaries during
such
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period pursuant to the requirements of applicable securities laws.
SECTION 6.6. PUBLIC ANNOUNCEMENTS. So long as this Agreement
is in effect, Parent and the Company shall consult with each other before
issuing any press release or otherwise making any public statements with
respect to the Offer or the Merger and shall not issue, or permit their
affiliates to issue, any such press release or make any such public statement
before such consultation, except as may be required by law. Notwithstanding the
foregoing, the Company may issue a press release describing Section 5.2 of this
Agreement in a form approved by Parent prior to its issue.
SECTION 6.7. REASONABLE BEST EFFORTS; COOPERATION. Upon the
terms and subject to the conditions hereof, each of the parties hereto shall
use all reasonable best efforts to obtain in a timely manner all necessary
waivers, consents and approvals and to effect all necessary registrations and
filings, and to use all reasonable best efforts to take, or cause to be taken,
all other actions and to do, or cause to be done, all other things necessary,
proper or advisable to cause all conditions to the Offer to be satisfied and to
consummate and make effective as promptly as practicable the transactions
contemplated by this Agreement, including, without limitation, (i) cooperating
in responding to inquiries from, and making presentations to, regulatory
authorities and (ii) defending against and responding to any action, suit,
proceeding, or investigation, whether judicial or administrative, challenging
or relating to this Agreement, the Subscription Agreement or the Voting
Agreement or the transactions contemplated hereby or thereby, including seeking
to have any stay or temporary restraining order entered by any court or other
Governmental Entity vacated or reversed. Notwithstanding anything herein to the
contrary, in connection with any filing or submission or other action required
to be made or taken by any party to effect the Merger and all other
transactions contemplated hereby, the Company shall not, without the prior
written consent of Parent, commit to any divestiture transaction, and Parent
shall not be required to divest or hold separate or otherwise take or commence
to take any action that, in the reasonable discretion of Parent, limits its
freedom of action with respect to, or its ability to retain, the Company or any
of Parent's affiliates or any material portion of the Company's assets or such
affiliates' assets.
SECTION 6.8. AGREEMENT TO DEFEND AND INDEMNIFY.
(a) It is understood and agreed that, subject to the
limitations on indemnification contained in the Georgia Code, the Company
shall, to the fullest extent permitted under applicable law and regardless of
whether the Merger becomes effective, indemnify and hold harmless, and after
the Effective Time, the Surviving Corporation shall for a period of six years
following the Effective Time, to the fullest extent permitted under
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applicable law, indemnify and hold harmless, each director, officer, employee,
fiduciary and agent of the Company or any Subsidiary and their respective
subsidiaries and affiliates including, without limitation, officers and
directors serving as such on the date hereof (collectively, the "Indemnified
Parties") against any costs or expenses (including reasonable attorneys' fees),
judgments, fines, losses, claims, damages, liabilities and amounts paid in
settlement in connection with any claim, action, suit, proceeding or
investigation arising out of or pertaining to any of the transactions
contemplated hereby, including without limitation liabilities arising under the
Securities Act or the Exchange Act in connection with the Offer or the Merger,
and in the event of any such claim, action, suit, proceeding or investigation
(whether arising before or after the Effective Time), (i) the Company or the
Surviving Corporation shall pay the reasonable fees and expenses of counsel
selected by the Indemnified Parties, which counsel shall be reasonably
satisfactory to the Company or the Surviving Corporation, promptly as
statements therefor are received, and (ii) the Company and the Surviving
Corporation will cooperate in the defense of any such matter; PROVIDED,
HOWEVER, that neither the Company nor the Surviving Corporation shall be liable
for any settlement effected without its prior written consent (which consent
shall not be unreasonably withheld); and PROVIDED FURTHER, that neither the
Company nor the Surviving Corporation shall be obliged pursuant to this Section
6.8 to pay the fees and disbursements of more than one counsel for all
Indemnified Parties in any single action except to the extent that, in the
opinion of counsel for the Indemnified Parties, two or more of such Indemnified
Parties have conflicting interests in the outcome of such action. For two years
after the Effective Time, the Surviving Corporation shall be required to
maintain or obtain officers' and directors' liability insurance covering the
Indemnified Parties who are currently covered by the Company's officers and
directors liability insurance policy on terms not less favorable than those in
effect on the date hereof in terms of coverage and amounts; PROVIDED, HOWEVER,
that if the aggregate annual premiums for such insurance at any time during
such period exceed the per annum rate of premium paid by the Company for such
insurance as of the date of this Agreement, then the Surviving Corporation
shall provide the maximum coverage that will then be available at an annual
premium equal to 150% of such per annum rate as of the date of this Agreement.
The Surviving Corporation shall continue in effect the indemnification
provisions currently provided by the Third Amended and Restated Articles of
Incorporation and By-Laws of the Company for a period of not less than six
years following the Effective Time. This Section 6.8 shall survive the
consummation of the Merger. Notwithstanding anything in this Section 6.8 to the
contrary, neither the Company nor the Surviving Corporation shall have any
obligation under this Section 6.8 to indemnify any Indemnified Party against
any cost, expense, judgment, fine, loss, claim, damage, liability or settlement
amount found to have resulted solely from such Indemnified Person's own gross
negligence or willful misconduct.
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This covenant shall survive any termination of this Agreement pursuant to
Section 8.1 hereof. Notwithstanding Section 9.7 hereof, this Section 6.8 is
intended to be for the benefit of and to grant third-party rights to
Indemnified Parties whether or not parties to this Agreement, and each of the
Indemnified Parties shall be entitled to enforce the covenants contained
herein.
(b) If the 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 of such consolidation or
merger or (ii) transfers all or substantially all 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 the Surviving Corporation assume the
obligations set forth in this Section 6.8.
SECTION 6.9. STATE TAKEOVER LAWS. If any state takeover
statute or other similar statute or regulation becomes or is deemed to become
applicable to the Offer, the Merger, this Agreement, the Subscription Agreement
or the Voting Agreement or any of the transactions contemplated by this
Agreement, the Subscription Agreement or the Voting Agreement, the Company
shall promptly take all reasonable action necessary to render such statute or
regulation inapplicable to all of the foregoing.
ARTICLE VII.
CONDITIONS OF MERGER
SECTION 7.1. CONDITIONS FOR EACH PARTY'S OBLIGATIONS TO
EFFECT THE MERGER. The respective obligations of each party to effect the
Merger shall be subject to the satisfaction on or prior to the Effective Time
of the following conditions:
(a) Purchaser shall have made, or caused to be made, the
Offer and shall have purchased, or caused to be purchased, the Shares pursuant
to the Offer;
(b) The Merger and this Agreement shall have been approved
and adopted by the requisite vote of the shareholders of the Company, if
required by the Georgia Code or the Company's Third Amended and Restated
Articles of Incorporation;
(c) No statute, rule, regulation, judgment, writ, decree,
order or injunction shall have been promulgated, enacted, entered or enforced,
and no other action shall have been taken, by any Governmental Entity that in
any of the foregoing cases has the effect of making illegal or directly or
indirectly restraining, prohibiting or restricting the consummation of the
Merger; and
(d) Any waiting period applicable to the Merger under the HSR
Act shall have expired or have been terminated.
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SECTION 7.2. CONDITIONS FOR OBLIGATIONS OF PARENT AND
PURCHASER. The obligations of Parent and Purchaser to effect the Merger shall
be further subject to the satisfaction on or prior to the Effective Time of the
following additional conditions:
(a) The representations and warranties of the Company set
forth in this Agreement that are qualified by reference to materiality or a
Material Adverse Effect shall be true and correct, and any such representations
and warranties that are not so qualified shall be true and correct in all
material respects, in each case as if such representations and warranties were
made at the Effective Time;
(b) The Company shall have performed in all material respects
all obligations and complied in all material respects with all agreements and
covenants of the Company to be performed or complied with by it under this
Agreement at or prior to the Effective Time; and
(c) All governmental consents, orders and approvals required
for the consummation of the Merger (including, without limitation, all such
consents, orders and approvals as are necessary to prevent any Authorization
from being revoked, suspended or otherwise adversely affected, and to prevent
any penalty from being imposed) shall have been obtained and shall be in
effect.
SECTION 7.3. CONDITIONS FOR OBLIGATIONS OF THE COMPANY. The
obligations of the Company to effect the Merger shall be further subject to the
satisfaction on or prior to the Effective Time of the following additional
conditions:
(a) The representations and warranties of Parent and
Purchaser set forth in this Agreement that are qualified by reference to
materiality or a Material Adverse Effect shall be true and correct, and any
such representations and warranties that are not so qualified shall be true and
correct in all material respects, in each case as if such representations and
warranties were made at the Effective Time; and
(b) Parent and Purchaser shall have performed in all material
respects all obligations and complied in all material respects with all
agreements and covenants of each of Parent and Purchaser to be performed or
complied with by it under this Agreement at or prior to the Effective Time.
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ARTICLE VIII.
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.1. TERMINATION. This Agreement may be terminated
and the Merger may be abandoned at any time prior to the Effective Time,
whether before or after approval of matters presented in connection with the
Merger by the shareholders of the Company:
(a) By the mutual written consent of Parent and the Company;
or
(b) By either of Parent or the Company if any Governmental
Entity shall have issued an order, decree or ruling or taken any other action
(which order, decree or ruling or other action each party hereto shall use its
reasonable best efforts to have vacated or reversed), in each case permanently
restraining, enjoining or otherwise prohibiting the transactions contemplated
by this Agreement and such order, decree, ruling or other action shall have
become final and non-appealable.
(c) By the Company:
(i) if the Company has approved a Superior Proposal
in accordance with Section 5.2(b), provided the Company has complied
with all provisions thereof, including the notice provisions therein,
and that it makes simultaneous payment of the Expenses and the
Termination Fee (as defined below); or
(ii) if Parent or Purchaser shall have terminated
the Offer or the Offer expires without Parent or Purchaser, as the
case may be, purchasing any shares pursuant thereto; provided that the
Company may not terminate this Agreement pursuant to this Section
8.1(c)(ii) if the Company is in material breach of this Agreement; or
(iii) if Parent, Purchaser or any of their
affiliates shall have failed to commence the Offer on or prior to 15
business days following the date of the initial public announcement of
the Offer; provided that the Company may not terminate this Agreement
pursuant to this Section 8.1(c)(iii) if the Company is in material
breach of this Agreement; or
(iv) if Parent or Purchaser shall have breached in
any material respect any of its representations, warranties, covenants
or other agreements contained in this Agreement which breach or
failure to perform is incapable of being cured or has not been cured
by the earlier of (x) ten business days following written notice
thereof to Parent from the Company and (y) the scheduled expiration of
the Offer; or
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(v) if the Offer shall not have expired or been
terminated on or before June 30, 2000; PROVIDED, HOWEVER, that if on
such date any applicable waiting period under the HSR Act shall not
have expired or been terminated, or any of the conditions in clauses
(f), (g) or (h) in Annex I hereto exist such date shall be extended to
July 30, 2000 (such date, as it may be extended, the "Termination
Date"); provided further that the Company may not terminate this
Agreement pursuant to this Section 8.1(c)(v) if the Company is in
material breach of this Agreement.
(d) By Parent or Purchaser:
(i) if prior to the purchase of the Shares pursuant
to the Offer, the Board of Directors shall have withdrawn, or modified
or changed in a manner adverse to Parent or Purchaser its approval or
recommendation of the Offer, this Agreement, the Merger, the
Subscription Agreement or the Voting Agreement or shall have approved
a Takeover Proposal; or
(ii) if Parent or Purchaser shall have terminated
the Offer without Parent or Purchaser purchasing any Shares
thereunder, provided that Parent or Purchaser may not terminate this
Agreement pursuant to this Section 8.1(d)(ii) if Parent or Purchaser
is in material breach of this Agreement; or
(iii) if, due to an occurrence that if occurring
after the commencement of the Offer would result in a failure to
satisfy any of the conditions set forth in Annex I hereto, Parent,
Purchaser, or any of their affiliates shall have failed to commence
the Offer on or prior to 15 business days following the date of the
initial public announcement of the Offer; or
(iv) any Person or "group" (as defined in Section
13(d)(3) of the Exchange Act), other than Parent, Purchaser or their
affiliates or any group of which any of them is a member shall have
acquired beneficial ownership (as determined pursuant to Rule 13d-3
promulgated under the Exchange Act) of 15% or more of the Shares; or
(v) if the Company receives a Takeover Proposal from
any Person (other than Parent or Purchaser), and the Board of
Directors takes a neutral position or makes no recommendation with
respect to such Takeover Proposal after a reasonable amount of time
(and in no event more than 30 days following such receipt) has elapsed
for the Board of Directors to review and make a recommendation with
respect to such Takeover Proposal; or
(vi) if the Company, or any of the Company
Representatives, shall take any of the actions described in
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clauses (i) or (ii) of Section 5.2(a) hereof, and such action is not
permitted by this Agreement; or
(vii) if the Company shall have breached in any
material respect any of its representations, warranties, covenants or
other agreements contained in this Agreement (other than the covenants
and agreements in clauses (i) and (ii) of Section 5.2(a)) which breach
or failure to perform is incapable of being cured or has not been
cured by the earlier of (x) ten business days following written notice
thereof to the Company from Parent and (y) the scheduled expiration of
the Offer; or
(viii) if the Offer shall not have expired or been
terminated on or before the Termination Date; provided that Parent or
Purchaser may not terminate this Agreement pursuant to this Section
8.1(d)(viii) if the Parent or Purchaser is in material breach of this
Agreement.
SECTION 8.2. EFFECT OF TERMINATION. (a) In the event of
termination of this Agreement by either the Company or Parent or Purchaser as
provided in Section 8.1, this Agreement shall forthwith become void and have no
effect, without any liability or obligation on the part of Parent, Purchaser or
the Company, other than the provisions of this Article VIII and as provided in
Section 9.1 and except that nothing herein shall relieve any party for breach
of any of its representations, warranties, covenants or agreements set forth in
this Agreement.
(b) If (x) Parent or Purchaser terminates this Agreement
pursuant to Section 8.1(d)(i), 8.1(v) or 8.1(d)(vi) or (y) the Company
terminates this Agreement pursuant to Section 8.1(c)(i), then in each case, the
Company shall pay, or cause to be paid to Parent, at the time of termination,
an amount equal to $2 million (the "Termination Fee") plus an amount equal to
the actual and reasonably documented out-of-pocket expenses of Parent,
Purchaser or Warburg or any affiliate of Warburg incurred by any such person in
connection with the Offer, the Merger, this Agreement and the consummation of
the transactions contemplated hereby, including, without limitation, the fees
and expenses of any such person's counsel and accountants as well as all fees
and expenses payable to all banks, investment banking firms, and other
financial institutions and Persons and their respective agents and counsel
incurred in connection with acting as any such person's financial advisor with
respect to, or arranging or committing to provide or providing any financing
for, the transactions contemplated hereby (the "Expenses"); provided that in no
event shall the Company be obligated to pay more than $1 million in Expenses.
In addition, if this Agreement is terminated by Parent pursuant to Section
8.1(d)(ii) or Section 8.1(d)(viii) or by the Company pursuant to Section
8.1(c)(ii) or Section 8.1(c)(v) and at the time of such termination, Parent is
not in material breach of this Agreement and the Minimum Condition has not been
satisfied, then the Company shall pay to
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Parent, at the time of termination, the Expenses, and, if the Company shall
thereafter, within 12 months after such termination, enter into an agreement
with respect to a Takeover Proposal, then the Company shall pay the Termination
Fee concurrently with entering into any such agreement.
ARTICLE IX.
GENERAL PROVISIONS
SECTION 9.1. NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND
AGREEMENTS. The representations, warranties and agreements in this Agreement
shall terminate at the Effective Time or the termination of this Agreement
pursuant to Section 8.1, as the case may be, except as provided in Section 8.2
and except that the agreements set forth in Article II and Sections 6.8 and 9.3
shall survive the Effective Time indefinitely and those set forth in Article
VIII and Section 9.3 shall survive termination indefinitely.
SECTION 9.2. NOTICES. All notices and other communications
given or made pursuant hereto shall be in writing and shall be deemed to have
been duly given or made (i) as of the date delivered or sent by facsimile if
delivered personally or by facsimile, and (ii) on the third business day after
deposit in the U.S. mail, if mailed by registered or certified mail (postage
prepaid, return receipt requested), in each case to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice, except that notices of changes of address shall be effective
upon receipt):
(a) if to Parent or Purchaser
Hilltopper Holding Corp.
Hilltopper Acquisition Corp.
c/o Warburg, Pincus & Co.
466 Lexington Avenue
New York, New York 10017
Attention: Joel Ackerman
Facsimile: (212) 878-9351
With a copy to:
Willkie Farr & Gallagher
787 Seventh Avenue
New York, New York 10019
Attention: Steven J. Gartner, Esq.
Facsimile: (212) 728-8111
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(b) if to the Company:
Centennial HealthCare Corporation
400 Perimeter Center Terrace
Suite 650
Atlanta, Georgia 30346
Attention: Daryl Griswold, Esq.
Facsimile: (770) 730-1268
With copies to:
King & Spalding
191 Peachtree Street
Atlanta, Georgia 30303-1763
Attention: Paul A. Quiros, Esq.
Facsimile: (404) 572-5100
Kilpatrick Stockton LLP
1100 Peachtree Street, Suite 2800
Atlanta, Georgia 30309-4530
Attention: David A. Stockton, Esq.
Facsimile: (404) 815-6555
SECTION 9.3. EXPENSES. Except as set forth in Section 8.2(b)
or the following sentence, all fees, costs and expenses incurred in connection
with this Agreement and the transactions contemplated hereby shall be paid by
the party incurring such fees, costs and expenses. Promptly following the
Effective Time, the Company shall pay or, to the extent previously paid,
reimburse Parent, Purchaser or Warburg or any affiliate of Warburg, as
applicable, for, all fees, costs and expenses incurred by any such person in
connection with the Merger Agreement and the transactions contemplated by that
Agreement.
SECTION 9.4. CERTAIN DEFINITIONS. For purposes of this
Agreement, the term:
(a) "affiliate" of a Person means a Person that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, the first mentioned Person;
(b) "control" (including the terms "controlled by" and "under
common control with") means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of a Person,
whether through the ownership of stock, as trustee or executor, by contract or
credit arrangement or otherwise; and
(c) "Person" means an individual, corporation, partnership,
limited liability company, association, trust, unincorporated organization or
other entity.
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SECTION 9.5. HEADINGS. The headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
SECTION 9.6. SEVERABILITY. If any term or other provision of
this Agreement is invalid, illegal or incapable of being enforced by any rule
of law, or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic or
legal substance of the transactions contemplated hereby is not affected in any
manner adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties
hereto shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible in an acceptable
manner to the end that transactions contemplated hereby are fulfilled to the
maximum extent possible.
SECTION 9.7. ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES.
This Agreement and the Confidentiality Agreement constitute the entire
agreement and supersede any and all other prior agreements and undertakings,
both written and oral, among the parties, or any of them, with respect to the
subject matter hereof. This Agreement is not intended to confer upon any Person
other than the parties hereto any rights or remedies hereunder, except as
otherwise provided herein and except that Sections 8.2(b) and 9.3 are intended
to be for the benefit of and to grant third-party rights to Warburg, and
Warburg shall be entitled to enforce the covenants contained in such sections.
SECTION 9.8. ASSIGNMENT. This Agreement shall not be assigned
by operation of law or otherwise, except that Parent and Purchaser may assign
all or any of their rights hereunder to any affiliate of Parent provided that
no such assignment shall relieve the assigning party of its obligations
hereunder.
SECTION 9.9. GOVERNING LAW. This Agreement shall be governed
by, and construed in accordance with, the laws of the State of Georgia
applicable to contracts executed in and to be performed entirely within that
State.
SECTION 9.10. AMENDMENT. This Agreement may be amended by the
parties hereto by action taken by Parent and Purchaser, and by action taken by
the Special Committee of the Board of Directors at any time before the
Effective Time; PROVIDED, HOWEVER, that, after approval of the Merger by the
shareholders of the Company, no amendment may be made which would reduce the
amount or change the type of consideration into which each Share will be
converted upon consummation of the Merger. This Agreement may not be amended
except by an instrument in writing signed by the parties hereto.
SECTION 9.11. WAIVER. At any time before the Effective Time,
any party hereto may (a) extend the time for the
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performance of any of the obligations or other acts of the other parties
hereto, (b) waive any inaccuracies in the representations and warranties of the
other parties hereto contained herein or in any document delivered pursuant
hereto and (c) waive compliance by the other parties hereto with any of their
agreements or conditions contained herein. Any agreement on the part of a party
hereto to any such extension or waiver shall be valid only as against such
party and only if set forth in an instrument in writing signed by such party.
The failure of any party hereto to assert any of its rights under this
Agreement or otherwise shall not constitute a waiver of those rights.
SECTION 9.12. COUNTERPARTS. This Agreement may be executed in
one or more counterparts, and by the different parties hereto in separate
counterparts, each of which when executed shall be deemed to be an original but
all of which shall constitute one and the same agreement.
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IN WITNESS WHEREOF, Parent, Purchaser and the Company have
caused this Agreement to be executed as of the date first written above by
their respective officers thereunto duly authorized.
CENTENNIAL HEALTHCARE
CORPORATION
By: /s/ J. Stephen Eaton
----------------------------
HILLTOPPER HOLDING CORP.
By: /s/ David Wenstrup
----------------------------
HILLTOPPER ACQUISITION CORP.
By: /s/ David Wenstrup
----------------------------
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ANNEX I
CONDITIONS TO THE OFFER. Notwithstanding any other provision
of the Offer, 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)
promulgated under the Exchange Act (relating to Parent's obligation to pay for
or return tendered Shares promptly after termination or withdrawal of the
Offer), pay for, and (subject to any such rules or regulations) may delay the
acceptance for payment of any tendered Shares and (except as provided in this
Agreement) amend or terminate the Offer as to any Shares not then paid for if
(i) there shall not have been validly tendered and not withdrawn prior to the
expiration of the Offer a number of shares of Company Common Stock which, when
taken together with the Shares, if any, beneficially owned by Parent,
represents more than 68.5% of the number of shares of Company Common Stock
outstanding on a fully diluted basis (the "Minimum Condition") or (ii) any
applicable waiting period under the HSR Act shall not have expired or been
terminated prior to the expiration of the Offer or (iii) at any time after the
date of this Agreement and before the time of payment for any such Shares
(whether or not any Shares have theretofore been accepted for payment or paid
for pursuant to the Offer), any of the following events shall occur and be
continuing or conditions exists:
(a) there shall be an injunction or other order, decree,
judgment or ruling issued or threatened by a Governmental Entity of competent
jurisdiction or a statute, rule, regulation, executive order or other action
shall have been enacted, promulgated, taken or threatened by a Governmental
Entity of competent jurisdiction which in any such case (i) restrains or
prohibits or seeks to restrain or prohibit the making or consummation of the
Offer or the consummation of the Merger or the performance of the other
transactions contemplated by this Agreement, the Subscription Agreement or the
Voting Agreement, (ii) prohibits or restricts or seeks to prohibit or restrict
the ownership or operation by Parent (or any of its affiliates or subsidiaries)
of any portion of its or the Company's business or assets which is material to
the business of all such entities taken as a whole, or compels Parent (or any
of its affiliates or subsidiaries) to dispose of or hold separate any portion
of its or the Company's business or assets which is material to the business of
all such entities taken as a whole, (iii) imposes or seeks to impose material
limitations on the ability of Parent effectively to acquire or to hold or to
exercise full rights of ownership of the Shares, including, without limitation,
the right to vote the Shares purchased by Purchaser or acquired by Parent under
the Subscription Agreement on all matters properly presented to the
shareholders of the Company, (iv) imposes or seeks to impose any material
limitations on the ability of Parent or any of their respective affiliates or
subsidiaries effectively to control in any material respect the business and
operations of
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the Company and any of the Subsidiaries, or (v) which otherwise is reasonably
likely to have a Material Adverse Effect; or
(b) this Agreement shall have been terminated by the Company
or Parent in accordance with its terms; or
(c) there shall have occurred or been discovered any event,
change or development that, individually or when considered together with any
other matter, has had or is reasonably likely to have a Material Adverse
Effect; or
(d) any of the representations and warranties of the Company
set forth in this Agreement that are qualified by reference to materiality or
Material Adverse Effect shall not be true and correct, or any such
representations and warranties that are not so qualified shall not be true and
correct in any material respects, in each case as if such representations and
warranties were made at the time of such determination; or
(e) the Company shall have failed to perform in any material
respect any obligation or to comply in any material respect with any agreement
or covenant of the Company to be performed or complied with by it under this
Agreement; or
(f) the Company shall have not obtained consents of third
parties listed in Schedule 4.4 to this Agreement (the terms of which consents
shall be reasonably satisfactory to Parent) and delivered evidence of such
consents to Parent; or
(g) the Company's credit agreement shall have not been
amended on terms reasonably satisfactory to Parent; or
(h) all notices, applications, approvals, licenses, consents,
certifications and waivers ("Approvals") required to be furnished to or
obtained from any governmental or regulatory authority or accreditation or
certification agency, including any Approvals in respect of Authorizations,
provider numbers, and program participation rights possessed by the Company and
the Subsidiaries, necessary in order for the Company and the Subsidiaries to
conduct their business following the consummation of the transactions
contemplated by this Agreement in the manner as such business is now and has
heretofore been conducted shall not have been obtained or furnished and any
applicable waiting period or periods shall not have expired (or, if there be no
time limit for waiver or objection, a notice of no-objection or equivalent with
respect thereto shall not have been received by the Company); or
(i) any suit, action, claim, proceeding or investigation
shall have been commenced or be pending by or before any Governmental Entity or
arbitrator, or shall have been, to the Company's knowledge, threatened by any
Governmental Entity, or any QUI TAM action shall have been filed or, to the
Company's knowledge, threatened, relating to any billing or
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claims made or submitted by the Company or any Subsidiary of or to any
Governmental Entity (including any federal or state healthcare or health
benefit program) or any insurance carrier, health maintenance or other managed
care organization, independent physician association or any other third party
payor which, in the case of any of the foregoing taken separately or together,
in the reasonable judgment of Parent either (i) materially adversely affects
the value of the equity of the Company to Parent or (ii) presents a risk
reasonably unacceptable to Parent of subjecting the Company or any Subsidiary
to a material liability or a material amount of damages or, on a going-forward
basis, imposing material limitations on the business of the Company and the
Subsidiaries and/or methods of operation (including any limitations on the
ability of the Company and the Subsidiaries to be reimbursed by any
Governmental Entity, including any federal or state healthcare or health
benefit program); or
(j) there shall have occurred (i) any general suspension of,
or limitation on prices for, trading in securities on any national securities
exchange or the over-the-counter market, (ii) a declaration of a banking
moratorium or any suspension of payments in respect of banks in the United
States, (iii) any limitation (whether or not mandatory) by an government or
Governmental Entity, on the extension of credit by banks or other lending
institutions, (iv) a commencement of a war or armed hostilities or other
national calamity directly involving the United States or (v) in the case of
any of the foregoing existing at the time of the execution of this Agreement, a
material acceleration or worsening thereof; or
(k) the Board of Directors (i) shall have withdrawn, or
modified or changed in a manner adverse to Parent or Purchaser (including by
amendment of the Schedule 14D-9) its approval or recommendation of this
Agreement, the Subscription Agreement or the Voting Agreement or the
transactions contemplated hereby or thereby, including the Offer or the Merger,
(ii) recommended a Takeover Proposal, (iii) shall have adopted any resolution
to effect any of the foregoing, or (iv) upon request of Purchaser, shall fail
to reaffirm its approval or recommendation of the Offer, this Agreement or the
Merger; or
(l) any Person or "group" (as defined in Section 13(d)(3) of
the Exchange Act), other than Parent, Purchaser or their affiliates or any
group of which any of them is a member, shall have acquired beneficial
ownership (as determined pursuant to Rule 13d-3 promulgated under the Exchange
Act) of 15% or more of the Shares; or
(m) any party to the Subscription Agreement or the Voting
Agreement other than the Purchaser, Parent or Warburg shall have breached or
failed to perform any of its agreements under such agreement or breached any of
its representations and warranties in such agreement or any such agreement
shall not be
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valid, binding and enforceable, except for such breaches or failures or
failures to be valid, binding and enforceable that would result in the Minimum
Condition not being satisfied;
which, in the judgment of Parent with respect to each and every matter referred
to above and regardless of the circumstances giving rise to any such condition,
makes it inadvisable to proceed with the Offer or with such acceptance for
payment of or payment for Shares or to proceed with the Merger.
The foregoing conditions are for the sole benefit of Parent
and may be asserted by Purchaser regardless of the circumstances (including any
action or inaction by Purchaser) giving rise to any such conditions and may be
waived by Purchaser in whole or in part at any time and from time to time, in
each case, in the exercise of the good faith judgment of Purchaser and subject
to the terms of this Agreement. The failure by Purchaser at any time to
exercise any of the foregoing rights shall not be deemed a waiver of any such
right and each such right shall be deemed an ongoing right which may be
asserted at any time and from time to time.
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APPENDIX B
OPINION OF J.P. MORGAN SECURITIES, INC.
63
<PAGE> 130
February 25, 2000
Special Committee of the Board of Directors
Centennial HealthCare Corporation
400 Perimeter Center Terrace, Suite 650
Atlanta, Georgia 30346
Attention: Mr. Bob L. Wood
Chairman of the Special Committee
Ladies and Gentlemen:
You have requested our opinion as to the fairness, from a financial point of
view, to the stockholders of Centennial HealthCare Corporation (the
"Company") of the consideration to be paid to them in connection with the
proposed tender offer (the "Tender Offer") for all shares of the Company
Common Stock, par value $0.01 per share (the "Common Stock"), by, and the
proposed merger (the "Merger") of the Company with, Hilltopper Acquisition
Corp. ("Acquisition Sub"), a wholly owned subsidiary of Hilltopper Holdings
Corporation ("Parent"), a company formed at the direction of E.M. Warburg
Pincus & Co., LLC (the "Buyer"). Pursuant to the Agreement and Plan of
Merger, dated as of February 25, 2000 (the "Agreement"), among the Company,
Parent and Acquisition Sub, Acquisition Sub will offer to purchase all shares
of Common Stock in the Tender Offer for $5.50 per share and then will merge
with and into the Company, and each share of Common Stock, issued and
outstanding immediately prior to the effective time of the Merger (other than
shares contributed to Parent by certain institutional shareholders of the
Company and certain members of senior management of the Company (the
"Contributing Shareholders"), dissenting shares and shares canceled pursuant
to the Agreement) shall be converted into the right to receive an amount in
cash, without interest, equal to $5.50.
In arriving at our opinion, we have reviewed (i) the Agreement; (ii) certain
publicly available information concerning the business of the Company and of
certain other companies engaged in businesses comparable to those of the
Company, and the reported market prices for certain other companies'
securities deemed comparable; (iii) publicly available terms of certain
transactions involving companies comparable to the Company and the
consideration received for such companies; (iv) current and historical market
prices of the common stock of the Company; (v) the audited financial
statements of the Company for the fiscal year ended December 31, 1998 and the
unaudited financial statements of the Company for the periods ended March 31,
June 30, September 30, and December 31, 1999; (vi) certain agreements with
respect to outstanding indebtedness or obligations of the Company; (vii)
certain internal financial analyses, forecasts and other information prepared
by the Company and its management (collectively, the "Financial
Information"); and (viii) the terms of certain other business combinations
that we deemed relevant.
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<PAGE> 131
In addition, we have held discussions with certain members of the management
of the Company and with outside auditors with respect to certain aspects of
the Tender Offer and the Merger, the past and current business operations of
the Company, the financial condition and future prospects and operations of
the Company, the effects of the Tender Offer and the Merger on the financial
condition and future prospects of the Company, and certain other matters we
considered necessary or appropriate to our inquiry. We have reviewed such
other financial studies and analyses and considered such other information as
we deemed appropriate for the purposes of this opinion. We have also held
discussions with the Company's internal and external counsel regarding the
status and potential impact of the pending OIG investigation.
In giving our opinion, we have relied upon and assumed, without independent
verification, the accuracy and completeness of all information that was
publicly available or was furnished to us by the Company or otherwise
reviewed by us, and we have not assumed any responsibility or liability
therefor. We have not conducted any valuation or appraisal of any assets or
liabilities, nor have any such valuations or appraisals been provided to us.
In relying on the Financial Information provided to us, we have assumed that
they have been reasonably prepared based on assumptions reflecting the best
currently available estimates and judgments by management as to the expected
future results of operations and financial condition of the Company to which
such Financial Information relates. We have also assumed that the Merger
will have the tax consequences described in discussions with, and materials
furnished to us by, representatives of the Company, and that the other
transactions contemplated by the Agreement will be consummated as described
in the Agreement. We have relied as to all legal matters relevant to
rendering our opinion upon the advice of counsel.
Our opinion is necessarily based on economic, market and other conditions as
in effect on, and the information made available to us as of, the date
hereof. It should be understood that subsequent developments may affect this
opinion and that we do not have any obligation to update, revise, or reaffirm
this opinion.
We have acted as financial advisor to the Special Committee of the Board of
Directors of the Company with respect to the proposed Tender Offer and the
proposed Merger and will receive a fee from the Company for our services.
Please be advised that we have no other current financial advisory or other
relationships with the Company. We acted as financial advisor to a Special
Committee of the Board of Directors of the Company with respect to a proposed
merger transaction between the Company and affiliates of Welsh, Carson
Anderson & Stowe, VI, L.P. in October 1998, which was terminated prior to
consummation. J.P. Morgan Securities Inc. and its affiliates maintain an
ongoing relationship with the Buyer and have advised, financed and undertaken
capital markets transactions with the Buyer. In the ordinary course of their
businesses, J.P. Morgan Securities Inc. and its affiliates may actively trade
the debt and equity securities of the Company for their own account or for
the accounts of customers and, accordingly, they may at any time hold long or
short positions in such securities.
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On the basis of and subject to the foregoing, it is our opinion as of the
date hereof that the consideration to be paid to the Company's stockholders
in the proposed Tender Offer and the proposed Merger is fair, from a
financial point of view, to such stockholders.
This letter is provided to the Special Committee of the Board of Directors of
the Company in connection with and for the purposes of its evaluation of the
Merger. This opinion does not constitute a recommendation to any stockholder
of the Company as to how such stockholder should vote with respect to the
Merger. This opinion may not be disclosed, referred to, or communicated (in
whole or in part) to any third party for any purpose whatsoever except with
our prior written consent in each instance. This opinion may be reproduced
in full in any offer to purchase, proxy or information statement mailed to
stockholders of the Company but may not otherwise be disclosed publicly in
any manner without our prior written approval and must be treated as
confidential.
Very truly yours,
J.P. MORGAN SECURITIES INC.
By: /s/ John D. Fowler
-------------------------
Name: John D. Fowler
Title: Managing Director
<PAGE> 133
APPENDIX C
ARTICLE 13 OF THE GEORGIA BUSINESS CORPORATION CODE
64
<PAGE> 134
APPENDIX C
DISSENTERS' RIGHTS OF APPRAISAL
TITLE 14, CHAPTER 2
BUSINESS CORPORATIONS
STATE OF GEORGIA
ARTICLE 13
DISSENTERS' RIGHTS
PART 1
RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
14-2-1301. Definitions.
As used in this article, the term:
(1) "Beneficial shareholder" means the person who is a beneficial owner
of shares held in a voting trust or by a nominee as the record shareholder.
(2) "Corporate action" means the transaction or other action by the
corporation that creates dissenters' rights under Code Section 14-2-1302.
(3) "Corporation" means the issuer of shares held by a dissenter before
the corporate action, or the surviving or acquiring corporation by merger or
share exchange of that issuer.
(4) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under Code Section 14-2-1302 and who exercises that right when
and in the manner required by Code Sections 14-2-1320 through 14-2-1327.
(5) "Fair value," with respect to a dissenter's shares, means the value
of the shares immediately before the effectuation of the corporate action to
which the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action.
(6) "Interest" means interest from the effective date of the corporate
action until the date of payment, at a rate that is fair and equitable under all
the circumstances.
(7) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares to
the extent of the rights granted by a nominee certificate on file with a
corporation.
(8) "Shareholder" means the record shareholder or the beneficial
shareholder.
14-2-1302. Right to dissent.
(1) A record shareholder of the corporation is entitled to dissent
from, and obtain payment of the fair value of his shares in the event of, any of
the following corporate actions:
(1) Consummation of a plan of merger to which the corporation
is a party:
(A) If approval of the shareholders of the
corporation is required for the merger by Code Section
14-2-1103 or the articles of incorporation and the shareholder
is entitled to vote on the merger; or
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(B) If the corporation is a subsidiary that is merged
with its Holding under Code Section 14-2-1104;
(2) Consummation of a plan of share exchange to which the
corporation is a party as the corporation whose shares will be
acquired, if the shareholder is entitled to vote on the plan;
(3) Consummation of a sale or exchange of all or substantially
all of the property of the corporation if a shareholder vote is
required on the sale or exchange pursuant to Code Section 14-2-1202,
but not including a sale pursuant to court order or a sale for cash
pursuant to a plan by which all or substantially all of the net
proceeds of the sale will be distributed to the shareholders within one
year after the date of sale;
(4) An amendment of the articles of incorporation that
materially and adversely affects rights in respect of a dissenter's
shares because it:
(A) Alters or abolishes a preferential right of the
shares;
(B) Creates, alters, or abolishes a right in respect
of redemption, including a provision respecting a sinking fund
for the redemption or repurchase, of the shares;
(C) Alters or abolishes a preemptive right of the
holder of the shares to acquire shares or other securities;
(D) Excludes or limits the right of the shares to
vote on any matter, or to cumulate votes, other than a
limitation by dilution through issuance of shares or other
securities with similar voting rights;
(E) Reduces the number of shares owned by the
shareholder to a fraction of a share if the fractional share
so created is to be acquired for cash under Code Section 14-2-
604; or
(F) Cancels, redeems, or repurchases all or part of
the shares of the class; or
(5) Any corporate action taken pursuant to a shareholder vote
to the extent that Article 9 of this chapter, the articles of
incorporation, bylaws, or a resolution of the board of directors
provides that voting or nonvoting shareholders are entitled to dissent
and obtain payment for their shares.
(2) A shareholder entitled to dissent and obtain payment for his shares
under this article may not challenge the corporate action creating his
entitlement unless the corporate action fails to comply with procedural
requirements of this chapter or the articles of incorporation or bylaws of the
corporation or the vote required to obtain approval of the corporate action was
obtained by fraudulent and deceptive means, regardless of whether the
shareholder has exercised dissenter's right.
(3) Notwithstanding any other provision of this article, there shall be
no right of dissent in favor of the holder of shares of any class or series
which, at the record date fixed to determine the shareholders entitled to
receive notice of and to vote at a meeting at which a plan of merger or share
exchange or a sale or exchange of property or an amendment of the articles of
incorporation is to be acted on, were either listed on a national securities
exchange or held of record by more than 2,000 shareholders, unless:
(1) In the case of a plan of merger or share exchange, the
holders of shares of the class or series are required under the plan of
merger or share exchange to accept for their shares anything except
shares of the surviving corporation or another publicly held
corporation which at the effective date of the merger or share exchange
are either listed on a national securities exchange or held of record
by more than 2,000 shareholders, except for scrip or cash payments in
lieu of fractional shares; or
(2) The articles of incorporation or a resolution of the board
of directors approving the transaction provides otherwise.
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14-2-1303. Dissent by nominees and beneficial owners.
A record shareholder may assert dissenters' rights as to fewer than all
the shares registered in his name only if he dissents with respect to all shares
beneficially owned by any one beneficial shareholder and notifies the
corporation in writing of the name and address of each person on whose behalf he
asserts dissenters' rights. The rights of a partial dissenter under this Code
section are determined as if the shares as to which he dissents and his other
shares were registered in the names of different shareholders.
PART 2
PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
14-2-1320. Notice of dissenters' rights.
(4) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is submitted to a vote at a shareholders' meeting, the meeting
notice must state that shareholders are or may be entitled to assert dissenters'
rights under this article and be accompanied by a copy of this article.
(5) If corporate action creating dissenters' rights under Code Section
14-2-1302 is taken without a vote of shareholders, the corporation shall notify
in writing all shareholders entitled to assert dissenters' rights that the
action was taken and send them the dissenters' notice described in Code Section
14-2-1322 no later than ten days after the corporate action was taken.
14-2-1321. Notice of intent to demand payment.
(6) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is submitted to a vote at a shareholders' meeting, a record
shareholder who wishes to assert dissenters' rights:
(1) Must deliver to the corporation before the vote is taken
written notice of his intent to demand payment for his shares if the
proposed action is effectuated; and
(2) Must not vote his shares in favor of the proposed action.
(7) A record shareholder who does not satisfy the requirements of
subsection (a) of this Code section is not entitled to payment for his shares
under this article.
14-2-1322. Dissenters' notice.
(8) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is authorized at a shareholders' meeting, the corporation
shall deliver a written dissenters' notice to all shareholders who satisfied the
requirements of Code Section 14-2-1321.
(9) The dissenters' notice must be sent no later than ten days after
the corporate action was taken and must:
(1) State where the payment demand must be sent and where and
when certificates for certificated shares must be deposited;
(2) Inform holders of uncertificated shares to what extent
transfer of the shares will be restricted after the payment demand is
received;
(3) Set a date by which the corporation must receive the
payment demand, which date may not be fewer than 30 nor more than 60
days after the date the notice required in subsection (a) of this Code
section is delivered; and
(4) Be accompanied by a copy of this article.
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14-2-1323. Duty to demand payment.
(10) A record shareholder sent a dissenters' notice described in Code
Section 14-2-1322 must demand payment and deposit his certificates in accordance
with the terms of the notice.
(11) A record shareholder who demands payment and deposits his shares
under subsection (a) of this Code section retains all other rights of a
shareholder until these rights are canceled or modified by the taking of the
proposed corporate action.
(12) A record shareholder who does not demand payment or deposit his
share certificates where required, each by the date set in the dissenters'
notice, is not entitled to payment for his shares under this article.
14-2-1324. Share Restrictions.
(a) The corporation may restrict the transfer of uncertificated shares
from the date the demand for their payment is received until the proposed
corporate action is taken or the restrictions released under Code Section
14-2-1326.
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
14-2-1325. Offer of payment.
(13) Except as provided in Code Section 14-2-1327, within ten days of
the later of the date the proposed corporate action is taken or receipt of a
payment demand, the corporation shall by notice to each dissenter who complied
with Code Section 14-2-1323 offer to pay to such dissenter the amount the
corporation estimates to be the fair value of his or her shares, plus accrued
interest.
(14) The offer of payment must be accompanied by:
(1) The corporation's balance sheet as of the end of a fiscal
year ending not more than 16 months before the date of payment, an
income statement for that year, a statement of changes in shareholders'
equity for that year, and the latest available interim financial
statements, if any;
(2) A statement of the corporation's estimate of the fair
value of the shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenter's right to demand payment
under Code Section 14-2-1327; and
(5) A copy of this article.
(15) If the shareholder accepts the corporation's offer by written
notice to the corporation within 30 days after the corporation's offer or is
deemed to have accepted such offer by failure to respond within said 30 days,
payment for his or her shares shall be made within 60 days after the making of
the offer or the taking of the proposed corporate action, whichever is later.
14-2-1326. Failure to take action.
(16) If the corporation does not take the proposed action within 60
days after the date set for demanding payment and depositing share certificates,
the corporation shall return the deposited certificates and release the transfer
restrictions imposed on uncertificated shares.
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(17) If, after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under Code Section 14-2-1322 and repeat the payment demand
procedure.
14-2-1327. Procedure if shareholder dissatisfied with payment or offer.
(18) A dissenter may notify the corporation in writing of his own
estimate of the fair value of his shares and amount of interest due, and demand
payment of his estimate of the fair value of his shares and interest due, if:
(1) The dissenter believes that the amount offered under Code
Section 14-2-1325 is less than the fair value of his shares or that the
interest due is incorrectly calculated; or
(2) The corporation, having failed to take the proposed
action, does not return the deposited certificates or release the
transfer restrictions imposed on uncertificated shares within 60 days
after the date set for demanding payment.
(19) A dissenter waives his or her right to demand payment under this
Code section and is deemed to have accepted the corporation's offer unless he or
she notifies the corporation of his or her demand in writing under subsection
(a) of this Code section within 30 days after the corporation offered payment
for his or her shares, as provided in Code Section 14-2-1325.
(20) If the corporation does not offer payment within the time set
forth in subsection (a) of Code Section 14-2-1325:
(1) The shareholder may demand the information required under
subsection (b) of Code Section 14-2-1325, and the corporation shall
provide the information to the shareholder within ten days after
receipt of a written demand for the information; and
(2) The shareholder may at any time, subject to the
limitations period of Code Section 14-2-1332, notify the corporation of
his own estimate of the fair value of his shares and the amount of
interest due and demand payment of his estimate of the fair value of
his shares and interest due.
PART 3
JUDICIAL APPRAISAL OF SHARES
14-2-1330. Court action.
(21) If a demand for payment under Code Section 14-2-1327 remains
unsettled, the corporation shall commence a proceeding within 60 days after
receiving the payment demand and petition the court to determine the fair value
of the shares and accrued interest. If the corporation does not commence the
proceeding within the 60 day period, it shall pay each dissenter whose demand
remains unsettled the amount demanded.
(22) The corporation shall commence the proceeding, which shall be a
nonjury equitable valuation proceeding, in the superior court of the county
where a corporation's registered office is located. If the surviving corporation
is a foreign corporation without a registered office in this state, it shall
commence the proceeding in the county in this state where the registered office
of the domestic corporation merged with or whose shares were acquired by the
foreign corporation was located.
(23) The corporation shall make all dissenters, whether or not
residents of this state, whose demands remain unsettled parties to the
proceeding, which shall have the effect of an action quasi in rem against their
shares. The corporation shall serve a copy of the petition in the proceeding
upon each dissenting shareholder who is a resident of this state in the manner
provided by law for the service of a summons and complaint, and upon each
nonresident dissenting shareholder either by registered or certified mail or by
publication, or in any other manner permitted by law.
(24) The jurisdiction of the court in which the proceeding is commenced
under subsection (b) of this Code section is plenary and exclusive. The court
may appoint one or more persons as appraisers to receive evidence and
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recommend decision on the question of fair value. The appraisers have the powers
described in the order appointing them or in any amendment to it. Except as
otherwise provided in this chapter, Chapter 11 of Title 9, known as the "Georgia
Civil Practice Act," applies to any proceeding with respect to dissenters'
rights under this chapter.
(25) Each dissenter made a party to the proceeding is entitled to
judgment for the amount which the court finds to be the fair value of his
shares, plus interest to the date of judgment.
14-2-1331. Court costs and counsel fees.
(26) The court in an appraisal proceeding commenced under Code Section
14-2-1330 shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court, but not
including fees and expenses of attorneys and experts for the respective parties.
The court shall assess the costs against the corporation, except that the court
may assess the costs against all or some of the dissenters, in amounts the court
finds equitable, to the extent the court finds the dissenters acted arbitrarily,
vexatiously, or not in good faith in demanding payment under Code Section
14-2-1327.
(27) The court may also assess the fees and expenses of attorneys and
experts for the respective parties, in amounts the court finds equitable:
(1) Against the corporation and in favor of any or all
dissenters if the court finds the corporation did not substantially
comply with the requirements of Code Sections 14-2-1320 through
14-2-1327; or
(2) Against either the corporation or a dissenter, in favor of
any other party, if the court finds that the party against whom the
fees and expenses are assessed acted arbitrarily, vexatiously, or not
in good faith with respect to the rights provided by this article.
(28) If the court finds that the services of attorneys for any
dissenter were of substantial benefit to other dissenters similarly situated,
and that the fees for those services should not be assessed against the
corporation, the court may award to these attorneys reasonable fees to be paid
out of the amounts awarded the dissenters who were benefited.
14-2-1332. Limitation of actions.
No action by any dissenter to enforce dissenters' rights shall be
brought more than three years after the corporate action was taken, regardless
of whether notice of the corporate action and of the right to dissent was given
by the corporation in compliance with the provisions of Code Section 14-2-1320
and Code Section 14-2-1322.
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CENTENNIAL HEALTHCARE CORPORATION
400 PERIMETER CENTER TERRACE, SUITE 650
ATLANTA, GEORGIA 30346
PROXY FOR THE SPECIAL MEETING OF SHAREHOLDERS TO
BE HELD ON ___________, 2000 AT 10:00 A.M.
The undersigned hereby appoints Daryl R. Griswold and Alan B. Cosby,
and each of them, proxies, with full power of substitution and resubstitution,
as proxies for and in the name of the undersigned, to vote all shares of common
stock, par value $.01 per share, of Centennial HealthCare Corporation, held by
the undersigned at the close of business on ___________, 2000, which the
undersigned would be entitled to vote if personally present at the Special
Meeting of Shareholders to be held on April ___, 2000 at 10:00 a.m., local time,
at The South Terrace Conference Center Classroom, 115 Perimeter Center Place,
Atlanta, Georgia 30346, and at any adjournment thereof, upon the matters
described in the accompanying Notice of Special Meeting of Shareholders and
Proxy Statement, receipt of which is hereby acknowledged, and upon any other
business that may properly come before the meeting or any adjournment thereof.
Said proxies are directed to vote on the matters described in the Notice of
Special Meeting of Shareholders and Proxy Statement as follows, and otherwise in
their discretion upon such other business as may properly come before the
meeting or any adjournment thereof.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
CENTENNIAL HEALTHCARE CORPORATION. THE BOARD OF DIRECTORS RECOMMEND A VOTE FOR
THE PROPOSAL BELOW.
To approve the Agreement and Plan of Merger, dated as of February 25,
2000, by and among Hilltopper Holding Corporation, Hilltopper Acquisition
Corporation and Centennial HealthCare Corporation.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
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THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO DIRECTION IS
INDICATED, THE PROXY WILL BE VOTED FOR THE PROPOSAL LISTED ABOVE.
Dated: , 2000
---------------
-----------------------------------------
Signature
Please sign exactly as your name(s) appear(s) hereon. Where more than
one owner is shown above, each should sign. When signing in a
fiduciary or representative capacity, please add your full title as
such. If this proxy is submitted by a corporation, it should be
executed in the full corporate name by a duly authorized officer. If a
partnership, please sign in partnership name by authorized person.
PLEASE COMPLETE, DATE AND SIGN THIS PROXY AND RETURN IT PROMPTLY IN
THE ENCLOSED ENVELOPE, WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING.
IF YOU ATTEND THE SPECIAL MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF
YOU HAVE PREVIOUSLY RETURNED YOUR PROXY.
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