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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. 3)
------------------
Filed by 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 (beta)240.14a-11(c) or (beta)240.14a-12
CONCENTRA MANAGED CARE, INC.
(Name of Registrant as Specified in its Charter)
----------------------------------------------
(Name of Person Filing Proxy Statement if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i) and 0-11.
(1) Title of each class of securities to which the transaction applies:
Common Stock ("Concentra Common Stock"), par value $0.01 per share,
of Concentra Managed Care, Inc. (the "Company").
(2) Aggregate number of securities to which transaction applies: (i)
47,294,074 shares of Concentra Common Stock and (ii) vested
"in-the-money" options to purchase 1,212,945 shares of Concentra
Common Stock.
(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):
$16.50 per share in cash-out merger plus the difference between
$16.50 and the weighted average exercise price of $6.48 for each
share subject to a vested "in the money" option.
(4) Proposed maximum aggregate value of the transaction: 47,294,074
shares of Concentra Common Stock x $16.50 per share = $780,352,221
$12,153,708.90 to be paid to option holders
Total proposed maximum aggregate value of the transaction:
$792,505,929.90
(5) Total fee paid: $158,501.19 (wired to Mellon Bank, N.A. on March 29,
1999).
[X] Fee paid previously with preliminary materials.
[ ] 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.
================================================================================
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CONCENTRA MANAGED CARE, INC.
312 UNION WHARF
BOSTON, MASSACHUSETTS 02109
________________, 1999
Dear Stockholders:
You are cordially invited to attend a Special Meeting of Stockholders of
Concentra Managed Care, Inc. to be held on _____________, 1999, at 10:00 a.m.,
local time, at ___________________ _________________________. The purpose of the
special meeting is for you to vote upon a merger that, if consummated, will
result in your receiving $16.50 in cash per share for your shares of Concentra
common stock, subject to your appraisal rights under Delaware law.
If you approve the merger, Yankee Acquisition Corp., a newly formed
Delaware corporation, will be merged with and into Concentra with Concentra
being the surviving corporation in the merger. Yankee was created only to engage
in the merger and was organized and is currently owned by Welsh, Carson,
Anderson & Stowe VIII, L.P. Welsh, Carson, Anderson & Stowe VIII, L.P. owns
14.97% of Concentra's common stock. Its affiliate was an investor in
OccuSystems, Inc., which merged with CRA Managed Care, Inc. to form Concentra in
1997. Affiliates of Ferrer Freeman Thompson & Co., LLC have agreed to purchase
about 7.0% of Yankee's capital stock prior to the merger.
Concentra's Board of Directors formed a special committee consisting of
two independent directors to evaluate the merger. The special committee has
unanimously recommended to the Board that the merger be approved. In connection
with the merger, BT Alex. Brown Incorporated, Concentra's financial advisor,
delivered to the Board and the special committee an opinion as to the fairness,
from a financial point of view, of the merger consideration to the holders of
Concentra common stock, other than Welsh, Carson, Anderson & Stowe VIII, L.P. or
its affiliates. The written opinion of BT Alex. Brown dated March 2, 1999 is
attached as Appendix B to the enclosed proxy statement, and you should read it
carefully in its entirety.
The approval and determination of the board were based on a number of
factors including the recommendation of the special committee, the opinion of BT
Alex. Brown and the other factors and negative aspects of the merger agreement
that are described in "Special Factors--The Special Committee's and the Board's
Recommendation" in the enclosed proxy statement.
THE BOARD HAS DETERMINED THAT THE MERGER IS ADVISABLE AND FAIR TO YOU AND
IN YOUR BEST INTEREST. THE BOARD THEREFORE RECOMMENDS THAT YOU APPROVE AND ADOPT
THE MERGER AGREEMENT.
We cannot complete the merger unless the stockholders approve it. The
accompanying proxy statement provides detailed information about the proposed
merger, and it includes a copy of the merger agreement attached as Appendix A.
Please give all of this information your careful attention. Approval of
the merger at the special meeting will require the affirmative vote of the
holders of a majority of the outstanding shares of Concentra common stock
entitled to vote at the special meeting. Whether or not you plan to attend, it
is important that your shares are represented at the special meeting. A failure
to vote will count as a vote against the merger. Accordingly, you are requested
to promptly complete, sign and date the enclosed proxy card and return it in the
envelope provided or vote by telephone or through the Internet as detailed in
the form of Concentra's proxy attached hereto, 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
stockholders, you will receive instructions for surrendering your Concentra
share certificates and a letter of transmittal to be used for this purpose. You
should not submit your share certificates for exchange until you have received
the instructions and the letter of transmittal.
Sincerely,
Daniel J. Thomas
President and Chief Executive
Officer
This proxy statement is dated _____________, 1999 and is first being mailed to
Concentra stockholders on or about _____________, 1999.
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CONCENTRA MANAGED CARE, INC.
312 UNION WHARF
BOSTON, MASSACHUSETTS 02109
617/367-2163
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NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON _____________, 1999
To the Stockholders of Concentra Managed Care, Inc.:
This is a notice that a Special Meeting of Stockholders of Concentra
Managed Care, Inc., a Delaware corporation, will be held on __________, 1999 at
10:00 a.m., local time, at ____________________________. The purpose of this
meeting is for you to:
1. Consider and vote upon a proposal to approve and adopt an Amended
and Restated Agreement and Plan of Merger, dated as of March 24,
1999. Pursuant to the merger agreement, Yankee Acquisition Corp., a
newly formed Delaware corporation, will be merged with and into
Concentra. Each outstanding share of Concentra common stock will be
converted into the right to receive $16.50 in cash, without
interest, other than shares held by Concentra stockholders who are
entitled to and have perfected their dissenters' appraisal rights.
Shares held by Concentra, its subsidiaries, and Yankee or its
affiliates will be canceled in the merger. A copy of the merger
agreement is attached as Appendix A to, and is described in, the
accompanying proxy statement.
2. Consider and act upon any other matters as may properly come before
the special meeting or any adjournments or postponements of the
special meeting.
Concentra's Board of Directors has determined that only holders of
shares of Concentra common stock at the close of business on _______________,
1999, will be entitled to notice of, and to vote at, the special meeting or any
adjournments or postponements of the special meeting. 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,
------------------------------
Richard A. Parr II
Executive Vice President,
General Counsel and
Corporate Secretary
Boston, Massachusetts
__________, 1999 _______________________
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WHETHER OR NOT YOU ARE ABLE TO ATTEND THE SPECIAL 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. YOU MAY ALSO VOTE
TELEPHONICALLY BY TOUCH-TONE TELEPHONE OR THROUGH THE INTERNET BY FOLLOWING THE
INSTRUCTIONS CONTAINED ON YOUR PROXY CARD. 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 OR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED IN
THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
You have the right to dissent from the merger and to receive payment of
the "fair value" of your shares. To do so, you must comply with the procedures
set forth in Section 262 of the Delaware General Corporation Law. See "Rights of
Dissenting Stockholders" in the proxy statement that accompanies this notice and
the full text of Section 262 of the Delaware General Corporation Law, which is
attached as Appendix C and is described in the accompanying proxy statement.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
QUESTIONS AND ANSWERS ABOUT THE MERGER ............................................. 1
SUMMARY ............................................................................ 4
The Companies ............................................................. 4
The Special Meeting ...................................................... 4
Record Date; Voting Power ................................................. 4
Voting Procedures ......................................................... 5
Recommendations ........................................................... 5
Opinion of Concentra's Financial Advisor .................................. 5
Terms of the Merger Agreement ............................................. 5
Accounting Treatment ...................................................... 7
Interests that Differ from Your Interests ................................. 7
Regulatory Approvals ...................................................... 8
Dissenters' Appraisal Rights .............................................. 8
Historical Market Information ............................................. 8
Selected Consolidated Financial Data ...................................... 10
Certain Projections ....................................................... 18
Cautionary Statement Concerning Forward-looking Information ............... 19
SPECIAL FACTORS .................................................................... 19
Background of the Merger .................................................. 19
The Special Committee's and the Board's Recommendation .................... 27
Opinion of Concentra's Financial Advisor .................................. 31
Purpose and Reasons of WCAS and the Members of Management for the Merger .. 38
Position of WCAS and the Members of Management as to Fairness of the Merger 39
Interests of Certain Persons in the Merger ................................ 39
Certain Effects of the Merger ............................................. 41
Financing of the Merger ................................................... 42
Conduct of Concentra's Business After the Merger .......................... 45
Material Federal Income Tax Consequences .................................. 45
THE SPECIAL MEETING ................................................................ 47
Date, Time and Place of the Special Meeting ............................... 47
Matters to be Considered at the Special Meeting ........................... 47
Proxy Solicitation ........................................................ 47
Record Date and Quorum Requirement ........................................ 47
Voting Procedures ......................................................... 48
Voting and Revocation of Proxies .......................................... 48
Effective Time of the Merger and Payment for Shares ....................... 49
Other Matters to Be Considered ............................................ 49
THE MERGER ......................................................................... 49
General Description ....................................................... 49
Certain Terms of the Merger Agreement ..................................... 49
Anticipated Accounting Treatment .......................................... 62
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Governmental Approvals .................................................... 62
Litigation Relating to the Merger ......................................... 62
Estimated Fees and Expenses of the Merger ................................. 63
RIGHTS OF DISSENTING STOCKHOLDERS ......................................... 63
PRINCIPAL STOCKHOLDERS AND STOCK OWNERSHIP OF
MANAGEMENT AND OTHERS ..................................................... 66
CERTAIN INFORMATION CONCERNING CONCENTRA .................................. 67
CERTAIN INFORMATION CONCERNING YANKEE ..................................... 69
Yankee .................................................................... 69
Equity Investors .......................................................... 69
PURCHASES OF COMMON STOCK BY CERTAIN PERSONS .............................. 72
INDEPENDENT AUDITORS ...................................................... 74
STOCKHOLDER PROPOSALS ..................................................... 74
OTHER MATTERS ............................................................. 74
WHERE YOU CAN FIND MORE INFORMATION ....................................... 74
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE ........................... 75
</TABLE>
Appendices:
A -- Merger Agreement
B -- Opinion of BT Alex. Brown Incorporated
C -- Section 262 of the Delaware General Corporation Law
99.1 Form of Concentra's Proxy
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CONCENTRA MANAGED CARE, INC.
312 UNION WHARF
BOSTON, MASSACHUSETTS 02109
617/367-2163
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PROXY STATEMENT
For the Special Meeting of Stockholders
To Be Held On _____________, 1999
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: WHAT WILL HAPPEN IN THE MERGER?
A: In the merger, Yankee will be merged with and into Concentra with Concentra
being the surviving corporation. If you are a stockholder of Concentra at the
time of the merger, you will receive a $16.50 cash payment for each of your
outstanding shares of Concentra common stock, unless you exercise and perfect
your dissenters' appraisal rights. Shares held by Concentra, its
subsidiaries, Yankee or its affiliates will be canceled in the merger. After
the merger, Concentra will be owned by the stockholders of Yankee and you
will no longer own stock in Concentra. To review the structure of the merger
in greater detail, see pages 49 through 62.
Q: WHAT WILL I RECEIVE IN THE MERGER?
A: You will receive $16.50 in cash, without interest, for each share of
Concentra common stock that you own. This is the "merger consideration." For
example: If you own 100 shares of Concentra common stock, you will receive
$1,650.00 in cash upon completion of the merger.
Q: WHY IS CONCENTRA BEING MERGED?
A: Concentra's board of directors believes that the merger of Yankee into
Concentra and the $16.50 per share you will receive in the merger is fair and
is in your best interest. The board made the determination after exploring
strategic alternatives and a number of third party proposals to acquire
Concentra. To review the background and reasons for the merger in greater
detail, see pages 19 through 31.
Q: WHY WAS THE SPECIAL COMMITTEE FORMED?
A: Because certain of Concentra's directors had potential conflicts of interest
in evaluating a number of third-party proposals to acquire Concentra
(including the merger), the board appointed a special committee of
disinterested directors to review and evaluate the proposals. At the time the
special committee was formed, the board believed that seven of the nine
directors had potential conflicts of interest. The special committee has
determined that the merger is fair to you and in your best interest.
Q: WHEN DO YOU EXPECT THE MERGER TO BE COMPLETED?
A: We are working to complete the merger during the month of August 1999.
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Q: WHAT ARE THE TAX CONSEQUENCES OF THE MERGER TO ME?
A: Your receipt of the merger consideration will be a taxable transaction for
federal income tax purposes. To review the federal income tax consequences to
you in greater detail, see page 45. Your tax consequences will depend on your
personal situation. You should consult your tax advisors for a full
understanding of the tax consequences of the merger to you.
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 merger of Yankee into Concentra.
THE SPECIAL COMMITTEE HAS UNANIMOUSLY APPROVED AND ADOPTED THE MERGER AGREEMENT.
THE BOARD HAS UNANIMOUSLY APPROVED AND ADOPTED THE MERGER AGREEMENT.
ACCORDINGLY, 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: Simply indicate on your proxy card how you want to vote and sign, date and
mail it in the enclosed envelope as soon as possible, so that your shares
will be represented at the special meeting. You may also vote telephonically
or through the Internet by following the instructions on your proxy card.
Approval of the merger requires the affirmative vote of the holders of a
majority of the outstanding shares of Concentra common stock entitled to vote
on the proposal.
Q: WHAT HAPPENS IF I DON'T RETURN A PROXY CARD?
A: The failure to return your proxy card will have the same effect as voting
against the merger.
Q: MAY I VOTE IN PERSON?
A: Yes. You may attend the special meeting and vote your shares in person,
rather than signing and mailing your proxy card or voting telephonically or
through the Internet.
Q: MAY I CHANGE MY VOTE AFTER I HAVE MAILED MY SIGNED PROXY CARD?
A: Yes. You may change your vote at any time before your proxy is voted at the
special meeting by following the instructions as detailed in "Voting and
Revocation of Proxies" on page 48. Before your proxy is voted, you may submit
a new proxy or you may attend the special meeting and vote 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.
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Q: SHOULD I SEND IN MY STOCK CERTIFICATES NOW?
A: No. After the merger is completed Concentra will send you written
instructions for exchanging your Concentra common stock certificates for the
merger consideration.
Q: WHO CAN HELP ANSWER MY QUESTIONS?
A: If you have additional questions about the merger, you should contact:
Richard A. Parr II
General Counsel
Concentra Managed Care, Inc.
5080 Spectrum Drive
Suite 400, West Tower
Addison, Texas 75001
Telephone: 972/364-8043
or
Georgeson & Company Inc.
the proxy solicitor who may be called
toll-free at 1-800-223-2064.
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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 CAREFULLY THIS ENTIRE DOCUMENT AND THE
OTHER AVAILABLE INFORMATION REFERRED TO IN "WHERE YOU CAN FIND MORE INFORMATION"
ON PAGE 74.
THE COMPANIES
Concentra Managed Care, Inc.
312 Union Wharf
Boston, Massachusetts 02109
617/367-2163
Concentra is the leading provider of healthcare management and cost
containment services to the workers' compensation, disability and auto insurance
markets. Concentra also provides out-of-network medical claims review to the
group health marketplace and performs non-injury services for over 80,000 local
employers.
Yankee Acquisition Corp.
c/o Welsh, Carson, Anderson
& Stowe
320 Park Avenue, Suite 2500
New York, New York 10022-6815
212/893-4500
Yankee was organized and is currently owned by Welsh, Carson, Anderson
& Stowe VIII, L.P. Affiliates of Ferrer Freeman Thompson & Co., LLC have agreed
to acquire about 7.0% of Yankee's outstanding capital stock prior to the merger.
Both Welsh Carson and Ferrer Freeman are private investment funds. Chase Capital
Partners, DLJ Investment Partners and some of its affiliates, and some members
of management have agreed to acquire about 5% of Yankee's outstanding capital
stock prior to the merger. Yankee was created only to enter into the merger
agreement and to complete the merger and related transactions.
THE SPECIAL MEETING
The special meeting will be held on ___________, 1999, at 10:00 a.m.,
local time, at ________________ _____________________. At the special meeting,
you will be asked to consider and vote upon a proposal to approve and adopt the
merger agreement.
RECORD DATE; VOTING POWER
Holders of record of Concentra common stock at the close of business on
______________, 1999 are entitled to notice of and to vote at the special
meeting. As of that date,
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there were _____ shares of Concentra common stock issued and outstanding held by
approximately ____ holders of record. If you held Concentra common stock on the
record date, you are entitled to one vote per share on any matter that may
properly come before the special meeting.
VOTING PROCEDURES
Approval by the Concentra common stockholders of the merger agreement
will require the affirmative vote of the holders of a majority of the
outstanding shares of Concentra common stock including shares voted by Welsh,
Carson, Anderson & Stowe VIII, L.P. ("WCAS") and Concentra's directors and
officers. Approval of the merger agreement does not require the approval of a
majority of unaffiliated stockholders.
RECOMMENDATIONS
Because certain of Concentra's directors had actual or potential
conflicts of interest in evaluating a number of third-party proposals to acquire
Concentra (including the merger), the board appointed the special committee to
review and evaluate the proposals. The special committee unanimously recommended
to the board that the merger agreement be approved. Following the unanimous
recommendation of the special committee, the board determined that the merger,
the merger agreement and the transactions contemplated thereby were advisable
and fair to you and in your best interest. THE SPECIAL COMMITTEE AND THE BOARD
RECOMMEND THAT YOU VOTE "FOR" THE APPROVAL AND ADOPTION OF THE MERGER AGREEMENT.
You also should refer to the reasons that the special committee and the board
considered in determining whether to approve and adopt the merger agreement
beginning on pages 27 through 31.
OPINION OF CONCENTRA'S FINANCIAL ADVISOR
The board and special committee have received an opinion of Concentra's
financial advisor, BT Alex. Brown Incorporated, as to the fairness, from a
financial point of view, of the merger consideration to the holders of Concentra
common stock, other than WCAS or its affiliates. The full text of the written
opinion of BT Alex. Brown Incorporated dated March 2, 1999 is attached to this
proxy statement as Appendix B, and you should read it carefully in its entirety.
THE OPINION OF BT ALEX. BROWN INCORPORATED IS DIRECTED TO THE BOARD AND SPECIAL
COMMITTEE AND DOES NOT CONSTITUTE A RECOMMENDATION TO YOU AS TO HOW YOU SHOULD
VOTE WITH RESPECT TO MATTERS RELATING TO THE PROPOSED MERGER.
TERMS OF THE MERGER AGREEMENT
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 Yankee will be merged with
and into Concentra, with Concentra being the surviving corporation. As a result
of the merger, you will receive $16.50 in cash for each share of Concentra
common stock that you own, unless you exer-
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cise and perfect your dissenters' appraisal rights. Shares held by Concentra,
its subsidiaries, Yankee or its affiliates will be canceled in the merger.
CONDITIONS TO THE MERGER. The completion of the merger depends upon the
satisfaction of a number of conditions, including:
o the continued accuracy of each party's representations and warranties
and the fulfillment of each party's promises contained in the merger
agreement;
o the adoption of the merger agreement by the affirmative vote of the
holders of a majority of the outstanding shares of Concentra common
stock;
o the absence of any order or regulation of any court or governmental
entity preventing or prohibiting the merger;
o the receipt of necessary governmental approvals and the termination
or expiration of any applicable regulatory waiting periods;
o Yankee's receipt of financing to consummate the merger; and
o the board's receipt from a valuation firm of a solvency letter
addressed to the board as to the solvency of the surviving
corporation after giving effect to the merger and Yankee's
contemplated merger financing arrangements.
Each party may, at its option, waive the satisfaction of any condition
to such party's obligations under the merger agreement. Concentra currently has
no intention to waive any condition to its obligations under the merger
agreement. In the event of any waiver by Concentra of a material condition under
the merger agreement, the merger agreement will be amended and stockholder
approval of the merger agreement, including the change resulting from the
waiver, will be obtained. EVEN IF THE STOCKHOLDERS APPROVE THE MERGER, THERE CAN
BE NO ASSURANCE THAT THE MERGER WILL BE CONSUMMATED.
TERMINATION. Either Concentra or Yankee may terminate the merger
agreement under certain circumstances, including if:
o the merger has not been completed by August 31, 1999, provided that
the delay is not due to a breach of any obligation under the merger
agreement by the party seeking to terminate;
o Concentra fails to obtain the required stockholder approval at the
special meeting; or
o any court in the United States or other governmental entity has
issued a final and non-appealable order or other action that in any
way prohibits the merger.
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The merger agreement can be terminated under other circumstances which
are described on page 59.
FEES AND EXPENSES. Concentra will be required to pay Yankee a
termination fee of $25.0 million and the expenses of Yankee up to $4.0 million
if:
o the merger agreement is terminated by Yankee in specific
circumstances involving Concentra entering into a business
transaction with a third party;
o the merger agreement is terminated by Concentra because in the good
faith judgment of the board, as advised by outside counsel, the board
determines that termination is required because of a third party's
acquisition proposal; or
o the merger agreement is terminated by Yankee because the board has
withdrawn or modified, in any way materially adverse to Yankee, the
board's recommendation or approval of the merger agreement.
ACCOUNTING TREATMENT
The merger will be accounted for as a recapitalization for accounting
purposes. Accordingly, the historical basis of Concentra's assets and
liabilities will not be affected by the merger. After the recapitalization,
Ferrer Freeman will own an approximate 7% interest in Concentra. This interest
will be held in a separate class of common stock which is identical to the
original common stock of Concentra except it will have the ability to elect a
member of the board of Concentra. Ferrer Freeman has no formal or informal
rights to approve or veto transactions. The rights granted to Ferrer Freeman are
protective rights rather than participating rights and, as such, Ferrer Freeman
and Welsh Carson should not be construed as members of a collaborative group.
INTERESTS THAT DIFFER FROM YOUR INTERESTS
INTERESTS OF CONCENTRA'S MANAGEMENT. Certain members of management,
including John K. Carlyle, W. Tom Fogarty, M.D., James M. Greenwood, Thomas E.
Kiraly, Kenneth Loffredo, Richard A. Parr II and Daniel J. Thomas (collectively,
the "Members of Management"), have interests in the merger that are different
from, or in addition to, yours as a Concentra stockholder. If the merger is
consummated, Messrs. Carlyle and Thomas will be designated as members of the
board of directors of Concentra and all of the Members of Management, other than
Mr. Carlyle, will remain as senior management of Concentra pursuant to amended
and restated employment agreements, or with respect to Mr. Kiraly an initial
employment agreement, that provide for severance benefits if their employment
with Concentra is terminated following the merger and employment retention
incentives, including grants of options to acquire common stock of Concentra
following the merger. The Members of Management will also acquire about
$________ of Yankee's outstanding common stock prior to the merger. In addition,
Members of Management will receive a maximum aggregate cash payment of
$7,530,000 for vested options and restricted stock that they hold based on a
price of $16.50 per share of restricted stock and the excess of
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$16.50 over the exercise price of the options. Also, Concentra will continue
certain indemnification arrangements and director's and officer's liability
insurance for existing directors and officers of Concentra after the merger.
THE SPECIAL COMMITTEE. The members of the special committee are not
Concentra employees, are not involved as participants in the proposed
transaction and have no past or present relationship with WCAS, Ferrer Freeman
Thompson & Co., LLC or any of the other parties who delivered expressions of
interest in acquiring Concentra. Each member of the special committee received a
$25,000 fee for serving on the special committee, plus $2,000 per special
committee meeting attended in person and $1,000 per telephonic meeting of the
special committee attended. Each member of the special committee also received
reimbursement of out-of-pocket expenses incurred in connection with service on
the special committee. The members of the special committee believe that the
foregoing arrangements do not affect their independence or impartiality.
REGULATORY APPROVALS
Concentra is required to make filings with or obtain approvals from
certain regulatory authorities in connection with the merger. These consents and
approvals include the termination or expiration of a waiting period with regard
to filings with the Federal Trade Commission and the Department of Justice under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. On May 5,
1999, the Federal Trade Commission granted Concentra's request for early
termination of the waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act.
DISSENTERS' APPRAISAL RIGHTS
If you do not vote in favor of the proposal to approve and adopt the
merger agreement and you comply strictly with the applicable provisions of
Section 262 of the Delaware General Corporation Law, you have the right to
dissent and be paid cash for the "fair value" of your shares of Concentra common
stock. This payment may be more than, the same as, or less than the merger
consideration of $16.50 a share. To perfect these appraisal rights with respect
to the merger, you must follow the required procedures precisely. The applicable
provisions of Section 262 of the Delaware General Corporation Law are attached
to this proxy statement as Appendix C.
HISTORICAL MARKET INFORMATION
Concentra common stock is traded on the Nasdaq National Market under
the symbol "CCMC." The following table sets forth, for the periods indicated,
the high and low sales prices per share as reported on Nasdaq.
HIGH LOW
---------- ----------
1997
FIRST QUARTER ............................ $28.00 $22.00
Second Quarter ........................... $29.50 $17.25
Third Quarter ............................ $35.88 $27.50
Fourth Quarter ........................... $38.50 $31.38
8
<PAGE>
1998
First Quarter ............................ $35.50 $27.25
Second Quarter ........................... $34.25 $22.00
Third Quarter ............................ $26.00 $ 5.63
Fourth Quarter ........................... $12.50 $ 5.44
1999
First Quarter ............................ $14.68 $10.0625
Second Quarter (through July __, 1999) ... $_____ $_______
On March 2, 1999, the last trading day prior to announcement of the
execution of the merger agreement, the closing price per share of Concentra
common stock as reported on Nasdaq was $11.625. On _________, 1999, Concentra
common stock closed at $_______ per share. Concentra urges you to obtain current
market quotations before making any decision with respect to the merger.
Since its inception, Concentra has not paid any cash dividends on its
common stock. Under the merger agreement, Concentra has agreed not to pay any
dividends on Concentra common stock prior to the closing of the merger.
Concentra's revolving credit facility with its senior lenders also prohibits
Concentra from paying dividends and making other distributions on Concentra
common stock.
9
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The table below presents selected consolidated historical financial
data that has been derived from Concentra's audited consolidated financial
statements. You should read the selected financial data in conjunction with
Concentra's separate historical consolidated financial statements, related notes
and other financial information incorporated by reference into this proxy
statement.
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
--------------------------------------------- ------------------
1994 1995 1996 1997 1998 1998 1999
---- ---- ---- ---- ---- ---- ----
(IN THOUSANDS, EXCEPT PER SHARE DATA)
STATEMENT OF OPERATIONS:
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue .............................. $223,499 $305,355 $372,683 $489,318 $611,056 $144,282 $155,411
Gross profit ......................... 37,093 62,435 82,755 116,679 141,759 34,384 31,674
Non-recurring charges ................ -- 898 964 38,625 33,114 12,600 --
Operating income ..................... 15,928 29,446 45,194 32,315 55,200 9,124 14,216
Income before taxes .................. 10,088 24,246 41,476 21,062 41,794 5,414 10,553
Provision for income taxes (1) ....... 6,802 7,771 13,437 11,062 19,308 4,567 4,485
NET INCOME BEFORE
EXTRAORDINARY ITEMS (1) ............ 3,286 16,475 28,039 10,000 22,486 847 6,068
Basic earnings per share before
extraordinary items ................ $0.48 $0.69 $0.23 $0.48 $0.02 $0.13
Basic weighted average shares
outstanding ........................ 33,810 40,411 42,774 46,451 44,939 47,251
Diluted earnings per share
before extraordinary items ......... $0.46 $0.65 $0.22 $0.47 $0.02 $0.13
Diluted weighted average shares
outstanding .......................... 35,939 43,344 46,895 47,827 47,769 47,882
BALANCE SHEET:
Working capital ...................... $ 19,117 $ 21,971 $116,439 $ 36,754 $201,871 $171,808 $202,457
Total assets ......................... 113,672 188,530 367,900 482,035 653,368 580,159 667,523
Total debt ........................... 83,785 34,639 142,229 206,600 327,925 298,381 327,900
Total stockholders' equity (deficit).. (5,820) 109,383 178,146 206,441 239,875 205,068 247,652
</TABLE>
1) Prior to its recapitalization in March of 1994, CRA Managed Care, Inc. had
elected to be taxed as an "S" corporation. In connection with its
recapitalization, CRA Managed Care, Inc. was required to change from an "S"
to a "C" corporation. This change resulted in CRA Managed Care, Inc.
recording an incremental tax provision of $3,772,000 in the first quarter
of 1994. Concentra's pro forma net income for 1994 would have been
$3,446,000 higher had CRA Managed Care, Inc. been subject to federal and
state income taxes during the entire period based upon an effective tax
rate indicative of the statutory rate in effect during the period.
10
<PAGE>
CONCENTRA MANAGED CARE, INC.
CONSOLIDATED PRO FORMA FINANCIAL STATEMENTS (UNAUDITED)
On March 2, 1999, Concentra entered into a definitive agreement to
merge with Yankee, a corporation formed by WCAS which is a 14.97% stockholder of
Concentra. Concentra's board of directors unanimously approved the transaction
based upon the recommendation of the special committee of the board of
directors, which was formed on October 1, 1998 to evaluate strategic
alternatives in response to several unsolicited expressions of interest
regarding the possible acquisition of some or all of Concentra's common stock.
On March 24, 1999, Concentra entered into an amended and restated agreement and
plan of merger with Yankee. Pursuant to the amended merger agreement, WCAS will
acquire approximately 93% and funds managed by Ferrer Freeman Thompson & Co.,
LLC will acquire approximately 7% of the post-merger shares of common stock of
Concentra for $16.50 per share. As a result of the merger, each outstanding
share of Concentra common stock will be converted into the right to receive
$16.50 in cash.
The transaction is valued at approximately $1,100,000,000, including
the refinancing of $327,750,000 of the 6.0% and 4.5% convertible subordinated
notes of Concentra that contain change in control provisions in the related
indentures. The transaction is structured to be accounted for as a
recapitalization and is expected to be completed in August of 1999. The
transaction is conditioned upon, among other things, approval of the
stockholders of Concentra, receipt of financing and certain regulatory approvals
as more particularly described in this proxy statement.
To finance the acquisition of Concentra, WCAS will invest approximately
$369,432,000 in equity financing, including the value of shares and convertibles
subordinated notes already owned by WCAS, and up to $110,000,000 in subordinated
indebtedness. Additionally, Ferrer Freeman will invest approximately $30,600,000
in equity and other investors, Chase Capital Partners, DLJ Investment Partners
and some of its affiliates, and the Members of Management, will invest
approximately $23,000,000 in equity. WCAS has also received commitments from
various lenders to provide financing of $190,000,000 in senior subordinated
notes, $375,000,000 in term loans and a $100,000,000 revolving credit facility
to replace Concentra's existing senior credit facility. Additionally, Concentra
would utilize excess cash on hand at the time of the merger to help finance the
purchase of Concentra common stock. Simultaneous with the right to receive cash
for shares, Yankee would merge with and into Concentra with Concentra surviving.
The following consolidated pro forma financial statements give effect
to the merger using the recapitalization method of accounting, after giving
effect to the pro forma adjustments described in the accompanying notes. These
unaudited consolidated pro forma financial statements are not required
disclosure in this proxy statement but they have been included for informational
purposes only to assist the reader in understanding the financial aspects of the
transaction. The current stockholders of Concentra, other than WCAS, its
affiliates and the Members of Management, will have no continuing financial
interest in Concentra after the transaction. These unaudited consolidated pro
forma financial statements have been prepared from, and should be read in
conjunction with, Concentra's historical consolidated financial statements and
notes thereto filed on Form 10-K\A which are incorporated by reference in this
proxy statement.
11
<PAGE>
The unaudited Consolidated Pro Forma Balance Sheet as of March 31, 1999
gives effect to the merger as if it had occurred on March 31, 1999 and the
Consolidated Pro Forma Statements of Operations for the three months ended March
31, 1999 and the year ended December 31, 1998 give effect to the merger as if it
had occurred on January 1, 1999 and January 1, 1998, respectively. The
Consolidated Pro Forma Financial Statements of Concentra do not purport to
present the financial position or results of operations of Concentra had the
merger been consummated at the dates indicated, nor are they necessarily
indicative of future operating results or financial position of the merged
companies.
As a result of the merger, Concentra will incur certain deal fees and
financing costs of approximately $44,000,000. These costs will consist
principally of banking and professional fees of approximately $17,500,000
associated with the issuance of new debt which will be capitalized as deferred
finance costs and other banking, professional and transaction fees of
$26,500,000 associated with the merger, which will be expensed. Concentra will
also incur approximately $4,788,000 in non-cash charges for deferred
compensation expense related to the accelerated vesting and issuance of 195,000
shares of restricted stock as a result of the merger. In addition, Concentra
expects to settle vested in-the-money options which will result in a non-cash
compensation charge of approximately $12,400,000. The expensed portion of the
these fees and non-cash compensation expense and the related tax benefit, have
not been reflected on the Consolidated Pro Forma Statements of Operations as
they are one-time and unusual in nature.
12
<PAGE>
CONCENTRA MANAGED CARE, INC.
Consolidated Pro Forma Balance Sheets
March 31, 1999 (Unaudited)
<TABLE>
<CAPTION>
PRO FORMA
CONCENTRA ADJUSTMENTS PRO FORMA
---------------- ----------- -----------
ASSETS
------
CURRENT ASSETS:
<S> <C> <C> <C>
Cash and cash equivalents ........................... $ 92,753,000 $287,384,000 (1) $ 35,318,000
675,000,000 (2)
(298,250,000)(2)
(677,569,000)(3)
(44,000,000)(4)
Marketable securities ............................... 5,003,000 -- 5,003,000
Accounts receivable, net ............................ 137,272,000 -- 137,272,000
Prepaid expenses, tax assets and other current assets 36,109,000 4,227,000(5) 40,336,000
------------- ------------- -------------
Total current assets ........................ 271,137,000 (53,208,000) 217,929,000
NET PROPERTY AND EQUIPMENT ............................ 89,048,000 -- 89,048,000
GOODWILL AND OTHER INTANGIBLE
ASSETS, NET ......................................... 285,971,000 -- 285,971,000
MARKETABLE SECURITIES ................................. 10,542,000 -- 10,542,000
OTHER ASSETS .......................................... 15,280,000 (7,093,000)(2) 25,687,000
17,500,000 (2)
------------- ------------- -------------
$ 671,978,000 $ (42,801,000) $ 629,177,000
============= ============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
----------------------------------------------
CURRENT LIABILITIES:
Revolving Credit Facility ............................ $ -- $ -- $ --
Current portion of long-term debt .................... 55,000 4,000,000 (2) 4,055,000
Accounts payable and accrued expenses ................ 68,626,000 -- 68,626,000
------------- ------------- -------------
Total current liabilities ................... 68,681,000 4,000,000 72,681,000
LONG-TERM DEBT, NET OF CURRENT PORTION ................ 327,845,000 (29,500,000)(1,2) 647,153,000
(298,250,000)(2)
647,058,000 (2)
DEFERRED INCOME TAXES AND OTHER LIABILITIES ........... 27,800,000 27,800,000
STOCKHOLDERS' EQUITY (DEFICIT):
Common stock ......................................... 473,000 256,000 (2) 256,000
(473,000)(7)
Paid-in capital ...................................... 272,420,000 23,942,000 (6)
4,788,000 (7)
422,776,000 (6) --
(723,926,000)(7)
Treasury stock ....................................... -- (677,569,000)(3) --
(106,148,000)(8)
783,717,000 (7)
Unrealized gain on investments ....................... 1,000 -- 1,000
Retained deficit ..................................... (25,242,000) (26,500,000)(4) (118,714,000)
(4,788,000)(5)
(7,093,000)(2)
4,227,000 (5)
(59,318,000)(7)
------------- ------------- -------------
Total stockholders' equity (deficit) ........ 247,652,000 (366,109,000) (118,457,000)
------------- ------------- -------------
$ 671,978,000 $ (42,801,000) $ 629,177,000
============= ============= =============
</TABLE>
See accompanying Notes to Consolidated Pro Forma Financial Statements.
13
<PAGE>
CONCENTRA MANAGED CARE, INC.
Consolidated Pro Forma Statements of Operations
For the Three Months Ended March 31, 1999 (Unaudited)
<TABLE>
<CAPTION>
PRO FORMA
CONCENTRA ADJUSTMENTS PRO FORMA
-------------- ----------- -----------
<S> <C> <C> <C>
Revenues:
Health services .......................... $ 70,622,000 $ -- $ 70,622,000
Managed care services:
Specialized cost containment ........... 46,712,000 -- 46,712,000
Field case management .................. 38,077,000 -- 38,077,000
------------- ------------- -------------
Total managed care services ........ 84,789,000 -- 84,789,000
------------- ------------- -------------
Total revenues ............... 155,411,000 -- 155,411,000
Cost of Services:
Health Services .......................... 57,800,000 -- 57,800,000
Managed care services .................... 65,937,000 -- 65,937,000
------------- ------------- -------------
Total cost of services ............. 123,737,000 -- 123,737,000
------------- ------------- -------------
Total gross profit ........... 31,674,000 -- 31,674,000
General and administrative expenses ........ 14,420,000 -- 14,420,000
Amortization of intangibles ................ 3,038,000 -- 3,038,000
------------- ------------- -------------
Operating income ................... 14,216,000 -- 14,216,000
Interest expense ........................... 4,677,000 12,744,000 (2) 17,421,000
Interest income ............................ (1,112,000) 1,112,000 (9) --
Other, net ................................. 98,000 -- 98,000
------------- ------------- -------------
Income (loss) before income taxes ...... 10,553,000 (13,856,000) (3,303,000)
Provision (benefit) for income taxes ....... 4,485,000 (5,392,000)(10) (907,000)
------------- ------------- -------------
Net income (loss) from continuing operations $ 6,068,000 $ (8,464,000) $ (2,396,000)
============= ============= =============
Basic earnings (loss) per share ............ $0.13 $(0.09)
============= =============
Weighted average common shares outstanding 47,251,000 (21,613,000)(11) 25,638,000
Diluted earnings (loss) per share .......... $0.13 $(0.09)
============= =============
Weighted average common shares and
equivalents outstanding ................ 47,882,000 (22,244,000)(11) 25,638,000
</TABLE>
See accompanying Notes to Consolidated Pro Forma Financial Statements.
14
<PAGE>
CONCENTRA MANAGED CARE, INC.
Consolidated Pro Forma Statements of Operations
For the Year Ended December 31, 1998 (Unaudited)
<TABLE>
<CAPTION>
PRO FORMA
CONCENTRA ADJUSTMENTS PRO FORMA
---------------- ----------- -----------
<S> <C> <C> <C>
Revenues:
Health services $259,481,000 $ -- $259,481,000
Managed care services:
Specialized cost containment 183,734,000 -- 183,734,000
Field case management 167,841,000 -- 167,841,000
----------- ------------ ------------
Total managed care services 351,575,000 -- 351,575,000
----------- ------------ ------------
Total revenues 611,056,000 -- 611,056,000
Cost of Services:
Health services 201,181,000 -- 201,181,000
Managed care services 268,116,000 -- 268,116,000
----------- ------------ ------------
Total cost of services 469,297,000 -- 469,297,000
----------- ------------ ------------
Total gross profit 141,759,000 -- 141,759,000
General and administrative expenses 45,326,000 -- 45,326,000
Amortization of intangibles 8,119,000 -- 8,119,000
Non-recurring charge 33,114,000 -- 33,114,000
----------- ------------ ------------
Operating income 55,200,000 -- 55,200,000
Interest expense 18,021,000 51,188,000 (2) 69,209,000
Interest income (4,659,000) 4,659,000 (9) --
Other, net 44,000 -- 44,000
----------- ------------ ------------
Income (loss) before income taxes 41,794,000 (55,847,000) (14,053,000)
Provision (benefit) for income taxes 19,308,000 (21,181,000)(10) (1,873,000)
----------- ------------ ------------
Net income (loss) from continuing operations $22,486,000 $(34,666,000) $(12,180,000)
=========== ============ ============
Basic earnings (loss) per share $0.48 $(0.48)
=========== ============
Weighted Average Common Shares Outstanding 46,451,000 (20,813,000)(11) 25,638,000
Diluted earnings (loss) per share $0.47 $(0.48)
=========== ===========
Weighted average common shares and
equivalents outstanding 47,827,000 (22,189,000)(11) 25,638,000
</TABLE>
See accompanying Notes to Consolidated Pro Forma Financial Statements.
15
<PAGE>
CONCENTRA MANAGED CARE, INC.
Notes To Consolidated Pro Forma Financial Statements (Unaudited)
(1) To record the equity contributions and the receipt of $233,784,000 of cash
and $29,500,000 of convertible subordinated notes by WCAS, $30,600,000 of
cash by Ferrer Freeman and $23,000,000 of cash by other investors.
(2) The table below reflects the pro forma adjustments to record (i) the
repayment or equity contribution of certain existing debt and the issuance
of new debt associated with the merger, (ii) the write-off of Concentra's
existing deferred finance costs on debt to be repaid and to record new
deferred finance costs associated with the issuance of new debt, and (iii)
the related interest expense adjustment to reflect the pro forma effect of
(i) and (ii) above.
<TABLE>
<CAPTION>
INTEREST
INTEREST EXPENSE
AMOUNT RATE ADJUSTMENT
------- ------- -----------
YEAR THREE MONTHS
ENDED ENDED
DECEMBER 31, 1998 MARCH 31, 1999
----------------- --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Repayment or equity contribution of existing debt:
Commitment fees on existing Revolving
Credit Facility ..................................... $ -- $ (250) $ (63)
4.5% Convertible Subordinated Notes due March, 2003 ... (230,000) 4.50%(a) (8,165) (2,587)
6.0% Convertible Subordinated Notes due December, 2001 (97,750) 6.00% (5,865) (1,466)
Interest on other indebtedness paid off during the year -- (2,042) (62)
-------- -------- --------
Total existing debt ........................... (327,750) (16,322) (4,178)
Equity contributions of convertible notes by WCAS ..... (29,500)
--------
Total repayment of existing debt .............. $(298,250)
=========
Issuance of new debt:
Term Facilities:
Commitment fee on new $100,000,000 Credit Facility .. $ -- 500 125
Tranche B at ABR plus applicable margin due 2006 .... 250,000 8.25%(b) 20,625 5,157
Tranche C at ABR plus applicable margin due 2007 .... 125,000 8.50%(b) 10,625 2,656
Senior Subordinated Notes at 10.75% due 2009 .......... 190,000 10.75% 20,425 5,106
Senior Discount Debentures with warrants at 13.75%
due 2010(c) .......................................... 86,058 16.63%(c) 14,908 3,846
--------- ------- --------
651,058 67,083 16,890
Warrants to purchase Concentra stock(c) ............... 23,942
---------
$ 675,000
=========
Amortization of existing deferred finance costs
on debt being repaid: ...............................
December 31, 1998 ............................ $ (7,592) (1,699)
March 31, 1999 ............................... (7,093) (499)
Amortization of deferred finance costs on new debt ... 17,500(d) 2,126 531
-------- --------
Total interest expense adjustment ............ $ 51,188 $ 12,744
======== ========
</TABLE>
(a) The 4.5% convertible subordinated notes were issued in March
($200,000,000) and April ($30,000,000) of 1998. As such, the interest
expense does not reflect a full year of interest expense.
(b) The Adjusted Borrowing Rate ("ABR") is assumed to be 5% for the
purposes of calculating interest expense. The annual effect of a 1/8%
change in the interest rate on the $375,000,000 variable rate debt is
$469,000 for the year ended December 31, 1998 and $117,000 for the three
months ended March 31, 1999.
(c) Reflects $110,000,000 Senior Discount Debentures less debt discount
of $23,942,000 which is the value assigned to the detachable warrants
for the purchase of 1,451,000 shares of Concentra stock at an exercise
price of $0.01 per share. The effective interest rate is 16.63%.
(d) The estimated deferred finance fees of $17,500,000 are being
amortized over the weighted average life of the new debt of 8.7 years.
16
<PAGE>
(3) To reflect the repurchase of 41,064,817 shares of common stock by
Concentra at $16.50 per share. These shares are comprised of 47,303,020
shares outstanding at March 31, 1999 plus 195,000 shares of restricted
stock vested and issued at the time of merger, less the 6,433,203 shares
owned by WCAS prior to the merger (see note 6).
(4) To record the use of cash to fund approximately $44,000,000 of transaction
fees consisting of deferred finance costs of approximately $17,500,000
(see note 2(d)) and banking, professional fees and other fees of
$26,500,000 associated with the merger, which will be expensed. The
expensed portion of the fees of $26,500,000 has not been reflected on the
Consolidated Pro Forma Statement of Operations, as they are one-time and
unusual in nature.
(5) To record the tax benefit ($4,227,000) on the pro forma adjustments
associated with the write-off of the existing deferred finance costs (see
note 2) and the vesting and issuance of restricted stock as a result of
the merger. For the purposes of these consolidated pro forma financial
statements, Concentra has assumed that none of the expensed portion of the
transaction fees of $26,500,000 will be deductible for tax purposes.
(6) To record the capital contribution of cash and convertible notes of
$316,884,000 (see note 1) and 6,433,203 shares of Concentra common stock
owned by WCAS. WCAS, Ferrer Freeman and other investors will own
22,389,824, (87.3%), 1,854,545 (7.2%) and 1,393,939 (5.5%) shares of
Concentra common stock post-merger, respectively.
(7) To retire Concentra's outstanding common stock at the time of the merger.
The value of the treasury stock of $783,717,000 exceeds Concentra's
required stated capital and paid-in capital by $59,318,000 which has been
reflected as an increase to Concentra's retained deficit.
(8) To reflect 6,433,203 shares of Concentra common stock owned by WCAS, which
were contributed to capital and will be subsequently retired at the time
of the merger.
(9) To record the decrease in interest income due to the use of available
cash.
(10) To record the tax benefit on the pro forma interest adjustments at7.9%,
for the year ended December 31, 1998 and 38.9% for the three months ended
March 31, 1999.
(11) To retire Concentra's outstanding common stock and reflect the subsequent
re-issuance of new common stock to WCAS, Ferrer Freeman and other
investors in connection with the merger. The merger agreement provides
that Concentra will use its best efforts to effect the cancellation or
amendment at the effective time of the merger of all outstanding options
to acquire Concentra common stock in exchange for a cash payment equal to
$16.50 per share to such holder less the exercise price per share of such
option. Concentra has not yet developed a plan with regard to unvested
options. If all vested in-the-money (exercise price less than $16.50 per
share) options and warrants are exercised at the time of the merger, the
cash proceeds from the exercise would be $9,649,000, the related tax
benefit would be $5,078,000, cash required to repurchase the outstanding
shares would be $23,934,000 and stockholders' deficit would increase to
($127,020,000). The settlement of the vested in-the-money options will
result in a non-cash compensation charge of approximately $12,400,000. As
the exercise of these options and warrants are not directly attributable
to the merger, their exercise and resulting repurchase has not been
reflected as a pro forma adjustment in the consolidated pro forma
financial statements.
17
<PAGE>
CERTAIN PROJECTIONS
In connection with WCAS's and Ferrer Freeman Thompson & Co., LLC's
review of Concentra and in the course of the negotiations between Concentra,
WCAS and Ferrer Freeman Thompson & Co., LLC described in "The Merger --
Background," Concentra provided WCAS and Ferrer Freeman Thompson & Co., LLC with
non-public business and financial information. The non-public information
Concentra provided included projections of Concentra's future operating
performance. These projections do not give effect to the merger or the financing
of the merger.
Concentra does not, as a matter of course, publicly disclose
projections of future revenues or earnings. The projections were not prepared
with a view to public disclosure and are included in this proxy statement only
because such information was made available to WCAS and Ferrer Freeman Thompson
& Co., LLC in connection with their due diligence investigation of Concentra.
The projections were not prepared with a view to compliance with the published
guidelines of the Securities and Exchange Commission regarding projections, nor
were they prepared in accordance with the guidelines established by the American
Institute of Certified Public Accountants for preparation and presentation of
financial projections. While presented with numerical specificity, these
projections reflect numerous assumptions made by Concentra's management. In
addition, factors such as industry performance and general business, economic,
regulatory, market and financial conditions, all of which are difficult to
predict and beyond the control of Concentra's management, may cause the
projections or the underlying assumptions to be inaccurate. Accordingly, there
can be no assurance that the projections will be realized, and actual results
may be materially greater or less than those contained in the projections.
Concentra does not intend to update or otherwise revise the projections
to reflect circumstances existing after the date when made or to reflect the
occurrence of future events even in the event that any or all of the assumptions
underlying the projections are shown to be in error.
The projections Concentra provided to WCAS and Ferrer Freeman Thompson
& Co., LLC included estimates of calendar year 1999 revenues, earnings before
interest, taxes, depreciation and amortization and earnings per share of $722.0
million, $126.4 million and $0.95, respectively, and estimates of calendar year
2000 revenues, earnings before interest, taxes, depreciation and amortization
and earnings per share of $831.5 million, $150.0 million and $1.10,
respectively. WCAS and Ferrer Freeman Thompson & Co., LLC took this information,
together with their own analyses, into account in determining whether to invest
in Concentra.
18
<PAGE>
CAUTIONARY STATEMENT CONCERNING
FORWARD-LOOKING INFORMATION
Concentra cautions you that this proxy statement, the information
incorporated in this proxy statement by reference and other statements Concentra
makes from time to time, contain statements that may constitute "forward-looking
statements." Those statements include statements regarding Concentra's intent,
belief or current expectations, as well as the assumptions on which those
statements are based. In preparing these projections, Concentra assumed a
compounded annual growth rate in revenues, operating margins and net income of
12.6%, 15.7% and 17.6%, respectively, and an effective annual tax rate of 41%.
Forward-looking statements are not guarantees of future performance and involve
risks and uncertainties, and actual results may differ materially from those
contemplated by forward-looking statements. Important factors currently known to
Concentra's management and Yankee that could cause actual results to differ
materially from those in forward-looking statements include, but are not limited
to, those factors set forth from time to time in reports Concentra filed with
the Securities and Exchange Commission. Except as required by law, Concentra
undertakes no obligation to update or revise forward-looking statements to
reflect changes in assumptions, the occurrence of unanticipated events or
changes to future operating results over time. You are cautioned not to place
too much reliance on such statements.
SPECIAL FACTORS
BACKGROUND OF THE MERGER
In early August 1998, representatives of WCAS telephoned Donald J.
Larson, who was then Chief Executive Officer of Concentra, in order to discuss
the possibility of WCAS acquiring Concentra. On August 25, 1998, WCAS sent a
letter to Mr. Larson confirming its interest in pursuing a potential transaction
with Concentra. Concentra believes that Mr. Larson intended to defer a response
to WCAS until he had an opportunity to consult with the Board of Directors of
Concentra (the "Board") at its next regularly scheduled meeting on September 15,
1999.
On September 8, 1998, Concentra issued a press release announcing that
Concentra's revenues and net income for the first two months of the quarter
ending September 30, 1998, were below expectations and that, consequently,
results for the third quarter were likely to be lower than analysts' estimates.
Further, Concentra revised its projected rate of revenue growth from
approximately 30% to approximately 20%, which would have an effect on
Concentra's earnings outlook. As a result, Concentra revised its forward-looking
earnings per share estimates to $0.29 and $0.21 for the third quarter and fourth
quarter of 1998, respectively. On the day of this announcement, the market price
of Concentra's common stock on the NASDAQ National Market dropped from $12 3/16
to $6 3/32.
On September 15, 1998, a representative of Donaldson Lufkin & Jenrette
Securities Corporation, acting on behalf of WCAS, delivered to each of
Concentra's directors an unsolicited letter in which WCAS expressed a
non-binding interest in acquiring Concentra's outstanding common stock at a
price of $16 per share. WCAS stated its willingness to commence immediately a
due
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diligence investigation and to make and complete an acquisition proposal on
an expedited basis.
Also on September 15, 1998, at a regularly scheduled meeting of the
Board, Donald J. Larson resigned as Concentra's Chairman and Chief Executive
Officer. The Board elected Daniel J. Thomas, formerly President and Chief
Operating Officer, to be Interim Chief Executive Officer, and elected John K.
Carlyle, a director and formerly Chairman of Concentra, to be Concentra's
Chairman.
At the September 15 Board meeting, the members of the Board also
discussed the WCAS indication of interest, potential alternatives to the
transaction proposed by WCAS, and several Board members' potential conflicts of
interest with respect to any transaction with WCAS as a result of previous
relationships with WCAS. At this meeting, Richard A. Parr II, Concentra's
General Counsel, and a representative of Concentra's legal counsel, Vinson &
Elkins L.L.P., apprised the Board of the appropriate process for evaluating the
WCAS indication of interest, for addressing directors' potential conflicts of
interest and for addressing potential competing offers, and discussed the
possible formation of a special committee of independent directors for the
purpose of considering strategic alternatives available to Concentra, including
remaining independent and evaluating the WCAS indication of interest.
Thereafter, the Board directed Concentra's senior management to assess
immediately Concentra's financial condition and strategy in light of the WCAS
proposal and to report their findings as soon as possible to the Board. The
Board deferred a response to WCAS and any action with respect to the formation
of a special committee until the Board's receipt and evaluation of senior
management's findings.
On September 22, 1998, WCAS made a filing under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), disclosing its
intention to acquire in excess of $15 million of Concentra's common stock.
Between September 11, 1998 and October 1, 1998, Concentra received four
letters containing additional unsolicited expressions of interest from third
parties to acquire Concentra. Bidders 1, 2 and 3 were national leveraged buyout
firms and Bidder 4 was a regional leveraged buyout firm. Bidder 1, in a letter
dated September 28, 1998, expressed an interest in purchasing Concentra for
$13.00 to $15.00 per share in cash. Bidder 2, in a letter dated September 25,
1998, offered to provide or arrange equity capital as well as senior mezzanine
debt to enable Concentra to finance a recapitalization to provide stockholders
with cash at a premium to the market price in respect of approximately 80% of
Concentra's shares. The letter elaborated that the contemplated transaction
would result in Concentra's public stockholders maintaining ownership of more
than 50% of Concentra's common stock. Bidder 2's letter did not specify a
purchase price for the acquisition. Bidder 3, in a letter dated September 30,
1998, merely expressed an interest in engaging in a cash acquisition of
Concentra without providing any details. Similarly, Bidder 4, in a letter dated
September 11, 1998, expressed an interest in entering into a transaction with
Concentra without describing the details of the transaction.
Between September 11, 1998 and October 1, 1998, Concentra sought the
informal assistance of BT Alex. Brown in evaluating Concentra's business and
financial condition.
On October 1, 1998, at a special meeting of the Board convened to
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update the Board on the results of senior management's assessment in response to
the Board's September meeting, Mr. Carlyle informed the Board of Concentra's
receipt of the additional expressions of interest and of WCAS's HSR Act filing.
Mr. Thomas and Mr. Carlyle reported to the Board regarding senior management's
efforts to assess the financial condition and strategy of Concentra, and stated
that, based on the initial results of such assessment, Concentra should further
consider the expressions of interest. Specifically, Mr. Thomas and Mr. Carlyle
reported that, after examining Concentra's projected cash flows and net income,
and in light of the significant capital expenditures necessary or desirable in
the areas of technology, information systems and facilities, it was likely that
the highest cash prices offered by the bidders in their offer letters exceeded
the anticipated trading price of Concentra's common stock for the remainder of
1998 and for the years 1999 and 2000. They reported that it was expected that
Concentra would be unable to meet consensus analysts' earning expectations for
the remainder of 1998 and for 1999, and that Concentra would be unable to grow
its earnings at the analysts' expectation of its long term growth rate, as a
result of the underperformance and slower growth of the majority of its business
lines, especially the field case management and bill review businesses. The
necessary capital expenditures were expected to cost approximately $40 million
for 1999, including nearly $25 million on information technology hardware and
software for all its business lines, most notably First Notice and Case
Management (which were undergoing significant development projects). Messrs.
Thomas and Carlyle did not make any recommendations to sell Concentra, but
rather were reporting preliminary assessments designed to aid the Board in
assessing whether to examine the matter more thoroughly through the use of a
special committee that would be advised by legal and financial advisors selected
by the committee.
At this meeting, Concentra's legal counsel described the fiduciary
duties, including their duties of loyalty and care, owed to Concentra and its
stockholders by Concentra's directors and officers, particularly in the context
of evaluating Concentra's strategic alternatives. Concentra's legal counsel
further discussed the process for evaluating and addressing directors' conflicts
of interest and the structure, functions, responsibilities and likely
composition of a possible special committee to be formed for the purpose of
addressing the expressions of interest. The Board then determined that seven of
nine directors had potential conflicts of interest that might preclude them
from, or limit them in, participating in the deliberations to evaluate the
expressions of interest. Messrs. Carlyle, Ortenzio, Rehm, Silverman and Thomas
each had relationships with one or more of the bidders in which the bidders had
invested in or were proposing to invest in ventures with such directors. Mr.
Rabkin was engaged in soliciting Bidder 1 to make a significant charitable
contribution to a not-for-profit entity. Messrs. Carlyle, Ortenzio, Rehm and
Thomas had pre-existing business relationships with WCAS. In addition, an
investment partnership affiliated with WCAS is currently an investor in MAGELLA
Healthcare Corporation, a company of which Mr. Carlyle is the President and
Chief Executive Officer. Mr. Silverman had a pre-existing business relationship
with Bidder 2. Please see "Interests of Certain Persons in the
Merger--Relationships with WCAS".
Thereafter, the Board determined that it was in the best interests of
Concentra and its stockholders to form a special committee, consisting of Hon.
Willis D. Gradison, Jr., and George H. Conrades. These two members of the Board
were not employed by Concentra, would not be involved as participants in any
potential transaction, and had no past or present relationship with WCAS or with
any of the other parties who had delivered an expression of interest in
acquiring
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Concentra. The special committee was charged by the Board with considering the
various strategic alternatives available to Concentra, including considering (1)
whether Concentra should remain independent and continue to pursue its current
strategy or a modified strategy, (2) any proposals to acquire Concentra and (3)
any proposals to engage in a strategic merger of Concentra with another company.
The special committee was authorized to conduct or supervise the conduct of any
negotiations with respect to such an acquisition or merger, and to review,
evaluate and make a determination with respect to such an acquisition or merger
(including conducting or supervising the conduct of any auction or related
activities that the special committee might deem necessary or appropriate to
protect the interests of Concentra's stockholders). The special committee was
also authorized to establish such procedures, review such information and engage
such legal counsel and financial advisors as it deemed reasonable and necessary.
The special committee retained Ropes & Gray as its legal counsel and
discussed with them the procedures to be followed in evaluating the various
strategic alternatives available to Concentra and responding to the expressions
of interest received by Concentra. Ropes & Gray advised the special committee of
the special committee's legal responsibilities, principles applicable to, and
consequences of, actions taken by the special committee with respect to its
evaluation of Concentra's strategic alternatives and its ultimate recommendation
to the Board. The procedures outlined by Ropes & Gray included the need for
separate meetings of the special committee, the desirability of controlling
communications with Concentra's Board and management in light of the potential
conflicts of interest, and the anticipated course of discussions and
negotiations with potential acquirors or merger partners. Following this
discussion, the special committee determined to meet as frequently as necessary
to remain informed about the status of discussions or negotiations and make
decisions regarding the alternatives presented. The special committee also
determined to limit communication with Concentra's Board and management
regarding potential alternatives being reviewed by the special committee to
avoid disclosure of the terms of any proposals being considered and the identity
of the parties submitting the proposals.
The special committee also selected BT Alex. Brown as its financial
advisor. The special committee instructed representatives of BT Alex. Brown to
meet with members of Concentra's senior management to participate in Concentra's
detailed evaluation of its business and financial prospects and preparation of
an updated five year plan. From October 15, 1998 through December 2, 1998,
representatives of BT Alex. Brown met periodically with Mr. Thomas, Joseph F.
Pesce, Concentra's Chief Financial Officer, and other members of Concentra's
senior management for this purpose.
On October 10, 1998, the Federal Trade Commission granted WCAS early
termination of its HSR Act filing. Concentra did not join WCAS's request for
early termination of its HSR Act waiting period.
On October 28, 1998, at a special meeting of the Board, the special
committee reported that it had held several meetings with representatives of
Ropes & Gray and BT Alex. Brown, had scheduled additional meetings with them and
with members of Concentra's senior management, and would report further to the
Board following the special committee's completion of a more
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comprehensive review of Concentra's business and financial prospects and updated
five year plan.
On October 29, 1998, Concentra issued its third quarter earnings
release, announcing results which fell short of previously revised expectations
for revenues and profitability, and disclosed a non-recurring charge of $15
million to $25 million, which was to be taken in the fourth quarter of 1998. In
addition, Concentra announced that it had received several unsolicited
expressions of interest to acquire Concentra, that it had formed the special
committee for the purpose of evaluating various strategic alternatives available
to Concentra, including remaining independent and pursuing its existing or a
modified strategy, and that the special committee had engaged BT Alex. Brown as
its financial advisor.
On November 2, 1998, WCAS made a Schedule 13D filing with the
Securities and Exchange Commission disclosing that WCAS had purchased 1,725,000
shares of Concentra's common stock between October 20, 1998 and October 30,
1998. WCAS also reported that it had during the same period purchased
$20,500,000 in principal amount of Concentra's 4.5% Convertible Subordinated
Notes due 2003 (convertible into 496,969 shares of Concentra common stock)
which, together with the shares of Concentra common stock purchased by WCAS,
would have represented 4,346,732 shares or approximately 9.1% of Concentra's
outstanding common stock if the notes were converted.
On November 17, 1998, the Board elected Mr. Thomas to the permanent
position of President and Chief Executive Officer, removing the interim
designation he had held since September 15.
Between October 28, 1998 and December 2, 1998, the special committee
held additional meetings with Ropes & Gray, BT Alex. Brown and Concentra's
senior management. The special committee reported to the Board at a special
meeting held on November 17 that the special committee would be prepared to
present an initial report and preliminary recommendations to the Board during
the first week of December.
On December 2, 1998, at a special meeting called for that purpose, the
special committee reported to the Board regarding the special committee's
consideration of strategic alternatives available to Concentra, including the
advantages and disadvantages of each, the rationale for the special committee's
recommendations and the special committee's analysis of Concentra's business and
financial prospects. The special committee recommended that Concentra pursue a
controlled process to evaluate and consider whether to preserve Concentra's
independence or complete a sale of Concentra and/or a recapitalization of
Concentra. The process would involve contacting selected potential financial
buyers and strategic merger partners to gauge their interest in acquiring or
merging with Concentra. The special committee proposed a tentative timetable for
undertaking and completing the process and recommended that the process be
directed and controlled by the special committee. The members of the Board
discussed in detail the special committee's recommendations and thereafter
approved and adopted the special committee's recommendations in full.
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Between December 7 and December 14, 1998, at the direction of the
special committee, eleven potential financial buyers and nine potential
strategic merger partners were contacted regarding their interest in acquiring
or merging with Concentra. WCAS and other parties who had delivered expressions
of interest to the Board were among those parties contacted. Subsequently,
Concentra entered into confidentiality and standstill agreements with nine
financial parties, including WCAS, and two strategic parties, and sent each of
these parties a copy of a confidential memorandum describing Concentra. In
selecting potential acquirors and strategic partners to be contacted in the
process, the special committee considered those entities which had expressed an
interest in acquiring Concentra (or a substantial portion thereof) either before
the formation of the special committee or after its inception and disclosure to
the public. In expanding the field beyond those which independently expressed
interest, the special committee focused specifically on financial sponsors with
portfolio companies in the specialty managed care and workers compensation
fields which had completed transactions similar in size and scope to the
potential acquisition of Concentra and potential strategic partners in the
specialty managed care or workers compensation fields with the financial
capability to complete a transaction of this size. The parties ultimately
selected to be contacted included insurance companies, health service providers,
information services companies and financial sponsors.
The special committee followed customary practices for sharing
non-public information with potential investors by pursuing
standstill/confidentiality agreements. Recognizing that material non-public
information would be included in both management presentations to potential
acquirors and strategic partners as well as any additional due diligence pursued
by the parties, the special committee required all interested parties to sign
standstill/confidentiality agreements. Such agreements were designed, in part,
to protect existing stockholders from the harm that might result from access to
material non-public information by potential acquirors.
On January 12, 1999, WCAS filed an amendment to its Schedule 13D with
the Securities and Exchange Commission indicating that WCAS had purchased an
additional 2,450,000 shares of Concentra's common stock between November 2, 1998
and January 6, 1999 and prior to its execution of a confidentiality and
standstill agreement with Concentra on January 12, 1999. WCAS also reported that
it had during the same period purchased an additional $14,000,000 in principal
amount of Concentra's 4.5% Convertible Subordinated Notes due 2003 (convertible
into 339,395 shares of Concentra common stock) which, together with the shares
of Concentra common stock owned by WCAS, would have represented 7,136,127 shares
or approximately 14.9% of Concentra's outstanding common stock if the notes were
converted.
On January 28, 1999, five financial parties, including WCAS, indicated
in writing their interest in acquiring Concentra. One strategic party indicated
orally an interest in a transaction with Concentra. The preliminary indications,
which were developed before management meetings or commencement of business or
legal due diligence, ranged from $13.50 to $20.00 per share. Each of the written
offers presented to the special committee on January 28, 1999 contemplated a
structure that would be characterized as a leveraged recapitalization. The
written offers provided for the purchase of between 90% and 100% of the
currently outstanding shares of Concentra. All written offers received were
conditioned upon completing the aforementioned due diligence which also
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included, but was not limited to, specific financial, accounting, tax and
environmental issues.
On February 4, 1999, Concentra announced revenues and earnings for the
fourth quarter and year ended December 31, 1998, as well as a non-recurring
charge of $20,514,000. Concentra also announced that overall revenue growth was
expected to slow to approximately 15% for 1999, and Concentra projected earnings
of approximately $0.90 to $0.95 for 1999, versus $0.93 per share for 1998.
Concentra stated that, in the future, total revenues were anticipated to grow in
the 12% to 15% range, and annual earnings growth was expected to re-accelerate
to a range of approximately 15% to 18%. Finally, Concentra announced that the
special committee continued to work with BT Alex. Brown to evaluate the various
strategic alternatives available to Concentra and that the special committee
planned to complete its evaluation and make a recommendation to the full Board
by the end of the first quarter of 1999.
Between February 9, 1999 and February 23, 1999, each of the potential
financial parties and the strategic party attended presentations by members of
Concentra's senior management and was given access to extensive documentary due
diligence information prepared by Concentra. Each party was also invited to
pursue additional business, legal, tax, human resources, information technology
and accounting due diligence. Five of the six parties pursued this additional
due diligence to varying degrees. WCAS pursued due diligence in each area.
On February 24, 1999, the special committee received second-round
indications of interest from four financial parties, including WCAS, each
indicating an interest in purchasing all or substantially all of Concentra's
outstanding common stock, and each proposing to effect the transaction through a
leveraged recapitalization. Three of the parties' indications of interest
explicitly required additional accounting and legal due diligence. Various
additional diligence requests from these parties included the tax, financial,
regulatory, environmental, employment and technology areas. Requests were also
made for select facility site visits and interviews with customers from each of
the major business lines. Each of these three offers stated that an additional
two to three weeks would be necessary to complete this incremental diligence.
The first two offers were for $15.00 and $16.00 per share, respectively. The
third offer included a range of value, between $16.00 and $17.00, but was
subject to the above other conditions, including complete accounting, tax and
legal due diligence as well as additional business due diligence. WCAS's
expression of interest stated that its offer expired on March 5, 1999 and that
only informal confirmatory due diligence was required. All parties submitted
commitment letters from their respective financing sources with respect to all
financing required for completion of the individually proposed transactions.
Only WCAS's commitment letters were not subject to further business due
diligence.
On the evening of February 25, 1999, unsolicited, WCAS orally indicated
an ability to revise its offer to $16.50, subject to Concentra executing a
definitive agreement prior to March 5, 1999. On February 26, 1999, the special
committee met to review the second-round indications. Based on written
confirmation of the $16.50 offer and a commitment from WCAS to bridge finance
the subordinated debt and mezzanine components of its offer, the special
committee elected to pursue an accelerated transaction with WCAS on the
condition that a definitive agreement, subject to no further due diligence
investigation, be executed by March 2, 1999 at a price of $16.50
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per share. In electing to pursue an accelerated transaction with WCAS, the
special committee considered that WCAS's expression of interest expired on March
5, 1999, that WCAS required only informal confirmatory due diligence, and that
WCAS's commitment letters were not subject to further business due diligence.
The other bidders and their financing sources required significantly greater due
diligence and the special committee believed it to be unlikely that a more
attractive offer would result from the additional due diligence. Given these
factors, the special committee believed that the stockholders' interests would
not be served by rebuffing WCAS's request for acceleration and continuing the
due diligence investigation of the other bidders for an extended period of time.
Legal counsel to Concentra and to the special committee commenced negotiation of
a definitive merger agreement incorporating the terms and conditions approved by
the special committee. The merger agreement provided that all but approximately
1.9 million shares of Concentra common stock (approximately seven percent of
Concentra's post-merger shares outstanding) would be converted into the right to
receive $16.50 in cash, with Concentra's current stockholders retaining those
outstanding shares. The merger agreement further provided that, if WCAS arranged
for an independent third party investor to purchase approximately seven percent
of Concentra's post-merger common stock, Concentra's stockholders would receive
$16.50 in cash for 100% of their shares.
On February 27, 1999, at a special meeting of the Board, the special
committee updated the Board regarding its pursuit of an accelerated transaction
with WCAS. The special committee described the WCAS proposal and the progress of
the negotiations with WCAS and preparation of the merger agreement.
On March 2, 1999, at a special meeting of the Board, the members of the
special committee, Concentra's senior management, representatives of BT Alex.
Brown and Ropes & Gray, and Concentra's legal counsel reviewed with the Board
the terms of the merger agreement and the merger, the background of the merger,
the strategic rationale for and potential benefits of the merger, and the status
of negotiations with WCAS. At this meeting, BT Alex. Brown reviewed with the
Board and special committee the financial analyses performed by BT Alex. Brown
in connection with its evaluation of the merger consideration and rendered an
oral opinion, subsequently confirmed by delivery of a written opinion, to the
effect that, as of the date of the opinion and based upon and subject to the
matters stated in its opinion, the merger consideration was fair, from a
financial point of view, to the holders of Concentra common stock, other than
WCAS or its affiliates. See "Opinion of Concentra's Financial Advisor." The
members of the special committee unanimously recommended to the Board that the
Board accept the $16.50 offer by WCAS and approve the merger agreement. After
extensive consideration, the Board unanimously approved the merger agreement and
instructed Concentra's senior management and legal advisors to complete
negotiations with WCAS and execute the merger agreement on behalf of Concentra.
For a more complete discussion of the analysis of the Board and the special
committee, see "Special Committee's and Board's Recommendation."
On the evening of March 2, 1999, Concentra and WCAS completed
negotiations and Concentra and Yankee Acquisition Corp. ("Yankee") executed the
merger agreement.
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On March 24, 1999, WCAS notified Concentra that Ferrer Freeman Thompson
& Co., LLC had agreed to purchase approximately seven percent of Concentra's
post-merger common stock. On March 24, 1999, Concentra and Yankee entered into
an amended and restated merger agreement under which Concentra's stockholders
are entitled to receive $16.50 in cash for 100% of their shares.
THE SPECIAL COMMITTEE'S AND THE BOARD'S RECOMMENDATION
The full Board formed the special committee, comprised of two
disinterested directors, to review and evaluate the proposals because it
appeared that certain of the directors would have actual or potential conflicts
of interest in evaluating third-party proposals to acquire Concentra. Neither of
these two directors were, or had ever been, employees of Concentra. The special
committee unanimously recommended to the Board that the merger agreement be
approved. Following the unanimous recommendation of the special committee, the
Board approved the merger agreement and recommended that the stockholders of
Concentra approve the merger agreement. In approving the merger agreement, the
special committee and the Board determined that the merger, the merger agreement
and the transactions contemplated thereby were advisable, fair and in the best
interests of Concentra and its stockholders, other than WCAS and its affiliates.
The special committee and the Board each adopted the analyses and findings of
the special committee's financial advisor, BT Alex. Brown. See "Special Factors
- -- Opinion of Concentra's Financial Advisor."
The special committee met on six occasions between October 1, 1998 and
the date of this proxy statement, in person or by telephone, to select their
legal counsel and financial advisor and to consider developments relating to a
possible sale of Concentra. The special committee was assisted in its
deliberations by its financial advisor, BT Alex. Brown, and its legal counsel,
Ropes & Gray. BT Alex. Brown acted on behalf of Concentra. Ropes & Gray acted
solely on the behalf of unaffiliated securityholders. At a meeting held on March
2, 1999, the special committee determined that the merger, the merger agreement
and the transactions contemplated thereby were fair and in the best interests of
Concentra and its stockholders, other than WCAS and its affiliates, and
recommended that the full Board approve the merger agreement.
THE SPECIAL COMMITTEE AND THE BOARD UNANIMOUSLY RECOMMEND THAT YOU
VOTE FOR THE APPROVAL AND ADOPTION OF THE MERGER AGREEMENT.
The special committee and the Board believes that the terms of the
merger agreement and the merger are advisable and fair to and in the best
interests of Concentra and its stockholders other than WCASand its affiliates.
In reaching its determination to recommend the merger agreement, the special
committee considered a number of factors, including the following:
1. The special committee considered the value of the consideration to
be received by Concentra's stockholders in the merger. The special committee
considered the historical market prices and trading information for Concentra
common stock, the price per share offered by Yankee, the certainty of value
provided by the cash consideration and the fact that the merger con-
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sideration represents a significant premium over the market prices at which
Concentra's common stock had previously traded, including, but not limited to,
the fact that the $16.50 per share cash consideration represented a 37.5%
premium over the $12.00 trading price on October 28, 1998, the day before
Concentra announced the formation of the special committee and a 161.4% premium
over the $6.31 trading price on October 9, 1998, the day before the Federal
Trade Commission granted early termination of WCAS's HSR Act filing.
2. As described above under "Background of the Merger," the special
committee noted that the merger consideration and the ultimate selection of the
Yankee proposal was the result of an extensive process that resulted in
discussions with a substantial number of potential bidders in a process designed
to elicit third-party proposals to acquire Concentra, and that the participants
in the process were afforded ample opportunity to submit proposals to Concentra.
3. The special committee considered information concerning Concentra's
financial performance, financial condition, business operations and prospects.
In particular, the special committee considered the projections prepared by
Concentra's management described in "Summary--Certain Projections." The special
committee also considered that necessary or desirable investments in facilities
and information systems and technology would require substantial expenditures
which might have a short-term negative impact on earnings per share and,
consequently, the market price of Concentra common stock. The special committee
considered the prospects of continuing to operate Concentra as an independent
public company and the possibility that Concentra's future performance might not
in the foreseeable future lead to a trading price for Concentra common stock
having a higher present value than the merger consideration.
4. The special committee considered a number of strategic alternatives
to the merger agreement. At the direction of the special committee, nine
potential strategic merger partners were contacted regarding their interest in
merging with Concentra. Only one potential strategic merger partner indicated an
interest in a transaction with Concentra, but, after attending presentations by
Concentra's senior management, it never submitted a merger proposal. The special
committee also considered redeploying Concentra's specialty managed care,
physician practice management or healthcare information technology operations
through a divestiture, subsidiary initial public offering, spin-off or similar
transaction. The special committee considered that those alternatives involved
numerous risks and problems, including valuation issues, lost synergies,
additional transaction risks, tax and accounting issues, and management
challenges. The special committee concluded that none of these strategic
alternatives were likely to enhance stockholder value as much as the merger
agreement.
5. The special committee considered that Concentra may be managed more
effectively as a private company. In particular, as a private company, Concentra
would not be subject to pressures from public stockholders and market
professionals to maintain and grow earnings per share and would have greater
flexibility to consider business strategies that have long-term benefits
(including investments in facilities and information systems and technology that
might be dilutive in the short term), but that might adversely affect earnings
per share and the market price of Concentra common stock in the short term if
Concentra were a public company. The special com-
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mittee based its assessment on its members' experience with securities analysts,
investment bankers and investors and input from the committee's financial
advisor.
6. The special committee considered the strong financial condition and
business reputation of WCAS, the experience and high rate of success of WCAS in
structuring and completing transactions similar to the merger, the financing
commitments obtained by WCAS and WCAS's ability to complete the merger in a
timely manner and without substantial additional due diligence.
7. The special committee considered the opinion of BT Alex. Brown dated
March 2, 1999 as to the fairness, from a financial point of view, of the merger
consideration to the holders of Concentra common stock, other than WCAS or its
affiliates, and further considered the related financial analyses performed by
BT Alex. Brown, as described below under "Opinion of Concentra's Financial
Advisor."
The special committee also considered potential negative aspects of the
merger agreement, including the following:
1. At times, the Concentra common stock has traded substantially above
the amount of the merger consideration. See "Summary - Historical Market
Information." The special committee believed, however that significant decreases
in the market prices of healthcare stocks combined with Concentra's need to
invest in facilities, information systems and technology, which would require
substantial expenditures that might have a short-term negative impact on
earnings per share, made it unlikely that Concentra common stock would trade
above $16.50 in the foreseeable future.
2. The special committee considered that, after the merger, Concentra's
current public stockholders will not participate in Concentra's future earnings
and growth.
3. The special committee considered certain restrictive provisions of
the merger agreement, including the restrictions relating to solicitation of
third party proposals, the termination provisions and the size, nature and
events that would trigger the payment of the $25 million termination fee and
related expense reimbursement obligation, capped at $4 million, contained in the
merger agreement (see "The Merger Agreement - Termination of the Merger
Agreement" and "Termination Fees"). Although the special committee determined
that the terms of the merger agreement were favorable to Concentra's
stockholders, the special committee recognized that the provisions limiting
Concentra from soliciting or encouraging alternative proposals, and the
termination fee provisions, would decrease the likelihood that a third party
would offer to acquire Concentra. Nonetheless, the special committee believed
that such provisions were in the best interests of Concentra's stockholders
because they enhanced the likelihood that the merger would be accomplished,
thereby providing Concentra's stockholders with the benefits of the merger
consideration. The special committee also noted that termination fee provisions
are customary in documents like the merger agreement, particularly when the
target company has the right, as does Concentra, to terminate the merger
agreement if its board of directors, in the exercise of its fiduciary duties,
determines termination is required by reason of another acquisition proposal.
The
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special committee determined that the amounts of the termination fee and
reimbursement cap, and the circumstances in which they would be paid, were
customary in transactions of the size and nature of the merger. In addition, in
evaluating the provisions, the special committee also took into account that
Concentra had contacted a substantial number of potential bidders and afforded
them a full opportunity to submit an offer to acquire Concentra.
4. The special committee considered that Yankee's stockholders may
cause Concentra, upon completion of the merger, to enter into employment
agreements with Concentra's executive officers and to grant the executive
officers options to purchase shares of Concentra common stock. The special
committee also considered that the executive officers may be given the
opportunity to roll over their current equity investment in Concentra into
common stock of Concentra as the surviving corporation in the merger. No such
agreements or option grants were effective when the special committee approved
the merger agreement.
5. The special committee considered that it was approving an
accelerated transaction with Yankee without pursuing further the negotiation of
other second-round indications of interest. The special committee also
considered that one of these indications of interest included a range of value
having a high end of $17.00 per share. The special committee realized, however,
that WCAS's expression of interest expired on March 5, 1999, that WCAS required
only informal confirmatory due diligence, and that WCAS's commitment letters
were not subject to further business due diligence. The other bidders and their
financing sources required significantly greater due diligence and the special
committee believed it to be unlikely that a higher offer would result from the
additional due diligence. Additionally, the special committee noted that
prolonging the process might lead to offers that were lower than those contained
in the second round indications of interest or the WCAS offer of $16.50 per
share and that WCAS may significantly lower its offer of $16.50 per share or
withdraw its offer altogether. Given these factors, the special committee
believed that the stockholders' interests would not be served by rebuffing
WCAS's request for acceleration and continuing the due diligence investigation
of the other bidders for an extended period of time. See "The Merger -
Background of the Merger."
6. The special committee considered that Concentra's debt to equity
ratio will be substantially higher following the merger and that Concentra's
existing creditors at the time of the merger could possibly allege that the
leveraging of Concentra to pay the merger consideration involved a fraudulent
conveyance entitling them to recover a portion or all of the merger
consideration from Concentra's public stockholders. The special committee did
not believe that the merger would constitute a fraudulent conveyance. In
approving the merger agreement, the special committee concluded that the
benefits of the merger agreement far outweighed the risk that the merger would
constitute a fraudulent conveyance that would enable Concentra's creditors to
recover the merger consideration from Concentra's public stockholders.
7. The special committee considered that Concentra would be required to
pay substantial costs and fees to its financial, legal, accounting and other
advisors in consummating the merger. The special committee concluded that
Concentra's professional advisors provided substantial benefits in negotiating
the financial and legal aspects of the merger agreement and that their fees were
reasonable.
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8. The special committee considered the risk that the merger
consideration is fixed and will not be adjusted in the event of an increase or
decrease in the market price of Concentra common stock or the value of
Concentra's business. The special committee recognized that fixed merger
consideration in a transaction such as the merger is not unusual and that the
fixed merger consideration, while creating a risk to Concentra's stockholders,
could also operate to benefit Concentra's stockholders, especially in light of
the recent historical performance of Concentra common stock.
In considering the fairness of the merger, the special committee and
the Board did not emphasize Concentra's net book value or liquidation value,
which were not believed to be material in evaluating the value of Concentra. The
special committee and the Board further believed that the Company's liquidation
value would be substantially below $16.50 per share.
The foregoing discussion of factors considered by the special committee
is not exhaustive, but Concentra believes it includes the material factors
considered by the special committee. The special committee did not quantify or
otherwise attempt to assign relative weights to the specific factors the special
committee considered in reaching its determination to recommend the merger.
Rather, the special committee viewed its position and recommendation as being
based on the total information presented to and considered by the special
committee.
OPINION OF CONCENTRA'S FINANCIAL ADVISOR
Concentra engaged BT Alex. Brown to act as exclusive financial advisor
to Concentra and the special committee in connection with the merger. On March
2, 1999, at a meeting of the Concentra board held to evaluate the proposed
merger, BT Alex. Brown rendered an oral opinion, which opinion was subsequently
confirmed by delivery of a written opinion dated March 2, 1999, to the effect
that, as of that date and based upon and subject to the matters stated in its
opinion, the merger consideration was fair, from a financial point of view, to
the holders of Concentra common stock, other than WCAS or its affiliates.
The full text of BT Alex. Brown's written opinion dated March 2, 1999,
which describes the assumptions made, matters considered and limitations of the
review undertaken, is attached as Appendix B to this proxy statement and is
incorporated herein by reference. BT Alex. Brown's opinion is directed to the
Concentra Board and special committee, addresses only the fairness of the merger
consideration from a financial point of view, does not address the merits of the
underlying decision by Concentra to engage in the merger, and does not
constitute a recommendation to any stockholder as to how such stockholder should
vote with respect to matters relating to the proposed merger. The summary of BT
Alex. Brown's opinion described below is qualified in its entirety by reference
to the full text of such opinion.
In connection with BT Alex. Brown's role as Concentra's financial
advisor, and in arriving at its opinion, BT Alex. Brown:
o reviewed publicly available financial and other information
concerning Concentra and
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internal analyses and other information furnished to or discussed
with BT Alex. Brown by Concentra and its advisors;
o held discussions with members of the senior management of Concentra
and WCAS regarding the business and prospects of Concentra;
o reviewed the reported prices and trading activity for Concentra
common stock;
o compared financial and stock market information for Concentra with
similar information for other companies whose securities are publicly
traded;
o reviewed the financial terms of recent business combinations which BT
Alex. Brown deemed comparable in whole or in part;
o reviewed the terms of the merger agreement as originally executed;
o was authorized to approach, and held discussions with, third parties
to solicit indications of interest with respect to the acquisition of
Concentra; and
o performed other studies and analyses and considered other factors as
BT Alex. Brown deemed appropriate.
BT Alex. Brown did not assume responsibility for independent
verification of, and did not independently verify, any information, whether
publicly available or furnished to BT Alex. Brown, about Concentra both before
and after giving effect to the merger, including, without limitation, any
financial information, forecasts or projections considered in connection with
the rendering of its opinion. For purposes of its opinion, BT Alex. Brown
assumed and relied upon the accuracy and completeness of all information
reviewed and BT Alex. Brown did not conduct a physical inspection of any of the
properties or assets, and did not prepare or obtain any independent evaluation
or appraisal of any of the assets or liabilities, of Concentra. With respect to
the financial forecasts and projections made available to BT Alex. Brown and
used in its analyses, BT Alex. Brown assumed that they were prepared on a basis
reflecting reasonable estimates and judgments. In rendering its opinion, BT
Alex. Brown expressed no view as to the reasonableness of the forecasts and
projections or the assumptions on which they are based. BT Alex. Brown's opinion
was necessarily based upon economic, market and other conditions existing on,
and the information made available to BT Alex. Brown as of, the date of its
opinion.
For purposes of rendering its opinion, BT Alex. Brown assumed that, in
all respects material to its analysis, the representations and warranties of
Concentra and Yankee contained in the merger agreement are true and correct,
Concentra and Yankee will each perform all of the covenants and agreements to be
performed by it under the merger agreement and all conditions to the obligations
of Concentra and Yankee to consummate the merger will be satisfied without any
waiver. BT Alex. Brown also assumed that all material governmental, regulatory
or other approvals and consents required in connection with the consummation of
the merger will be
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obtained and that in connection with obtaining any necessary governmental,
regulatory or other approvals and consents, or any amendments, modifications or
waivers to any agreements, instruments or orders to which either Concentra or
Yankee is a party or is subject or by which it is bound, no limitations,
restrictions or conditions will be imposed or amendments, modifications or
waivers made that would have a material adverse effect on Concentra or
materially reduce the contemplated benefits of the merger to Concentra. In
addition, BT Alex. Brown was informed by Concentra, and for purposes of
rendering its opinion BT Alex. Brown assumed, that the merger will be recorded
as a recapitalization for financial reporting purposes. BT Alex. Brown expressed
no opinion as to the price at which the Concentra common stock will trade at any
time. No other instructions or limitations were imposed by the Board or special
committee upon BT Alex. Brown with respect to the investigations made or the
procedures followed by it in rendering its opinion.
The following is a summary of the material analyses performed by BT
Alex. Brown in connection with its opinion to the Board and special committee
dated March 2, 1999. Certain of the financial analyses summarized below include
information presented in tabular format. In order to fully understand BT Alex.
Brown's financial analyses, the tables must be read together with the text of
each summary. The tables alone do not constitute a complete description of the
financial analyses. Considering the data set forth below without considering the
full narrative description of the financial analyses, including the
methodologies and assumptions underlying the analyses, could create a misleading
or incomplete view of BT Alex. Brown's financial analyses.
ANALYSIS OF SELECTED PUBLIC COMPANIES
BT Alex. Brown compared financial and stock market information for
Concentra and the following 11 selected publicly held companies in the specialty
managed care and physician practice management sectors of the healthcare
services industry:
o American Dental Partners, Inc.
o American Oncology Resources, Inc.
o CorVel Corporation
o First Commonwealth, Inc.
o First Health Group Corp.
o Healthcare Recoveries, Inc.
o Healthplan Services Corporation
o Orthodontic Centers of America, Inc.
o Pediatrix Medical Group, Inc.
o United Payors and United Providers, Inc.
o Vision Twenty-One, Inc.
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BT Alex. Brown calculated adjusted market values, calculated as equity
market value, plus debt, less cash, as multiples of latest 12 months revenues,
earnings before interest, taxes, depreciation and amortization, and earnings
before interest and taxes, and equity market values as a multiple of the latest
12 months and estimated calendar years 1999 and 2000 earnings per share. All
multiples were based on closing stock prices on February 26, 1999. Earnings per
share estimates for the selected companies were based on research analysts'
estimates and earnings per share estimates for Concentra were based on internal
estimates of the management of Concentra. This analysis indicated the following
implied adjusted market value and equity market value multiples for the selected
companies, as compared to the implied multiples for Concentra based on the
merger consideration of $16.50 per share:
<TABLE>
<CAPTION>
MULTIPLES FOR
IMPLIED MULTIPLES OF CONCENTRA IMPLIED BY
SELECTED COMPANIES MERGER CONSIDERATION
--------------------- -------------------
MEAN RANGE
----- ------
<S> <C> <C> <C>
Adjusted Market Values:
Latest 12 months revenues 1.9x 0.6x - 5.9x 1.6x
Latest 12 months earnings before
interest, taxes, depreciation and
amortization 8.0x 3.4x - 13.7x 8.9x
Latest 12 months earnings before
interest and taxes 10.6x 4.0x - 15.4x 11.2x
Equity Market Values:
<CAPTION>
MULTIPLES FOR
IMPLIED MULTIPLES OF CONCENTRA IMPLIED BY
SELECTED COMPANIES MERGER CONSIDERATION
--------------------- -------------------
MEAN RANGE
----- ------
<S> <C> <C> <C>
Latest 12 months earnings per
share 16.5x 11.2x - 23.9x 17.8x
Estimated calendar year 1999
earnings per share 12.1x 7.5x - 19.0x 17.3x
Estimated calendar year 2000
earnings per share 9.9x 5.8x - 15.8x 15.0x
</TABLE>
ANALYSIS OF SELECTED MERGER AND ACQUISITION TRANSACTIONS
BT Alex. Brown reviewed the purchase prices and implied transaction
multiples in the following eight proposed, pending or completed merger and
acquisition transactions announced since January 1, 1995 having transaction
values greater than $150 million in the specialty managed care and physician
practice management sectors of the healthcare services industry:
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<PAGE>
<TABLE>
<CAPTION>
Acquiror Target
<S> <C>
o Golder, Thoma, Cressey, Rauner Inc., CompDent Corporation
TA Associates, Inc., NMS Capital Partners
o Protective Life Corporation United Dental Corporation
o Magellan Health Services, Inc. Merit Behavioral Care Corporation
o MedPartners, Inc. Talbert Medical Management Holdings, Inc.
o Magellan Health Services, Inc. Human Affairs International, Incorporated
o Laidlaw, Inc. EmCare Holdings, Inc.
o Columbia/HCA Healthcare Corporation Value Health, Inc.
o Kohlberg Kravis Roberts & Co. Merit Behavioral Care Corporation
</TABLE>
BT Alex. Brown calculated adjusted market values in the selected
transactions as multiples of latest 12 months revenues, earnings before
interest, taxes, depreciation and amortization and earnings before interest and
taxes, and equity market values as multiples of latest 12 months and one-year
forward net income. All multiples were based on publicly available information
at the time of announcement of the relevant transaction. This analysis indicated
the following implied adjusted market value and equity market value multiples
for the selected transactions, as compared to the implied multiples for
Concentra based on the merger consideration of $16.50 per share:
<TABLE>
<CAPTION>
MULTIPLES FOR
IMPLIED MULTIPLES OF CONCENTRA IMPLIED BY
SELECTED COMPANIES MERGER CONSIDERATION
--------------------- -------------------
MEAN RANGE
----- ------
<S> <C> <C> <C>
Adjusted Market Values:
Latest 12 months revenues 1.3x 0.3x - 3.4x 1.6x
Adjusted Market Values:
Latest 12 months earnings before
interest, taxes, depreciation and
amortization 11.6x 6.5x - 16.0x 8.9x
Latest 12 months earnings before
interest and taxes 13.1x 8.5x - 20.4x 11.2x
Equity Market Values:
Latest 12 months net income 21.4x 15.4x - 30.5x 17.9x
One-year forward net income 17.6x 12.7x - 21.6x 16.6x
</TABLE>
DISCOUNTED CASH FLOW ANALYSIS
BT Alex. Brown performed a discounted cash flow analysis to estimate
the present value
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of the stand-alone, unlevered, after-tax free cash flows that Concentra could
generate based on internal estimates of the management of Concentra for the
fiscal years 1999 through 2003. The stand-alone discounted cash flow analysis
was determined by: (a) adding the present value of the projected free cash flows
over the fiscal years 1999 through 2003; (b) adding the present value of the
estimated terminal values in fiscal year 2003; and (c) subtracting the current
net debt for Concentra. The range of estimated terminal values for Concentra was
calculated by applying terminal value multiples ranging from 6.0x to 9.0x to
Concentra's projected fiscal year 2003 earnings before interest, taxes,
depreciation and amortization. The present value of the cash flows and terminal
values were calculated using discount rates ranging from 15% to 19%. This
analysis yielded an implied range for Concentra of approximately $10.04 to
$19.71 per share, as compared to the merger consideration of $16.50 per share.
PREMIUM ANALYSIS
BT Alex. Brown analyzed the premiums paid in 84 transactions, 16
selected healthcare transactions and nine selected healthcare services
transactions having transaction values of between $750 million and $1.25 billion
effected since January 1, 1995, based on the target company's stock price one
day and one month prior to public announcement of the transaction. This analysis
indicated the following premiums in the selected transactions, as compared to
the implied premiums in the merger one day and one month prior to public
announcement of the merger and one day prior to public disclosure of the Federal
Trade Commission's granting of early termination of WCAS's HSR Act filing in
which WCAS disclosed its intention to acquire in excess of $15 million of
Concentra common stock:
<TABLE>
<CAPTION>
PREMIUM ONE DAY
PREMIUM PREMIUM PRIOR TO EARLY
ONE DAY PRIOR TO ONE MONTH PRIOR TO TERMINATION OF
PUBLIC ANNOUNCEMENT PUBLIC ANNOUNCEMENT WCAS'S
------------------- ------------------
MEAN RANGE MEAN RANGE HSR ACT FILING
----- ------ ----- ------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Selected Transactions (84) 26.3% (24.3%)-118.5% 35.3% (27.5%)-118.5%
Selected Health Care
Transactions (16) 37.7% (5.2%)-118.5% 45.5% 5.5%-118.5%
Selected Health Care
Services Transactions (9) 34.1% 7.7%-118.5% 49.5% 18.9%-118.5%
Merger Premium Implied
for Concentra 55.3% 52.6% 161.4%
</TABLE>
OTHER FACTORS
In rendering its opinion, BT Alex. Brown also reviewed and considered,
among other things:
o historical and projected financial data for Concentra;
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<PAGE>
o historical market prices and trading volumes for Concentra common
stock and the relationship between movements in Concentra common
stock, movements in the common stock of the selected companies and
movements in the S&P 500 Index;
o selected analysts' reports on Concentra, including calendar years
1999 and 2000 earnings per share estimates and long-term growth rate
estimates of such analysts;
o the implied price per share of Concentra common stock assuming
completion of the merger on June 30, 1999 based on the present value
of Concentra's terminal value at the end of fiscal year 2002; and
o the implied equity returns to the equity investors based on internal
estimates of the management of Concentra assuming the merger occurs.
The summary above is not a complete description of the opinion of BT
Alex. Brown to the Board and special committee or the financial analyses
performed and factors considered by BT Alex. Brown in connection with its
opinion, but rather is a summary of the material aspects of the opinion and
analyses performed and factors considered by BT Alex. Brown in connection with
its opinion. The preparation of a fairness opinion is a complex analytic process
involving various determinations as to the most appropriate and relevant methods
of financial analyses and the application of those methods to the particular
circumstances and, therefore, a fairness opinion is difficult to summarize. BT
Alex. Brown believes that its analyses and the summary above must be considered
as a whole and that selecting portions of its analyses and factors or focusing
on information presented in tabular format without considering all analyses and
factors or the narrative description of the analyses could create a misleading
or incomplete view of the processes underlying BT Alex. Brown's analyses and
opinion.
In performing its analyses, BT Alex. Brown made numerous assumptions
with respect to industry performance, general business, economic, market and
financial conditions and other matters, many of which are beyond the control of
Concentra. No company, transaction or business used in such analyses as a
comparison is identical to Concentra or the proposed merger, nor is an
evaluation of the results of those analyses entirely mathematical; rather, the
analyses involve complex considerations and judgments concerning financial and
operating characteristics and other factors that could affect the merger, public
trading or other values of the companies, business segments or transactions
being analyzed. The estimates contained in BT Alex. Brown's analyses and the
ranges of valuations resulting from any particular analysis are not necessarily
indicative of actual values or future results, which may be significantly more
or less favorable than those suggested by its analyses. In addition, analyses
relating to the value of businesses or securities do not purport to be
appraisals or to reflect the prices at which businesses or securities actually
may be sold. Accordingly, BT Alex. Brown's analyses and estimates are inherently
subject to substantial uncertainty.
BT Alex. Brown is an internationally recognized investment banking firm
and, as a customary part of its investment banking business, is engaged in the
valuation of businesses and their securities in connection with mergers and
acquisitions, negotiated underwritings, private place-
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ments and valuations for estate, corporate and other purposes. Concentra and the
special committee selected BT Alex. Brown based on BT Alex. Brown's reputation,
expertise and familiarity with Concentra. BT Alex. Brown and its affiliates have
in the past provided financial services to Concentra and WCAS and its affiliates
unrelated to the proposed merger, for which services BT Alex. Brown and its
affiliates have received compensation. BT Alex. Brown maintains a market in
Concentra common stock and regularly publishes research reports regarding the
businesses and securities of Concentra and other publicly traded companies in
the healthcare industry. In the ordinary course of business, BT Alex. Brown and
its affiliates may actively trade or hold the securities and other instruments
and obligations of Concentra for their own account and for the accounts of
customers and, accordingly, may at any time hold a long or short position in
such securities, instruments or obligations.
The type and amount of consideration payable in the merger was
determined through negotiation between Concentra and WCAS. BT Alex. Brown did
not recommend the amount of consideration to be paid to the Concentra common
stockholders. Although BT Alex. Brown provided financial advice to Concentra
during the course of negotiations, the decision to enter into the merger was
solely that of the Board and special committee. BT Alex. Brown's opinion and
financial analyses were only one of many factors considered by the Board and
special committee in their evaluation of the proposed merger and should not be
viewed as determinative of the views of the Board, special committee or
management with respect to the merger consideration or the merger.
Pursuant to the terms of BT Alex. Brown's engagement, Concentra has
agreed to pay BT Alex. Brown upon completion of the merger an aggregate
financial advisory fee equal to 0.75% of the aggregate consideration, including
liabilities assumed, payable in connection with the merger. In addition,
Concentra has agreed to reimburse BT Alex. Brown for its reasonable travel and
other out-of-pocket expenses, including reasonable fees and disbursements of
counsel, and to indemnify BT Alex. Brown and related parties against
liabilities, including liabilities under the federal securities laws, relating
to, or arising out of, its engagement. BT Alex. Brown's opinion is available for
inspection and copying at Concentra's principal executive offices during its
regular business hours.
PURPOSE AND REASONS OF WCAS AND THE MEMBERS OF MANAGEMENT FOR THE MERGER
The purpose of WCAS and the Members of Management for engaging in the
transactions contemplated by the merger agreement is to enable WCAS and Ferrer
Freeman to acquire 100% ownership of Concentra. WCAS and the Members of
Management believe that as a private company Concentra will have greater
operating flexibility to focus on enhancing value by emphasizing growth (both
internally and through acquisitions) and operating cash flow without the
constraint of the public market's emphasis on quarterly earnings. This
assessment by WCAS and the Members of Management is based upon publicly
available information regarding Concentra, WCAS's due diligence investigation of
Concentra and WCAS's experience in investing in companies in the healthcare
industry. While WCAS and the Members of Management believe that there will be
significant opportunities associated with an investment in Concentra, there are
also substantial risks that such opportunities may not be fully realized.
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<PAGE>
As a result of the merger, WCAS will acquire a 93 percent interest in
Concentra and will invest approximately $392,432,000 in equity financing and up
to $110,000,000 in subordinated indebtedness and has received commitments from
various lenders to provide financing of $190,000,000 in senior subordinated
notes, $375,000,000 in term loans and a $100,000,000 revolving credit facility.
The Members of Management will acquire a portion of these shares. Ferrer Freeman
will invest approximately $30,600,000 in equity in exchange for an approximate
seven percent interest in Concentra. In addition, certain members of Concentra's
current management will have amended and restated employment agreements with the
surviving corporation.
POSITION OF WCAS AND THE MEMBERS OF MANAGEMENT AS TO FAIRNESS OF THE MERGER
WCAS and the Members of Management have considered the analyses and
findings of the special committee and the Board (described in detail in "-- The
Special Committee's and the Board's Recommendation") with respect to the
fairness of the merger to Concentra's stockholders, other than WCAS and its
affiliates. Each of the Members of Management and WCAS adopts the analysis and
findings of the special committee and the Board with respect to the fairness of
the merger and believes that the merger, the merger agreement and the
transactions contemplated thereby are fair and in the best interests of
Concentra's common stockholders. Each of the Members of Management intend to
vote all shares owned by each of them in favor of the merger agreement. In a
letter agreement dated March 24, 1999, WCAS agreed to and to cause its
affiliates to vote all shares of Concentra common stock owned by WCAS or any of
its affiliates in favor of the merger. Neither WCAS nor the Members of
Management makes any recommendation as to how you should vote on the merger
agreement. WCAS has financial interests in the merger and certain members of
Concentra's management have financial and employment interests in the merger.
See "Special Factors -- Interests of Certain Persons in the Merger."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendations of the Board, you should be aware
that certain members of the Board and certain of Concentra's executive officers
have certain interests in the merger that are in addition to your interest as a
Concentra stockholder generally.
EMPLOYMENT AGREEMENTS. Yankee and each of Daniel J. Thomas, James M.
Greenwood, Richard A. Parr II, W. Tom Fogarty, M.D. and Kenneth Loffredo have
agreed that at or prior to the effective time of the merger they will amend and
restate the existing employment agreements between such individuals and
Concentra. Concentra will enter into a new employment agreement with Thomas E.
Kiraly on substantially the same terms as detailed below. The principal terms of
the amended and restated employment agreements are as follows:
o each agreement would have a term of two years, subject to automatic
renewal for additional one-year terms, unless terminated in
accordance with the agreement's terms;
o each agreement would provide for compensation consisting of base
salary amounts, bonuses at the discretion of the Board of Concentra
and participation in any employee
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<PAGE>
benefit plan adopted by Concentra for its employees;
o each agreement would provide for a severance payment in the event of
termination by Concentra without cause or resignation by the employee
for good reason consisting of two years' base salary for Mr. Thomas
and one year's base salary for Messrs. Greenwood, Kiraly, Parr,
Fogarty and Loffredo; provided, however, if termination by Concentra
occurs within 12 months following the merger, each agreement would
provide for a severance payment consisting of two and one half years'
base salary for Mr. Thomas and two years' base salary for each of
Messrs. Greenwood, Kiraly, Parr, Fogarty and Loffredo.
STOCK OPTIONS AND RESTRICTED STOCK. The merger agreement provides that
Concentra will use its best efforts to effect the cancellation or amendment at
the effective time of the merger of all outstanding options to acquire Concentra
common stock in exchange for a cash payment equal to $16.50 payable to such
holder had he exercised such option less the exercise price per share of such
option. If all of the options to acquire Concentra common stock were exchanged
for cash as described above, the executive officers and other key executives of
Concentra would be entitled to a maximum aggregate cash payment of $7,530,000
and the directors of Concentra would be entitled to a maximum aggregate cash
payment of $1,447,241. In addition, the executive officers and other key
executives of Concentra will be granted new options to acquire up to 10.5% of
Concentra common stock following the merger at a price per share of $16.50. Some
of these new options will be non-qualified and vest 20% per year over a five
year period while other new options will vest upon the achievement of certain
performance criteria.
OFFICERS' AND DIRECTORS' INDEMNIFICATION INSURANCE. The merger
agreement provides that, for a period of six years after the effective time, the
surviving corporation will indemnify the present and former officers, directors,
employees and agents of Concentra and its subsidiaries from liabilities arising
out of actions or omissions in their capacity as such prior to the effective
time of the merger, to the full extent permitted under Delaware law or as
provided in Concentra's or its subsidiaries' organizational documents or any
written indemnification agreements. In addition, the surviving entity will
maintain directors' and officers' insurance coverage for six years after the
effective time on terms no less favorable to such indemnified parties than
existing insurance coverage, but the surviving corporation will not be required
to pay an annual premium in excess of 200% of the last premium paid prior to the
date of the merger agreement.
RELATIONSHIPS WITH WCAS. John K. Carlyle, a director of Concentra, has
served as Concentra's acting Chairman since September 1998. Mr. Carlyle also
served as Concentra's Chairman from August 1997 to January 1998. Prior to the
formation of Concentra resulting from the merger of OccuSystems, Inc.
("OccuSystems") and CRA Managed Care, Inc. in August 1997, Mr. Carlyle was
OccuSystems' Chairman and Chief Executive Officer from 1995 through 1997. An
investment partnership affiliated with WCAS was the primary venture capital
investor in OccuSystems and is currently an investor in MAGELLA Healthcare
Corporation, a neonatology and perinatology physician practice management
company of which Mr. Carlyle is the President and Chief Executive Officer. Mr.
Carlyle was a co-investor with a partnership affiliated with WCAS in Amcomp
Corporation and OthoLink Physicians Corporation. In addition, Mr. Carlyle is a
limited partner in WCAS Healtcare Partners, L.P., a partnership affiliated with
WCAS.
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Mr. Ortenzio currently serves as President of Select Medical
Corporation, a company in which two WCAS members serve on the board of directors
and in which WCAS has a significant investment. Mr. Ortenzio is a director of
both Centennial Healthcare Corporation and U.S. Oncology, Inc., two companies in
which WCAS or partnerships affiliated with WCAS have investments, and on which
general partners of WCAS serve on the board of directors. Mr. Ortenzio was a
co-investor with partnerships affiliated with WCAS in Amcomp Corporation,
OccuSystems, Inc. and U.S. Oncology, Inc. In addition, Mr. Ortenzio is a limited
partner in WCAS Healthcare Partners, L.P., a partnership affiliated with WCAS,
and a partnership affiliated with Mr. Ortenzio is a limited partner in Welsh,
Carson Anderson & Stowe VI, L.P. and WCAS Capital Partners II, L.P.,
partnerships affiliated with WCAS.
Richard A. Rehm is a limited partner in WCAS Healthcare Partners, L.P.,
a partnership affiliated with WCAS and was Chairman and founder of OccuSystems.
In addition, Paul Queally, a general partner of WCAS, served on
Concentra's Board until May 1998.
INVESTMENT IN CONCENTRA. The Members of Management have agreed to
acquire a portion of WCAS's interest in Concentra upon consummation of or after
the merger. The exact interest Members of Management will hold after the merger
has not yet been determined.
PAYMENTS TO ADVISORS. Donaldson, Lufkin & Jenrette has previously
provided advisory services to WCAS and Concentra and has in each instance
charged market rates for the services rendered. Similarly, BT Alex. Brown has
also previously provided advisory services to Concentra and portfolio companies
of WCAS at market rates for services rendered. Neither Donaldson, Lufkin &
Jenrette nor BT Alex. Brown believe that the foregoing arrangements affect their
ability to independently and impartially evaluate this merger.
CERTAIN EFFECTS OF THE MERGER
As a result of the merger, the entire equity interest in Concentra will
be owned by WCAS, Ferrer Freeman and Members of Management through their
ownership of Yankee capital stock. After the merger is complete, Concentra's
officers who are currently subject to Section 16(b) of the Exchange Act will be
granted options to acquire up to 3% of Concentra's common stock on a fully
diluted basis. You will no longer have any interest in, and will not be
stockholders of, Concentra, and therefore will not participate in Concentra's
future earnings and potential growth. Instead, you will have the right to
receive $16.50 in cash, without interest, for each share held (other than shares
in respect of which appraisal rights have been perfected). An equity investment
in Concentra following the merger involves substantial risk resulting from the
future borrowings that will be required to purchase the Concentra common stock
from Concentra's stockholders and to fund the capital expenditures and
acquisitions necessary to execute Concentra's business strategy.
Concentra's substantial leverage following the merger may:
o make it more difficult for Concentra to satisfy its debt
obligtations;
o increase Concentra's vulnerability to general adverse economic and
industry conditions;
o require Concentra to dedicate a substantial portion of its cash flow
from operations to payments on its indebtedness and therefore limit
Concentra's ability to fund future working capital, capital
expenditures and other general corporate requirements;
o limit Concentra's flexibility in planning for, or reacting to,
changes in its business and the healthcare industry;
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o place Concentra at a competitive disadvantage compared to companies
with less debt;
o limit, along with the financial and other restrictive convenants in
its indebtedness, Concentra's ability to borrow additional funds; and
o limit Concentra's ability to engage in various transactions such as
acquisitions and dispositions or to make certain investments.
Nonetheless, if Concentra successfully executes its business strategy,
the value of an equity investment could be considerably greater than its
original cost. See "-- Conflicts of Interest" and "Cautionary Statement
Concerning Forward-looking Information."
In connection with the merger, the Members of Management are entitled
to receive cash amounts in connection with the exercise of stock options and
restricted stock grants. See "Special Factors--Interests of Certain Persons in
the Merger." Mr. Thomas is entitled to receive approximately $2,262,500; Mr.
Greenwood is entitled to receive approximately $408,400; Mr. Fogarty is entitled
to receive approximately $505,500; Mr. Parr is entitled to receive approximately
$124,000; Mr. Loffredo is entitled to receive approximately $151,000; and Mr.
Carlyle is entitled to receive approximately $504,000. None of such individuals
will receive any other payments in connection with the merger. The Members of
Management and WCAS are still negotiating the terms of the Members of
Management's future investment in Concentra and it is possible that one or more
of the Memebers of Management will acquire an equity interest in Concentra in
lieu of receiving these cash amounts.
In addition, the Concentra common stock will no longer be traded on
Nasdaq and price quotations for sales of shares in the public market will no
longer be available. The registration of the Concentra common stock under the
Securities Exchange Act of 1934 will terminate and Concentra will no longer file
periodic or annual reports.
FINANCING OF THE MERGER
It is estimated that approximately $1,118.0 million will be required to
consummate the merger, repurchase Concentra's existing convertible subordinated
notes dues 2001 and 2003 and pay related fees and expenses. These funds are
expected to come from the following sources:
o an equity investment by WCAS of approximately $370.1 million,
o an equity investment by Ferrer Freeman of approximately $30.6
million,
o an equity investment by Chase Capital Partners, DLJ Investment
Partners and some of its affiliates, and the Members of Management of
approximately $23.0 million,
o borrowings by Concentra Operating Corporation, a wholly-owned
subsidiary of Concentra ("Operating Company"), of approximately
$375.0 million under new credit
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facilities (the "New Credit Facilities"),
o borrowings by Operating Company of approximately $190.0 million from
the issuance of senior subordinated notes (the "Senior Subordinated
Notes"),
o borrowings by Concentra of approximately $110.0 million from the
issuance of senior discount debentures (the "Discount Notes"), and
o $71.6 million from Concentra's available cash reserves.
The merger is subject to a financing contingency which states that
Yankee is not obligated to perform its obligations under the merger agreement if
financing cannot be obtained on terms no less favorable in material respects to
the terms stated in the financing commitments.
SENIOR SUBORDINATED NOTES. We anticipate that Operating Company will
raise approximately $190.0 million of the funds necessary to consummate the
merger and related transactions through the issuance of the Senior Subordinated
Notes in the private capital markets. Donaldson, Lufkin & Jenrette Securities
Corporation and Chase Securities Inc. have each provided WCAS with letters dated
February 24, 1999 stating that they are highly confident, subject to the
assumptions in those letters, that Operating Company will be able to raise the
necessary funds from the issuance of such Senior Subordinated Notes. We
anticipate that the Senior Subordinated Notes will be:
o subordinated to the New Credit Facilities,
o have registration rights,
o redeemable by Operating Company after 2004, or up to 35% of the notes
will be redeemable by Concentra with the net proceeds from certain
sales of equity,
o redeemable by Operating Company at the option of the holders upon a
change of control, and
o subject to customary covenants for this type of financing, including,
but not limited to, restrictions on indebtedness, dividends, liens,
affiliate transactions, stock repurchases, assets sales and mergers.
DISCOUNT NOTES. We anticipate that Concentra, as the surviving
corporation in the merger, will raise approximately $110.0 million of the funds
necessary to consummate the merger and related transactions through the issuance
of senior discount notes in the private capital markets. The Discount Notes will
be issued with warrants to purchase Concentra common stock at a nominal exercise
price. Chase Capital Partners and WCAS have provided binding commitments in the
form of commitment letters dated February 24, 1999 and March 1, 1999,
respectively, to purchase the Discount Notes from Concentra. Concentra will not
be required to pay any interest on the
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Discount Notes until 2004. We anticipate that the Discount Notes will be:
o structurally subordinated to the New Credit Facilities and the Senior
Subordinated Notes,
o have registration rights,
o redeemable by Concentra after July 2004,
o redeemable, with regard to up to 35% of the accreted value of the
notes, by Concentra at any time prior to July 2002 with the net
proceeds from certain sales of equity,
o redeemable by Concentra at the option of the holders upon a change of
control, and
o subject to customary covenants for this type of financing, including
restrictions on indebtedness, dividends, liens, affiliate
transactions, stock repurchases, assets sales and mergers.
NEW CREDIT FACILITIES. We anticipate that Operating Company will raise
approximately $375.0 million of the funds necessary to consummate the merger and
related transactions through borrowings under the New Credit Facilities. Chase
Securities Inc., The Chase Manhattan Bank, DLJ Capital Funding, Inc., Credit
Suisse First Boston and Fleet National Bank have provided a binding commitment
to provide the funds for the New Credit Facilities in the form of a commitment
letter dated February 26, 1999 (the "Bank Commitment Letter"). It is expected
that the New Credit Facilities will include, provide or be:
o $375.0 million of term loan facilities,
o a $100.0 million revolving loan facility,
o terms of six to eight years,
o guaranteed by Concentra and its subsidiaries, other than its joint
ventures,
o loans may be prepaid and commitments may be reduced in certain
amounts,
o prepayment will be mandatory with the net proceeds from certain sales
of equity, incurrence of certain indebtedness and certain asset sales
and with 50% of excess cash flow,
o secured by a perfected interest in substantially all of Concentra's
Operating Company's and their subsidiaries' tangible and intangible
assets,
o customary representations and warranties, and
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o subject to customary covenants, including, but not limited to,
delivery of financial statements, reports, accountants' letters,
projections, officers' certificates, payment of other material
obligations, continuation of business, compliance with laws,
maintenance of property and insurance, maintenance of books and
records, litigation, compliance with environmental laws, further
assurances and limitations on indebtedness, liens, guarantee
obligations, mergers, sales of assets, leases, dividends, capital
expenditures, investments, optional payments, transactions with
affiliates, sale and leasebacks and changes in sale of business.
The foregoing is only a summary of the Bank Commitment Letter and is
qualified in its entirety by reference to the actual terms of the Bank
Commitment Letter, which is filed as an exhibit to Concentra's Schedule 13E-3 of
which this Proxy Statement is a part.
Definitive agreements for the issuance and sale of the Senior
Subordinated Notes, the Discount Notes and the New Credit Facilities have not
been negotiated or completed. Accordingly, the terms of such arrangements
described above may change as a result of the negotiation of definitive
agreements. In addition, each of the financings described above is subject to
the satisfaction of numerous customary conditions, including the condition that
no material adverse change to Concentra has occurred and that the merger has
been consummated. We intend to repay the debt discussed above with cash flow
from our continuing operations.
CONDUCT OF CONCENTRA'S BUSINESS AFTER THE MERGER
WCAS is continuing to evaluate Concentra's business, practices,
operations, properties, corporate structure, capitalization, management and
personnel to determine what changes, if any, will be desirable. Subject to the
foregoing, WCAS expects that the day-to-day business and operations of Concentra
after the merger will be conducted substantially as they are currently being
conducted by Concentra. WCAS does not currently intend to dispose of any assets
of Concentra other than in the ordinary course of business. Additionally, WCAS
does not currently contemplate any material change in the composition of
Concentra's current management, although after the merger, the Board will
consist of Messrs. John K. Carlyle, Russell L. Carson, Carlos Ferrer, D. Scott
Mackesy, Steve Nelson, Andrew M. Paul, Paul B. Queally, Daniel J.
Thomas and Sean M. Traynor.
MATERIAL 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 Concentra 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 Concentra 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
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citizens or residents of the United States or who are foreign corporations,
foreign partnerships or foreign estates or trusts, persons who will own stock of
Concentra (actually or constructively, under certain constructive ownership
rules in the 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 merger consideration in the merger by holders of
Concentra common stock will be a taxable transaction for federal income tax
purposes. Each holder's gain or loss per share of Concentra common stock will be
equal to the difference between $16.50 and the holder's basis in that particular
share of the Concentra 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 Concentra common stock held for more than 12 months prior to the date
of disposition.
A holder of Concentra common stock may be subject to backup withholding
at the rate of 31% with respect to merger consideration received pursuant to the
merger, unless the holder (i) is a corporation or comes within certain other
exempt categories and, when required, demonstrates this fact or (ii) 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
Concentra common stock pursuant to the merger, each holder must provide the
exchange agent with his current TIN by completing a Form W-9 or Substitute Form
W-9. A holder of Concentra common stock who does not provide Concentra 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. Concentra (or its agent) will report to the holders of Concentra
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 STOCKHOLDERS 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 STOCKHOLDER WHO
ACQUIRED HIS OR HER SHARES OF CONCENTRA COMMON STOCK PURSUANT TO THE EXERCISE OF
STOCK OPTIONS OR OTHERWISE AS COMPENSATION. EACH HOLDER OF CONCENTRA 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.
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THE SPECIAL MEETING
DATE, TIME AND PLACE OF THE SPECIAL MEETING
The special meeting will be held on ___________, 1999 at 10:00 a.m., local time
at _________________.
MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING
The purpose of the special meeting is to consider and vote upon a
proposal to approve and adopt an Amended and Restated Agreement and Plan of
Merger, dated as of March 24, 1999, by and between Yankee, a newly-formed
Delaware corporation, and Concentra. Pursuant to the merger agreement, Yankee
will be merged with and into Concentra and each outstanding share of Concentra
common stock will be converted into the right to receive $16.50 in cash, without
interest, other than shares of Concentra common stock held by stockholders who
are entitled to and have perfected their dissenters' appraisal rights. Shares
held by Concentra, its subsidiaries, and Yankee or its affiliates will be
canceled in the merger. Accordingly, upon consummation of the merger, the
current shares of Concentra common stock will cease to represent ownership
interests in Concentra.
The Board has determined that the merger is fair to, advisable and in
the best interests of the stockholders of Concentra and has approved and adopted
the merger agreement. The Board unanimously recommends that the stockholders of
Concentra vote FOR approval and adoption of the merger agreement.
PROXY SOLICITATION
Concentra is soliciting your proxy pursuant to this proxy statement.
Concentra will pay all expenses incurred in connection with solicitation of the
enclosed proxy. Officers, directors and regular employees of Concentra may
solicit proxies in person or by telephone. They will receive no additional
compensation for their services. In addition, Concentra has retained Georgeson &
Company Inc. to solicit proxies for a fee of $10,000 plus expenses. Concentra
has requested brokers and nominees who hold stock in their names to furnish this
proxy statement to their customers, and Concentra will reimburse these brokers
and nominees for their related out-of-pocket expenses. This proxy statement and
the accompanying proxy card are being mailed to stockholders on or about
____________, 1999.
RECORD DATE AND QUORUM REQUIREMENT
The Concentra common stock is the only outstanding voting security of
Concentra. The Board has fixed the close of business on _______________, 1999 as
the record date for the determination of stockholders entitled to notice of, and
to vote at, the special meeting and any adjournments or postponements of the
special meeting. If you hold Concentra common stock at the close of business on
the record date, you will be entitled to one vote for each share you hold on
each
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matter submitted to a vote of stockholders. At the close of business on the
record date, there were _____ shares of Concentra 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 Concentra common stock, whether affiliated or unaffiliated
with Concentra, entitled to vote at the special meeting. If you fail to vote, or
vote to abstain, it will have the same legal effect as a vote cast against
approval. Your broker and, in many cases, your nominee will not have
discretionary power to vote on the proposal to be presented at the special
meeting. Accordingly, you should instruct your broker or nominee how to vote. A
broker non-vote will have the same effect as a vote against the merger.
If there are insufficient votes to approve the merger agreement at the
special meeting, your proxy may be voted to adjourn the special meeting in order
to solicit additional proxies in favor of approval of the merger agreement if
you voted in favor of the merger agreement or gave no voting instructions. If
the special meeting is adjourned or postponed for any purpose, at any subsequent
reconvening of the special meeting, your proxy will be voted in the same manner
as it would have been voted at the original convening of the meeting unless you
withdraw or revoke your proxy. Your proxy may be voted this way even though it
may have been voted on the same or any other matter at a previous meeting.
Under Delaware law, if you do not vote in favor of the merger agreement
and comply with certain notice requirements and other procedures, you will have
the right to dissent and to be paid cash for the "fair value" of your shares as
finally determined under such procedures. This payment may be more, the same as,
or less than the consideration to be received by other stockholders of Concentra
under the terms of the merger agreement. If you fail to follow such procedures
precisely, you may lose your appraisal rights. See "Rights of Dissenting
Stockholders."
VOTING AND REVOCATION OF PROXIES
You may revoke your proxy at any time before it is exercised by (i)
filing with the Secretary of Concentra an instrument revoking it, (ii)
submitting a properly executed proxy bearing a later date or (iii) voting in
person at the special meeting. Subject to such revocation, all of your shares
represented by a properly executed proxy received by the Secretary of Concentra
will be voted in accordance with your instructions, and if no instructions are
indicated, will be voted to approve and adopt the merger agreement 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 or postponement of the special meeting.
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Your shares will be voted by proxy at the special meeting if your proxy
card is properly signed, dated and received by the Secretary of Concentra or if
you vote your proxy through the Internet or by telephone as indicated on the
form of Concentra's proxy attached hereto as Appendix 99.1 prior to the special
meeting.
EFFECTIVE TIME OF THE MERGER AND PAYMENT FOR SHARES
The effective time of the merger will be the date and time of filing of
the certificate of merger with the Secretary of State of the State of Delaware.
This is currently expected to occur as soon as practicable after the special
meeting, subject to approval and adoption 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
Concentra common stock certificates, together with a letter of transmittal, will
be forwarded to you by Concentra's exchange agent, ChaseMellon Shareholder
Services, L.L.C., promptly after the effective time. You should not submit your
certificates to the exchange agent until you have received these materials. The
exchange agent will send you payment of the merger consideration as promptly as
practicable following receipt by the exchange agent of your certificates and
other required documents. No interest will be paid or accrued on the cash
payable upon the surrender of certificates. You should not send any certificates
at this time.
OTHER MATTERS TO BE CONSIDERED
The Board is not aware of any other matter that will be brought before
the special meeting. If, however, other matters are presented, your proxy will
be voted in the discretion of the holder of your proxy.
THE MERGER
GENERAL DESCRIPTION
At the effective time of the merger, Yankee will be merged with and
into Concentra. Concentra will be the surviving corporation and will continue
under the name "Concentra Managed Care, Inc." As a result of the merger, you
will receive $16.50 in cash, without interest, for each share of Concentra
common stock that you own unless you are entitled to and have perfected your
dissenters' appraisal rights. Shares held by Concentra, its subsidiaries, and
Yankee or its affiliates will be canceled in the merger. In addition, each
outstanding and unexercised vested option to purchase Concentra common stock
will be converted into the right to receive cash for the difference, if
positive, between $16.50 a share and the exercise price of the option.
CERTAIN TERMS OF THE MERGER AGREEMENT
The following description of the merger agreement describes the
material terms of the merger agreement. The full text of the merger agreement is
attached to this proxy statement as Appendix A and is incorporated herein by
reference. Concentra encourages you to read the entire merger agreement.
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EFFECTIVE TIME OF THE MERGER. The merger agreement provides that the
closing of the merger will take place as soon as practicable after the
satisfaction or waiver of the conditions to the merger. At the closing,
Concentra will file the necessary documents with public officials to complete
the merger. Concentra expects that, if all conditions to the merger have been
satisfied or waived, the effective time will occur on the date of the special
meeting or as soon thereafter as practicable.
GENERAL. The merger agreement provides that, subject to satisfaction of
certain conditions, Yankee will be merged with and into Concentra, and that
following the merger, the separate existence of Yankee will cease and Concentra
will continue as the surviving corporation. At the effective time, and subject
to the terms and conditions set forth in the merger agreement:
o the stockholders of Concentra will receive $16.50 in cash, without
interest, for each share of Concentra common stock that they own,
other than shares held by stockholders who are entitled to and have
perfected their dissenters' appraisal rights. Shares held by
Concentra, its subsidiaries, and Yankee or its affiliates will be
canceled in the merger, and
o each outstanding share of common stock of Yankee shall be converted
into one share of common stock of the same class of the surviving
corporation. As a result of the merger, the Concentra common stock
will no longer be publicly traded.
SURRENDER AND EXCHANGE OF STOCK CERTIFICATES. As soon as practicable
after the effective time of the merger, the surviving corporation will deposit
with ChaseMellon Shareholder Services, L.L.C., the exchange agent, an amount of
cash equal to the aggregate amount of merger consideration to be paid to holders
of Concentra common stock. The exchange agent will as promptly as practicable
send payment of the merger consideration in exchange for surrendered Concentra
common stock certificates.
Promptly after the effective time of the merger, the exchange agent
will send to each holder of Concentra common stock certificates a letter of
transmittal containing instructions for use in effecting the exchange of such
holder's Concentra common stock certificates for the merger consideration
payable to such holder. Upon surrender to the exchange agent of an outstanding
certificate or certificates which represented Concentra common stock and
acceptance of such certificate by the exchange agent, the exchange agent will
deliver to the holder of such certificate the amount of merger consideration
owed to the holder pursuant to the merger agreement. No interest will be paid or
accrue on any cash payable to any holder of Concentra common stock certificates.
Any portion of the merger consideration payable to holders of Concentra
common stock certificates which remains undistributed for 183 days after the
effective time shall be delivered to the surviving corporation. Any holder of
Concentra common stock certificates who has not previously exchanged his
certificates may thereafter only look to the surviving corporation and only as a
general creditor thereof for payment of that portion of the merger consideration
owed to such holder pursuant to the merger agreement.
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If you do not have your Concentra common stock certificate, you may
make an affidavit of that fact. In addition, the surviving corporation may
require that you post a bond in a reasonable amount determined by the surviving
corporation with respect to the missing stock certificate. Upon receipt of the
affidavit and any required bond, the exchange agent will issue the merger
consideration payable to you in exchange for your Concentra common stock
certificate.
STOCK PLAN. Concentra has agreed to use its reasonable best efforts
(which shall include, without limitation, attempting to obtain the consents, if
required, of holders of Concentra options) to effect the cancellation or
amendment at the effective time of all outstanding options to acquire Concentra
common stock in exchange for a cash payment equal to, in the case of each such
canceled Concentra option, the merger consideration payable to such holder had
he exercised such option less the exercise price per share of such option.
Concentra has also agreed to use its reasonable best efforts (which shall
include, without limitation, attempting to obtain the consents, if required, of
holders of shares of Concentra common stock which are restricted stock of
Concentra) to effect the cancellation or amendment of all restricted stock
grants in exchange for a cash payment equal to the merger consideration per
share to be paid at the time such restrictions would otherwise lapse. In
addition, Concentra's current employee stock purchase plan will be terminated at
the effective time of the merger.
FINANCING. Yankee has provided a binding commitment, in the form of a
bid letter from WCAS to Concentra dated February 26, 1999 (the "Equity and
Bridge Commitment"), and has received binding written commitments, dated
February 26, 1999, addressed to WCAS, from Chase Securities, Inc., The Chase
Manhattan Bank, DLJ Capital Funding, Inc., Credit Suisse First Boston and Fleet
National Bank (the "Debt Commitments"), and "highly confident" letters dated
February 24, 1999, from Donaldson, Lufkin & Jenrette Securities Corporation and
Chase Securities, Inc. (the "Highly Confident Letters"). Chase Capital Partners
and WCAS have provided commitment letters dated February 24, 1999 and March 1,
1999, respectively, to purchase from Concentra senior unsecured discount notes
of Concentra (the "Senior Discount Investment Letters"). WCAS Capital Partners
III, L.P. has provided a binding commitment to provide certain bridge financing,
in the form of a commitment letter dated February 26, 1999, from WCAS to
Concentra (the "Bridge Commitment"). Ferrer Freeman Thompson & Co., LLC has
executed a subscription agreement with Yankee, on behalf of Health Care Capital
Partners L.P. and Health Care Executive Partners, L.P., pursuant to which Health
Care Capital Partners L.P. has agreed to contribute to the equity capital of
Yankee (together with the Equity and Bridge Commitment, the Debt Commitments,
the Highly Confident Letters, the Senior Discount Investment Letters and the
Bridge Commitment, the "Financing Commitments").
CONTRIBUTION OBLIGATION. Yankee has received the undertaking of WCAS,
its sole stockholder, obligating WCAS to contribute to the equity capital of
Yankee pursuant to the terms of a letter agreement delivered to Concentra
concurrently with Yankee's execution and delivery of the merger agreement.
RIGHTS AGREEMENT AMENDMENT. Concentra has entered into an amendment to
the Rights Agreement dated September 29, 1997 between Concentra and ChaseMellon
Shareholder Services,
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L.L.C. pursuant to which (i) the rights agreement and the rights will not be
applicable to the merger, (ii) the execution of the merger agreement and the
consummation of the merger shall not result in a "Distribution Date" under the
rights agreement, (iii) consummation of the merger shall not result in WCAS,
Yankee or their affiliates being an "Acquiring Person," result in the occurrence
of an event described in Section 14 of the rights agreement or otherwise result
in the ability of any person to exercise any material rights under the rights
agreement or to require the rights to separate from the shares of Concentra
common stock to which they are attached and (iv) the rights agreement will
expire immediately prior to the effective time of the merger.
REPRESENTATIONS AND WARRANTIES. The merger agreement contains customary
representations and warranties of Concentra relating to various aspects of its
businesses and financial statements and other matters, including among other
things:
o its organization, standing and power,
o its capital structure,
o its subsidiaries,
o its authority to enter into and the validity and effectiveness of the
merger agreement,
o the absence of conflicts, violations or defaults under its
certificate of incorporation, bylaws and certain other agreements,
o the absence of required consents and approvals of certain
governmental entities relating to the merger,
o the documents and reports filed with the Securities and Exchange
Commission (the "SEC") and the accuracy and completeness of the
information contained therein,
o this proxy statement and the accuracy and completeness of the
information contained herein,
o the absence of defaults under material contracts,
o compliance with applicable laws,
o litigation,
o taxes,
o pension and benefit plans and other matters relating to the Employee
Retirement Income Security Act of 1974,
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o the stockholder vote required to consummate the merger,
o environmental matters,
o intellectual property,
o labor matters,
o material contracts,
o transactions with affiliates, and
o the amendment of the rights agreement.
The merger agreement also contains customary representations and
warranties of Yankee relating to various aspects of its business, including
among other things:
o its organization, standing and power,
o its capital structure,
o its subsidiaries,
o its authority to enter into and the validity and effectiveness of the
merger agreement,
o the absence of conflicts, violations or defaults under its
certificate of incorporation, bylaws and certain other agreements,
o the absence of required consents and approvals of certain
governmental entities relating to the merger,
o the documents and reports filed with the SEC and the accuracy and
completeness of the information contained therein,
o this proxy statement and the accuracy and completeness of the
information contained herein,
o the merger will not result in a fraudulent conveyance,
o the interim operations of Yankee,
o financing,
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o litigation,
o its and its affiliates' ownership of shares of Concentra common
stock,
o its solvency, and
o its receipt of an undertaking from its sole stockholder to contribute
equity capital.
The representations and warranties expire at the effective time of the
merger.
CONDUCT OF BUSINESS PRIOR TO THE MERGER. Concentra has agreed that
prior to the merger it will operate its business in the ordinary course
consistent with past practices and will use all reasonable efforts to preserve
intact its business organizations, goodwill and relationships with third parties
and to retain the services of its current officers and key employees and
preserve its relationships with customers and suppliers.
In addition, the merger agreement places specific restrictions on the
ability of Concentra and its subsidiaries to:
o declare, set aside or pay any dividends on or make other
distributions in respect of any of its capital stock (except for cash
dividends paid to Concentra and its wholly-owned subsidiaries with
regard to Concentra's subsidiaries' capital stock), or set aside
funds therefor;
o adjust, split, combine or reclassify any of its capital stock, or
issue, authorize or propose the issuance of any other securities in
respect of, in lieu of or in substitution for, shares of its capital
stock;
o repurchase, redeem or otherwise acquire any shares of its capital
stock, except as required by the terms of its securities outstanding
or any employee benefit plan in effect as of the date of the merger
agreement, or set aside funds therefor;
o other than in accordance with the rights agreement:
o grant any options, warrants or other rights to purchase shares of
capital stock;
o except as permitted by the merger agreement, amend the terms of
or reprice any Concentra stock option or restricted stock grant
outstanding on the date of the merger agreement or amend the
terms of any current Concentra stock option plan;
o issue, deliver, pledge, sell or otherwise encumber any shares of
its capital stock, any Concentra debt or any subsidiary debt, or
any securities convertible into, or any rights, warrants or
options to acquire, any such shares, Concentra debt or subsidiary
debt (this restriction does not apply to shares issuable pursuant
to Concentra stock
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options outstanding on the date of the merger agreement, shares
issuable upon conversion of Concentra's 6% Convertible
Subordinated Notes due 2001 and 4.5% Convertible Subordinated
Notes due 2003 and issuances of capital stock of Concentra's
subsidiaries to Concentra or to a wholly-owned subsidiary of
Concentra);
o amend or propose to amend its certificate of incorporation or bylaws
(or other organizational documents);
o merge or consolidate with, or acquire any equity interest in, any
corporation, partnership, association or other business organization, or enter
into an agreement with respect thereto, except for:
o a merger of a wholly-owned subsidiary with or into Concentra or
another wholly-owned subsidiary of Concentra,
o the creation of a wholly-owned subsidiary in the ordinary course
of business, or
o investments in joint ventures not in excess of $5,000,000 in the
aggregate;
o acquire or agree to acquire any material assets, except for certain
acquisitions described in the merger agreement and acquisitions
involving the payment of consideration by Concentra not in excess of
$10,000,000 in the aggregate or as otherwise described in the merger
agreement;
o make any loan or advance to, or any other investment in, any persons
in excess of $5,000,000 in the aggregate, other than with respect to
a wholly-owned subsidiary of Concentra existing on the date of the
merger agreement;
o sell, lease, encumber or otherwise dispose of any of its material
assets other than sales or leases in the ordinary course of business
consistent with past practice or agree to such an arrangement;
o authorize, recommend, propose or announce an intention to adopt a
plan of complete or partial liquidation or dissolution (other than by
wholly-owned subsidiaries acquired by Concentra);
o except for increases in the compensation of employees of Concentra or
its subsidiaries (other than directors or executive officers) made in
the ordinary course of business and consistent with past practice, or
as may be required by applicable law or pursuant to any of the
employee benefit plans existing on the date of the merger agreement:
o enter into any new, or materially amend any existing, employment,
severance or
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termination agreement with any director, officer or key employee,
or
o become obligated under any new employee benefit plan, which was
not in existence on the date the merger agreement, or amend any
such existing plan or arrangement if such amendment would have
the effect of materially enhancing any benefits thereunder;
o assume or incur any indebtedness for borrowed money (except for lease
obligations incurred in the ordinary course of business and
consistent with past practice or drawdowns under its existing
revolving credit facility, if any, made in the ordinary course of
business consistent with past practice);
o issue or sell any debt securities or warrants or rights to acquire
any debt securities;
o guarantee any debt obligations of any other person (except
obligations of wholly-owned subsidiaries of Concentra);
o make any material changes with respect to accounting policies,
procedures and practices other than as required by the SEC,
applicable law or generally accepted accounting principles;
o settle or compromise any claims or litigation involving payments by
Concentra or any of its subsidiaries of more than $500,000 in any
single instance or related instances, or that otherwise are material
to Concentra and its subsidiaries, taken as a whole;
o make any tax election, or take any tax position, except in the
ordinary and usual course of business consistent with past practices;
o enter into any license with respect to any intellectual property
unless such license is non-exclusive and entered into in the ordinary
course consistent with past practice or in accordance with existing
contracts or other agreements;
o fail to use reasonable business efforts to keep in full force and
effect insurance comparable in amount and scope of coverage to
insurance now carried by it; or
o agree to or make any commitment to take any actions prohibited by the
merger agreement.
NO SOLICITATION. In the merger agreement, Concentra has agreed that:
o it will not, and will not authorize or permit any of its officers,
directors, employees, agents, affiliates and other representatives or
those of any of its subsidiaries to, initiate, encourage or solicit
(including by way of providing information) any prospective acquiror
or the invitation or submission of any inquiries, proposals or offers
or any other
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efforts or attempts that constitute, or may reasonably be expected to
lead to, any Acquisition Proposal (as herein defined) from any person
or engage in any negotiations with respect thereto or otherwise
cooperate with or assist or participate in, or facilitate any such
proposal;
o it will immediately cease and cause to be terminated any existing
solicitation, initiation, encouragement, activity, discussion or
negotiation with any other parties prior to the date of the merger
agreement; and
o it will promptly (and in any event within 24 hours) communicate to
Yankee the terms and conditions of any Acquisition Proposal that it
may receive and will keep Yankee informed, as promptly as reasonably
practicable, as to the status of any actions, including any
discussions, taken pursuant to such Acquisition Proposal.
However, the merger agreement does not prohibit:
o Concentra's Board from taking and disclosing to the stockholders of
Concentra a position contemplated by Rules 14d-9 and 14e-2(a)
promulgated under the Securities Exchange Act of 1934; and
o following receipt from a third party, without any solicitation,
encouragement or initiation, directly or indirectly, by Concentra or
any representative of Concentra, of a bona fide Acquisition Proposal:
o Concentra from engaging in discussions or negotiations with such
third party and furnishing such third party information
concerning it and its business, properties and assets if such
third party executes a confidentiality agreement in reasonably
customary form; and
o the Board from withdrawing, modifying, refusing to recommend or
terminating the merger agreement in accordance with the terms of
the merger agreement but only to the extent that the Board shall
conclude in good faith based on the advice of outside counsel
that such action is necessary in order for the Board to act in a
manner that is consistent with its fiduciary duties under
applicable law.
The term "Acquisition Proposal" means:
o any inquiry, proposal or offer from any person relating to any direct
or indirect acquisition or purchase of a business that constitutes
one-third or more of the net revenues, net income or assets of
Concentra and its subsidiaries, taken as a whole, or one-third or
more of the outstanding Concentra common stock,
o any tender offer or exchange offer that if consummated would result
in any person beneficially owning one-third or more of the
outstanding Concentra common stock, or
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o any merger, consolidation, business combination, recapitalization,
liquidation, dissolution or similar transaction involving Concentra
(or any subsidiary or subsidiaries whose business constitutes
one-third or more of the net revenues, net income or assets of
Concentra and its subsidiaries taken as a whole).
CONDITIONS PRECEDENT. The respective obligations of each party to
complete the merger are subject to the satisfaction or waiver, where
permissible, by each party prior to the effective time of the following
conditions:
o adoption of the merger agreement by the affirmative vote of the
holders of a majority of the outstanding shares of Concentra common
stock entitled to vote thereon; provided that Yankee will, and will
cause its affiliates to, vote all shares of Concentra common stock
owned by Yankee or any of its affiliates in favor of the adoption of
the merger agreement;
o termination or expiration of the applicable waiting period (and any
extension thereof) under the HSR Act;
o no restrictive order or other requirement will have been placed on
Concentra, Yankee or the surviving corporation in connection with any
regulatory approval;
o no temporary restraining order, preliminary or permanent injunction
or other order issued by any court of competent jurisdiction or other
legal restraint or prohibition preventing the consummation of the
merger will be in effect; and
o no statute, rule, order, decree or regulation will have been enacted,
promulgated or otherwise issued by any governmental entity which
prohibits the consummation of the merger.
The obligation of Yankee to effect the merger is further subject to the
following conditions:
o Concentra will have performed the obligations required to be
performed by it under the merger agreement at or prior to the closing
date and the representations and warranties of Concentra set forth in
the merger agreement will be true and correct in all material
respects (provided that any representation or warranty of Concentra
contained in the merger agreement that is subject to a materiality,
Material Adverse Effect or similar qualification shall not be so
qualified for purposes of determining the existence of any breach
thereof on the part of Concentra) both as of the date of the merger
agreement and as of the closing date of the merger and Yankee will
have received a certificate signed on behalf of Concentra by the
chief executive officer and the chief financial officer of Concentra
to such effect; and
o Yankee will have obtained the financing required to complete the
merger substantially
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on the terms contemplated by the Financing Commitments or alternative
financing on terms no less favorable in any material respect than
those set forth in the Financing Commitments, unless the failure to
obtain the financing was the result of a failure by Yankee to perform
any covenant or condition contained therein or the inaccuracy of any
representation or warranty of Yankee.
The obligation of Concentra to effect the merger is further subject to
the following conditions:
o Yankee will have performed the obligations required to be performed
by it under the merger agreement at or prior to the closing date and
the representations and warranties of Yankee set forth in the merger
agreement will be true and correct in all material respects (provided
that any representation or warranty of Yankee, contained in the
merger agreement that is subject to a materiality, Material Adverse
Effect or similar qualification will not be so qualified for purposes
of determining the existence of any breach thereof on the part of
Yankee) both as of the date of the merger agreement and as of the
closing date of the merger and Concentra will have received a
certificate signed on behalf of Yankee by the president of Yankee to
such effect;
o Yankee will have caused a valuation firm to have delivered to
Concentra a solvency letter addressed to the Board in form and
substance reasonably acceptable to Concentra as to the solvency of
the surviving corporation after giving effect to the merger and the
financing arrangements contemplated by Yankee with respect to the
merger; and
o Yankee will have obtained the financing substantially on the terms
contemplated by the Financing Commitments or alternative financing on
terms no less favorable in any material respect than those set forth
in the Financing Commitments.
TERMINATION. The merger agreement may be terminated and the merger may
be abandoned at any time prior to the effective time as follows:
o by mutual written consent of Concentra and Yankee;
o by either Yankee or Concentra if any court of competent jurisdiction
in the United States or other governmental entity shall have issued a
final and non-appealable order, decree or ruling, or taken any other
action restraining, enjoining or otherwise prohibiting the merger;
o by either Yankee or Concentra if the effective time has not occurred
on or before August 31, 1999, but this right to terminate the merger
agreement will not be available to any party whose breach of any
obligation under the merger agreement has been the cause of or
resulted in the failure of the effective time to occur on or before
such date;
o by Yankee, if any of the representations and warranties of Concentra
contained in the merger agreement fail to be true and correct in any
material respect when made or have
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since become, and at the time of termination remain, untrue or
incorrect in any material respect and such failure or breach shall
continue unremedied for ten days after Concentra has received written
notice from Yankee of the occurrence of such failure or breach
(provided that in no event shall such ten-day period extend beyond
August 31, 1999);
o by Yankee, if Concentra shall have breached or failed to comply in
any material respect with any of its obligations under the merger
agreement (other than as a result of a breach by Yankee of any of its
obligations under the merger agreement) and such failure or breach
shall continue unremedied for ten days after Concentra has received
written notice from Yankee of the occurrence of such failure or
breach (provided that in no event shall such ten-day period extend
beyond August 31, 1999);
o by Yankee, if the Board has withdrawn or modified, in any manner
which is materially adverse to Yankee, its recommendation or approval
of the merger agreement and the merger;
o by Concentra, if any of the representations and warranties of Yankee
contained in the merger agreement shall fail to be true and correct
in any material respect when made or have since become, and at the
time of termination remain, untrue or incorrect in any material
respect and such failure or breach shall continue unremedied for ten
days after Yankee has received written notice from Concentra of the
occurrence of such failure or breach (provided that in no event shall
such ten-day period extend beyond August 31, 1999);
o by Concentra, if Yankee shall have breached or failed to comply in
any material respect with any of its obligations under the merger
agreement (other than as a result of a breach by Concentra of any of
its obligations under the merger agreement) and such failure or
breach shall continue unremedied for ten days after Yankee has
received written notice from Concentra of the occurrence of such
failure or breach (provided that in no event shall such ten-day
period extend beyond August 31, 1999);
o by Concentra, if the Board determines in the exercise of its good
faith judgment as to fiduciary duties to Concentra's stockholders
imposed by law, as advised by outside counsel, that such termination
is required by reason of an Acquisition Proposal being made.
Concentra shall notify Yankee promptly of its intention to terminate
the merger agreement or enter into a definitive agreement with
respect to any Acquisition Proposal; and provided that Concentra may
not effect such termination unless Concentra has contemporaneously
with such termination tendered payment to Yankee, or its designees,
of the applicable Concentra termination fee (discussed below); or
o by Yankee or Concentra, if Concentra fails to obtain the required
Concentra stockholder approval at the stockholder meeting (or any
adjournment thereof).
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TERMINATION FEES AND EXPENSES. The merger agreement provides that
except as described below and except with respect to claims for damages incurred
as a result of a material breach of the merger agreement, all costs and expenses
incurred in connection with the merger agreement will be paid by the party
incurring such expense. Concentra will pay all costs and expenses in connection
with the printing and mailing of this proxy statement, as well as all SEC filing
fees related to the transactions contemplated by the merger agreement.
Concentra will pay Yankee a termination fee equal to $25.0 million in
the aggregate and will reimburse Yankee for its out-of-pocket expenses up to an
aggregate amount equal to $4.0 million, so that the total possible fee paid by
Concentra in connection with the termination of the merger agreement is $29.0
million, if:
o the merger agreement is terminated by Yankee because the Board of
Concentra has withdrawn or modified, in any way which is materially
adverse to Yankee, its recommendation or approval of the merger
agreement and the merger,
o the merger agreement is terminated by Concentra because in the
exercise of its good faith judgment as to its fiduciary duties to its
stockholders imposed by law, as advised by outside counsel, the Board
of Concentra determines that such termination is required by reason
of an Acquisition Proposal being made, or
o the merger agreement is terminated by Yankee after Concentra fails to
obtain the required stockholder approval required to complete the
merger and, within 275 days after such termination, Concentra enters
into a definitive agreement with respect to a transaction proposed in
an Acquisition Proposal that was submitted to Concentra prior to
Concentra's stockholder meeting and Concentra consummates such
transaction within 462 days after such termination.
If Yankee is in material breach of its obligations under the merger
agreement, Concentra will not be obligated to pay Yankee a termination fee or
reimburse Yankee for its expenses. Concentra has agreed to pay any termination
fee owed by it to Yankee on the date of the termination of the merger agreement
or, in the case of a fee owed due to consummation of another transaction, on the
date such transaction is consummated. Any reimbursement for expenses owed to
Yankee by Concentra will be paid when the termination fee is paid provided that
documentation of such expenses has been received by Concentra.
INDEMNIFICATION. The merger agreement provides that, for a period of
six years after the effective time, the surviving corporation will indemnify the
present and former officers, directors, employees and agents of Concentra and
its subsidiaries from liabilities arising out of actions or omissions in their
capacity as such prior to or at the effective time of the merger, to the full
extent permitted under Delaware law or as provided in Concentra's or its
subsidiaries' organizational documents or any written indemnification
agreements. In addition, the surviving entity will maintain directors' and
officers' insurance coverage for six years after the effective time on terms no
less favorable to such indemnified parties than existing insurance coverage, but
the surviving corporation will not be required to pay an annual premium in
excess of 200% of the last premium
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paid prior to the date of the merger agreement.
AMENDMENT. The merger agreement may be amended, modified or
supplemented, only by written agreement of Yankee and Concentra at any time
prior to the effective time. However, after the required Concentra stockholder
approval, no term or condition contained in the merger agreement shall be
amended or modified in any manner that by law requires further approval by the
stockholders of Concentra without so obtaining such further stockholder
approval.
ANTICIPATED ACCOUNTING TREATMENT
The merger will be accounted for as a recapitalization for accounting
and financial reporting purposes. Accordingly, the historical basis of
Concentra's assets and liabilities will not be affected by the merger. After the
recapitalization, Ferrer Freeman will own an approximate 7% interest in
Concentra. This interest will be held in a separate class of common stock that
is identical to the original common stock of Concentra except it will have the
ability to elect a member of the Board of Concentra. Ferrer Freeman has no
formal or informal rights to approve or veto transactions. The rights granted to
Ferrer Freeman are protective rights rather than participating rights and as
such Ferrer Freeman and WCAS should not be construed as members of a
collaborative group.
GOVERNMENTAL APPROVALS
Transactions such as the merger are subject to review by the Department
of Justice and the Federal Trade Commission to determine whether they comply
with applicable antitrust laws. Under the provisions of the HSR Act, the merger
may not be consummated until such time as the specified waiting period
requirements of the HSR Act have been satisfied. Concentra filed a notification
report, together with a request for early termination of the waiting period,
with the Department of Justice and the Federal Trade Commission under the HSR
Act on April 22, 1999. The request for early termination of the waiting period
was granted by the Federal Trade Commission on May 5, 1999.
LITIGATION RELATING TO THE MERGER
As of the date of this proxy statement, Concentra is aware of three
lawsuits that have been filed by alleged stockholders of Concentra relating to
the merger. All three lawsuits were filed in the Chancery Court for New Castle
County, Delaware. Each of the lawsuits names Concentra, its directors and Yankee
as defendants. The plaintiff in each lawsuit seeks to represent a purported
class of all public holders of Concentra common stock.
The lawsuits allege, among other things, that the directors of
Concentra breached their fiduciary duties to Concentra's stockholders by
approving the merger. Specifically, the directors are alleged to have breached
their fiduciary duties of care and loyalty by failing to conduct an impartial
auction to determine the maximum value attainable for the common stock of
Concentra. The complaints allege that certain relationships between WCAS and
Concentra caused Concentra's directors to favor WCAS throughout the sale of
Concentra and to enter into a merg-
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er agreement that had the effect of capping the price of Concentra's stock. The
lawsuits seek, among other things, preliminary and permanent injunctive relief
prohibiting consummation of the merger, unspecified damages, attorneys' fees and
other relief. Concentra expects that these three lawsuits will be consolidated
into a single action. Concentra intends to contest these lawsuits vigorously.
ESTIMATED FEES AND EXPENSES OF THE MERGER
Estimated fees and expenses of the merger incurred or to be incurred by
Concentra are approximately as follows:
Legal and accounting fees and other
transaction expenses ........................... $ 2,700,000
Hart-Scott-Rodino filing fee ..................... 45,000
Exchange Agent fees and expenses ................. 25,000
Proxy solicitation fees and expenses ............. 10,000
Securities and Exchange Commission filing fee .... 158,501
Printing and mailing costs ....................... 50,000
Miscellaneous expenses ........................... 50,000
Financial advisory fees .......................... 13,800,000
Underwriting of Senior Credit Facility ........... 11,500,000
Senior Subordinated Underwriting ................. 5,200,000
Welsh Carson's fee ............................... 10,500,000
RIGHTS OF DISSENTING STOCKHOLDERS
You are entitled to appraisal rights under Section 262 of the Delaware
General Corporation Law (the "DGCL"). Section 262 of the DGCL is reprinted in
its entirety as Appendix C to this proxy statement. All references in Section
262 of DGCL and in this summary to a "stockholder" are to the record holder or
beneficial owner of shares of Concentra common stock as to which appraisal
rights are asserted. If you have a beneficial interest in shares of Concentra
common stock that are held of record in the name of another person, such as a
broker or nominee, you must act promptly to cause the record holder to properly
follow the steps summarized below in a timely manner to perfect whatever
appraisal rights you 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. If you wish to exercise statutory appraisal rights or preserve your
right to do so, you should review this discussion and Appendix C carefully to
comply strictly with the procedures set forth herein and therein, or you may
lose your appraisal rights.
If you elect to demand the appraisal of your shares you must deliver to
Concentra a written demand for appraisal of your shares of Concentra common
stock before the taking of the vote
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on the merger at the special meeting. The demand must reasonably inform
Concentra of your identity and that you intend to demand the appraisal of your
shares of Concentra common stock. This written demand for appraisal of the
shares of Concentra common stock must be in addition to and separate from your
proxy or vote against the merger. Voting against, abstaining from voting, or
failing to vote on the merger will not constitute a demand for appraisal within
the meaning of Section 262. If you elect to demand appraisal rights, you will
not be granted appraisal rights under Section 262 if you have either voted in
favor of the merger or consented thereto in writing (including by granting the
proxy solicited by this proxy statement or by returning a signed proxy without
specifying a vote against the merger or a direction to abstain from such vote).
Additionally, appraisal rights will not be granted under Section 262 if you do
not continuously hold through the effective time of the merger your shares of
Concentra common stock with respect to which you demand appraisal.
You must fully and correctly execute a demand for appraisal as your
name appears on the certificate or certificates representing your shares of
Concentra common stock. If your shares of Concentra common stock are owned of
record in a fiduciary capacity, such as by a trustee, guardian or custodian, the
fiduciary must execute the demand. If the shares of Concentra common stock are
owned of record by more than one person, as in a joint tenancy or tenancy in
common, all joint owners must execute the demand. An authorized agent, including
an agent for two or more joint owners, may execute your demand for appraisal;
however, the agent must identify you as the record owner and expressly disclose
the fact that, in exercising the demand, such person is acting as your agent.
If you elect to exercise your appraisal rights, you must mail or
deliver your written demand to the Secretary of Concentra at 5080 Spectrum
Drive, Suite 400, West Tower, Addison, Texas 75001. The written demand for
appraisal must specify your name and mailing address, the number of shares of
Concentra common stock you own, and that you are thereby demanding appraisal of
your shares. Within ten days after the effective time of the merger, Concentra
must provide notice of the effective time to all stockholders who have complied
with Section 262 and who have not voted for or consented to adoption of the
merger agreement.
Within 120 days after the effective time, either Concentra or any
stockholder who has complied with the required conditions of Section 262 may
file a petition in the Delaware Court of Chancery (the "Delaware Chancery
Court") demanding a determination of the value of the shares of Concentra common
stock of the dissenting stockholders. If a petition for an appraisal is timely
filed, after a hearing on such petition, the Delaware Chancery Court will
determine which stockholders are entitled to appraisal rights and will appraise
the shares of Concentra common stock owned by such stockholders, determining the
fair value of such shares of Concentra common stock, exclusive of any element of
value arising from the accomplishment or expectation of the merger, together
with a fair rate of interest to be paid, if any, upon the amount determined to
be the fair value. In determining fair value, the Delaware Chancery Court is to
take into account all relevant factors including:
o market value,
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o asset value,
o dividends,
o earning prospects,
o the nature of Concentra's enterprise,
o the discounted cash flows of Concentra, and
o any other factors that the court deems relevant.
The court is required to determine the amount necessary to compensate
the stockholder for the loss of his interest in Concentra as a going concern
rather than in a liquidation context.
If you seek appraisal you should know that the "fair value" of your
shares of Concentra common stock determined under Section 262 could be more
than, the same as, or less than the merger consideration you will receive in the
merger, and that the opinion of BT Alex. Brown as to fairness, from a financial
point of view, is not an opinion as to fair value under Section 262. The cost of
the appraisal proceeding may be determined by the Delaware Chancery Court and
taxed against the parties as the Delaware Chancery Court deems equitable in the
circumstances. Upon application of a dissenting stockholder, the Delaware
Chancery Court may order that all or a portion of the expenses incurred by any
dissenting stockholder in connection with the appraisal proceeding, including,
without limitation, reasonable attorneys' fees and the fees and expenses of
experts, be charged pro rata against the value of all shares of Concentra common
stock entitled to appraisal.
If you have duly demanded appraisal in compliance with Section 262, you
will not, from and after the effective time of the merger, be entitled to vote
for any purpose the shares of Concentra common stock subject to your demand or
to receive payment of dividends or other distributions on your shares of
Concentra common stock, except for dividends or distributions payable to
stockholders of record at a date prior to the effective time.
At any time within 60 days after the effective time, you shall have the
right to withdraw your demand for appraisal and to accept the terms offered in
the merger. After this period, you may withdraw your demand for appraisal only
with the consent of Concentra. If no petition for appraisal is filed with the
Delaware Chancery Court within 120 days after the effective time, stockholders'
rights to appraisal shall cease, and all holders of shares of Concentra common
stock shall be entitled to receive the merger consideration as provided for in
the merger agreement. Inasmuch as Concentra has no obligation to file such a
petition, and has no present intention to do so, any stockholder who desires
such a petition to be filed is advised to file it on a timely basis. However, no
petition timely filed in the Delaware Chancery Court demanding appraisal shall
be dismissed as to any stockholder without the approval of the Delaware Chancery
Court, and such approval may be conditioned upon such terms as the Delaware
Chancery Court deems just.
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PRINCIPAL STOCKHOLDERS AND STOCK OWNERSHIP OF
MANAGEMENT AND OTHERS
The following table sets forth certain information with respect to the
beneficial ownership of the Concentra common stock as of June 30, 1999 by: (i)
each person known to Concentra to beneficially own more than 5% of any class of
Concentra's outstanding voting securities, (ii) each director of Concentra,
(iii) the chief executive officer and the four other most highly compensated
executive officers of Concentra and Mr. Kiraly and (iv) all executive officers
and directors of Concentra as a group. As of January 12, 1999, Concentra had
47,111,912 shares of its common stock outstanding. Unless otherwise indicated,
Concentra believes that each person or entity named below has sole voting and
investment power with respect to all shares shown as beneficially owned by such
person or entity, subject to community property laws where applicable and the
information set forth in the footnotes to the table below.
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY PERCENTAGE
NAMES SHARES OPTIONS OWNED (1) OF CLASS
------ ------- --------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Welsh, Carson, Anderson & Stowe
and affiliates
320 Park Avenue
New York, NY 10022 .................... 6,343,203 836,364 7,179,567 14.97%
Massachusetts Financial Services
Company
500 Boylston
Boston, MA 02116 ...................... 5,852,888 672,785 6,525,673 13.7%
DIRECTORS
John K. Carlyle ....................... 510 75,000 75,510 0.2%
George H. Conrades .................... 1,326 51,971 53,297 0.1%
Hon. Willis D. Gradison, Jr ........... 1,510 5,000 6,510 0.0%
Robert A. Ortenzio .................... 15,188 25,000 40,188 0.1%
Mitchell T. Rabkin, M.D ............... 1,326 51,971 53,297 0.1%
Richard D. Rehm, M.D .................. 10,000 38,750 48,750 0.1%
Lois E. Silverman ..................... 641,512 10,000 651,512 1.4%
EXECUTIVE OFFICERS
Daniel J. Thomas ...................... 33,367 389,000 422,367 0.9%
James M. Greenwood .................... 33,000 123,000 156,000 0.3%
Richard A. Parr II .................... 17,773 62,750 80,523 0.2%
Joseph F. Pesce ....................... 40,411 179,803 220,214 0.5%
W. Tom Fogarty, M.D ................... 99,389 103,800 203,189 0.4%
Kenneth Loffredo ...................... 1,158 101,250 38,126 0.1%
Thomas E. Kiraly ...................... 0 0 0 0%
All directors and executive officers as
a group (14 persons) ................ 921,859 1,180,338 2,102,197 4.3%
</TABLE>
- ----------
(1) A person is considered to beneficially own any shares (a) over
which such person exercises sole or shared voting or investment power or (b) of
which such person has the right to acquire beneficial ownership at any time
within 60 days of January 12, 1999 (i.e. through the conversion of securities or
the exercise of stock options). Shares are deemed to be outstanding for the
purposes of computing the percentage ownership of the person holding such
shares, but are not deemed outstanding for purposes of computing the percentage
of any other person shown on the table.
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<PAGE>
CERTAIN INFORMATION CONCERNING CONCENTRA
Concentra is the leading provider of healthcare management and cost
containment services to the workers' compensation, disability and auto insurance
markets. Concentra also provides out-of-network medical claims review to the
group health marketplace and performs non-injury healthcare services for over
80,000 local employers. Concentra offers a continuum of services to employers,
insurers and third-party administrators of all sizes on a non-risk-bearing
basis. Concentra's services allow customers to increase the direction of care
for injury claims, aggressively manage the costs and care plan of those claims,
and review medical claims retrospectively, thus reducing overall workers'
compensation, disability, auto-insurance, and out-of-network group health costs.
Concentra believes that by offering both claims management services and the
provision of care, Concentra is in a unique position to provide comprehensive,
integrated services on a bundled or unbundled basis to national and regional
accounts and local employers.
Concentra's continuum of services is comprised of three distinct
categories: healthcare services; specialized cost containment services; and
field case management. Concentra's field case management organization consists
of over 1,100 full-time field case managers in 89 offices in 49 states.
Concentra's specialized cost containment services, including provider bill
review, preferred provider network management, out-of-network medical claims
review services, first-report-of-injury, telephonic case management,
precertification and independent medical examinations, are provided in 85
service locations in 49 states. Healthcare services include injury care and
physical therapy services for work-related injuries and illnesses, physical
examinations, substance abuse testing, and certain other loss-prevention
services, and are provided through 169 clinics located in 50 markets in 25
states. Through the twelve months ended December 31, 1998, revenues from
healthcare services, specialized cost-containment services and field case
management represented approximately 43.0%, 29.8% and 27.2% of total revenues,
respectively.
JOHN K. CARLYLE has served as a Director of Concentra since August
1997. Mr. Carlyle served as Chairman of the Board of Directors of Concentra from
August 1997 to January 1998. Mr. Carlyle is currently President and CEO of
MAGELLA Healthcare Corporation, a private physician practice management company
devoted to the area of neonatology and perinatology. Mr. Carlyle served as
OccuSystems' Chairman and Chief Executive Officer from January 1997 until August
1997. He joined OccuSystems in 1990 as its President and served in that capacity
until December 1996. Mr. Carlyle served as the Chief Executive Officer and a
director of OccuSystems from 1991 until August 1997. Mr. Carlyle has served as a
director of National Surgery Centers, Inc., an owner and operator of free
standing, multi-specialty ambulatory surgery centers, since 1991. He also serves
as a director of several private companies.
W. TOM FOGARTY, M.D. has served as Senior Vice President and Chief
Medical Officer of Concentra since August 1997. He served as OccuSystems' Senior
Vice President and Chief Medical Officer from September 1995 to August 1997.
From 1993 to September 1995, Dr. Fogarty served as Vice President and Medical
Director of OccuSystems. From 1992 to 1993, he served as a Regional Medical
Director of Occu-Systems and, from 1985 until 1992, as a medical director of one
of OccuSystems' centers.
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<PAGE>
JAMES M. GREENWOOD has served as Executive Vice President of Corporate
Development since February 1998 and as Senior Vice President of Corporate
Development of Concentra from August 1997 to February 1998. He served as
OccuSystems' Chief Financial Officer from 1993 when he joined OccuSystems as a
Vice President until August 1997. Mr. Greenwood served as a Senior Vice
President of OccuSystems since May 1994. From 1988 until he joined OccuSystems
in 1993, Mr. Greenwood served in numerous positions with Bank One, Texas, N.A.,
and its predecessors, most recently as Senior Vice President and Manager of
Mergers and Acquisitions.
THOMAS E. KIRALY has served as Executive Vice President, Chief
Financial Officer and Treasurer of Concentra since May 25, 1999. Prior to that
time, Mr. Kiraly served as the principal accounting and financial officer of BRC
Holdings, Inc. from December 1988 to May 1999. BRC Holdings, Inc., based in
Dallas, Texas, was a diversified provider of specialized information systems and
services to health care institutions and local governments and was acquired in
February 1999 by Affiliated Computer Services, Inc., another Dallas, Texas based
provider of information services. During his tenure at BRC Holdings, Inc., Mr.
Kiraly held the titles of Executive Vice President and Chief Financial Officer
from March 1994 through May 1999 and Vice President of Finance from December
1988 through March 1994. Prior to that time, Mr. Kiraly was a Senior Management
Consultant with Touche Ross & Co., a predecessor to Deloitte & Touche L.L.P., a
national accounting firm, from May 1985 until December 1988.
KENNETH LOFFREDO has served as Senior Vice President of Marketing and
Sales since August 1997. Mr. Loffredo served as Vice President of Sales of CRA
from February 1995 to August 1997. From July 1993 to January 1995 he was CRA's
Regional Sales Manager for the New England states. Mr. Loffredo joined CRA in
July of 1981, and from 1981 to June 1993, he held positions of Case Manager,
Account Manager and Regional Manager.
RICHARD A. PARR II has served as Executive Vice President, General
Counsel and Secretary of Concentra since August 1997. He served as OccuSystems'
Executive Vice President, General Counsel and Secretary from August 1996 to
August 1997. Prior to joining OccuSystems, Mr. Parr served as Vice President and
Assistant General Counsel of OrNda HealthCorp, a national hospital management
company, from April 1993 through August 1996 and as Associate General Counsel of
OrNda HealthCorp from September 1991 through March 1993.
DANIEL J. THOMAS has served as a Director of Concentra since January
1998. He has served as President and Chief Executive Officer since September
1998, and he served as President and Chief Operating Officer of Concentra from
January 1998 until September 1998. He served as Executive Vice President and
President of the Practice Management Services subsidiary of Concentra from
August 1997 until January 1998. He served as a director of OccuSystems and as
its President and Chief Operating Officer from January 1997 to August 1997. From
April 1993 through December 1996, Mr. Thomas served as OccuSystems' Executive
Vice President and Chief Operating Officer. Prior to joining OccuSystems in
1993, Mr. Thomas served in various capacities with Medical Care International,
Inc., most recently as its Senior Vice President and Divisional Director. Mr.
Thomas is a certified public accountant.
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<PAGE>
All of the individuals listed above are United States citizens and,
with the exception of Messrs. Greenwood and Parr, have their business address at
312 Union Wharf, Boston, Massachusetts 02109. Messrs. Greenwood and Parr have
their business address at 5080 Spectrum Drive, Suite 400, West Tower, Addison,
Texas 75001.
None of Concentra, the Members of Management or any executive officer,
director or person controlling Concentra was, during the last five years
convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors) or was a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such proceeding
was or is subject to a judgment, decree or final order enjoining future
violations of, or prohibiting activities subject to, federal or state securities
laws or finding any violation of such laws.
For a more detailed description of the business and properties of
Concentra, see the descriptions thereof contained in Concentra's Annual Report
on Form 10-K for the fiscal year ended December 31, 1998, which is incorporated
herein by reference. See "Where You Can Find More Information."
CERTAIN INFORMATION CONCERNING YANKEE
YANKEE
Yankee is a newly formed Delaware corporation organized and currently
owned by WCAS for the purpose of effecting the merger. The principle executive
offices of Yankee are located at 320 Park Avenue, New York, New York 10022. The
current directors of Yankee are D. Scott Mackesy, Andrew M. Paul and Paul B.
Queally. The current officers of Yankee are D. Scott Mackesey, Andrew M. Paul
and Paul B. Queally. Health Care Partners L.P. and Health Care Executive
Partners L.P., affiliates of Ferrer Freeman Thompson & Co., LLC, have agreed to
purchase about 7% of Yankee's capital stock prior to the merger. Chase Capital
Partners, DLJInvestment Partners and some of its affiliates, and the Members of
Management (the "Other Investors") have agreed to acquire about 5% of Yankee's
capital stock prior to the merger. Health Care Capital Partners may assign its
rights to purchase that capital stock to affiliates, members or partners of
Ferrer Freeman Thompson & Co., LLC.
EQUITY INVESTORS
WCAS
WCAS is a private investment firm based in New York and founded in
1979. WCAS currently manages over $7 billion in private equity capital and
focuses primarily on the healthcare and information services industries. Since
1979, WCAS has completed over eighty leveraged buyouts concentrated in these
industries. The principal executive offices of WCAS are located at 320 Park
Avenue, New York, New York 10022 and its telephone number is (212) 893-4500. The
sole general partner of WCAS is WCAS VIII Associates LLC, a Delaware limited
liability company ("WCAS VIII Associates").
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<PAGE>
WCAS VIII ASSOCIATES
The principal business of WCAS VIII Associates is acting as the sole
general partner of WCAS. Each managing member of WCAS VIII Associates is a
citizen of the United States. The principal occupation of each managing member
of WCAS VIII Associates is being a general partner or managing member of the
partnerships and limited liability companies which serve as the sole general
partners of the private investment partnerships which are affiliated with WCAS.
The managing members of WCAS VIII Associates are Bruce K. Anderson, Russell L.
Carson, Priscilla A. Newman, Anthony J. de Nicola, Thomas E. McInerney, Andrew
M. Paul, Paul B. Queally, Jonathan M. Rather, Lawrence B. Sorrell, Laura M. Van
Buren, and Patrick J. Welsh.
FERRER FREEMAN
Ferrer Freeman is a private investment firm based in Connecticut.
Ferrer Freeman manages two private equity funds, Health Care Capital Partners
and Health Care Executive Partners, which are dedicated to making investments in
the health care industry. The principal offices of Ferrer Freeman are located at
The Mill, 10 Glenville Street, Greenwich, Connecticut 06831 and its telephone
number is (203) 532-8011.
In connection with its investment in Yankee, Ferrer Freeman has entered
into a subscription agreement to purchase 1,854,545 shares of Yankee's Class A
common stock immediately prior to the merger, representing approximately 7% of
Yankee's outstanding capital stock. The Class A common stock of Yankee is
identical in all respects to Yankee's common stock except that the Class A
common stock is entitled to elect one member to Yankee's board of directors. The
merger agreement provides that, at the effective time of the merger, shares of
Yankee's Class A common stock will be converted into an equal number of shares
of Class A common stock of Concentra with the same rights as Yankee's Class A
common stock prior to the merger.
In connection with its investment in Yankee, WCAS and the Other
Investors have agreed to purchase 23,742,187 shares of Yankee's common stock
immediately prior to the merger, representing approximately 93% of Yankee's
outstanding capital stock. WCAS and the Other Investors intend to enter into a
definitive purchase agreement similar to the one executed by Ferrer Freeman to
purchase these shares. The merger agreement provides that, at the effective time
of the merger, shares of Yankee's common stock will be converted into an equal
number of shares of Concentra common stock with the same rights as Yankee's
common stock prior to the merger.
WCAS, the Other Investors, Ferrer Freeman and Concentra intend to enter
into a stockholders agreement. The stockholders agreement will not provide for
any agreements with WCAS, the Other Investors and Ferrer Freeman with respect to
voting of shares or management of Concentra following the merger. The
stockholders agreement will provide for:
o limitations on the transfer of shares owned by the investors,
o tag along rights for Ferrer Freeman, the Other Investors and
affiliates of WCAS other
70
<PAGE>
than WCAS, to participate in proposed dispositions of Concentra
common stock by WCAS,
o in the event that WCAS receives a third party offer to purchase a
significant portion of the outstanding Concentra common stock, WCAS
may require the other investors to accept the offer and sell their
shares of Concentra to the third party, and
o preemptive rights to the investors to participate, on a pro rata
basis according to their ownership of Concentra capital stock, in
equity offerings of Concentra with certain customary exceptions.
Simultaneously with the execution of the stockholders agreement, WCAS,
the Other Investors, Ferrer Freeman and Concentra intend to enter into a
registration rights agreement. The registration rights agreement will give the
investors rights to require Concentra to register their shares of Concentra
capital stock under the Securities Act of 1933 and to include, upon request,
their shares in any other registration of shares by Concentra.
None of WCAS, WCAS VIII Associates or any executive officer, director
or person controlling any member of WCAS or WCAS VIII Associates was, during the
last five years, convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors) or was a party to a civil proceeding of a
judicial or administrative body of competent jurisdiction and as a result of
such proceeding was or is subject to a judgment, decree or final order enjoining
future violations of, or prohibiting activities subject to, federal or state
securities laws or finding any violation of such laws. Each person listed below
is a citizen of the United States unless noted otherwise.
The business address of each managing member of WCAS VIII Associates is
320 Park Avenue, New York, New York 10022.
Except as disclosed below, over the last five years the only material
occupation, position, offices or employments for each managing member of WCAS
VIII Associates has only been as a general partner or managing member of the
partnerships and limited liability companies which serve as the sole general
partners of the private investment partnerships which are affiliated with WCAS.
D. SCOTT MACKESY is a citizen of Canada and his principal occupation is
as an employee of WCAS Management Corporation, an affiliate of WCAS. Mr.
Mackesy's business address is 320 Park Avenue, Suite 2500, New York, New York
10022-6815. Prior to joining WCAS in 1998, Mr. Mackesy was employed from 1992 to
1998 by Morgan Stanley Dean Winter & Co., most recently as a Vice President in
its investment research department. The address of Morgan Stanley Dean Winter &
Co. is 1585 Broadway, New York, New York 10036.
Prior to joining WCAS in 1994, Mr. de Nicola was employed from 1990 to
1994 by William Blair & Company, a private equity investment firm. The address
of William Blair & Company, L.L.C. is 222 West Adams Street, Chicago, Illinois
60606.
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<PAGE>
Prior to joining WCAS in February 1996, Mr. Queally held various
positions, including, most recently, General Partner, at The Sprout Group,
Donaldson, Lufkin & Jenrette Inc.'s private equity group from May 1987 to
February 1996. The address of Donaldson, Lufkin & Jenrette, Inc. is 277 Park
Avenue, New York, New York 10172.
Prior to joining WCAS in May 1999, Jonathan M. Rather was employed as
Chief Operating Officer and Chief Financial Officer of Goelet Corporation. The
address of Goelet Corporation is 425 Park Avenue, 28th Floor, New York, New York
10022.
Prior to joining WCAS in May 1999, Jonathan M. Rather was employed as
Chief Operating Officer and Chief Financial Officer of Goelet Corporation. The
address of Goelet Corporation is 425 Park Avenue, 28th Floor, New York, New York
10022.
Prior to joining WCAS in June 1998, Mr. Sorrel was employed as a senior
executive at Morgan Stanley Dean Winter & Co. working in its private equity
investment business, most recently, as a Managing Director. Mr. Sorrell joined
Morgan Stanley & Co. in 1986. The address of Morgan Stanley Dean Winter & Co. is
1585 Broadway, New York, New York 10036.
SEAN M. TRAYNOR'S principal occupation is as an employee of WCA
Management Corporation, an affiliate of WCAS. Mr. Traynor's business address is
320 Park Avenue, Suite 2500, New York, New York 10022-6815. Prior to joining
WCAS in April 1999, Mr. Traynor was employed from 1996 to April 1999 by BT Alex.
Brown Incorporated, as an Associate in its investment banking division. The
address of BT Alex. Brown Incorporated is One South Street, Baltimore, Maryland
21202. From June to August 1995, Mr. Traynor was employed by The Chase Manhattan
Bank, as an Associate in its corporate finance department.
The address of The Chase Manhattan Bank is 270 Park Avenue, New York, New York
10017.
PURCHASES OF COMMON STOCK BY CERTAIN PERSONS
NUMBER OF
SHARES NUMBER OF
PURCHASED CONVERTIBLE PRICE PAID
PARTY DATE (SOLD) NOTES PURCHASED PER SHARE OR NOTE
- ----- ------- ----------- --------------- ----------------
WCAS 9/08/98 250,000 $ 6.10
9/09/98 625,000 $ 6.73
9/10/98 625,000 $ 7.02
9/11/98 624,763 $ 7.66
10/20/98 200,000 7,000 $10.14 per Share;
$72.84 per Note
10/21/98 165,000 3,000 $10.72 per Share;
$74.17 per Note
10/22/98 190,000 $10.35
10/23/98 150,000 2,000 $ 9.98 per Share;
$74.00 per Note
10/26/98 50,000 2,500 $10.44 per Share;
$74.50 per Note
10/27/98 350,000 2,000 $10.71 per Share;
$75.00 per Note
10/29/98 485,000 2,000 $10.60 per Share;
$75.00 per Note
10/30/98 135,000 $10.68
11/02/98 50,000 $10.63
11/09/98 1,000 $75.00
11/18/98 50,000 $10.44
72
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES NUMBER OF
PURCHASED CONVERTIBLE PRICE PAID
PARTY DATE (SOLD) NOTES PURCHASED PER SHARE OR NOTE
- ------ ------- ----------- --------------- ----------------
<S> <C> <C> <C> <C>
11/19/98 30,000 $10.50
11/20/98 40,000 $10.69
11/23/98 1,000 $76.25
11/25/98 1,000 $78.00
12/01/98 2,000 $79.00
12/03/98 3,000 $78.50
12/04/98 1,000 $79.00
1/05/99 65,000 $10.12
1/06/99 40,000 2,000 $10.50 per Share;
$78.50 per Note
1/07/99 175,000 1,000 $10.33 per Share;
$79.00 per Note
1/08/99 475,000 $10.49 per Share
1/11/99 225,000 2,000 $10.84 per Share;
$78.50 per Note
1/12/99 1,300,000 $10.73 per Share
7/02/99 (90,000)
Carlyle 11/97 227,200(9)
5/98 510(2)
80,000(3)
Conrades 9/97 459(1)
5/98 510(2)
Gradison 5/98 510(2)
Ortenzio 9/97 451(1)
5/98 510(2)
Rabkin 9/97 459(1)
5/98 510(2)
Silverman 9/97 459(1)
5/98 510(2)
Greenwood 11/97 62,500(8)
5/98 15,000(2)
Loffredo 11/97 15,000(4)
1/98 176(5)
6/98 452(6)
Parr 11/97 6,000(4)
1/98 476(5)
6/98 312(6)
8/98 1,000(7)
1/99 761(10)
Pesce 11/97 24,000(4)
1/98 472(5)
5/98 9,000(2)
6/98 657(6)
1/99 1,583(10)
Thomas 5/98 9,000(2)
</TABLE>
FOOTNOTES 1 - Restricted Shares Granted 9/1/97 at $32.75
2 - Restricted Shares Granted 5/13/98 at $29.4375
3 - Acquired Through Exercise Of 50,000 Options at $19.50 And
30,000 Restricted Shares at $0
4 - Restricted Shares Granted 11/1/97 at $32.625
5 - Shares Purchased Through Employee Stock Purchase Plan at $24.86
6 - Shares Purchased Through Employee Stock Purchase Plan at $22.10
7 - Shares Purchased Through Open Market at $19.00
8 - Shares Acquired Through Exercise of Stock Options As
Follows: 5,000 on 11/4/97 at $4.00, 7,500 on 11/4/97 at
$6.00, 15,000 on 11/4/97 at $7.00, 12,500 on 11/4/97 at
$12.00, 7,500 on 11/14/97 at $12.00, 4,000 on 11/14/97 at
$19.50, 5,000 on 11/25/97 at $19.50, 31,000 on 11/26/97 at
$19.50
9 - Shares Acquired Through Exercise of Stock Option As
Follows: 37,200 on 11/5/97 at $4.00, 60,000 on 11/5/97 at
$12.00, 40,000 on 11//6/97 at $7.00, 15,000 on 11/7/97 at
$7.00, 25,000 on 11/18/97 at $7.00, 10,000 on 11/21/97 at
$19.50
10 - Shares Purchased Through Employee Stock Purchase
Plan on January 1, 1999 at $9.0843
73
<PAGE>
INDEPENDENT AUDITORS
The consolidated balance sheets of Concentra as of December 31, 1997
and December 31, 1998, and the related consolidated statements of operation,
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1998, incorporated by reference in this proxy statement have
been audited by Arthur Andersen L.L.P., independent auditors, as stated in their
report. A representative of Arthur Andersen L.L.P. will be at the special
meeting to answer appropriate questions from stockholders and will have the
opportunity to make a statement if so desired.
STOCKHOLDER PROPOSALS
Any proposals of holders of Concentra common stock intended to be
presented at the annual meeting of stockholders of Concentra to be held in 1999
must have been received by Concentra no later than December 1, 1998, to be
included in Concentra's proxy statement and form of proxy relating to that
meeting.
OTHER MATTERS
As of the date of this proxy statement, the Board knows of no other
business to be presented at the special meeting. If other matters do properly
come before the meeting, or any adjournments or postponements thereof, it is the
intention of the persons named in the proxy to vote on such matters in their
sole discretion.
WHERE YOU CAN FIND MORE INFORMATION
Concentra files annual, quarterly and current reports, proxy statements
and other information with the SEC. You may read and copy any reports,
statements or other information that Concentra files at the SEC's public
reference rooms in Washington, D.C., New York, New York and Chicago, Illinois.
Please call the SEC at 1-800-SEC-0330 for further information on the public
reference rooms. Concentra public filings are also available to the public from
commercial document retrieval services and at the Internet World Wide Web site
maintained by the SEC at http://www.sec.gov. Reports, proxy statements and other
information concerning Concentra 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 SEC allows Concentra to "incorporate by reference" information into
this document, which means that Concentra can disclose important information to
you by referring you to another document filed separately with the SEC. 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
Concentra has previously filed with the SEC. These documents contain important
business information about Concentra and its financial condition.
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<PAGE>
Concentra may have sent to you some of the documents incorporated by
reference, but you can obtain any of them through Concentra, the SEC or the
SEC's Internet World Wide Web site described above. Documents incorporated by
reference are available from Concentra without charge, excluding exhibits unless
specifically incorporated by reference as an exhibit to this document.
Stockholders may obtain documents incorporated by reference in this document by
requesting them in writing or by telephone at the following address and
telephone number:
Concentra Managed Care, Inc.
5080 Spectrum Drive, Suite 400, West Tower
Addison, Texas 75001
972/364-8043
Attention: Richard A. Parr II, General Counsel
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 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 Concentra, 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. Concentra
has not authorized anyone to provide you with information that is different from
what is contained in this document. This document is dated ______________, 1999.
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 stockholders 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 SEC by Concentra are
incorporated by reference in this proxy statement:
(i) Concentra's Annual Report on Form 10-K for the fiscal year ended
December 31, 1998; and
(ii) Concentra's Current Reports on Form 8-K filed on February 4,
1999, March 3, 1999, March 29, 1999 and April 28,1999.
(iii) Concentra's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1999.
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<PAGE>
All documents filed by Concentra with the SEC pursuant to Sections
13(a), 13(c), 14 and 15(d) of the Securities Exchange Act of 1934 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.
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APPENDIX A
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
YANKEE ACQUISITION CORP.,
AND
CONCENTRA MANAGED CARE, INC.
DATED AS OF MARCH 24, 1999
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TABLE OF CONTENTS
Page
Article 1 The Merger
1.1 The Merger ...................................................... A-2
1.2 Closing ......................................................... A-2
1.3 Effective Time of the Merger .................................... A-2
1.4 Effects of the Merger ........................................... A-2
ARTICLE 2 EFFECT OF THE MERGER ON THE CAPITAL STOCK
OF THE CONSTITUENT CORPORATIONS
2.1 Effect on Capital Stock ......................................... A-3
2.2 Exchange of Certificates ........................................ A-4
2.3 Stock Plans ..................................................... A-6
ARTICLE 3 REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Company ................... A-7
3.2 Representations and Warranties of Newco ......................... A-20
ARTICLE 4 COVENANTS RELATING TO CONDUCT OF BUSINESS
4.1 Affirmative Covenants of the Company ............................ A-23
4.2 Negative Covenants of the Company ............................... A-23
ARTICLE 5 ADDITIONAL AGREEMENTS
5.1 Access to Information ........................................... A-26
5.2 No Solicitation ................................................. A-26
5.3 Fees and Expenses ............................................... A-27
5.4 Brokers or Finders .............................................. A-28
5.5 Indemnification; Directors' and Officers' Insurance ............. A-28
5.6 Reasonable Efforts .............................................. A-31
5.7 Publicity ....................................................... A-31
5.8 HSR and Other Governmental Approvals ............................ A-31
5.9 Notification of Certain Matters ................................. A-32
5.10 Continuation of Employee Benefits ............................... A-32
5.11 Preparation of the Proxy Statement; Stockholders Meeting ........ A-33
5.12 Solvency Letter ................................................. A-33
5.13 Recapitalization ................................................ A-34
5.14 Other Actions ................................................... A-34
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Page
ARTICLE 6 CONDITIONS PRECEDENT
6.1 Conditions to Each Party's Obligation to Effect the Merger ... A-34
6.2 Conditions to Obligations of Newco ........................... A-35
6.3 Conditions to Obligation of the Company ...................... A-36
ARTICLE 7 TERMINATION AND AMENDMENT
7.1 Termination .................................................. A-36
7.2 Effect of Termination ........................................ A-38
7.3 Amendment .................................................... A-38
7.4 Extension; Waiver ............................................ A-38
ARTICLE 8 GENERAL PROVISIONS
8.1 Nonsurvival of Covenants and Agreements ...................... A-38
8.2 Confidentiality Agreements ................................... A-38
8.3 Notices ...................................................... A-38
8.4 Interpretation ............................................... A-40
8.5 Counterparts ................................................. A-40
8.6 Entire Agreement; No Third Party Beneficiaries ............... A-40
8.7 Governing Law ................................................ A-40
8.8 Assignment ................................................... A-40
8.9 Effectiveness ................................................ A-41
8.10 Reference; No Waiver ......................................... A-41
iii
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SCHEDULES
Schedule 2.3 -- Stock Plans
Schedule 3.1(a) -- Company Subsidiaries
Schedule 3.1(b)(i) -- Company Capital Structure
Schedule 3.1(b)(ii) -- Registration Rights Agreement and Voting Agreements
Schedule 3.1(b)(iii) -- Company Subsidiary Capital Structure
Schedule 3.1(c)(ii) -- Company Violations; Consents and Approvals
Schedule 3.1(c)(iii) -- Required Filings and Consents
Schedule 3.1(f) -- Company Defaults
Schedule 3.1(h) -- Company Litigation
Schedule 3.1(i) -- Company Taxes
Schedule 3.1(j)(i) -- Company Employment Agreements
Schedule 3.1(j)(ii) -- Company Plans
Schedule 3.1(j)(iv) -- Company Determination Letters
Schedule 3.1(j)(v) -- Plan Operation and Administration
Schedule 3.1(j)(xiii) -- Other Employee Benefits
Schedule 3.1(j)(xiv) -- Certain Consequences of Consummation of Transaction
Schedule 3.1(k) -- Absence of Certain Changes or Events
Schedule 3.1(q) -- Company Intellectual Property
Schedule 3.1(r) -- Company Insurance Matters
Schedule 4.2(d) -- Approved Acquisitions
Schedule 5.4(b) -- Newco Brokers and Finders
Schedule 5.5(e) -- Company Indemnification Agreements
Schedule 5.10 -- Continuation of Employee Benefits
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AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
This Amended And Restated Agreement And Plan Of Merger, dated as of
March 24, 1999 (this "Agreement"), is made and entered into by and between
Yankee Acquisition Corp., a Delaware corporation ("Newco"), and Concentra
Managed Care, Inc., a Delaware corporation (the "Company").
RECITALS
Whereas, Newco and the Company have entered into that certain Agreement
and Plan of Merger dated as of March 2, 1999 (the "Original Merger Agreement");
Whereas, subsequent to the date of the Original Merger Agreement, Newco
and the Company have each determined that it is in the best interests of each of
the foregoing entities and their respective stockholders to enter into this
Agreement, which amends and restates the Original Merger Agreement;
Whereas, the Board of Directors of each of Newco and the Company (in
the case of the Company acting through a special committee (the "Special
Committee") formed for the purposes of representing the Company in connection
with the transactions contemplated hereby) has unanimously deemed it advisable
and in the best interests of their respective stockholders for Newco to merge
with and into the Company (the "Merger") pursuant to Section 251 of the Delaware
General Corporation Law (the "DGCL") upon the terms and subject to the
conditions set forth herein;
Whereas, the Board of Directors of each of Newco and the Company has
unanimously adopted resolutions approving and declaring advisable this Agreement
and the Merger;
Whereas, Newco and the Company desire to make certain representations,
warranties, covenants and agreements in connection with the Merger and also to
prescribe various conditions to the Merger; and
Whereas, it is intended that the Merger be recorded as a
recapitalization for financial reporting purposes.
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AGREEMENT
Now, Therefore, in consideration of the foregoing and the
representations, warranties, covenants and agreements herein contained, the
parties hereto, intending to be legally bound, hereby agree as follows:
ARTICLE 1
THE MERGER
1.1 THE MERGER. Upon the terms and subject to the conditions set forth
in this Agreement, and in accordance with the DGCL, Newco shall be merged with
and into the Company at the Effective Time (as hereinafter defined). At the
Effective Time, the separate corporate existence of Newco shall cease, and the
Company shall continue as the surviving corporation under the name "Concentra
Managed Care, Inc." Newco and the Company are sometimes hereinafter referred to
as the "Constituent Corporations" and, as the context requires, the Company is
sometimes hereinafter referred to as the "Surviving Corporation."
1.2 CLOSING. Unless this Agreement shall have been terminated and the
transactions herein contemplated shall have been abandoned pursuant to Section
7.1, and subject to the satisfaction or waiver of the conditions set forth in
Article 6, the closing of the Merger (the "Closing") shall take place at 10:00
a.m. on a date to be specified by the parties hereto, as promptly as practical
(but in no event later than the second business day) after satisfaction and/or
waiver of all of the conditions set forth in Article 6 (the "Closing Date"), at
the offices of Reboul, MacMurray, Hewitt, Maynard & Kristol, 45 Rockefeller
Plaza, New York, New York 10111, unless another date, time or place is agreed to
in writing by the parties hereto.
1.3 EFFECTIVE TIME OF THE MERGER. Subject to the provisions of this
Agreement, the parties hereto shall cause the Merger to be consummated by filing
a certificate of merger (the "Certificate of Merger") with the Secretary of
State of the State of Delaware, as provided in the DGCL, as soon as practicable
after the Closing. The Merger shall become effective upon such filing or at such
time thereafter as is provided in the Certificate of Merger as the Company and
Newco shall agree (the "Effective Time").
1.4 EFFECTS OF THE MERGER.
(a) The Merger shall have the effects as set forth in the
applicable provisions of the DGCL.
(b) The directors of Newco and the officers of the Company
immediately prior to the Effective Time shall, from and after the Effective
Time, be the initial directors and officers of the Surviving Corporation until
their successors have been duly elected or appointed and qualified, or until
their earlier death, resignation or removal in accordance with the Surviving
Corporation's Certificate of Incorporation and Bylaws.
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(c) The Certificate of Incorporation of Newco as in effect at the
Effective Time shall be the Certificate of Incorporation of the Surviving
Corporation following the Merger until thereafter amended in accordance with its
terms and the DGCL.
(d) The Bylaws of Newco as in effect at the Effective Time shall be
the Bylaws of the Surviving Corporation following the Merger until thereafter
changed or amended as provided by the DGCL, the Certificate of Incorporation of
the Surviving Corporation or the Bylaws of the Surviving Corporation.
ARTICLE 2
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS
2.1 EFFECT ON CAPITAL STOCK. As of the Effective Time, by virtue of
the Merger and without any action on the part of the holder of any shares of
common stock, par value $.01 per share, of the Company (the "Company Common
Stock") or any shares of capital stock of Newco:
(a) COMMON STOCK OF NEWCO. Each share of common stock, par
value $.01 per share, of Newco (the "Newco Common Stock") issued and outstanding
immediately prior to the Effective Time shall be converted into and become one
fully paid and nonassessable share of common stock, par value $.01 per share, of
the Surviving Corporation. Each share of Class A common stock, par value $.01
per share, of Newco (the "Newco Class A Common Stock") issued and outstanding
immediately prior to the Effective Time shall be converted into and become one
fully paid and nonassessable share of Class A common stock, par value $.01 per
share, of the Surviving Corporation.
(b) CANCELLATION OF TREASURY STOCK AND NEWCO-OWNED COMPANY
COMMON STOCK. Each share of Company Common Stock that is owned by Newco or any
subsidiary or affiliate of Newco or held in the treasury of the Company
(collectively, the "Excluded Shares") shall automatically be canceled and
retired and shall cease to exist, and no cash, Company Common Stock or other
consideration shall be delivered or deliverable in exchange therefor.
(c) CONVERSION OR RETENTION OF COMPANY COMMON STOCK. Except as
otherwise provided herein, each share of Company Common Stock issued and
outstanding immediately prior to the Effective Time other than Excluded Shares
or Dissenting Shares (as defined in Section 2.1(d)) shall be converted into the
right to receive in cash from the Surviving Corporation following the Merger an
amount equal to $16.50 (the "Merger Consideration").
(d) DISSENTING SHARES. Notwithstanding anything in this
Agreement to the contrary, shares of Company Common Stock that are issued and
outstanding immediately prior to the Effective Time and that are held by a
holder who has validly demanded payment of the fair value for such holder's
shares as determined in accordance with Section 262 of the DGCL ("Dissenting
Shares") shall not be converted into or be exchangeable for the right to receive
the Merger
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Consideration (but instead shall be converted into the right to receive payment
from the Surviving Corporation with respect to such Dissenting Shares in
accordance with the DGCL), unless and until such holder shall have failed to
perfect or shall have effectively withdrawn or lost such holder's right under
the DGCL. If any such holder shall have failed to perfect or shall have
effectively withdrawn or lost such right, each share of such holder shall be
treated as a share of Company Common Stock that had been converted as of the
Effective Time into the right to receive the Merger Consideration in accordance
with Section 2.1(c). Concentra shall give prompt notice to Newco of any demands,
attempted withdrawals of such demands and any other instruments served pursuant
to applicable law received by the Company for appraisal of shares of Company
Common Stock, and Newco shall have the right to participate in and direct all
negotiations and proceedings with respect to such demands. The Company shall
not, except with the prior written consent of Newco, make any payment with
respect to, settle, offer to settle, or approve any withdrawal of any such
demands.
(e) CANCELLATION AND RETIREMENT OF COMPANY COMMON STOCK. As of
the Effective Time, all shares of Company Common Stock (other than Excluded
Shares and Dissenting Shares) issued and outstanding immediately prior to the
Effective Time, shall no longer be outstanding and shall automatically be
canceled and retired and shall cease to exist, and each holder of a certificate
representing any such shares of Company Common Stock shall, to the extent such
certificate represents such shares, cease to have any rights with respect
thereto, except the right to receive a cash amount equal to the Merger
Consideration per share multiplied by the number of shares so represented, to be
paid in consideration therefor upon surrender of such certificate in accordance
with Section 2.2(b).
2.2 EXCHANGE OF CERTIFICATES.
(a) EXCHANGE AGENT. Prior to the mailing of the Proxy Statement
(as defined in Section 3.1(c)(iii)), Newco shall appoint a bank or trust company
to act as exchange agent (the "Exchange Agent") for the payment of the Merger
Consideration. As soon as reasonably practicable as of or after the Effective
Time, the Surviving Corporation shall deposit with the Exchange Agent, for the
benefit of the holders of shares of Company Common Stock, for exchange in
accordance with this Article 2, the aggregate Merger Consideration (such cash
consideration being hereinafter referred to as the "Exchange Fund"). The
Exchange Agent shall, pursuant to irrevocable instructions of the Surviving
Corporation, make payments of the Merger Consideration out of the Exchange Fund.
The Exchange Fund shall not be used for any other purpose.
(b) EXCHANGE PROCEDURES. Promptly after the Effective Time, the
Surviving Corporation shall cause the Exchange Agent to mail or deliver to each
Person (as defined in Section 3.1(a)) who was, at the Effective Time, a holder
of record of Company Common Stock a letter of transmittal containing
instructions for use by holders of Company Common Stock to effect the exchange
of their shares of Company Common Stock for the Merger Consideration as provided
herein. As soon as practicable after the Effective Time, each holder of an
outstanding certificate or certificates which prior thereto represented shares
of Company Common Stock (the "Certificates") shall, upon surrender to the
Exchange Agent of such Certificate or Certificates (or,
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if such shares are held in book-entry or other uncertificated form, upon the
entry through a book-entry transfer agent of the surrender of such shares of
Company Common Stock on a book-entry account statement (any references herein to
"Certificates" shall be deemed to include references to book-entry account
statements relating to the ownership of shares of Company Common Stock)) and
acceptance thereof by the Exchange Agent, be entitled to an amount of cash equal
to the Merger Consideration per share multiplied by the number of shares
represented by such Certificate. The Exchange Agent shall accept such
Certificates upon compliance with such reasonable terms and conditions as the
Exchange Agent may impose to effect an orderly exchange thereof in accordance
with normal exchange practices. After the Effective Time, there shall be no
further transfer on the records of the Company or its transfer agent of
Certificates, and if such Certificates are presented to the Company for
transfer, they shall be canceled against delivery of the Merger Consideration.
If cash is to be remitted to a name other than that in which the Certificate
surrendered for exchange is registered, it shall be a condition of such exchange
that the Certificate so surrendered shall be properly endorsed, with signature
guaranteed, or otherwise in proper form for transfer. Until surrendered as
contemplated by this Section 2.2(b), each Certificate shall be deemed at any
time after the Effective Time to represent only the right to receive upon such
surrender the Merger Consideration as contemplated by Section 2.1. No interest
will be paid or will accrue on any cash payable as Merger Consideration.
(c) NO FURTHER OWNERSHIP RIGHTS IN COMPANY COMMON STOCK
EXCHANGED FOR CASH. All cash paid upon the surrender for exchange of
Certificates representing shares of Company Common Stock in accordance with the
terms of this Article 2 shall be deemed to have been paid in full satisfaction
of all rights pertaining to the shares of Company Common Stock exchanged for
cash theretofore represented by such Certificates.
(d) TERMINATION OF EXCHANGE FUND. Any portion of the Exchange
Fund which remains undistributed to the holders of the Certificates for 183 days
after the Effective Time shall be delivered to the Surviving Corporation and any
holders of shares of Company Common Stock prior to the Merger who have not
theretofore complied with this Article 2 shall thereafter look only to the
Surviving Corporation and only as general creditors thereof for payment of the
Merger Consideration.
(e) NO LIABILITY. None of Newco, the Surviving Corporation or
the Exchange Agent shall be liable to any Person in respect of any cash from the
Exchange Fund delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
(f) INVESTMENT OF EXCHANGE FUND. The Exchange Agent shall
invest any cash in the Exchange Fund, as directed by the Surviving Corporation,
on a daily basis. Any interest and other income resulting from such investments
shall be paid to the Surviving Corporation. To the extent that there are losses
with respect to such investments, or the Exchange Fund diminishes for other
reasons below the level required to make prompt payments of the Merger
Consideration as contemplated hereby, the Surviving Corporation shall promptly
replace or restore the portion of the Exchange Fund lost through investments or
other events so as to ensure that the Exchange Fund is, at all times, maintained
at a level sufficient to make such payments.
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(g) WITHHOLDING RIGHTS. The Surviving Corporation shall be
entitled to deduct and withhold from the consideration otherwise payable
pursuant to this Agreement to any holder of shares of Company Common Stock such
amounts as the Surviving Corporation is required to deduct and withhold with
respect to the making of such payment under the Internal Revenue Code of 1986,
as amended (the "Code"), or any provision of state, local or foreign tax law. To
the extent that amounts are so deducted and withheld by the Surviving
Corporation, such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the holder of the shares of Company Common
Stock in respect of which such deduction and withholding was made by the
Surviving Corporation.
(h) LOST CERTIFICATES. If any Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the Person
claiming such Certificate to be lost, stolen or destroyed and, if required by
the Surviving Corporation, the posting by such Person of a bond in such
reasonable amount as the Surviving Corporation may require as indemnity against
any claim that may be made against it with respect to such Certificate, the
Exchange Agent will issue in exchange for such lost, stolen or destroyed
Certificate the Merger Consideration payable pursuant to this Agreement.
2.3 STOCK PLANS. (a) Each of the Company's stock option plans
(the "Stock Plans") and options to acquire shares of Company Common Stock or
shares of restricted stock of the Company outstanding on the date hereof (the
"Company Stock Options"), including without limitation information concerning
the date of vesting of such options or the lapse of restrictions on such
restricted stock and the acceleration of such vesting or restrictions by virtue
of the Merger or the transactions contemplated hereby, are set forth on SCHEDULE
2.3. As soon as practicable following the date of this Agreement, except as
otherwise may be agreed by Newco, the Company shall use its reasonable best
efforts to take such actions (which shall include, without limitation,
attempting to obtain the consents, if required, of the holders of Company Stock
Options) as may be required to effect the cancellation or amendment at the
Effective Time of all Company Stock Options that are stock options in exchange
for a cash payment equal to, in the case of each such canceled Company Stock
Option, the product of (1) the excess, if any, of the Merger Consideration per
share over the exercise price per share of such Company Stock Option and (2) the
number of shares of Company Common Stock subject to such Company Stock Option.
As soon as practicable after the date of this Agreement, the Company shall use
its reasonable best efforts to take such action (which shall include, without
limitation, attempting to obtain the consents, if required, of holders of
Company Stock Options which are shares of restricted stock of the Company) as
may be required to effect the cancellation or amendment of all such Company
Stock Options which are shares of restricted stock, in exchange for a cash
payment equal to the Merger Consideration per share to be paid at the time such
restrictions would otherwise lapse.
(b) Prior to the Effective Time, the Board of Directors of the
Company shall take all actions necessary to provide that at the Effective Time,
the Concentra Managed Care, Inc. Employee Stock Purchase Plan shall be
terminated.
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES
3.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants as of the date hereof (or such other date as shall be
expressly specified) to Newco as follows:
(a) ORGANIZATION, STANDING AND POWER. Each of the Company and its
Subsidiaries (as defined below) is a corporation, partnership or a limited
liability company duly organized, validly existing and in good standing under
the laws of its respective jurisdiction of incorporation, has all requisite
corporate, partnership or limited liability company power and authority to own,
lease and operate its properties and to carry on its business as now being
conducted, and is duly qualified to do business as a foreign corporation,
partnership or limited liability company and in good standing to conduct
business in each jurisdiction in which the business it is conducting, or the
operation, ownership or leasing of its properties, makes such qualification
necessary, other than in such jurisdictions where the failure so to qualify
would not, individually or in the aggregate, have a Material Adverse Effect (as
defined below) with respect to the Company. The Company has heretofore made
available to Newco complete and correct copies of the certificates of
incorporation and bylaws (or other organizational documents) of the Company and
its Subsidiaries. All Subsidiaries of the Company, their respective
jurisdictions of incorporation or organization, their respective forms of
organization, holders of their respective outstanding capital stock or other
equity interests, and their respective jurisdictions of qualification to do
business are identified on SCHEDULE 3.1(A). As used in this Agreement, (i) a
"Material Adverse Effect" shall mean, with respect to any party, (A) a material
adverse effect on the business, operations, assets, financial condition or
results of operations of such party and its Subsidiaries, taken as a whole or
(B) a material adverse effect on the ability of such party and its Subsidiaries
to perform their respective obligations under this Agreement, (ii) "Subsidiary,"
with respect to any party, means any corporation, partnership, joint venture or
other organization, whether incorporated or unincorporated, of which (A) such
party or any other Subsidiary of such party is a general partner, (B) voting
power to elect a majority of the board of directors or others performing similar
functions with respect to such corporation, partnership, joint venture or other
organization is held by such party or by any one or more of its Subsidiaries, or
by such party and any one or more of its Subsidiaries or (C) at least 50% of the
equity interests is, directly or indirectly, owned or controlled by such party
or by any one or more of its Subsidiaries, or by such party and any one or more
of its Subsidiaries and (iii) "Person" shall mean any natural person, firm,
individual, partnership, joint venture, business trust, trust, association,
corporation, company, unincorporated entity or other entity.
(b) CAPITAL STRUCTURE.
(i) The Company. The authorized capital stock of the Company
consists of 120,000,000 shares of stock of which (A) 100,000,000 shares are
Company Common Stock and (B) 20,000,000 shares are Preferred Stock, par value
$.01 per share (the
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"Preferred Stock"), of which 250,000 shares have been designated as Series A
Junior Participating Preferred Stock (the "Junior Preferred Stock"). As of the
close of business on the date hereof (the "Capitalization Date"), 47,292,199
shares of Company Common Stock were issued and outstanding; no shares of
Preferred Stock were issued and outstanding; no shares of Company Common Stock
were held in the Company's treasury; 6,518,741 shares of Company Common Stock
were reserved for issuance pursuant to the outstanding Company Stock Options; no
shares were reserved for issuance pursuant to the Concentra Managed Care, Inc.
401(k) Plan and CRA Managed Care, Inc. Employee Stock Purchase Plan; an
indeterminate number of shares (not to exceed 500,000) were reserved for
issuance pursuant to the Concentra Managed Care, Inc. Employee Stock Purchase
Plan; and there were outstanding rights with respect to 47,292,199 one
one-thousandths of a share of Junior Preferred Stock under the Rights Agreement
dated as of September 29, 1997 between the Company and ChaseMellon Shareholder
Services, L.L.C. (the "Rights Agreement"). Except as set forth on SCHEDULE
3.1(B)(I), no bonds, debentures, notes or other instruments or evidence of
indebtedness of the Company ("Company Debt") are issued and outstanding. Except
as set forth on SCHEDULE 3.1(B)(I), there are no outstanding securities
convertible into, or exchangeable or exercisable for, shares of capital stock or
other securities of the Company and, except as set forth on SCHEDULE 3.1(B)(I),
there are no calls, rights (including, without limitation, preemptive rights),
commitments or agreements (including, without limitation, employment,
termination and similar agreements) to which the Company or any of its
Subsidiaries is a party or by which it is bound, in any case obligating the
Company or any of its Subsidiaries to issue, deliver, sell, purchase, redeem or
acquire, any securities or other equity interests or debt instruments of the
Company, including, without limitation, shares of capital stock or Company Debt,
or obligating the Company or any of its Subsidiaries to grant, extend or enter
into any such option, warrant, call, right, commitment or agreement. All
outstanding shares of capital stock of the Company are validly issued, fully
paid and nonassessable and are not subject to, and have not been issued in
violation of, preemptive or other similar rights. Set forth on SCHEDULE 2.5 is a
list of all outstanding options, warrants and rights to purchase shares of
Company Common Stock and the exercise prices relating thereto.
(ii) VOTING OF SHARES. Except as set forth in this Agreement or on
SCHEDULE 3.1(B)(II), there are not as of the date hereof any stockholder
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 of any shares
of the capital stock of the Company. All registration rights agreements,
stockholders' agreements and voting agreements to which the Company or any of
its Subsidiaries is a party are identified on SCHEDULE 3.1(B)(II).
(iii) SUBSIDIARIES. Except as described on SCHEDULE 3.1(B)(III),
all outstanding shares of capital stock of, or other ownership interests in, the
Subsidiaries of the Company are owned by the Company or a direct or indirect
Subsidiary of the Company, free and clear of all pledges, liens, claims,
charges, security interests or other encumbrances of any kind (collectively,
"Liens"). All such issued and outstanding shares of capital stock or other
ownership interests are validly issued, fully paid and nonassessable and no such
shares or other ownership interests have been issued in violation of any
preemptive or similar rights. Except as set forth on SCHEDULE 3.1(B)(III), no
bonds, debentures, notes or other instruments or evidence of indebtedness of any
Subsidiary of the Company ("Subsidiary Debt") are issued and outstanding. No
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shares of capital stock of, or other ownership interests in, any Subsidiary of
the Company are reserved for issuance. There are no outstanding securities
convertible into, or exchangeable or exercisable for, shares of capital stock
of, or other ownership interests in, any Subsidiary of the Company. Except as
set forth on SCHEDULE 3.1(B)(III), there are no calls, rights (including,
without limitation, preemptive rights), commitments or agreements (including,
without limitation, employment, termination and similar agreements) to which the
Company or any of its Subsidiaries is a party or by which it is bound, in any
case obligating the Company or any of its Subsidiaries to issue, deliver, sell,
purchase, redeem or acquire, any securities or other equity interests or debt
instruments of any Subsidiary of the Company, including, without limitation,
shares of capital stock or Subsidiary Debt.
(c) AUTHORITY; NO VIOLATIONS; CONSENTS AND APPROVALS.
(i) Subject to the adoption of this Agreement by the holders of
a majority of the outstanding shares of Company Common Stock (the "Company
Stockholder Approval"), the Company has all requisite corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated by this Agreement. The execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of the Company, subject
to the Company Stockholder Approval. This Agreement has been duly executed and
delivered by the Company and, subject, to the Company Stockholder Approval, and
assuming that this Agreement constitutes the valid and binding agreement of
Newco, constitutes a valid and binding obligation of the Company enforceable in
accordance with its terms and conditions except that the enforcement hereof may
be limited by (A) applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance or other similar laws now or hereafter in effect relating
to creditors' rights generally and (B) general principles of equity (regardless
of whether enforceability is considered in a proceeding at law or in equity).
(ii) Except as set forth on SCHEDULE 3.1(C)(II), the execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby by the Company will not (A) conflict with, or result in any violation of,
or default (with or without notice or lapse of time, or both) under, or give
rise to a right of termination, cancellation, modification or acceleration of
any material obligation under, or the creation of a Lien (any such conflict,
violation, default, right of termination, cancellation , acceleration or
creation, a "Violation"), of or pursuant to any provision of the certificate of
incorporation or bylaws (or other organizational documents) of the Company or
any of its Subsidiaries or (B) result in any Violation of (1) any loan or credit
agreement, note, bond, mortgage, deed of trust, indenture, lease, Plan (as
defined in Section 3.1(j)), Company Permit (as defined in Section 3.1(g)), or
other agreement, obligation, instrument, concession, franchise or license or (2)
any judgment, order, decree, statute, law, ordinance, rule, regulation, writ or
injunction (collectively, "Laws") applicable to the Company or any of its
Subsidiaries or their respective properties or assets, except in the case of
clauses (1) and (2) for any Violations that, individually or in the aggregate,
would not have a Material Adverse Effect on the Company or prevent the
consummation of any of the transactions contemplated hereby. The Board of
Directors of the Company has taken all actions necessary under the DGCL,
including
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approving the transactions contemplated by this Agreement, to ensure that
Section 203 of the DGCL does not, and will not, apply to the transactions
contemplated hereby.
(iii) No consent, approval, franchise, license, waiver, order or
authorization of, or registration, declaration or filing with, notice,
exemption, application or certification to, or permit from any court,
administrative agency or commission or other governmental authority or
instrumentality, domestic or foreign (a "Governmental Entity"), is required by
or with respect to the Company or any of its Subsidiaries in connection with the
execution and delivery of this Agreement by the Company or the consummation by
the Company of the transactions contemplated hereby, except for (A) the filing
of a pre-merger notification and report form by the Company under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), and the expiration or termination of the applicable waiting period
thereunder, (B) the filing with the SEC of (1) a proxy statement in definitive
form for distribution to the stockholders of the Company in advance of the
Stockholders Meeting in accordance with Regulation 14A promulgated under the
Exchange Act (such proxy statement as amended or supplemented from time to time
being hereinafter referred to as the "Proxy Statement") and (2) such reports
under and such other compliance with the Exchange Act and the rules and
regulations thereunder as may be required in connection with this Agreement and
the transactions contemplated hereby, (C) the filing of the Certificate of
Merger with the Secretary of State of the State of Delaware and appropriate
documents with the relevant authorities of other states in which the Company
does business, (D) such filings and approvals as may be required by any
applicable state takeover, securities or "blue sky" laws, (E) those filings and
consents as may be required under any environmental, health or safety law or
regulation pertaining to any notification, disclosure or required approval
necessitated by the transactions contemplated by this Agreement (all of which
filings and consents are listed on Schedule 3.1(c)(iii)), and (F) such other
consents, approvals, orders, authorizations, registrations, declarations,
filings, notices or permits the failure of which to be obtained or made would
not have a Material Adverse Effect on the Company or prevent the consummation of
any of the transactions contemplated hereby.
(d) DISCLOSURE DOCUMENTS. The Company has made available to Newco a
true and complete copy of each report, schedule, registration statement and
definitive proxy statement filed by the Company with the SEC prior to the date
of this Agreement (the "Company SEC Documents"), which are all the documents
(other than preliminary material) that the Company was required to file with the
SEC. As of their respective dates, the Company SEC Documents complied in all
material respects with the requirements of the Securities Act of 1933 (the
"Securities Act") or the Exchange Act, as the case may be, and the rules and
regulations of the SEC promulgated thereunder, and none of the Company SEC
Documents contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The financial statements of the Company included in the Company
SEC Documents complied as to form in all material respects with the published
rules and regulations of the SEC with respect thereto, were prepared in
accordance with generally accepted accounting principles ("GAAP") applied on a
consistent basis during the periods involved (except as may be indicated in the
notes thereto or, in the case of unaudited statements, as permitted by Rule
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10-01 of Regulation S-X of the SEC) and fairly present, in accordance with
applicable requirements of GAAP (subject, in the case of the unaudited
statements, to year-end audit adjustments, as permitted by Rule 10-01, and any
other adjustments described therein), the consolidated financial position of the
Company and its consolidated Subsidiaries as of their respective dates and the
consolidated results of operations and the consolidated cash flows of the
Company and its consolidated Subsidiaries for the periods presented therein.
(e) INFORMATION SUPPLIED. None of the information to be supplied by
the Company specifically for inclusion or incorporation by reference in the
Proxy Statement will, on the date it is first mailed to the holders of the
Company Common Stock or on the date (the "Meeting Date") of the related
stockholders meeting (the "Stockholders Meeting"), 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 are made, not misleading. If at any time prior to
the Meeting Date, any event with respect to the Company, or with respect to
information supplied by the Company specifically for inclusion in the Proxy
Statement, shall occur which is required to be described in an amendment of, or
supplement to, the Proxy Statement, such event shall be so described by the
Company. All documents that the Company is responsible for filing with the SEC
in connection with the transactions contemplated herein, to the extent relating
to the Company or its Subsidiaries or other information supplied by the Company
specifically for inclusion therein, will comply as to form, in all material
respects, with the provisions of the Exchange Act and the rules and regulations
thereunder, and each such document required to be filed with any Governmental
Entity other than the SEC will comply in all material respects with the
provisions of applicable Law as to the information required to be contained
therein. Notwithstanding the foregoing, the Company makes no representation or
warranty with respect to (i) the information supplied or to be supplied by Newco
for inclusion in the Proxy Statement or (ii) any projections, forward-looking
statements or similar information provided to Newco that are not of an
historical nature, except that, in the case of clause (ii), the Company has
prepared such projections or statements in good faith based upon assumptions the
Company believed to be reasonable in light of the circumstances existing at the
time such projections were made.
(f) NO DEFAULT. Except (i) as may result from the execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby, as set forth on SCHEDULE 3.1(C)(II), or (ii) as set forth on SCHEDULE
3.1(F), no Violation exists (and no event has occurred which, with notice or the
lapse of time or both, would constitute a Violation) of any term, condition or
provision of (A) the certificate of incorporation or bylaws (or other
organizational documents) of the Company or any of its Subsidiaries, (B) any
loan or credit agreement, note, bond, mortgage, indenture, lease or other
agreement, obligation or commitment (collectively, "Contracts"), instrument,
permit, concession, franchise or license to which the Company or any of its
Subsidiaries is now a party or by which the Company or any of its Subsidiaries
or any of their respective properties or assets is bound or (C) any Law
applicable to the Company or any of its Subsidiaries, except in the case of (A),
(B) and (C) for Violations which, in the aggregate, would not have a Material
Adverse Effect on the Company or prevent the consummation of any of the
transactions contemplated hereby.
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(g) COMPLIANCE WITH APPLICABLE LAWS. The Company and its
Subsidiaries hold all permits, licenses, variances, exemptions, orders,
franchises and approvals of all Governmental Entities necessary for the lawful
conduct of their respective businesses (the "Company Permits") and are in
compliance with the terms thereof, except where the failure to hold any such
Company Permits or to be in compliance would not, individually or in the
aggregate, have a Material Adverse Effect on the Company or prevent the
consummation of any of the transactions contemplated hereby. The conduct by the
Company and its Subsidiaries of their respective businesses has been in
compliance with all applicable Laws, with such exceptions as would not have,
individually or in the aggregate, a Material Adverse Effect on the Company. As
of the date of this Agreement, no investigation or review by any Governmental
Entity with respect to the Company or any of its Subsidiaries is pending or, to
the knowledge of the Company, has been threatened which would have, individually
or in the aggregate, a Material Adverse Effect on the Company or prevent the
consummation of any of the transactions contemplated hereby.
(h) LITIGATION. Except as set forth on SCHEDULE 3.1(H) or disclosed
in the Company SEC Documents, as of the date hereof and at and as of the Closing
Date, there is no claim, suit, action or proceeding pending or, to the knowledge
of the Company, threatened against the Company or any Subsidiary of the Company
("Company Litigation") the loss of which would have, individually or in the
aggregate, a Material Adverse Effect on the Company, nor is there any material
judgment, decree, unfunded settlement, award, temporary restraining order,
injunction, rule or order of any Governmental Entity or arbitrator outstanding
against the Company or any Subsidiary of the Company ("Company Order") that
would have, individually or in the aggregate, a Material Adverse Effect on the
Company.
(i) TAXES.
(i) Each of the Company, its Subsidiaries and any affiliated,
combined or unitary group of which any such corporation is or was a member (A)
has duly filed all material tax returns, reports, declarations, estimates,
information returns and statements ("Tax Returns") required to be filed by it,
or requests for extensions to file such Tax Returns have been timely filed and
granted and have not expired, and such Tax Returns are true, correct and
complete in all material respects; (B) has duly paid in full (or the Company has
paid on its behalf) or made adequate provision in the Company's accounting
records for all taxes for all past and current periods for which the Company or
any of its Subsidiaries is liable; and (C) has complied in all material respects
with all applicable laws, rules, and regulations relating to the payment and
withholding of taxes and has in all material respects timely withheld from
employee wages and paid over to the proper governmental authorities all amounts
required to be so withheld and paid over. The most recent financial statements
contained in the Company SEC Documents reflect adequate reserves for all taxes
payable by the Company and its Subsidiaries for all taxable periods and portions
thereof accrued through the date of such financial statements. SCHEDULE 3.1(I)
sets forth the last taxable period through which the federal income tax returns
of the Company and any of its Subsidiaries have been examined by the Internal
Revenue Service or otherwise closed. All deficiencies asserted as a result of
such examinations and any examination by any applicable state, local or foreign
taxing authority which have not been or will not be appealed or contested in a
timely manner have been
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paid, fully settled or adequately provided for in the most recent financial
statements contained in the Company SEC Documents. Except as set forth on
SCHEDULE 3.1(I), no federal, state, local or foreign tax audits or other
administrative proceedings or court proceedings are currently pending with
regard to any federal, state, local or foreign taxes for which the Company or
any of its Subsidiaries would be liable, and no deficiencies for any such taxes
have been proposed, asserted or assessed, or to the best knowledge of the
Company or any of its Subsidiaries, threatened against the Company or any of its
Subsidiaries pursuant to such examination of the Company or any of its
Subsidiaries by such federal, state, local or foreign taxing authority with
respect to any period. Except as set forth on SCHEDULE 3.1(I), no requests for
waivers of the time to assess any taxes against the Company or any of its
Subsidiaries have been granted or are pending and neither the Company nor any of
its Subsidiaries has executed (or will execute prior to the Effective Time) any
closing agreement pursuant to Section 7121 of the Code, or any predecessor
provision thereof or any similar provision of state, local or foreign income tax
law that relates to the assets or operations of the Company or any of its
Subsidiaries. Neither the Company nor any of its Subsidiaries is a party to any
agreement providing for the allocation or sharing of liability for any taxes.
The Company has made available to Newco complete and accurate copies of all
income and franchise Tax Returns and all other material Tax Returns filed by or
on behalf of the Company or any of its Subsidiaries for the taxable years ending
on or prior to December 31, 1997. Except as set forth on SCHEDULE 3.1(I),
neither the Company nor any of its Subsidiaries has made any payments subject to
Section 280G of the Code, or is obligated to make any such payments that will
not be deductible under Section 280G of the Code, or is a party to any agreement
that under certain circumstances could obligate it to make any payments that
will not be deductible under Section 280G of the Code. Neither the Company nor
any of its Subsidiaries has been a United States real property holding
corporation within the meaning of Section 897(c)(2) of the Code during the
applicable period specified in Section 897(c)(1)(A)(ii) of the Code. As used in
this Agreement the term "taxes" includes all federal, state, local and foreign
or other taxing authority income, franchise, property, sales, use, ad valorem,
payroll, social security, unemployment, assets, value added, withholding,
excise, severance, transfer, employment, alternative or add-on minimum and other
taxes, charges, fees, levies, imports, duties, licenses or other assessments
including without limitation obligations for withholding taxes from payments due
or made to any other person, together with any interest, penalties or additional
amounts imposed by any taxing authority or additions to tax.
(j) PENSION AND BENEFIT PLANS; ERISA.
(i) For purposes of this Agreement, the term "Plan" shall refer
to any of the following maintained by the Company, any of its Subsidiaries or
any of their respective ERISA Affiliates (as defined below), or with respect to
which the Company, any of its Subsidiaries or any of their respective ERISA
Affiliates contributes or has any obligation to contribute or has any liability
(including, without limitation, a liability arising out of an indemnification,
guarantee, hold harmless or similar agreement): any plan, program, arrangement,
agreement or commitment, whether written or oral, which is an employment,
consulting, deferred compensation or change-in-control agreement, or an
executive compensation, incentive bonus or other bonus, employee pension,
profit-sharing, savings, retirement, stock option, stock purchase, severance
pay, change-in-control, life, health, disability or accident insurance plan, or
other employee benefit plan, pro-
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gram, arrangement, agreement or commitment, whether written or oral, including,
without limitation, any "employee benefit plan" as defined in Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA").
SCHEDULE 3.1(J)(I) sets forth each employment agreement with a person who is
entitled to receive at least $100,000 per year from the Company or any of its
Subsidiaries (other than employment agreements terminable without material
liability (not otherwise disclosed) on not more than sixty (60) days' notice).
(ii) SCHEDULE 3.1(J)(II) identifies each "employee benefit
plan" as defined in Section 3(3) of ERISA
that the Company, its Subsidiaries or any of their respective ERISA Affiliates
maintains or contributes to. None of the Company, its Subsidiaries or any of
their respective ERISA Affiliates has maintained or contributed to any of the
following during the three years immediately preceding the date of this
Agreement:
(A) a defined benefit plan subject to Title IV
of ERISA;
(B) a "Multiemployer plan" as defined in Section 4001
of ERISA;
or
(C) a "Multiple Employer Plan" as that term is
defined in Section 413(a) of the Code.
(iii) No event has occurred and no condition or
circumstance currently exists, in connection with
which the Company, any of its Subsidiaries, their respective ERISA Affiliates or
any Plan, directly or indirectly, could be subject to any liability under ERISA,
the Code or any other Law applicable to any Plan which would be reasonably
likely to have a Material Adverse Effect on the Company.
(iv) With respect to each Plan, (A) all material payments
due from the Company or any of its Subsidiaries to date have been made and all
material amounts that should be accrued (in accordance with GAAP) as liabilities
of the Company or any of its Subsidiaries which have not been paid have been
properly recorded on the books of the Company, (B) each such Plan which is an
"employee pension benefit plan" (as defined in Section 3(2) of ERISA) and
intended to qualify under Section 401 of the Code has either received a
favorable determination letter from the Internal Revenue Service with respect to
such qualifications as of the date specified in SCHEDULE 3.1(J)(IV) or has filed
for such a determination letter with the Internal Revenue Service within the
time permitted under Rev. Proc. 95-12 (December 29, 1994), 1995-3 IRB 24, and
nothing has occurred since the date of such letter that has resulted in or could
reasonably be expected to result in a tax qualification defect which would have
a Material Adverse Effect on the Company, and (C) there are no material actions,
suits or claims pending (other than routine claims for benefits) or, to the
Company's knowledge, threatened with respect to such Plan or against the assets
of such Plan.
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<PAGE>
(v) Except as disclosed in SCHEDULE 3.1(J)(V), each Plan has been
operated and administered in accordance with its terms and in compliance with
applicable ERISA provisions and the Code, except where any such non-compliance
could not reasonably be expected to have a Material Adverse Effect on the
Company.
(vi) Neither the Company nor any of its ERISA Affiliates, nor to
the knowledge of the Company or any of its ERISA Affiliates, any other
"disqualified person" or "party in interest" (as defined in Section 4975 of the
Code and Section 3(14) of ERISA, respectively) with respect to a Plan has
breached the fiduciary rules of ERISA or engaged in a prohibited transaction
which could subject the Company or any of its Subsidiaries to any tax or penalty
imposed under Section 4975 of the Code or Section 502(i), (j), or (l) of ERISA,
where any such breach, tax or penalty could reasonably be expected to have a
Material Adverse Effect on the Company.
(vii) All reporting and disclosure obligations imposed under ERISA
and the Code have been satisfied with respect to each Plan, except where any
failure to satisfy such obligations could not reasonably be expected to have a
Material Adverse Effect on the Company.
(viii) Each Plan which is subject to the requirements of the
Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA") and the Health
Insurance Portability and Accountability Act ("HIPAA") has been maintained in
compliance with COBRA and HIPAA, including all notice requirements, and no tax
payable on account of Section 4980B or any other section of the Code has been or
is expected to be incurred with respect to any Plan, except where any such
noncompliance or tax could not reasonably be expected to have a Material Adverse
Effect on the Company.
(ix) The Company has made available to Newco, with respect to each
Plan for which the following exists:
(A) a copy of the most recent annual report on
Form 5500, with respect to such Plan including any Schedule B thereto;
(B) the most recent determination letter from the
Internal Revenue Service, if any;
(C) a copy of the Summary Plan Description, together
with each Summary of Material Modifications with respect to such Plan
and, unless the Plan is embodied entirely in an insurance policy to
which the Company or any of its Subsidiaries is a party, a true and
complete copy of such Plan; and
(D) if the Plan is funded through a trust or any
third party funding vehicle (other than an insurance policy), a copy
of the trust or other funding agreement and the latest financial
statements thereof.
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<PAGE>
(x) Except as disclosed in the Company SEC Documents or as required
by this Agreement, neither the Company nor any of its Subsidiaries has any
announced plan or legally binding commitment to create any additional material
Plans or to make any material amendment or modification to any existing Plan,
except as required by law or as necessary to maintain tax-qualified status.
(xi) The Company and its ERISA Affiliates have complied in all
respects with all Laws relating to the hiring and retention of all employees,
leased employees and independent contractors relating to wages, hours, Plans,
equal opportunity, collective bargaining and the payment of social security and
other taxes, except where such noncompliance could not reasonably be expected to
have a Material Adverse Effect on the Company.
(xii) Notwithstanding anything else set forth herein, neither the
Company nor any Subsidiary of the Company has incurred any liability with
respect to any Plan under ERISA (including, without limitation, Title I or Title
IV of ERISA), the Code or other applicable Law (other than the liability
attributable to the provision of benefits under the Plans), which has not been
satisfied in full, and no event has occurred, and there exists no condition or
set of circumstances which could result in the imposition of any liability under
ERISA (including, without limitation, Title I or Title IV of ERISA), the Code or
other applicable Law with respect to any of the Plans, which liability would,
individually or in the aggregate, have a Material Adverse Effect on the Company.
(xiii) Except as disclosed in SCHEDULE 3.1(J)(XIII), no Plan, other
than a Plan which is an employee pension benefit plan (within the meaning of
Section 3(2)(A) of ERISA), provides material benefits, including without
limitation death, health or medical benefits (whether or not insured), with
respect to current or former employees of the Company or any Subsidiary of the
Company beyond their retirement or other termination of service with the Company
or such Subsidiary (other than (A) coverage mandated by applicable law, (B)
deferred compensation benefits properly accrued as liabilities on the books of
the Company, or (C) benefits the full cost of which is borne by the current or
former employee (or his beneficiary)).
(xiv) Except as set forth on SCHEDULE 3.1(J)(XIV), the consummation
of the transactions contemplated by this Agreement will not (A) entitle any
current or former employee or officer of the Company or any Subsidiary to
material severance pay, unemployment compensation or any other payment, or (B)
accelerate the time of payment or vesting, or materially increase the amount of
compensation due any such employee or officer.
(xv) For purposes of this Section 3.1(j), ERISA Affiliates include
each corporation that is a member of the same controlled group as the Company or
any of its Subsidiaries within the meaning of Section 414(b) of the Code, any
trade or business, whether or not incorporated, under common control with the
Company or any of its Subsidiaries within the meaning of Section 414(c) of the
Code and any member of an affiliated service group that includes the Company,
any of its Subsidiaries and any of the corporations, trades or business
described above, within the meaning of Section 414(m) of the Code.
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(k) ABSENCE OF CERTAIN CHANGES OR EVENTS. Since September 30, 1998
and except as disclosed in SCHEDULE 3.1(K) or the Company SEC Documents, (i)
each of the Company and its Subsidiaries has conducted its business, in all
material respects, only in the ordinary course and in a manner consistent with
past practice (except in connection with the negotiation and execution and
delivery of this Agreement), (ii) no event has occurred that would have been
prohibited by the terms of Section 4.2 had the terms of such Section been in
effect as of and at all times since September 30, 1998, (iii) there has been no
material change by the Company in its accounting methods, principles or
practices and (iv) other than any event relating to the economy or securities
markets in general, there has not been any event or events (whether or not
covered by insurance), individually or in the aggregate, having, or that would
be reasonably expected to have, a Material Adverse Effect on the Company.
(l) NO UNDISCLOSED MATERIAL LIABILITIES. There are no liabilities
of the Company or any of its Subsidiaries of any kind whatsoever, whether
accrued, contingent, absolute, determined, determinable or otherwise, that could
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on the Company, other than (i) liabilities reflected in the
Company's financial statements (together with the related notes thereto) filed
with the Company's quarterly report on Form 10-Q for the quarter ended September
30, 1998, (ii) liabilities under this Agreement or for professional fees and
expenses in connection with the transactions contemplated hereby and (iii)
liabilities that have occurred in the ordinary course of business since
September 30, 1998.
(m) OPINION OF FINANCIAL ADVISOR. The Board of Directors of the
Company has received the opinion of BT Alex. Brown Incorporated (the "Financial
Advisor") dated March 2, 1999 to the effect that, as of such date, the Merger
Consideration to be received by the holders of Company Common Stock in the
Merger (other than Welsh, Carson, Anderson & Stowe VIII, L.P. ("WCAS") or its
affiliates) is fair from a financial point of view to such holders, and such
opinion has not been withdrawn or materially and adversely modified. True and
complete copies of all agreements and understandings between the Company and the
Financial Advisor relating to the transactions contemplated by this Agreement
have been provided by the Company to Newco.
(n) VOTE REQUIRED. The affirmative vote of the holders of a
majority of the outstanding shares of Company Common Stock is the only vote of
the holders of any class or series of the Company's capital stock necessary
(under applicable Law or otherwise) to adopt this Agreement.
(o) ENVIRONMENTAL MATTERS. Except as set forth in the Company SEC
Documents, (i) the assets, properties, businesses and operations of the Company
and its Subsidiaries are in compliance with applicable Environmental Laws (as
defined herein), except for such non-compliance which has not had and will not
have, individually or in the aggregate, a Material Adverse Effect on the
Company, (ii) the Company and its Subsidiaries have obtained and, as currently
operating, are in compliance with all Company Permits necessary under any
Environmental Law for the conduct of the business and operations of the Company
and its Subsidiaries in the manner now conducted except for such non-compliance
which has not had and will not have, individually or in the aggregate, a
Material Adverse Effect on the Company, and (iii) neither the Company nor any of
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its Subsidiaries nor any of their respective assets, properties, businesses or
operations has received or is subject to any outstanding order, decree,
judgment, complaint, agreement, claim, citation, notice or proceeding indicating
that the Company or any of its Subsidiaries is or may be liable for a violation
of any Environmental Law which liability would have, individually or in the
aggregate, a Material Adverse Effect on the Company nor, to the knowledge of the
Company, has any such order, decree, judgment, complaint, claim, citation,
notice or proceeding been threatened. As used in this Agreement, the term
"Environmental Law" means any law, regulation, decree, judgment, permit or
authorization relating to works or public safety and the indoor and outdoor
environment, including, without limitation, pollution, contamination, clean-up,
regulation and protection of the air, water or soils in the indoor or outdoor
environment.
(p) BOARD RECOMMENDATION. The Board of Directors of the Company, at
a meeting duly called and held, has by the unanimous vote of those directors
present (i) determined that this Agreement and the transactions contemplated
hereby, including the Merger, are advisable and fair to and in the best
interests of the stockholders of the Company and has approved the same and (ii)
resolved to recommend, subject to their fiduciary duties under applicable Law
and Sections 5.2 and 5.11(b), that the holders of the shares of Company Common
Stock approve and adopt this Agreement.
(q) INTELLECTUAL PROPERTY. Except as set forth on SCHEDULE 3.1(Q),
each of the Company and its Subsidiaries owns or has a valid right to use each
trademark, trade name, patent, service mark, brand mark, brand name, computer
program, database, industrial design and copyright required, owned or used in
connection with the operation of its businesses, including any registrations
thereof and pending applications therefor, and each license or other contract
relating thereto that is material to the conduct of its business (collectively,
the "Company Intellectual Property"), except where the failure to own or have a
right to use such property would not have, individually or in the aggregate, a
Material Adverse Effect on the Company. All material Company Intellectual
Property is set forth on SCHEDULE 3.1(Q). Except as set forth on SCHEDULE
3.1(Q), the use of the Company Intellectual Property by the Company or its
Subsidiaries does not conflict with, infringe upon, violate or interfere with or
constitute an appropriation of any right, title, interest or goodwill,
including, without limitation, any intellectual property right, trademark, trade
name, patent, service mark, brand mark, brand name, computer program, database,
industrial design, copyright or any pending application therefor of any other
Person. Except as set forth on SCHEDULE 3.1(Q), the use of all Company
Intellectual Property will not be adversely affected by the transactions
contemplated in this Agreement. The Company is taking reasonable precautions to
prevent disclosure of any confidential Company Intellectual Property.
(r) INSURANCE. The Company and its Subsidiaries are covered by
valid and currently effective insurance policies issued in favor of the Company
that are customary in all material respects for companies of similar size and
financial condition in the Company's industry. Except as set forth on SCHEDULE
3.1(R), all such policies are in full force and effect, all premiums due thereon
have been paid and the Company has complied with the provisions of such
policies, except where such failure to be in full force and effect, such
nonpayment or such noncompliance would not have, individually or in the
aggregate, a Material Adverse Effect on the Company.
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Except as set forth on SCHEDULE 3.1(R), the Company has not been advised of any
defense to coverage in connection with any material claim to coverage asserted
or noticed by the Company under or in connection with any of its extant
insurance policies. The Company has not received any written notice from or on
behalf of any insurance carrier issuing policies or binders relating to or
covering the Company and its Subsidiaries that there will be a cancellation or
non-renewal of existing policies or binders.
(s) LABOR MATTERS. Neither the Company nor any of its Subsidiaries
is a party to, or is bound by, any collective bargaining agreement, contract or
other agreement or understanding with a labor union or labor organization, nor
is the Company or any of its Subsidiaries the subject of a proceeding asserting
that it or any such Subsidiary has committed an unfair labor practice (within
the meaning of the National Labor Relations Act) or seeking to compel it or such
Subsidiaries to bargain with any labor organization as to wages and conditions
of employment. There is (i) no strike or material labor dispute, slowdown or
stoppage pending or, to the knowledge of the Company, threatened against the
Company or any of its ERISA Affiliates and (iii) to the knowledge of the
Company, no union representation question existing with respect to the employees
of the Company or its ERISA Affiliates.
(t) CONTRACTS. Except as set forth on SCHEDULE 3.1(K), neither the
Company nor any of its Subsidiaries is a party to any Contract required to be
described in or filed as an exhibit to any Company SEC Document that is not
described in or filed as required by the Securities Act or the Exchange Act, as
the case may be. Except as set forth on SCHEDULE 3.1(K), and except for matters
that would not, individually or in the aggregate, have a Material Adverse Effect
on the Company, (i) neither the Company nor any of its Subsidiaries is (with or
without the lapse of time or the giving of notice, or both) in breach or default
in any material respect under any Contract, (ii) to the knowledge of the
Company, none of the other parties to any Contract is (with or without the lapse
of time or the giving of notice, or both) in breach or default in any material
respect under any Contract and (iii) neither the Company nor any of its
Subsidiaries has received any written notice of the intention of any party to
terminate any Contract whether as a termination for convenience or for default
of the Company or any of its Subsidiaries thereunder.
(u) AFFILIATED TRANSACTIONS. Except as set forth on SCHEDULE 3.1(U)
or in the Company SEC Documents, no executive officer or director of the Company
(or, to the Company's knowledge, any spouse of any such individual or any entity
in which such individual owns a material beneficial interest) is a party to any
agreement, contract, commitment, transaction or understanding with or binding
upon the Company or any of its Subsidiaries or any of their respective assets or
has any material interest in any material property owned by the Company or its
Subsidiaries or has engaged in any transaction with any of the foregoing within
the last twelve months.
(v) RIGHTS AGREEMENT AMENDMENT. The Company has entered into an
amendment to the Rights Agreement (the "Rights Agreement Amendment") pursuant to
which (i) the Rights Agreement and the Rights will not be applicable to the
Merger, (ii) the execution of this Agreement and the consummation of the Merger
shall not result in a "Distribution Date" under
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the Rights Agreement, (iii) consummation of the Merger shall not result in Newco
or its affiliates being an "Acquiring Person," result in the occurrence of an
event described in Section 14 of the Rights Agreement or otherwise result in the
ability of any Person to exercise any material rights under the Rights Agreement
or enable or require the Rights to separate from the shares of Company Common
Stock to which they are attached and (iv) the Rights Agreement will expire
immediately prior to the Effective Time.
3.2 REPRESENTATIONS AND WARRANTIES OF NEWCO. Newco represents and
warrants to the Company as of the date hereof (or such other date as shall be
expressly specified) as follows:
(a) ORGANIZATION, STANDING AND POWER. Newco is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has all requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as now being conducted, and
is duly qualified to do business as a foreign corporation and in good standing
to conduct business in each jurisdiction in which the business it is conducting,
or the operation, ownership or leasing of its properties, makes such
qualification necessary, other than in such jurisdictions where the failure so
to qualify would not have a Material Adverse Effect with respect to Newco. Newco
has heretofore made available to the Company complete and correct copies of its
certificate of incorporation and bylaws.
(b) CAPITAL STRUCTURE. As of the date of this Amended and Restated
Agreement, the authorized capital stock of Newco consists of (i) 100,000,000
shares of Newco Common Stock, ten shares of which have been validly issued and
are fully paid, nonassessable and owned of record and beneficially by WCAS, free
and clear of any Lien, (ii) 20,000,000 shares of preferred stock, par value $.01
per share ("Newco Preferred Stock") and (iii) 5,000,000 shares of Newco Class A
Common Stock. No shares of Newco Preferred Stock or Newco Class A Common Stock
are issued and outstanding.
(c) AUTHORITY; NO VIOLATIONS; CONSENTS AND APPROVALS.
(i) Newco has all requisite corporate power and authority to
enter into this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement by Newco have been duly
authorized by all necessary corporate action on the part of Newco. This
Agreement has been duly executed and delivered by Newco and, assuming that such
constitutes the valid and binding agreement of the Company, constitutes the
valid and binding obligation of Newco enforceable in accordance with its terms
and conditions except that the enforcement hereof may be limited by (A)
applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance or other similar laws now or hereafter in effect relating to
creditors' rights generally and (B) general principles of equity (regardless of
whether enforceability is considered in a proceeding at law or in equity).
(ii) The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby by Newco will not (A)
result in any Violation of any provision of the certificate of incorporation or
bylaws of Newco or (B) result in any Violation of (1) any loan
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or credit agreement, note, mortgage, indenture, lease, or other agreement,
obligation, instrument, concession, franchise or license or (2) any Law
applicable to Newco or its properties or assets, except in the case of clauses
(1) and (2), for any Violations that, individually or in the aggregate, would
not have a Material Adverse Effect on Newco or prevent the consummation of any
of the transactions contemplated hereby.
(iii) No consent, approval, order or authorization of, or
registration, declaration or filing with, notice to, or permit from any
Governmental Entity is required by or with respect to Newco in connection with
its execution and delivery of this Agreement or the consummation by Newco of the
transactions contemplated hereby, except for (A) filings under the HSR Act, (B)
the filing with the SEC of such reports under and such other compliance with the
Exchange Act and the rules and regulations thereunder as may be required in
connection with this Agreement and the transactions contemplated hereby, (C) the
filing of the Certificate of Merger with the Secretary of State of the State of
Delaware and (D) such filings and approvals as may be required by any applicable
state securities, "blue sky" or takeover laws.
(d) INFORMATION SUPPLIED. None of the information to be supplied by
Newco specifically for inclusion or incorporation by reference in the Proxy
Statement will, on the date it is first mailed to the holders of Company Common
Stock or at the Meeting Date, 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 are made, not misleading. If at any time prior to the Meeting Date, any
event with respect to Newco, or with respect to information supplied by Newco
specifically for inclusion in the Proxy Statement, shall occur which is required
to be described in an amendment of, or supplement to, the Proxy Statement, such
event shall be so described by Newco and provided to the Company. All documents
that Newco is responsible for filing with the SEC in connection with the
transactions contemplated herein will comply as to form, in all material
respects, with the provisions of the Exchange Act and the rules and regulations
thereunder, and each such document required to be filed with any Governmental
Entity other than the SEC will comply in all material respects with the
provisions of applicable Law as to the information required to be contained
therein. Notwithstanding the foregoing, Newco makes no representation or
warranty with respect to the information supplied or to be supplied by the
Company for inclusion in the Proxy Statement.
(e) BOARD RECOMMENDATION. The Board of Directors of Newco has
determined by unanimous written consent that this Agreement and the transactions
contemplated hereby, including the Merger, are advisable and fair to and in the
respective best interests of Newco and has approved the same. WCAS, the sole
stockholder of Newco, has approved and adopted this Agreement.
(f) FRAUDULENT CONVEYANCE. Assuming the accuracy of the
representations and warranties of the Company set forth in this Agreement, Newco
has no reason to believe that the financing to be provided to Newco to
effectuate the Merger will cause (i) the fair salable value of the Surviving
Corporation's assets to be less than the total amount that will be required to
pay its existing liabilities (including known contingent liabilities), (ii) the
Surviving Corporation not to
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be able to pay its existing liabilities (including known contingent liabilities)
as they mature, or (iii) the Surviving Corporation to have an unreasonably small
amount of capital with which to engage in its business activities.
(g) INTERIM OPERATIONS OF NEWCO. Newco was formed on March 1, 1999
solely for the purpose of engaging in the transactions contemplated hereby.
Newco has engaged in no other business activities and has conducted its
operations only as contemplated hereby. Except for (i) obligations or
liabilities incurred in connection with its incorporation or organization and
the transactions contemplated by this Agreement and (ii) this Agreement and any
other agreements or arrangements contemplated by this Agreement or in
furtherance of the transactions contemplated hereby, Newco has not incurred,
directly or indirectly, through any subsidiary or affiliate, any obligations or
liabilities or engaged in any business activities of any type or kind whatsoever
or entered into any agreements or arrangements with any Person.
(h) FINANCING. Newco has provided a binding commitment, in the form
of a bid letter from WCAS to the Company dated February 26, 1999 (the "Equity
and Bridge Commitment"), and has received binding written commitments, dated
February 26, 1999, addressed to WCAS, from Chase Securities, Inc., The Chase
Manhattan Bank, DLJ Capital Funding, Inc., Credit Suisse First Boston and Fleet
National Bank (the "Debt Commitments"), and "highly confident" letters dated
February 24, 1999, from Donaldson, Lufkin & Jenrette Securities Corporation and
Chase Securities, Inc. (the "Highly Confident Letters"). Chase Capital Partners
and WCAS have provided binding commitments in the form of commitment letters
dated February 24, 1999 and March 1, 1999, respectively, to purchase from the
Company pay-in-kind senior unsecured notes of the Company and Company Common
Stock (the "PIK Investment Letters"). WCAS Capital Partners III, L.P. has
provided binding commitment to provide certain bridge financing, in the form of
a commitment letter dated February 26, 1999, from WCAS to the Company (the
"Bridge Commitment"). Ferrer Freeman Thompson & Co., on behalf of Health Care
Capital Partners L.P. and Health Care Executive Partners L.L.P. (collectively,
"HCCP") has executed a subscription agreement with Newco pursuant to which HCCP
has agreed to contribute to the equity capital of Newco (together with the
Equity and Bridge Commitment, the Debt Commitments, the Highly Confident Letters
and the PIK Investment Letters and the Bridge Commitment, the "Financing
Commitments"). True and correct copies of the Financing Commitments have been
furnished to the Company. The Financing Commitments have been obtained, subject
to the terms and conditions of the Financing Commitments, to provide the
financing necessary to pay the Merger Consideration pursuant to the Merger, to
pay (or provide the funds for the Company to pay) all amounts contemplated by
Section 5.10 when due, to refinance any indebtedness or other obligation of the
Company and its Subsidiaries which may become due as a result of this Agreement
or any of the transactions contemplated hereby, and to pay all related fees and
expenses (the financing necessary to provide such funds pursuant to the
Financing Commitments being hereinafter referred to as the "Financing"), which
Financing Commitments are in full force and effect as of the date of this
Amended and Restated Agreement. It is the good faith belief of Newco, as of the
date of this Amended and Restated Agreement, that the Financing will be
obtained, and Newco shall use commercially reasonable efforts to obtain the
Financing, including using commercially reasonable efforts to fulfill or cause
the fulfillment of any of the conditions thereto. If the
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Financing is not available, Newco shall use commercially reasonable efforts to
obtain other financing (on terms no more burdensome in any material respect than
those set forth in the Financing Commitments) to consummate the transactions
contemplated hereby.
(i) LITIGATION. As of the date hereof, there is no claim, suit,
action or proceeding pending or, to the knowledge of Newco, threatened against
Newco or any of its affiliates nor is there any material judgment, decree,
unfunded settlement, award, temporary restraining order, injunction, rule or
order of any Governmental Entity or arbitrator outstanding against Newco or any
of its affiliates that would have a Material Adverse Effect on Newco or prevent
the consummation of any of the transactions contemplated by this Agreement.
(j) OWNERSHIP OF SHARES. Except as set forth in the Schedule 13D
filed by WCAS with the SEC on October 20, 1998, as amended on January 6, 1999,
with respect to its ownership of certain shares of Company Common Stock and
certain Company Debt, none of WCAS, HCCP, Newco or their affiliates beneficially
own (within the meaning of Rule 13d-3 under the Exchange Act) shares of Company
Common Stock or any principal amount of Company Debt.
(k) SOLVENCY. Newco hereby represents that Newco is now and since
inception has been solvent and that it holds assets the current value of which
exceed the current value of its debts.
(l) CONTRIBUTION OBLIGATION. Newco has received the undertaking of
its sole stockholder obligating the sole stockholder to contribute to the equity
capital of Newco pursuant to the terms of a letter agreement delivered to the
Company concurrently with Newco's execution and delivery of this Agreement.
ARTICLE 4
COVENANTS RELATING TO CONDUCT OF BUSINESS
4.1 AFFIRMATIVE COVENANTS OF THE COMPANY. During the period from
the date of this Agreement and continuing until the Effective Time except as
expressly contemplated or permitted by this Agreement or to the extent that
Newco shall otherwise consent in writing, (i) the Company shall, and shall cause
each of its Subsidiaries to, carry on its businesses in the usual, regular and
ordinary course in substantially the same manner as heretofore conducted and
(ii) the Company shall, and shall cause each of its Subsidiaries to, use all
reasonable efforts to preserve intact its present business organization and
goodwill, maintain its rights and franchises and retain the services of its
current officers and key employees and preserve its relationships with
customers, suppliers and others having business dealings with it.
4.2 NEGATIVE COVENANTS OF THE COMPANY. During the period from the date
of this Agreement and continuing until the Effective Time except as expressly
contemplated or permitted by this Agreement or to the extent that Newco shall
otherwise consent in writing:
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(a) the Company shall not, and shall not permit any of its
Subsidiaries to, (i) declare, set aside or pay any dividends on or make other
distributions in respect of any of its capital stock (except for cash dividends
paid to the Company and its wholly-owned Subsidiaries with regard to the
Company's Subsidiaries' capital stock), or set aside funds therefor, (ii)
adjust, split, combine or reclassify any of its capital stock, or issue,
authorize or propose the issuance of any other securities in respect of, in lieu
of or in substitution for, shares of its capital stock or (iii) repurchase,
redeem or otherwise acquire any shares of its capital stock, except as required
by the terms of its securities outstanding or any Plan in effect on the date
hereof, or set aside funds therefor;
(b) other than in accordance with the Rights Agreement, the Company
shall not, and shall not permit any of its Subsidiaries to, (i) grant any
options, warrants or other rights to purchase shares of capital stock, (ii)
amend the terms of or reprice any Company Stock Option outstanding on the date
of this Agreement or amend the terms of any Stock Option Plan, or (iii) except
for shares issuable pursuant to Company Stock Options outstanding on the date of
this Agreement, shares issuable upon conversion of the Company's 6% Convertible
Subordinated Notes due 2001 and 4.5% Convertible Subordinated Notes due 2003 and
issuances of capital stock of the Company's Subsidiaries to the Company or to a
wholly-owned Subsidiary of the Company, issue, deliver, pledge, sell or
otherwise encumber any shares of its capital stock, any Company Debt or any
Subsidiary Debt, or any securities convertible into, or any rights, warrants or
options to acquire, any such shares, Company Debt or Subsidiary Debt;
(c) the Company shall not, and shall not permit any of its
Subsidiaries to, amend or propose to amend its certificate of incorporation or
bylaws (or other organizational documents);
(d) the Company shall not, and shall not permit any of its
Subsidiaries to, (i) merge or consolidate with, or acquire any equity interest
in, any corporation, partnership, association or other business organization, or
enter into an agreement with respect thereto, except for (A) a merger of a
wholly-owned Subsidiary of the Company with or into the Company or another
wholly-owned Subsidiary of the Company, (B) the creation of a wholly-owned
Subsidiary of the Company in the ordinary course of business or (C) investments
in joint ventures not in excess of $5,000,000 in the aggregate, (ii) acquire or
agree to acquire any material assets, except for (A) acquisitions involving the
payment of consideration by the Company not in excess of $10,000,000 in the
aggregate and (B) those acquisitions described on SCHEDULE 4.2(D), or (iii) make
any loan or advance to, or otherwise make any investment in, any persons in
excess of $5,000,000 in the aggregate, other than loans or advances to, or
investments in, a wholly-owned Subsidiary of the Company existing on the date of
this Agreement;
(e) the Company shall not, and shall not permit any of its
Subsidiaries to, sell, lease, encumber or otherwise dispose of, or agree to
sell, lease (whether such lease is an operating or capital lease), encumber or
otherwise dispose of, any of its material assets (including, without limitation,
any capital stock or other ownership interest in any Subsidiary of the Company),
other than sales or leases in the ordinary course of business consistent with
past practice;
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(f) the Company shall not, and shall not permit any of its
Subsidiaries (other than wholly-owned Subsidiaries acquired by the Company) to,
authorize, recommend, propose or announce an intention to adopt a plan of
complete or partial liquidation or dissolution;
(g) except for increases in the compensation (including, without
limitation, salary, bonus and other benefits) of employees of the Company or its
Subsidiaries (other than directors or executive officers) made in the ordinary
course of business and consistent with past practice, the Company shall not, and
shall not permit any of its Subsidiaries to, except as may be required by
applicable Law or pursuant to any of the Plans existing on the date of this
Agreement, (i) enter into any new, or materially amend any existing, employment
or severance or termination agreement with any director, officer or key employee
or (ii) become obligated under any new Plan, which was not in existence on the
date hereof, or amend any such plan or arrangement in existence on the date
hereof if such amendment would have the effect of materially enhancing any
benefits thereunder;
(h) the Company shall not, and shall not permit any of its
Subsidiaries to, (i) assume or incur any indebtedness for borrowed money (except
for lease obligations incurred in the ordinary course of business and consistent
with the past practice or drawdowns by the Company under its existing revolving
credit facility, if any, made in the ordinary course of business consistent with
past practice), (ii) issue or sell any debt securities or warrants or rights to
acquire any debt securities or (iii) guarantee any debt obligations of any other
Person (except obligations of wholly-owned Subsidiaries of the Company);
(i the Company shall not, and shall not permit any of its
Subsidiaries to, other than as required by the SEC, applicable Law or GAAP, make
any material changes with respect to accounting policies, procedures and
practices;
(j the Company shall not, and shall not permit any of its
Subsidiaries to, settle or compromise any claims or litigation involving
payments by the Company or any of its Subsidiaries of more than $500,000 in any
single instance or related instances, or that otherwise are material to the
Company and its Subsidiaries, taken as a whole;
(k the Company shall not, and shall not permit any of its
Subsidiaries to, make any tax election, or take any tax position, except in the
ordinary and usual course of business consistent with past practices;
(l the Company shall not, and shall not permit any of its
Subsidiaries to, enter into any license with respect to Intellectual Property
unless such license is non-exclusive and entered into in the ordinary course
consistent with past practice or in accordance with existing contracts or other
agreements;
(m the Company shall not, and shall not permit any of its
Subsidiaries to, fail to use reasonable business efforts to keep in full force
and effect insurance comparable in amount and scope of coverage to insurance now
carried by it; and
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(n the Company shall not, and shall not permit any of its
Subsidiaries to, agree to or make any commitment to, whether orally or in
writing, take any actions prohibited by this Agreement.
ARTICLE 5
ADDITIONAL AGREEMENTS
5.1 ACCESS TO INFORMATION.
(a Upon reasonable notice, the Company shall, and shall cause each
of its Subsidiaries to, afford access to the officers, employees, accountants,
counsel and other representatives of Newco (including financing sources and
their employees, accountants, counsel and other representatives), during normal
business hours during the period prior to the Effective Time, to all of the
Company's and its Subsidiaries' properties, books, leases, contracts,
commitments, officers, employees, accountants, counsel, other representatives
and records. The Confidentiality Agreements dated as of January 12, 1999 and
March 24, 1999 between WCAS and the Company and HCCP and the Company,
respectively (the "Confidentiality Agreements"), shall apply with respect to
information furnished thereunder or hereunder and any other activities
contemplated thereby or hereby.
(b During the period prior to the Effective Time, the Company
shall, and shall cause each of its Subsidiaries to, promptly furnish to Newco
(i) a copy of each report, schedule, registration statement and other document
filed by it with the SEC, or received by it from the SEC, during such period,
and (ii) all other information concerning its business, properties and personnel
as Newco may reasonably request.
5.2 NO SOLICITATION.
(a From and after the date hereof, the Company will not, and will
not authorize or (to the extent within its control) permit any of its officers,
directors, employees, agents, affiliates and other representatives or those of
any of its Subsidiaries (collectively, "Company Representatives") to, directly
or indirectly, initiate, encourage or solicit (including by way of providing
information) any prospective acquiror or the invitation or submission of any
inquiries, proposals or offers or any other efforts or attempts that constitute,
or may reasonably be expected to lead to, any Company Acquisition Proposal (as
hereinafter defined) from any Person or engage in any negotiations with respect
thereto or otherwise cooperate with or assist or participate in, or facilitate
any such proposal; PROVIDED, HOWEVER, that, notwithstanding any other provision
of this Agreement, (i) the Company's Board of Directors may take and disclose to
the stockholders of the Company a position contemplated by Rules 14d-9 and
14e-2(a) promulgated under the Exchange Act and (ii) following receipt from a
third party, without any solicitation, encouragement or initiation, directly or
indirectly, by the Company or any Company Representative, of a bona fide Company
Acquisition Proposal, (x) the Company may engage in discussions or negotiations
with such third party and may furnish such third party information concerning
it, and its
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business, properties and assets if such third party executes a confidentiality
agreement in reasonably customary form and (y) the Board of Directors of the
Company may withdraw, modify or not make its recommendation referred to in
Section 5.11(b) or terminate this Agreement in accordance with Article 7, but in
each case referred to in the foregoing clauses (i) and (ii), only to the extent
that the Company's Board of Directors shall conclude in good faith based on the
advice of the Company's outside counsel that such action is necessary in order
for the Company's Board of Directors to act in a manner that is consistent with
its fiduciary duties under applicable Law.
(b The Company shall immediately cease and cause to be terminated
any existing solicitation, initiation, encouragement, activity, discussion or
negotiation with any parties conducted heretofore by the Company or any Company
Representatives with respect to any Company Acquisition Proposal existing on the
date hereof.
(c The Company will promptly (and in any event within 24 hours)
communicate to Newco the terms and conditions of any Company Acquisition
Proposal that it may receive and will keep Newco informed, as promptly as
reasonably practicable, as to the status of any actions, including any
discussions, taken pursuant to such Company Acquisition Proposal.
(d As used in this Agreement, "Company Acquisition Proposal" means
any inquiry, proposal or offer from any Person relating to any direct or
indirect acquisition or purchase of a business that constitutes one-third or
more of the net revenues, net income or assets of the Company and its
Subsidiaries, taken as a whole, or one-third or more of the outstanding Company
Common Stock, any tender offer or exchange offer that if consummated would
result in any Person beneficially owning one-third or more of the outstanding
Company Common Stock, or any merger, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction involving the
Company (or any Subsidiary or Subsidiaries whose business constitutes one-third
or more of the net revenues, net income or assets of the Company and its
Subsidiaries taken as a whole), other than the transactions contemplated by this
Agreement.
5.3 FEES AND EXPENSES.
(a Except as otherwise provided in this Section 5.3 and except with
respect to claims for damages incurred as a result of a material breach of this
Agreement, all costs and expenses incurred in connection with this Agreement and
the transactions contemplated hereby shall be paid by the party incurring such
expense, except that the Company shall pay all costs and expenses in connection
with the printing and mailing of the Proxy Statement, as well as all SEC filing
fees related to the transactions contemplated hereby.
(b In the event of the termination of this Agreement (i) by
Newco under Section 7.1(f), (ii) by the Company under Section 7.1(g) or (iii) by
Newco under Section 7.1(h) if, and only if (in the case of termination by Newco
under Section 7.1(h)) within 275 days after such termination, the Company enters
into a definitive agreement with respect to a transaction proposed in a Company
Acquisition Proposal that was submitted to the Company prior to the Company
Stockholder Meeting and thereafter consummates such transaction with 462 days
after such ter-
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mination, then the Company shall (A) pay to Newco or its designee (provided that
Newco is not in material breach of its obligations under this Agreement on the
date of any such termination), a fee in the amount of $25,000,000 (the "Company
Termination Fee"), in cash, by wire transfer of immediately available funds to
an account designated by Newco and (B) reimburse Newco for the documented
out-of-pocket fees and expenses reasonably incurred thereby in connection with
this Agreement and the transactions contemplated hereby (including those which
may be incurred in connection with enforcing the terms of this Section 5.3) in
an aggregate amount not in excess of $4,000,000 (the "Expenses"). The Company
shall pay the Company Termination Fee to Newco on the day of termination of this
Agreement (or in the case of clause (iii) above, on the date of consummation of
such transaction). The Company shall reimburse the Expenses to Newco
concurrently with, or after the payment of the Company Termination Fee but in no
event prior to the delivery by Newco to the Company of a reasonably detailed
statement of the Expenses and any supporting documentation reasonably requested
by the Company.
5.4 BROKERS OR FINDERS.
(a) The Company represents, as to itself, its Subsidiaries and its
affiliates, that no agent, broker, investment banker, financial advisor or other
firm or person is or will be entitled to any broker's or finders fee or any
other commission or similar fee in connection with any of the transactions
contemplated by this Agreement, except for the Financial Advisor, whose fees and
expenses will be paid by the Company in accordance with the Company's agreements
with such firm (copies of which have been delivered by the Company to Newco
prior to the date of this Agreement).
(b) Newco represents that no agent, broker, investment banker,
financial advisor or other firm or person engaged by Newco is or will be
entitled to receive from the Company any broker's or finders fee or any other
commission or similar fee in connection with any of the transactions
contemplated by this Agreement except as set forth on SCHEDULE 5.4(B).
5.5 INDEMNIFICATION; DIRECTORS' AND OFFICERS' INSURANCE.
(a Newco agrees that all rights to indemnification existing in
favor of the present or former directors, officers and employees of the Company
(as such) or any of its Subsidiaries or present or former directors, officers
and employees of the Company or any of its Subsidiaries serving or who served at
the Company's or any of its Subsidiaries' request as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise, as provided in the Company's
certificate of incorporation or bylaws, or the articles of incorporation, bylaws
or similar documents of any of the Company's Subsidiaries and the
indemnification agreements with such present and former directors, officers and
employees as in effect as of the date hereof with respect to matters occurring
at or prior to the Effective Time, shall survive the Merger and shall continue
in full force and effect and without modification (other than modifications
which would enlarge the indemnification rights) for a period of six years after
the Effective Time, and the Surviving Corporation shall comply fully with its
obligations hereunder and thereunder. Without limiting the foregoing, the
Company shall, and after the Effective Time,
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the Surviving Corporation shall periodically advance expenses as incurred with
respect to the foregoing (including with respect to any action to enforce rights
to indemnification or the advancement of expenses) to the fullest extent
permitted under applicable Law; PROVIDED, HOWEVER, that the person to whom the
expenses are advanced provides an undertaking (without delivering a bond or
other security) to repay such advance if it is ultimately determined that such
person is not entitled to indemnification.
(b The Company shall, and from and after the Effective Time, the
Surviving Corporation shall, for a period of six years after the Effective Time,
indemnify, defend and hold harmless each person who is now, or has been at any
time prior to the date of this Agreement or who becomes prior to the Effective
Time, an officer, director, employee or agent of the Company or any of its
Subsidiaries (collectively, the "Indemnified Parties") against all losses,
expenses (including attorneys' fees), claims, damages, liabilities or amounts
that are paid in settlement with the approval of the indemnifying party (which
approval shall not be unreasonably withheld) of, or otherwise in connection
with, any threatened or actual claim, action, suit, proceeding or investigation
(a "Claim"), based in whole or in part on or arising in whole or in part out of
the fact that the Indemnified Party (or the person controlled by the Indemnified
Party) is or was a director, officer, employee or agent of the Company or any of
its Subsidiaries and pertaining to any matter existing or arising out of actions
or omissions occurring at or prior to the Effective Time (including, without
limitation, any Claim arising out of this Agreement or any of the transactions
contemplated hereby), whether asserted or claimed prior to, at or after the
Effective Time, in each case to the fullest extent permitted under Delaware law,
and shall pay any expenses, as incurred, in advance of the final disposition of
any such action or proceeding to each Indemnified Party to the fullest extent
permitted under Delaware law. In determining whether an Indemnified Party is
entitled to indemnification under this Section 5.5, if requested by such
Indemnified Party, such determination shall be made by special, independent
counsel selected by the Surviving Corporation and approved by the Indemnified
Party (which approval shall not be unreasonably withheld), and who has not
otherwise performed services for the Surviving Corporation or its affiliates
within the last three years (other than in connection with such matters).
Without limiting the foregoing, in the event any such claim, action, suit,
proceeding or investigation is brought against any Indemnified Parties (whether
arising before or after the Effective Time), (i) the Indemnified Parties may
retain the Company's regularly engaged independent legal counsel or counsel
satisfactory to them and reasonably satisfactory to the Company (or satisfactory
to them and reasonably satisfactory to the Surviving Corporation after the
Effective Time), and the Company (or after the Effective Time, the Surviving
Corporation) shall pay all reasonable fees and expenses of such counsel for the
Indemnified Parties as promptly as statements therefor are received; and (ii)
the Company (or after the Effective Time, the Surviving Corporation) will use
all reasonable efforts to assist in the vigorous defense of any such matter,
provided that neither the Company nor the Surviving Corporation shall be liable
for any settlement effected without its prior written consent, which consent
shall not unreasonably be withheld. In the event of any Claim, any Indemnified
Party wishing to claim indemnification will promptly notify the Company (or
after the Effective Time, the Surviving Corporation) thereof (provided that
failure to so notify the Surviving Corporation will not affect the obligations
of the Surviving Corporation except to the extent that the Surviving Corporation
shall have been prejudiced as a result of such failure) and shall deliver to the
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Company (or after the effective Time, the Surviving Corporation) the undertaking
contemplated by Section 145(e) of the DGCL, but without any requirement for the
posting of a bond. Without limiting the foregoing, in the event any such Claim
is brought against any of the Indemnified Parties, such Indemnified Parties may
retain only one law firm (plus one local counsel, if necessary) to represent
them with respect to each such matter unless the use of counsel chosen to
represent the Indemnified Parties would present such counsel with a conflict of
interest, or the representation of all of the Indemnified Parties by the same
counsel would be inappropriate due to actual or potential differing interests
between them, in which case such additional counsel as may be required (as shall
be reasonably determined by the Indemnified Parties and the Company or the
Surviving Corporation, as the case may be) may be retained by the Indemnified
Parties at the cost and expense of the Company (or the Surviving Corporation)
and the Company (or the Surviving Corporation) shall pay all reasonable fees and
expenses of such counsel for such Indemnified Parties. The Company (or the
Surviving Corporation) shall use all reasonable efforts to assist in the
vigorous defense of any such Claim, provided that the Company (or the Surviving
Corporation) shall not be liable for any settlement effected without its written
consent, which consent, however, shall not be unreasonably withheld.
Notwithstanding the foregoing, nothing contained in this Section 5.5 shall be
deemed to grant any right to any Indemnified Party which is not permitted to be
granted to an officer, director, employee or agent of the Company under Delaware
law, assuming for such purposes that the Company's certificate of incorporation
and bylaws provide for the maximum indemnification permitted by law.
(c For a period of six years after the Effective Time, the
Surviving Corporation shall maintain officers' and directors' liability
insurance and fiduciary liability insurance ("D&O Insurance") covering the
persons described in paragraph (a) of this Section 5.5 (whether or not they are
entitled to indemnification thereunder) who are currently covered by the
Company's existing officers' and directors' or fiduciary liability insurance
policies on terms no less advantageous to such indemnified parties than such
existing insurance; PROVIDED that the Surviving Corporation will not be required
to pay an annual premium therefor in excess of 200% of the last annual premium
paid prior to the date hereof (the "Current Premium"); and, PROVIDED, FURTHER,
that if the existing D&O Insurance expires, is terminated or canceled during the
six-year period, the Surviving Corporation will use reasonable efforts to obtain
as much D&O Insurance as can be obtained for the remainder of such period for a
premium on an annualized basis not in excess of 200% of the Current Premium.
(d In the event the Surviving Corporation or any of its respective
successors or assigns (i) consolidates with or merges into any other Person and
is not 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, proper provisions shall be made so that such Person
assumes the obligations set forth in this Section 5.5.
(e The Company will honor the indemnification agreements identified
in SCHEDULE 5.5(E). The Company may, with the consent of Newco, enter into
substantially similar indemnification agreements with other directors and
officers of the Company.
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(f This Section 5.5, which shall survive the consummation of the
Merger at the Effective Time and shall continue for the periods specified
herein, is intended to benefit the Company, the Surviving Corporation, and any
Person referenced in this Section 5.5 or indemnified hereunder each of whom may
enforce the provisions of this Section 5.5 (whether or not parties to this
Agreement).
5.6 REASONABLE EFFORTS.
(a) Subject to the terms and conditions of this Agreement, each of
the parties hereto agrees to use all reasonable efforts to take, or cause to be
taken, all action and to do, or cause to be done, all things necessary, proper
or advisable, under applicable Laws or otherwise, to consummate and make
effective the transactions contemplated by this Agreement, subject, if
applicable, to the Company Stockholder Approval, including cooperating fully
with the other party or parties. The Company will use all reasonable efforts to
obtain any consent from third parties necessary to allow the Company to continue
operating its business as presently conducted as a result of the consummation of
the transactions contemplated hereby.
(b) In case at any time after the Effective Time, any further
action is necessary or desirable to carry out the purposes of this Agreement or
to vest the Surviving Corporation with full title to all properties, assets,
rights, approvals, immunities and franchises of the Company, the parties to this
Agreement shall direct their respective officers and directors to take all such
necessary action.
5.7 PUBLICITY. The parties will consult with each other and will
mutually agree upon any press release or public announcement pertaining to the
Merger or this Agreement and shall not issue any such press release or make any
such public announcement prior to such consultation and agreement, except as may
be required by applicable law (or stock exchange rules), in which case the party
proposing to issue such press release or make such public announcement shall use
reasonable efforts to consult in good faith with the other party before issuing
any such press release or making any such public announcement.
5.8 HSR AND OTHER GOVERNMENTAL APPROVALS.
(a Each party hereto shall file or cause to be filed with the
Federal Trade Commission (the "FTC") and the Antitrust Division of the
Department of Justice (the "Antitrust Division") any notification required to be
filed by their respective "ultimate parent" companies under the HSR Act and the
rules and regulations promulgated thereunder with respect to the transactions
contemplated in this Agreement. Such parties will use all reasonable efforts to
make such filings promptly and to respond on a timely basis to any requests for
additional information made by either of such agencies. Each of the parties
hereto agrees to furnish the other with copies of all correspondence, filings
and communications (and memoranda setting forth the substance thereof) between
it and its affiliates and their respective representatives, on the one hand, and
the FTC, the Antitrust Division or any other Governmental Entity or members or
their respective staffs, on the other hand, with respect to the Merger, other
than personal financial information filed therewith.
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(b Each party hereto shall cooperate and use its reasonable efforts
to promptly prepare and file all necessary documentation to effect all necessary
applications, notices, petitions, filings and other documents, and use all
reasonable efforts to obtain (and will cooperate with each other in obtaining)
any consent, acquiescence, authorization, order or approval of, or any exemption
or nonopposition by, any Governmental Entity required to be obtained or made by
Newco or the Company or any of their respective affiliates in connection with
the Merger or the taking of any other action contemplated by this Agreement;
provided, however, that the Company and its respective affiliates shall not be
required to divest of any assets in connection therewith.
(c Each party hereto agrees to furnish the other with such
necessary information and reasonable assistance as such other party and its
affiliates may reasonably request in connection with their preparation of
necessary filings, registrations or submissions of information to any
Governmental Entities, including without limitation any filings necessary under
the provisions of the HSR Act.
(d Without limiting the foregoing, the Company and its Board of
Directors shall (i) use their commercially reasonable efforts to take all action
necessary or otherwise reasonably requested by Newco to exempt the Merger from
the provisions of any applicable takeover, business combination, control share
acquisition or similar statute and (ii) if any state takeover statute or similar
statute or regulation becomes applicable to this Agreement or the Merger, use
its commercially reasonable efforts to take all action necessary to ensure that
the Merger may be consummated as promptly as practicable on the terms
contemplated by this Agreement and otherwise to minimize the effect of such
statute or regulation on the Merger.
5.9 NOTIFICATION OF CERTAIN MATTERS. Each party shall give prompt
written notice to the other of (a) the occurrence, or failure to occur, of any
event of which it becomes aware that has caused or that would be likely to cause
any representation or warranty of such party contained in this Agreement to be
untrue or inaccurate in any material respect at any time from the date hereof to
the Closing Date and (b) the failure of such party to comply with or satisfy in
any material respect 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 5.9 shall not limit or otherwise affect the remedies
available hereunder to any of the party or parties receiving such notice.
5.10 CONTINUATION OF EMPLOYEE BENEFITS.
(a From and after the Effective Time, the Surviving Corporation
and its Subsidiaries will honor in accordance with their terms all existing
employment, severance, consulting and salary continuation agreements between the
Company or any of its Subsidiaries and any current or former officer, director,
employee or consultant of the Company or any of its Subsidiaries or group of
such officers, directors, employees or consultants described on SCHEDULE 5.10.
(b In addition to honoring the agreements referred to in SCHEDULE
5.10, until the first anniversary of the Effective Time, the Surviving
Corporation will not materially alter the ben-
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efits (including health benefits, severance policies and general employment
policies and procedures) that are available to employees of the Company and its
Subsidiaries on the date hereof. Nothing in this Section 5.10(b) shall be deemed
to prevent the Surviving Corporation or any of its Subsidiaries from making any
change required by applicable Law.
(c To the extent permitted under applicable Law, each employee of
the Company or its Subsidiaries shall be given credit for all service with the
Company or its Subsidiaries (or service credited by the Company or its
Subsidiaries) under all employee benefit plans, programs, policies and
arrangements maintained by the Surviving Corporation in which they participate
or in which they become participants for purposes of eligibility, vesting and
benefit accrual including, without limitation, for purposes of determining (i)
short-term and long-term disability benefits, (ii severance benefits, (iii)
vacation benefits and (iv) benefits under any retirement plan.
(d This Section 5.10, which shall survive the consummation of the
Merger at the Effective Time and shall continue without limit except as
expressly set forth herein, is intended to benefit and bind the Company, the
Surviving Corporation and any Person referenced in this Section 5.10, each of
whom may enforce the provisions of this Section 5.10 whether or not parties to
this Agreement. Except as provided in clause (a) above, nothing contained in
this Section 5.10 shall create any beneficiary rights in any employee or former
employee (including any dependent thereof) of the Company, any of its
Subsidiaries or the Surviving Corporation in respect of continued employment for
any specified period of any nature or kind whatsoever.
5.11 PREPARATION OF THE PROXY STATEMENT; STOCKHOLDERS MEETING.
(a As soon as practicable following the date of this Agreement, the
Company shall prepare the Proxy Statement, and the Company shall prepare and
file with the SEC the Proxy Statement. Newco will cooperate with the Company in
connection with the preparation of the Proxy Statement including, but not
limited to, furnishing to the Company any and all information regarding Newco
and its affiliates as may be required to be disclosed therein. The Company will
use its commercially reasonable efforts to cause the Proxy Statement to be
mailed to its stockholders as promptly as practicable after the date of this
Agreement. The Company and Newco agree to correct any information provided by it
for use in the Proxy Statement which shall have become false or misleading. The
Company will as promptly as practicable notify Newco of (i) the receipt of any
comments from the SEC and (ii) any request by the SEC for any amendment to the
Proxy Statement or for additional information.
(b The Company will, as soon as practicable following the date of
this Agreement, duly call, give notice of, convene and hold the Stockholders
Meeting for the purpose of adopting this Agreement and approving the Merger. At
the Stockholders Meeting, Newco shall cause all of the shares of Company Common
Stock then owned by Newco or any of its affiliates to be voted in favor of the
adoption of this Agreement and the approval of the Merger. The Company will,
through its Board of Directors, recommend to its stockholders approval of the
foregoing matters, as set forth in, and subject to, Section 3.1(p). Such
recommendation, together with a copy of the opinion referred to in Section
3.1(m), shall be included in the Proxy Statement.
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5.12 SOLVENCY LETTER.
Prior to the Effective Time, Newco shall cause the valuation firm which
delivers a solvency letter (the "Solvency Letter") to the financial institutions
providing the Financing Commitments (or, if no Solvency Letter has been provided
thereto, a valuation firm reasonably acceptable to the Company) to have
delivered to the Company a Solvency Letter addressed to the Board of Directors
in form and substance reasonably acceptable thereto as to the solvency of the
Surviving Corporation after giving effect to the Merger, the financing
arrangements contemplated by Newco with respect to the Merger and the other
transactions contemplated hereby (the "Solvency Letter Condition"). The parties
hereto agree to cooperate with the firm delivering the Solvency Letter (the
"Appraiser") in connection with the preparation of the Solvency Letter,
including, without limitation, providing the Appraiser with any information
reasonably available to them necessary for the Appraiser's preparation of the
Solvency Letter. 5.13 RECAPITALIZATION. Each of the Company and Newco shall use
all reasonable efforts to cause the transactions contemplated by this Agreement,
including the Merger, to be accounted for as a recapitalization and such
accounting treatment to be accepted by their respective accountants and by the
SEC, and each of the Company and Newco agrees that it shall take no action that
would reasonably be likely to cause such accounting treatment not to be
obtained. In the event that Newco reasonably determines that it cannot account
for the transactions contemplated by this Agreement as a recapitalization, the
parties shall take all commercially reasonable actions to amend this Agreement
to provide that not more than 7% of the outstanding Company Common Stock after
giving effect to the transactions contemplated hereby shall be retained by the
existing stockholders of the Company, substantially on the terms and conditions
set forth in the Original Merger Agreement. The terms of this Agreement shall
continue in effect in such amendment to the extent consistent with the revised
transaction structure. Any terms required to be revised to accommodate such
revised structure shall be reasonably acceptable to both parties hereto.
5.14 OTHER ACTIONS. Except as expressly permitted by the terms of this
Agreement, no party hereto will knowingly or intentionally take or agree or
commit to take, nor will it permit any of its Subsidiaries to take or agree or
commit to take, any action that is reasonably likely to result in any of its
representations or warranties hereunder being untrue in any material respect.
ARTICLE 6
CONDITIONS PRECEDENT
6.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The
respective obligations of each party to effect the Merger shall be subject to
the satisfaction or waiver, where permissible, by each party hereto prior to the
Effective Time of the following conditions:
(a STOCKHOLDER APPROVAL. This Agreement shall have been adopted
by the affirmative vote of the holders of a majority of the outstanding shares
of Company Common Stock entitled to vote thereon; provided that Newco shall, and
shall cause its affiliates to, vote all shares of
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Company Common Stock owned by Newco or any of its affiliates in favor of the
adoption of this Agreement.
(b HSR Act and other approvals. The waiting period (and any
extension thereof) applicable to the Merger under the HSR Act shall have been
terminated or shall have expired, the approvals listed on Schedule 3.1(c)(iii)
shall have been obtained and no restrictive order or other requirements shall
have been placed on the Company, Newco or the Surviving Corporation in
connection therewith.
(c No Injunctions or Restraints. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition (an "Injunction")
preventing the consummation of the Merger shall be in effect; provided, however,
that prior to invoking this condition, each party shall use all reasonable
efforts to have any such Injunction vacated.
(d Statutes. No statute, rule, order, decree or regulation shall
have been enacted, promulgated or otherwise issued by any Governmental Entity
which prohibits the consummation of the Merger.
6.2 CONDITIONS TO OBLIGATIONS OF NEWCO. The obligations of Newco to
effect the Merger are further subject to the following conditions, any or all of
which may be waived in whole or in part by Newco, to the extent permitted by
applicable Law:
(a the representations and warranties of the Company set forth in
this Agreement shall be true and correct in all material respects (provided that
any representation or warranty of the Company contained herein that is subject
to a materiality, Material Adverse Effect or similar qualification shall not be
so qualified for purposes of determining the existence of any breach thereof on
the part of the Company) as of the date of this Agreement and as of the Closing
Date as though made on and as of the Closing Date and Newco shall have received
a certificate signed on behalf of the Company by the chief executive officer and
the chief financial officer of the Company to the effect set forth in this
paragraph;
(b the Company shall have performed the obligations required to be
performed by it under this Agreement at or prior to the Closing Date except for
such failures to perform as have not had or could not reasonably be expected,
either individually or in the aggregate, to have a Material Adverse Effect on
the Surviving Corporation (provided that any obligation the performance of which
is subject to a materiality, Material Adverse Effect or similar qualification
shall not be so qualified for purposes of determining the existence of any
nonperformance thereof) and Newco shall have received a certificate signed on
behalf of the Company by the chief executive officer and the chief financial
officer of the Company to the effect set forth in this paragraph; and
(c Newco shall have obtained the Financing substantially on the
terms contemplated by the Financing Commitments or alternative financing on
terms no less favorable in any material respect than those set forth in the
Financing Commitments, unless the failure to obtain the
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Financing was the result of a failure by Newco to perform any covenant or
condition contained therein or herein or the inaccuracy of any representation or
warranty of Newco.
6.3 CONDITIONS TO OBLIGATION OF THE COMPANY. The obligation of the
Company to effect the Merger is further subject to the following conditions, any
or all of which may be waived in whole or in part by the Company, to the extent
permitted by applicable Law:
(a the representations and warranties of Newco set forth in this
Agreement shall be true and correct in all material respects (provided that any
representation or warranty of Newco contained herein that is subject to a
materiality, Material Adverse Effect or similar qualification shall not be so
qualified for purposes of determining the existence of any breach thereof on the
part of Newco) as of the date of this Agreement and as of the Closing Date as
though made on and as of the Closing Date and the Company shall have received a
certificate signed on behalf of Newco by the president of Newco to the effect
set forth in this paragraph;
(b Newco shall have performed the obligations required to be
performed by it under this Agreement at or prior to the Closing Date except for
such failures to perform as have not had or could not reasonably be expected,
either individually or in the aggregate, to have a Material Adverse Effect on
the Surviving Corporation (provided that any obligation the performance of which
is subject to a materiality, Material Adverse Effect or similar qualification
shall not be so qualified for purposes of determining the existence of any
nonperformance thereof) and the Company shall have received a certificate signed
on behalf of Newco by the president of Newco to the effect set forth in this
paragraph;
(c the Solvency Letter Condition; and
(d Newco shall have obtained the Financing substantially on the
terms contemplated by the Financing Commitments or alternative financing on
terms no less favorable in any material respect than those set forth in the
Financing Commitments.
ARTICLE 7
TERMINATION AND AMENDMENT
7.1 TERMINATION. This Agreement may be terminated and the Merger may be
abandoned at any time prior to the Effective Time, whether before or after
adoption of this Agreement by the stockholders of the Company:
(a by mutual written consent of the Company and Newco;
(b by Newco or the Company if any court of competent jurisdiction
in the United States or other Governmental Entity shall have issued an order,
decree or ruling, or taken any other action restraining, enjoining or otherwise
prohibiting the Merger and such order, decree, ruling or other action shall have
become final and non-appealable;
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(c by Newco or the Company if the Effective Time shall not have
occurred on or before August 31, 1999 (the "Termination Date"), provided that
the right to terminate this Agreement under this Section 7.1(c) shall not be
available to any party whose breach of any obligation under this Agreement has
been the cause of or resulted in the failure of the Effective Time to occur on
or before such date;
(d by Newco, if (i) any of the representations and warranties of
the Company contained in this Agreement shall fail to be true and correct in any
material respect when made or have since become, and at the time of termination
remain, untrue or incorrect in any material respect, or (ii) the Company shall
have breached or failed to comply in any material respect with any of its
obligations under this Agreement (other than as a result of a breach by Newco of
any of its obligations under this Agreement) and such failure or breach with
respect to any such representation, warranty or obligation shall continue
unremedied for ten days after the Company has received written notice from Newco
of the occurrence of such failure or breach (provided that in no event shall
such ten-day period extend beyond the Termination Date);
(e by the Company if (i) any of the representations and warranties
of Newco contained in this Agreement shall fail to be true and correct in any
material respect when made or have since become, and at the time of termination
remain, untrue or incorrect in any material respect, or (ii) Newco shall have
breached or failed to comply in any material respect with any of its obligations
under this Agreement (other than as a result of a breach by the Company of any
of its obligations under this Agreement) and such failure or breach with respect
to any such representation, warranty or obligation shall continue unremedied for
ten days after Newco has received written notice from the Company of the
occurrence of such failure or breach (provided that in no event shall such
ten-day period extend beyond the Termination Date);
(f by Newco if the Board of Directors of the Company shall have
withdrawn or modified, in any manner which is materially adverse to Newco, its
recommendation or approval of this Agreement and the Merger;
(g by the Company, if in the exercise of its good faith judgment as
to fiduciary duties to its stockholders imposed by law, as advised by outside
counsel, the Board of Directors of the Company determines that such termination
is required by reason of a Company Acquisition Proposal being made; provided
that the Company shall notify Newco promptly of its intention to terminate this
Agreement or enter into a definitive agreement with respect to any Company
Acquisition Proposal, and provided further that the Company may not effect such
termination pursuant to this Section 7.1(g) unless the Company has
contemporaneously with such termination tendered payment to Newco, or its
designee, of the Company Termination Fee pursuant to Section 5.3; and
(h by Newco or the Company if the Company fails to obtain the
Company Stockholder Approval at the Stockholder Meeting (or any adjournment
thereof).
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7.2 EFFECT OF TERMINATION. In the event of termination of this
Agreement by any party hereto as provided in Section 7.1, this Agreement shall
forthwith become void and there shall be no liability or obligation hereunder on
the part of any party hereto or their respective affiliates, officers, directors
or stockholders, except (a) the last sentence of Section 5.1(a), Section 5.3,
this Section 7.2 and Article 8 shall survive such termination, and (b) no such
termination shall relieve any party from liability for a breach of any term or
provision hereof. The Confidentiality Agreements shall remain in full force and
effect following any termination of this Agreement.
7.3 AMENDMENT. This Agreement may be amended, modified or supplemented,
only by written agreement of Newco and the Company at any time prior to the
Effective Time with respect to any of the terms contained herein; provided,
however, that, after the Company Stockholder Approval, no term or condition
contained in this Agreement shall be amended or modified in any manner that by
Law requires further approval by the stockholders of the Company without so
obtaining such further stockholder approval.
7.4 EXTENSION; WAIVER. At any time prior to the Effective Time, the
parties hereto, by action taken or authorized by their respective Boards of
Directors, may, to the extent legally allowed (a extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(b) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto and (c) waive compliance
with any of the agreements or conditions contained herein. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in a written instrument signed on behalf of such party. The failure of
any party hereto to assert any of its rights hereunder shall not constitute a
waiver of such rights.
ARTICLE 8
GENERAL PROVISIONS
8.1 NONSURVIVAL OF COVENANTS AND AGREEMENTS. None of the
representations, warranties, covenants and agreements in this Agreement or in
any instrument delivered pursuant to this Agreement shall survive the Effective
Time, except for the covenants and agreements contained in Article 2, Section
5.3, Section 5.5, Section 5.10 and any other covenant or agreement that
contemplates performance after the Effective Time.
8.2 CONFIDENTIALITY AGREEMENTS. The Confidentiality Agreements shall
survive the execution and delivery of this Agreement or any termination of this
Agreement, and the provisions of the Confidentiality Agreements shall apply to
all information and material delivered by any party hereunder.
8.3 NOTICES. Any notice or communication required or permitted
hereunder shall be in writing and either delivered personally, delivered by
nationally recognized overnight courier or telecopied or sent by certified or
registered mail, postage prepaid, and shall be deemed to be given, dated and
received when so delivered personally, delivered by nationally recognized
overnight
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courier or telecopied or, if mailed, five business days after the date of
mailing to the following address or telecopy number, or to such other address or
addresses as such person may subsequently designate by notice given hereunder:
(a if to Newco, to:
Yankee Acquisition Corp.
c/o Welsh, Carson, Anderson & Stowe VIII, L.P.
320 Park Avenue, Suite 2500 New York, New York 10022-6815
Attn: Paul B. Queally Facsimile: 212/893-9566
with copies to:
Reboul, MacMurray, Hewitt, Maynard & Kristol
45 Rockefeller Plaza New York, New York 10111
Attn: Robert A. Schwed Facsimile: 212/841-5725
(b if to the Company, to:
Concentra Managed Care, Inc.
5080 Spectrum Drive, Suite 400, West Tower Addison, Texas 75248
Attn: Richard A. Parr II Facsimile: 972/387-1938
and
Concentra Managed Care, Inc.
312 Union Wharf Boston, Massachusetts 02109
Attn: Daniel J. Thomas Facsimile: 617/367-8519
with a copy to:
Vinson & Elkins L.L.P. 2001 Ross Avenue, Suite 3700 Dallas,
Texas 75201
Attn: Jeffrey A. Chapman Facsimile: 214/999-7797
(c if to the Special Committee, to:
Hon. Willis D. Gradison Patton Boggs LLP
2550 M Street, N.W. Washington, D.C. 20037-1350
Facsimile: 202/457-8315
and
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George H. Conrades Polaris Venture Partners
1000 Winter St., Suite 3350 Waltham, Massachusetts 02451
Facsimile: 781/290-0880
with a copy to:
Ropes & Gray One International Place
Boston, Massachusetts 02110
Attn: David C. Chapin
Facsimile: 617/951-7050
8.4 INTERPRETATION. When a reference is made in this Agreement to
Articles or Sections, such reference shall be to an Article or Section of this
Agreement unless otherwise indicated. The table of contents and headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. Whenever the word
"include," "includes" or "including" are used in this Agreement, they shall be
deemed to be followed by the words "without limitation." The phrase "made
available" in this Agreement shall mean that the information referred to has
been made available if requested by the party to whom such information is made
available.
8.5 COUNTERPARTS. This Agreement may be executed in two counterparts,
each of which shall be considered one and the same agreement and shall become
effective when two counterparts have been signed by each of the parties and
delivered to the other party, it being understood that both parties need not
sign the same counterpart.
8.6 ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES. This Agreement
(together with the Confidentiality Agreement and any other documents and
instruments referred to herein) constitutes the entire agreement and supersedes
all prior agreements and understandings, both written and oral, between the
parties hereto with respect to the subject matter hereof. This Agreement shall
be binding upon and inure solely to the benefit of each party hereto, and,
except as provided in Section 5.5 and Section 5.10, nothing in this Agreement,
express or implied, is intended to or shall confer upon any other Person any
other right, benefit or remedy of any nature whatsoever under or by reason of
this Agreement.
8.7 GOVERNING LAW. This Agreement shall be governed and construed in
accordance with the laws of the State of Delaware, without giving effect to the
principles of conflicts of law thereof.
8.8 ASSIGNMENT. Neither this Agreement nor any of the rights, interests
or obligations hereunder shall be assigned by any of the parties hereto (whether
by operation of law or otherwise) without the prior written consent of the other
parties. Any assignment in violation of the foregoing shall be null and void.
This Agreement will be binding upon, inure to the benefit of and be enforceable
by the parties hereto and their respective successors and permitted assigns.
A-40
<PAGE>
8.9 EFFECTIVENESS. This Agreement shall not become effective until such
time as this Agreement has been executed and delivered by each of the parties
thereto.
8.10 REFERENCE; NO WAIVER. Any reference in this Agreement to the "date
hereof," the "date of this Agreement" or the "date of execution of this
Agreement" shall be deemed to refer to March 2, 1999, the date of the Original
Merger Agreement, but any reference to the "date of this Amended and Restated
Agreement" or the "date of execution of this Amended and Restated Agreement"
shall refer to the date first written above. The parties' execution and delivery
of this Agreement shall not constitute a waiver of any rights that either of the
parties hereto may have by reason of any event, condition, misrepresentation or
breach of covenant of the Original Merger Agreement having occurred prior to the
date of execution and delivery of this Agreement whether or not known to any or
all of the parties hereto.
[The Remainder Of This Page Is Intentionally Blank]
A-41
<PAGE>
In witness whereof, the parties hereto have caused this Amended and
Restated Agreement and Plan of Merger to be signed by their respective officers
thereunto duly authorized as of March 24, 1999.
NEWCO:
YANKEE ACQUISITION CORP.
By: /s/ Paul B. Queally
-------------------
Paul B. Queally
President
COMPANY:
CONCENTRA MANAGED CARE, INC.
By: /s/ Daniel J. Thomas
--------------------
Daniel J. Thomas
President and Chief
Executive Officer
A-42
<PAGE>
APPENDIX B
[LETTERHEAD OF BT ALEX. BROWN INCORPORATED]
March 2, 1999
Board of Directors and
Special Committee of the Board of Directors
Concentra Managed Care, Inc.
312 Union Wharf
Boston, Massachusetts 02105
Members of the Board and Special Committee:
BT Alex. Brown Incorporated ("BT Alex. Brown") has acted as financial
advisor to Concentra Managed Care, Inc. ("Concentra") in connection with the
proposed transaction involving Concentra and Welsh, Carson, Anderson & Stowe
VIII, L.P. ("Welsh Carson") pursuant to the Agreement and Plan of Merger, dated
as of March 2, 1999 (the "Merger Agreement"), between Yankee Acquisition Corp.,
a wholly owned subsidiary of Welsh Carson ("Newco"), and Concentra, which
provides, among other things, for the merger of Newco with and into Concentra
(the "Merger"). As set forth more fully in the Merger Agreement, as a result of
the Merger, each outstanding share of the common stock, par value $0.01 per
share, of Concentra (the "Concentra Common Stock") will be converted into either
(i) the right to retain, at the election of the holder thereof, one share of
Concentra Common Stock (the "Stock Consideration") or (ii) the right to receive
$16.50 in cash (the "Cash Consideration" and, together with the Stock
Consideration, the "Merger Consideration"), subject to certain proration
procedures (as to which we express no opinion) more fully specified in the
Merger Agreement. The Merger Agreement provides that the aggregate number of
shares of Concentra Common Stock to be converted into the Stock Consideration at
the effective time of the Merger will be 1,854,500. The Merger Agreement further
provides for the possible restructuring of the Merger in order to achieve
recapitalization accounting treatment as a merger in which each share of
Concentra Common Stock outstanding immediately prior to the effective time of
the Merger would be converted into the right to receive only the Cash
Consideration.
You have requested BT Alex. Brown's opinion as to the fairness, from a
financial point of view, of the Merger Consideration to the holders of Concentra
Common Stock (other than Welsh Carson or its affiliates).
B-1
<PAGE>
Board of Directors and
Special Committee of the Board of Directors
Concentra Managed Care, Inc.
March 2, 1999
Page 2
In connection with BT Alex. Brown's role as financial advisor to
Concentra, and in arriving at its opinion, BT Alex. Brown has reviewed certain
publicly available financial and other information concerning Concentra and
certain internal analyses and other information furnished to or discussed with
it by Concentra and its advisors. BT Alex. Brown has also held discussions with
members of the senior management of Concentra and Welsh Carson regarding the
business and prospects of Concentra. In addition, BT Alex. Brown has (i)
reviewed the reported prices and trading activity for Concentra Common Stock,
(ii) compared certain financial and stock market information for Concentra with
similar information for certain other companies whose securities are publicly
traded, (iii) reviewed the financial terms of certain recent business
combinations which it deemed comparable in whole or in part, (iv) reviewed the
terms of the Merger Agreement, and (v) performed such other studies and analyses
and considered such other factors as it deemed appropriate. In connection with
its engagement, BT Alex. Brown was authorized to approach, and held discussions
with, certain third parties to solicit indications of interest with respect to
the acquisition of Concentra.
BT Alex. Brown has not assumed responsibility for independent
verification of, and has not independently verified, any information, whether
publicly available or furnished to it, concerning Concentra or the pro forma
company, including, without limitation, any financial information, forecasts or
projections considered in connection with the rendering of its opinion.
Accordingly, for purposes of its opinion, BT Alex. Brown has assumed and relied
upon the accuracy and completeness of all such information and BT Alex. Brown
has not conducted a physical inspection of any of the properties or assets, and
has not prepared or obtained any independent evaluation or appraisal of any of
the assets or liabilities, of Concentra. With respect to the financial forecasts
and projections made available to BT Alex. Brown and used in its analyses, BT
Alex. Brown has assumed that they have been prepared on bases reflecting
reasonable estimates and judgments as to the matters covered thereby. In
rendering its opinion, BT Alex. Brown expresses no view as to the reasonableness
of such forecasts and projections or the assumptions on which they are based. BT
Alex. Brown's opinion is necessarily based upon economic, market and other
conditions as in effect on, and the information made available to it as of, the
date hereof.
For purposes of rendering its opinion, BT Alex. Brown has assumed that,
in all respects material to its analysis, the representations and warranties of
Concentra and Newco contained in the Merger Agreement are true and correct,
Concentra and Newco will each perform all of the covenants and agreements to be
performed by it under the Merger Agreement and all conditions to the obligations
of each of Concentra and Newco to consummate the Merger will be satisfied
without any waiver thereof. BT Alex. Brown has also assumed that all material
governmental, regulatory or other approvals and consents required in connection
with the consummation of the Merger will be obtained and that in connection with
obtaining any necessary governmental, regu-
B-2
<PAGE>
Board of Directors and
Special Committee of the Board of Directors
Concentra Managed Care, Inc.
March 2, 1999
Page 3
latory or other approvals and consents, or any amendments, modifications or
waivers to any agreements, instruments or orders to which either Concentra or
Newco is a party or is subject or by which it is bound, no limitations,
restrictions or conditions will be imposed or amendments, modifications or
waivers made that would have a material adverse effect on Concentra or
materially reduce the contemplated benefits of the Merger to Concentra. In
addition, you have informed BT Alex. Brown, and accordingly for purposes of
rendering its opinion BT Alex. Brown has assumed, that the Merger will be
recorded as a recapitalization for financial reporting purposes. BT Alex. Brown
is expressing no opinion as to the price at which the Concentra Common Stock
will trade at any time.
This opinion is addressed to, and for the use and benefit of, the Board
of Directors and the Special Committee of the Board of Directors of Concentra
and is not a recommendation to any stockholder as to the form of Merger
Consideration to be elected by such stockholder or how such stockholder should
vote with respect to matters relating to the proposed Merger. This opinion is
limited to the fairness, from a financial point of view, of the Merger
Consideration to the holders of Concentra Common Stock (other than Welsh Carson
or its affiliates), and BT Alex. Brown expresses no opinion as to the merits of
the underlying decision by Concentra to engage in the Merger.
BT Alex. Brown, as a customary part of its investment banking business,
is engaged in the valuation of businesses and their securities in connection
with mergers and acquisitions, negotiated underwritings, private placements and
valuations for estate, corporate and other purposes. We have acted as financial
advisor to Concentra in connection with the Merger and will receive a fee for
our services, a significant portion of which is contingent upon the consummation
of the Merger and a portion of which is payable upon delivery of this opinion.
BT Alex. Brown and its affiliates have in the past provided financial services
to Concentra and Welsh Carson unrelated to the proposed Merger, for which
services BT Alex. Brown and its affiliates have received compensation. BT Alex.
Brown maintains a market in Concentra Common Stock and regularly publishes
research reports regarding the businesses and securities of Concentra and other
publicly traded companies in the healthcare industry. In the ordinary course of
business, BT Alex. Brown and its affiliates may actively trade or hold the
securities and other instruments and obligations of Concentra for their own
account and for the accounts of customers and, accordingly, may at any time hold
a long or short position in such securities, instruments or obligations.
B-3
<PAGE>
Based upon and subject to the foregoing, it is BT Alex. Brown's opinion
that, as of the date of this letter, the Merger Consideration is fair, from a
financial point of view, to the holders of Concentra Common Stock (other than
Welsh Carson or its affiliates).
Very truly yours,
BT ALEX. BROWN INCORPORATED
B-4
<PAGE>
APPENDIX C
SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW
SS. 262. APPRAISAL RIGHTS.
(a) Any stockholder of a corporation of this State who holds shares of
stock on the date of the making of a demand pursuant to subsection (d) of this
section with respect to such shares, who continuously holds such shares through
the effective date of the merger or consolidation, who has otherwise complied
with subsection (d) of this section and who has neither voted in favor of the
merger or consolidation nor consented thereto in writing pursuant to ss.228 of
this title shall be entitled to an appraisal by the Court of Chancery of the
fair value of the stockholder's shares of stock under the circumstances
described in subsections (b) and (c) of this section. As used in this section,
the word "stockholder" means a holder of record of stock in a stock corporation
and also a member of record of a nonstock corporation; the words "stock" and
"share" mean and include what is ordinarily meant by those words and also
membership or membership interest of a member of a nonstock corporation; and the
words "depository receipt" mean a receipt or other instrument issued by a
depository representing an interest in one or more shares, or fractions thereof,
solely of stock of a corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to ss.251 (other than a merger effected pursuant to ss.251(g)
of this title), ss.252, ss.254, ss.257, ss.258, ss.263 or ss.264 of this title:
(1) Provided, however, that no appraisal rights under this
section shall be available for the shares of any class or series of
stock, which stock, or depository receipts in respect thereof, at the
record date fixed to determine the stockholders entitled to receive
notice of and to vote at the meeting of stockholders to act upon the
agreement of merger or consolidation, were either (i) listed on a
national securities exchange or designated as a national market system
security on an interdealer quotation system by the National Association
of Securities Dealers, Inc. or (ii) held of record by more than 2,000
holders; and further provided that no appraisal rights shall be
available for any shares of stock of the constituent corporation
surviving a merger if the merger did not require for its approval the
vote of the stockholders of the surviving corporation as provided in
subsection (f) of ss.251 of this title.
(2) Notwithstanding paragraph (1) of this subsection,
appraisal rights under this section shall be available for the shares
of any class or series of stock of a constituent corporation if the
holders thereof are required by the terms of an agreement of merger or
consolidation pursuant to ss.ss.251, 252, 254, 257, 258, 263 and 264 of
this title to accept for such stock anything except:
C-1
<PAGE>
a. Shares of stock of the corporation surviving or
resulting from such merger or consolidation, or depository
receipts in respect thereof;
b. Shares of stock of any other corporation, or depository
receipts in respect thereof, which shares of stock (or
depository receipts in respect thereof) or depository receipts
at the effective date of the merger or consolidation will be
either listed on a national securities exchange or designated
as a national market system security on an interdealer
quotation system by the National Association of Securities
Dealers, Inc. or held of record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional
depository receipts described in the foregoing subparagraphs
a. and b. of this paragraph; or
d. Any combination of the shares of stock, depository
receipts and cash in lieu of fractional shares or fractional
depository receipts described in the foregoing subparagraphs
a., b. and c. of this paragraph.
(3) In the event all of the stock of a subsidiary Delaware
corporation party to a merger effected under ss.253 of this title is
not owned by the parent corporation immediately prior to the merger,
appraisal rights shall be available for the shares of the subsidiary
Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation
that appraisal rights under this section shall be available for the shares of
any class or series of its stock as a result of an amendment to its certificate
of incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal
rights are provided under this section is to be submitted for approval
at a meeting of stockholders, the corporation, not less than 20 days
prior to the meeting, shall notify each of its stockholders who was
such on the record date for such meeting with respect to shares for
which appraisal rights are available pursuant to subsections (b) or (c)
hereof that appraisal rights are available for any or all of the shares
of the constituent corporations, and shall include in such notice a
copy of this section. Each stockholder electing to demand the appraisal
of such stockholder's shares shall deliver to the corporation, before
the taking of the vote on the merger or consolidation, a written demand
for appraisal of such stockholder's shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of
the stockholder and that the stockholder intends thereby to demand the
appraisal of such stockholder's shares. A proxy or vote against the
merger or consolidation shall not consti-
C-2
<PAGE>
tute such a demand. A stockholder electing to take such action must do
so by a separate written demand as herein provided. Within 10 days
after the effective date of such merger or consolidation, the
surviving or resulting corporation shall notify each stockholder of
each constituent corporation who has complied with this subsection and
has not voted in favor of or consented to the merger or consolidation
of the date that the merger or consolidation has become effective; or
(2) If the merger or consolidation was approved pursuant to
ss.228 or ss.253 of this title, each constituent corporation, either
before the effective date of the merger or consolidation or within ten
days thereafter, shall notify each of the holders of any class or
series of stock of such constituent corporation who are entitled to
appraisal rights of the approval of the merger or consolidation and
that appraisal rights are available for any or all shares of such class
or series of stock of such constituent corporation, and shall include
in such notice a copy of this section; provided that, if the notice is
given on or after the effective date of the merger or consolidation,
such notice shall be given by the surviving or resulting corporation to
all such holders of any class or series of stock of a constituent
corporation that are entitled to appraisal rights. Such notice may,
and, if given on or after the effective date of the merger or
consolidation, shall, also notify such stockholders of the effective
date of the merger or consolidation. Any stockholder entitled to
appraisal rights may, within 20 days after the date of mailing of such
notice, demand in writing from the surviving or resulting corporation
the appraisal of such holder's shares. Such demand will be sufficient
if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the
appraisal of such holder's shares. If such notice did not notify
stockholders of the effective date of the merger or consolidation,
either (i) each such constituent corporation shall send a second notice
before the effective date of the merger or consolidation notifying each
of the holders of any class or series of stock of such constituent
corporation that are entitled to appraisal rights of the effective date
of the merger or consolidation or (ii) the surviving or resulting
corporation shall send such a second notice to all such holders on or
within 10 days after such effective date; provided, however, that if
such second notice is sent more than 20 days following the sending of
the first notice, such second notice need only be sent to each
stockholder who is entitled to appraisal rights and who has demanded
appraisal of such holder's shares in accordance with this subsection.
An affidavit of the secretary or assistant secretary or of the transfer
agent of the corporation that is required to give either notice that
such notice has been given shall, in the absence of fraud, be prima
facie evidence of the facts stated therein. For purposes of determining
the stockholders entitled to receive either notice, each constituent
corporation may fix, in advance, a record date that shall be not more
than 10 days prior to the date the notice is given, provided, that if
the notice is given on or after the effective date of the merger or
consolidation, the record date shall be such effective date. If no
record date is fixed and the notice is given prior to the effective
date, the record date shall be the close of business on the day next
preceding the day on which the notice is given.
C-3
<PAGE>
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise entitled to
appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw such stockholder's demand for appraisal and to accept the terms offered
upon the merger or consolidation. Within 120 days after the effective date of
the merger or consolidation, any stockholder who has complied with the
requirements of subsections (a) and (d) hereof, upon written request, shall be
entitled to receive from the corporation surviving the merger or resulting from
the consolidation a statement setting forth the aggregate number of shares not
voted in favor of the merger or consolidation and with respect to which demands
for appraisal have been received and the aggregate number of holders of such
shares. Such written statement shall be mailed to the stockholder within 10 days
after such stockholder's written request for such a statement is received by the
surviving or resulting corporation or within 10 days after expiration of the
period for delivery of demands for appraisal under subsection (d) hereof,
whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by 1 or more publications at
least 1 week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such publication as
the Court deems advisable. The forms of the notices by mail and by publication
shall be approved by the Court, and the costs thereof shall be borne by the
surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the
Court shall appraise the shares, determining their fair value exclusive of any
element of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court
C-4
<PAGE>
shall take into account all relevant factors. In determining the fair rate of
interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted
such stockholder's certificates of stock to the Register in Chancery, if such is
required, may participate fully in all proceedings until it is finally
determined that such stockholder is not entitled to appraisal rights under this
section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and
taxed upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation,
no stockholder who has demanded appraisal rights as provided in subsection (d)
of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation); provided,
however, that if no petition for an appraisal shall be filed within the time
provided in subsection (e) of this section, or if such stockholder shall deliver
to the surviving or resulting corporation a written withdrawal of such
stockholder's demand for an appraisal and an acceptance of the merger or
consolidation, either within 60 days after the effective date of the merger or
consolidation as provided in subsection (e) of this section or thereafter with
the written approval of the corporation, then the right of such stockholder to
an appraisal shall cease. Notwithstanding the foregoing, no appraisal proceeding
in the Court of Chancery shall be dismissed as to any stockholder without the
approval of the Court, and such approval may be conditioned upon such terms as
the Court deems just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.
C-5
Instructions for Voting Your Proxy
Concentra Managed Care, Inc. is now offering stockholders of record three
alternative ways of voting your proxies:
o By Telephone (using a touch-tone telephone)
o Through the Internet (using a browser)
o By Mail (traditional method)
Your telephone or Internet vote authorizes the named proxies to vote your shares
in the same manner as if you had returned your proxy card. We encourage you to
use these cost effective and convenient ways of voting, 24 hours a day, 7 days a
week.
TELEPHONE VOTING
Available only until 5:00 p.m. Eastern time on June 00, 1999
o This method of voting is available for residents of the U.S. only
o On a touch tone telephone, call TOLL FREE 1-888-000-0000, 24 hours a day,
7 days a week
o You will be asked to enter ONLY the 12-digit Control Number shown below
o Your vote will be confirmed and cast as you directed
INTERNET VOTING
Available only until 5:00 p.m. Eastern time on June 00, 1999
o Visit our Internet voting website at http://cybervote.georgeson.com
o Enter the Company Number AND 12-digit Control Number shown below and follow
the instructions on your screen
o You will incur only your usual Internet charges, if applicable.
VOTING BY MAIL
o Simply mark, sign and date your proxy card and return it in the postage
paid envelope
o If you vote by telephone or the Internet, please do not mail your proxy card.
COMPANY NUMBER
CONTROL NUMBER
TO VOTE BY MAIL, PLEASE DETACH PROXY CARD HERE
- --------------------------------------------------------------------------------
/X/ Please mark votes as in this example.
This proxy, when properly executed, will be voted in the manner directed herein
by the undersigned stockholder. If no direction is made, this proxy will be
voted FOR the approval and adoption of the Amended and Restated Merger
Agreement.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL 1.
1. PROPOSAL TO APPROVE AND ADOPT THE AMENDED AND RESTATED MERGER AGREEMENT DATED
MARCH 24, 1999 BETWEEN CONCENTRA MANAGED CARE, INC. AND YANKEE ACQUISITION CORP.
For Against Abstain
[ ] [ ] [ ]
2. Discretionary Proxy, in their discretion, the proxies (and if the undersigned
is a proxy, and substitute proxies) are authorized to vote upon any other
business that may be proposed to come before the meeting.
Date:____________, 1999
_______________________
_______________________
Signature(s)
Please sign your name exactly as it appears on the stock certificate. When
shares are held by joint tenants, both stockholders should sign above. When
signing as attorney, executor, administrator, trustee, or guardian, please state
your title as such. If a corporation, please sign in full corporate name by this
President of the corporation or other authorized officer. If a partnership,
please sign in full partnership name by an authorized person.
<PAGE>
CONCENTRA MANAGED CARE, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
for the Special Meeting of Stockholders on June 00, 1999
The undersigned hereby appoints DANIEL J. THOMAS and RICHARD A. PARR II, or
either of them, with full power of substitution in each, proxies (and if the
undersigned is a proxy, substitute proxies) to vote all Common Stock of the
undersigned in Concentra Managed Care, Inc. at the Special Meeting of
Stockholders to be held at on ___________, 1999 at 10:00 a.m.
local time, and at any adjournment and postponement thereof, as specified on the
reverse side of this card.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSAL.
PLEASE SIGN AND DATE THE REVERSE SIDE OF THIS PROXY
SEE REVERSE SIDE
