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Registration No. 333-66081
Filed Pursuant to Rule 424(B)(4)
(CENTRAL PARKING LOGO) (ALLRIGHT PARKING LOGO)
MERGER PROPOSED -- YOUR VOTE IS VERY IMPORTANT
The Boards of Directors of Central Parking Corporation and Allright
Holdings, Inc. have agreed on a merger of a subsidiary of Central Parking and
Allright, so that Allright will become a subsidiary of Central Parking.
Following the merger, Central Parking will be the largest parking services
company in the United States. The combined company will be named "Central
Parking Corporation" and will be headquartered in Nashville, Tennessee.
If the merger is completed, each share of Allright common stock will be
exchanged for the number of shares of Central Parking common stock equal to (A)
the total purchase price of Allright divided by $46.00 (B) divided by the total
number of shares of Allright common stock outstanding on the closing date. We
estimate that the total purchase price, after all adjustments, will be
approximately $350,334,690 and that the total number of Central Parking shares
that will be issued to Allright shareholders will be approximately 7.6 million
or approximately 88.658 shares of Central Parking common stock for each share of
Allright common stock. Central Parking's common stock is listed on the New York
Stock Exchange under the symbol "CPC."
To be completed, the merger must be approved by the holders of a majority
of the outstanding shares of each company. Central Parking and Allright have
each scheduled a special meeting of its shareholders to approve the merger
agreement. Shareholders of Central Parking and Allright holding the number of
shares needed to approve the transaction have agreed to vote in favor of the
merger agreement. Therefore, there will be a quorum at each of the meetings and
enough votes cast for approval of the merger agreement to ensure its passage
without the vote of any other Central Parking or Allright shareholder.
Whether or not you plan to attend your special meeting, please take the
time to vote by completing and mailing the enclosed proxy card to us. If you
sign, date and mail your proxy card without marking how you want to vote, your
proxy will be counted as a vote in favor of the merger. If you do not return
your card, the effect will be a vote against the merger. The dates, times and
places of the meetings are as follows:
FOR CENTRAL PARKING SHAREHOLDERS:
February 17, 1999 11:00 a.m. (C.S.T.)
2401 21st Avenue South, Third Floor
Nashville, Tennessee 37212
FOR ALLRIGHT SHAREHOLDERS:
February 17, 1999 11:00 a.m. (C.S.T.)
1313 Main Street
Houston, Texas 77002
This joint proxy statement/prospectus provides you with detailed
information about the proposed merger. You can also get information about
Central Parking from documents which Central Parking has filed with the
Securities and Exchange Commission. We encourage you to read this entire
document carefully.
SEE "RISK FACTORS" BEGINNING ON PAGE 16 OF THIS JOINT PROXY
STATEMENT/PROSPECTUS FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE
CONSIDERED BY CENTRAL PARKING AND ALLRIGHT SHAREHOLDERS WITH RESPECT TO THE
PROPOSALS DESCRIBED IN, AND THE SECURITIES BEING OFFERED BY, THIS JOINT PROXY
STATEMENT/PROSPECTUS.
THE SECURITIES ISSUABLE IN THE MERGER HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS JOINT PROXY STATEMENT/PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
We strongly support this strategic combination between Central Parking and
Allright and join with the other members of our respective Boards of Directors
in enthusiastically recommending that you vote in favor of the merger.
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/s/ MONROE J. CARELL, JR. /s/ WILLIAM S. BENJAMIN
- ----------------------------------------------------------- -----------------------------------------------------
Monroe J. Carell, Jr., Chairman and Chief Executive Officer William S. Benjamin, President
Central Parking Corporation Allright Holdings, Inc.
</TABLE>
Joint Proxy Statement/Prospectus Dated January 14, 1999 and First Mailed to
Shareholders on January 15, 1999.
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CENTRAL PARKING CORPORATION
2401 21ST AVENUE SOUTH, SUITE 200
NASHVILLE, TENNESSEE 37212
(615) 297-4255
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD FEBRUARY 17, 1999
NOTICE IS HEREBY GIVEN that a special meeting of shareholders of Central
Parking Corporation, a Tennessee corporation ("Central Parking"), will be held
at Central Parking's headquarters, 2401 21st Avenue South, Third Floor,
Nashville, Tennessee, on February 17, 1999, at 11:00 a.m. (Central Standard
Time) (the "Central Parking Special Meeting") for the following purposes:
- The approval of an Agreement and Plan of Merger (the "Merger Agreement")
by and among Central Parking, Central Merger Sub, Inc. ("Central Parking
Sub"), Allright Holdings, Inc. ("Allright"), Apollo Real Estate
Investment Fund II, L.P. and AEW Partners, L.P., dated as of September
21, 1998, and amended as of January 5, 1999, pursuant to which Central
Parking Sub will be merged with and into Allright (the "Merger"), and the
issuance of Central Parking common stock as contemplated by the Merger
Agreement (the "Merger Proposal").
- The approval of an amendment to the Central Parking Amended and Restated
Charter to increase the number of shares of authorized common stock from
50 million to 100 million (the "Charter Amendment Proposal"). Approval of
the Charter Amendment Proposal is not required to complete the Merger.
- Such other business as may properly come before the Central Parking
Special Meeting or any adjournment or postponement thereof.
The Board of Directors has fixed the close of business on January 11, 1999
as the record date (the "Record Date") for determining the holders of the common
stock of Central Parking entitled to notice of and to vote at the Central
Parking Special Meeting and any adjournment or postponement thereof.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" APPROVAL
OF THE MERGER PROPOSAL AND "FOR" APPROVAL OF THE CHARTER AMENDMENT PROPOSAL.
To be approved, a majority of the shares of Central Parking common stock
entitled to be cast must vote in favor of the proposals. Holders of outstanding
shares of common stock of Central Parking sufficient to approve the Merger
Proposal have agreed that they will vote their shares of Central Parking common
stock in favor of the Merger Proposal. Therefore, there will be a quorum at the
Central Parking Special Meeting and enough votes cast for approval of the Merger
Proposal to ensure such proposal's passage without the vote of any other Central
Parking shareholder.
The common stock of Central Parking should be represented as fully as
possible at the Central Parking Special Meeting. Therefore, please sign and
return the enclosed proxy at your earliest convenience. You may, of course,
revoke your proxy at any time before it is voted at the meeting. However,
signing and returning the proxy will assure your representation at the Central
Parking Special Meeting if you do not attend.
By Order of the Board of Directors
/s/ HENRY J. ABBOTT
------------------------------------
Henry J. Abbott
Secretary
Nashville, Tennessee
January 15, 1999
YOUR VOTE IS IMPORTANT.
PLEASE COMPLETE, SIGN, DATE AND RETURN YOUR PROXY.
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ALLRIGHT HOLDINGS, INC.
C/O ALLRIGHT CORPORATION
1313 MAIN STREET
HOUSTON, TEXAS 77002
(713) 222-2505
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD FEBRUARY 17, 1999
NOTICE IS HEREBY GIVEN that a special meeting of shareholders of Allright
Holdings, Inc., a Delaware corporation ("Allright"), will be held at Allright's
headquarters, 1313 Main Street, Houston, Texas on February 17, 1999, at 11:00
a.m. (Central Standard Time) (the "Allright Special Meeting") for the following
purposes:
- The adoption of an Agreement and Plan of Merger (the "Merger Agreement"),
dated as of September 21, 1998, and amended as of January 5, 1999, by and
among Central Parking Corporation, Central Merger Sub, Inc., Allright,
Apollo Real Estate Investment Fund II, L.P. and AEW Partners, L.P.
- Such other business as may properly come before the Allright Special
Meeting or any adjournment or postponement thereof.
Allright has fixed the close of business on January 11, 1999 as the record
date (the "Record Date") for determining the holders of Allright common stock
entitled to notice of and to vote at the Allright Special Meeting and any
adjournments or postponements thereof.
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE TO ADOPT THE
MERGER AGREEMENT WHICH IS DESCRIBED IN DETAIL IN THE ACCOMPANYING JOINT PROXY
STATEMENT/PROSPECTUS.
Adoption of the Merger Agreement requires that the holders of a majority
of the outstanding shares of Allright common stock at the Allright Special
Meeting vote in favor of the Merger Agreement. Holders of outstanding shares of
common stock of Allright sufficient to adopt the Merger Agreement have
previously agreed that they will vote their shares of Allright common stock in
favor of the Merger Agreement. Therefore, there will be a quorum at the Allright
Special Meeting and enough votes cast for adoption of the Merger Agreement to
ensure its passage without the vote of any other Allright shareholder.
A list of the holders of Allright common stock entitled to vote at the
Allright Special Meeting will be open to examination during ordinary business
hours, at the location of the Allright Special Meeting for ten days preceeding
the Allright Special Meeting.
The common stock of Allright should be represented as fully as possible at
the Allright Special Meeting. Therefore, please sign and return the enclosed
proxy at your earliest convenience. You may, of course, revoke your proxy at any
time before it is voted at the meeting. However, signing and returning the proxy
will assure your representation at the Allright Special Meeting if you do not
attend.
By Order of the Board of Directors
/S/ MARC L. DAVIDSON
--------------------------------------
Marc L. Davidson
Secretary
Houston, Texas
January 15, 1999
YOUR VOTE IS IMPORTANT.
PLEASE COMPLETE, SIGN, DATE AND RETURN YOUR PROXY.
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TABLE OF CONTENTS
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Questions and Answers about the Merger...................... 1
Summary..................................................... 3
Risk Factors................................................ 16
The Merger.................................................. 22
General................................................... 22
Central Parking's Reasons for the Merger; Recommendation
of the Central Parking Board of Directors.............. 25
Background of the Business Relationship and the Merger.... 27
Allright's Reasons for the Merger; Recommendation of the
Allright Board of Directors............................ 28
Opinion of Central Parking's Financial Advisor............ 30
Forward-Looking Statements May Prove Inaccurate........... 36
Accounting Treatment...................................... 37
Certain Federal Income Tax Consequences................... 37
Appraisal Rights.......................................... 38
Regulatory Matters........................................ 42
Federal Securities Laws Consequences; Resale
Restrictions........................................... 43
Conduct of the Business If the Merger Is Not
Consummated............................................ 43
Certain Transactions; Interests of Certain Persons in the
Merger................................................. 43
Comparative Price Range of Common Stock and Dividend
Policy.................................................... 47
Unaudited Pro Forma Condensed Combined Financial
Statements................................................ 48
Central Parking's Management's Discussion and Analysis of
Financial Condition and Results of Operations............. 62
The Merger Agreement........................................ 74
The Merger................................................ 74
Closing; Effective Time................................... 74
Certificate of Incorporation and Bylaws; Directors and
Officers............................................... 74
Conversion of Securities; Merger Consideration............ 74
Certain Adjustments....................................... 76
Treatment of Stock Options and Warrants................... 76
Representations and Warranties............................ 77
Certain Covenants......................................... 77
Conditions to Consummation of the Merger.................. 83
Termination; Non-Consummation............................. 84
Effect of Termination; Non-Competition.................... 85
Survival of Representations; Indemnification.............. 85
Miscellaneous............................................. 88
Registration Rights Agreement............................... 89
Other Related Agreements.................................... 100
Transaction Support Agreements............................ 100
Noncompetition Agreement.................................. 101
Central Parking Special Meeting............................. 102
The Meeting............................................... 102
Purpose of the Meeting.................................... 102
Increase in the Authorized Shares of Common Stock......... 102
Voting.................................................... 103
</TABLE>
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<TABLE>
<CAPTION>
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Allright Special Meeting.................................... 105
The Meeting............................................... 105
Purpose of the Meeting.................................... 105
Voting.................................................... 105
Description of Central Parking.............................. 106
General................................................... 106
Industry.................................................. 106
Growth Strategy........................................... 107
Operating Strategy........................................ 108
Acquisitions.............................................. 110
Sales and Marketing....................................... 112
International Expansion................................... 113
Parking Facility Properties............................... 114
Operating Arrangements.................................... 115
Competition............................................... 116
Insurance................................................. 117
Regulation................................................ 117
Employees................................................. 118
Service Marks and Trademarks.............................. 118
Litigation................................................ 119
Principal Shareholders of Central Parking................... 120
Description of Allright..................................... 123
Business -- General....................................... 123
Operations; Structure..................................... 123
Strategy & Growth......................................... 125
MBE Partnerships.......................................... 127
Employees................................................. 127
No Established Trading Market; Dividends.................. 127
International Foreign Currency Exposure................... 127
Litigation................................................ 128
Certain Indemnification Rights............................ 128
Allright's Management's Discussion and Analysis of Financial
Condition and Results of Operations....................... 129
Principal Shareholders of Allright.......................... 138
Management of Allright Corporation.......................... 140
Management of the Combined Company.......................... 142
Description of Central Parking Capital Stock................ 145
Comparison of Rights of Holders of Central Parking Common
Stock and Allright Common Stock........................... 147
Legal Matters............................................... 150
Experts..................................................... 150
Where You Can Find More Information......................... 150
Index to Financial Statements............................... F-1
Annex A -- Agreement and Plan of Merger
Annex B -- Fairness Opinion of The Blackstone Group, L.P.
Annex C -- Delaware General Corporation Law Section 262
</TABLE>
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The Securities and Exchange Commission allows Central Parking to "incorporate by
reference" information into this joint proxy statement/prospectus, which means
important information may be disclosed to you by referring you to another
document filed separately with the Securities and Exchange Commission. The
information incorporated by reference is deemed to be part of this joint proxy
statement/prospectus, except for any information superseded by information in
(or incorporated by reference in) this joint proxy statement/ prospectus.
If you are a Central Parking shareholder or Allright shareholder, you can obtain
any of the documents incorporated by reference through either Central Parking or
the Securities and Exchange Commission. Documents incorporated by reference are
available from Central Parking at no cost to you, including any exhibit that we
have specifically incorporated by reference in this joint proxy
statement/prospectus. In order to obtain such documents incorporated by
reference in this joint proxy statement/prospectus you may request them in
writing or by telephone from the appropriate party at the following address:
Central Parking Corporation
2401 21(st) Avenue South
Suite 200
Nashville, Tennessee 37212
Attention: Investor Relations
(615) 297-4255
If you would like to request documents from Central Parking, please do so by
February 8, 1999 to receive them before the special meetings.
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QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: Why are Central Parking and Allright proposing the merger?
A: The merger will combine the management and operational expertise and
resources of two of the leading parking services companies in the United
States. The merger also will create the opportunity for cost savings and
increased efficiencies. Central Parking and Allright believe the combined
company will be better positioned to capitalize on growth opportunities in
the parking industry.
Q: As an Allright shareholder, what will I receive in the merger?
A: In the merger, we estimate that Central Parking will issue to Allright
shareholders a total of approximately 7.6 million shares of Central Parking
common stock in exchange for all of the outstanding Allright common stock.
The actual number of shares of Central Parking common stock that will be
issued to Allright shareholders will be determined at closing by an exchange
ratio that is based on (A) an assumed value of $46.00 per share of Central
Parking common stock; (B) a base equity purchase price of Allright of
$564,390,050, adjusted for certain items such as assumed long-term debt,
working capital shortfalls and certain costs and expenses; and (C) the
number of shares of Allright common stock, warrants and certain options
outstanding as of the closing date. The amount of any adjustments to the
purchase price will be determined on the closing date of the merger.
Central Parking will not issue any fractional shares. Instead, you will
receive an amount of cash for any fraction of a share based on $46.00 per
share of Central Parking common stock.
For example: If you own 100 shares of Allright common stock, based on an
assumed equity purchase price (after making all adjustments) of $350,334,690
(estimated as of January 5, 1999) and 85,903 shares of Allright common
stock, warrants and certain options to purchase Allright common stock
(estimated to be outstanding on the closing date assuming the exercise of
all incentive stock options prior to that time), upon the completion of the
merger you will have the right to receive 8,865 shares of Central Parking
common stock with $36.80 in cash in place of fractional shares of Central
Parking common stock. This calculation is for illustrative purposes only and
does not represent what the actual exchange ratio will be.
Q: What happens as the market price of Central Parking common stock fluctuates?
A: Fluctuations in the market price of Central Parking common stock do not
affect the number of shares that will be received by Allright shareholders
in the merger. For purposes of calculating the exchange ratio, which will
determine the number of shares of Central Parking common stock to be
received by Allright shareholders in the merger, the per share value of
Central Parking common stock is $46.00. The actual market price of Central
Parking common stock may be either higher or lower than $46.00 on and after
the date the merger is consummated. For example, as of January 11, 1999, the
closing price of Central Parking common stock on the New York Stock Exchange
was $31.00.
Q: What can I do if I do not want to receive Central Parking common stock in
the merger?
A: Under Delaware corporate law, any Allright shareholder who does not wish to
receive Central Parking common stock in exchange for his Allright common
stock may dissent from the merger and seek an appraisal of his shares of
Allright common stock and request to be paid the fair value for his shares.
In order to qualify for this right, an Allright
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shareholder must comply with the conditions for appraisal rights contained
in section 262 of the General Corporation Law of the State of Delaware.
Q: As a Central Parking shareholder, how will the merger affect me?
A: The merger will not affect the number of shares of common stock you own. We
estimate that following the merger, you and the other current Central
Parking shareholders will own approximately 79.6% of the common stock of
Central Parking.
Q: What do I need to do now?
A: Please complete and mail the proxy card to us as soon as possible. If you
sign, date and mail your proxy card without indicating how you wish to vote,
your proxy will be counted as a vote in favor of approval of the merger
agreement and with respect to Central Parking, a vote in favor of the
charter amendment. If you fail to return your proxy card and fail to vote at
the meeting, the effect will be a vote against the merger agreement and with
respect to Central Parking, a vote against the charter amendment.
Q: What do I do if I want to change my vote?
A: If you are a Central Parking shareholder, you must deliver to Central
Parking prior to the Central Parking special meeting a later-dated, signed
proxy card or attend the Central Parking special meeting in person and vote.
If you are an Allright shareholder, you must deliver to Allright prior to
the Allright special meeting, a later-dated, signed proxy card or attend the
Allright special meeting in person and vote.
Q: If my shares are held in "street name" by my broker, will my broker vote my
shares for me?
A: You cannot vote shares held in "street name" -- only your broker can. If you
do not provide your broker with instructions on how to vote your shares,
your broker will not be permitted to vote them, and the effect will be a
vote against the merger.
Q: Should I send in my stock certificates now?
A: No. No one should send their stock certificates in now.
Allright shareholders: After the merger is completed, we will send you
written instructions on how to exchange your Allright common stock for
Central Parking common stock.
Central Parking shareholders: You will keep your shares of common stock and
so you should not send in your Central Parking certificates at all.
Q: When do you expect the merger to be completed?
A: We are working toward completing the merger as quickly as possible. In
addition to Central Parking shareholder approval and Allright shareholder
approval, Central Parking and Allright must also obtain clearance from the
Department of Justice, Antitrust Division, regarding antitrust matters. This
clearance may not be received prior to the special meetings. We hope to
complete the merger in early 1999.
Q: Whom should I call with questions?
A: If you are a Central Parking shareholder and you have any questions about
the merger, please call Randy Hunley, Investor Relations at Central Parking,
at (615) 297-4255. If you are an Allright shareholder and you have any
questions about the merger, please call Timothy L. Grady, Chief Operating
Officer at Allright at (713) 222-2505.
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SUMMARY
This summary highlights selected information from this joint proxy
statement/prospectus and may not contain all of the information that is
important to you. To understand the merger fully and for a more complete
description of the legal terms of the merger, you should read carefully this
entire document and the documents which are referred to in this joint proxy
statement/prospectus. See "Where You Can Find More Information" on page 152. We
have included page references in parentheses to direct you to a more complete
description of the topics presented in this summary.
THE COMPANIES (SEE PAGE 106 FOR CENTRAL PARKING AND PAGE 123 FOR ALLRIGHT)
CENTRAL PARKING CORPORATION
Central Parking Corporation
2401 21st Avenue South, Suite 200
Nashville, Tennessee 37212
(615) 297-4255
Central Parking is a leading provider of parking services, operating, as of
September 30, 1998, 2,440 parking facilities containing approximately 1,023,000
spaces in 35 states, the District of Columbia, Canada, Chile, Puerto Rico, the
United Kingdom, the Republic of Ireland, Spain, Germany, Mexico, and Malaysia.
Central Parking operates both multi-level parking facilities and surface lots.
ALLRIGHT HOLDINGS, INC.
Allright Holdings, Inc.
c/o Allright Corporation
1313 Main Street
Houston, TX 77002
(713) 222-2505
Allright is a holding company, the sole material asset of which is 100% of the
authorized, issued and outstanding shares of common stock of Allright
Corporation. Allright Corporation is one of the world's largest and most
experienced full-service parking management companies. As of September 30, 1998,
Allright operated 2,315 facilities in over one hundred cities across the United
States and Canada, including facilities in thirty-three states, the District of
Columbia, and two Canadian provinces.
RECOMMENDATION TO SHAREHOLDERS (SEE PAGES 25 AND 28)
The Central Parking board of directors believes that the merger is fair to you
and in your best interests and unanimously recommends that you vote "for"
approval of the merger agreement and the issuance of Central Parking common
stock related thereto. The Central Parking board of directors also unanimously
recommends that you vote "for" the amendment to the Central Parking charter to
increase the authorized shares of common stock from 50 million to 100 million.
The Allright board of directors believes that the merger is fair to you and in
your best interests and unanimously recommends that you vote "for" adoption of
the merger agreement.
REASONS FOR THE MERGER (SEE PAGES 25 AND 28)
The merger will enhance Central Parking's position as a leading parking services
provider and will broaden Central Parking's geographical base. Central Parking
believes that the opportu-
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nity for cost savings and increased efficiencies of merging with Allright, along
with the resulting combination of management and operational expertise and
resources, will enhance Central Parking's overall operations.
The total consideration to be received by Allright's shareholders pursuant to
the merger represents, in Allright's board of directors' opinion, an attractive
price for the outstanding Allright common stock, and would enable Allright's
shareholders to participate in the growth of Central Parking's business after
the merger. In addition, the shares of Central Parking common stock received by
the Allright shareholders pursuant to the merger are expected to be tradeable on
the New York Stock Exchange.
RECORD DATE; VOTING POWER (SEE PAGES 103 AND 105)
You are entitled to vote at the Central Parking special meeting if you owned
shares of Central Parking common stock as of the close of business on January
11, 1999, the Central Parking record date.
There were 29,579,628 shares of Central Parking common stock outstanding on the
Central Parking record date. Central Parking shareholders will have one vote at
the Central Parking special meeting for each share of Central Parking common
stock they own on the Central Parking record date.
You are entitled to vote at the Allright special meeting if you owned shares of
Allright common stock as of the close of business on January 11, 1999, the
Allright record date.
There were 79,376.5 shares of Allright common stock outstanding on the Allright
record date. Allright shareholders will have one vote at the Allright special
meeting for each share of Allright common stock they owned on the Allright
record date.
SHAREHOLDER VOTE REQUIRED TO APPROVE THE MERGER (SEE PAGES 104 AND 105)
The favorable vote of the holders of a majority of the shares of Central Parking
common stock entitled to be cast is required to approve the merger agreement and
the issuance of Central Parking common stock related to the merger. Your failure
to vote will have the effect of a vote against the merger.
The Carell Children's Trust, which owns approximately 24.2% of the outstanding
shares of Central Parking common stock, and Monroe J. Carell, Jr. and certain
trusts and foundations, which collectively own approximately 36.5% of the
outstanding shares of Central Parking common stock, have agreed that they will
vote their shares of Central Parking common stock in favor of the merger
agreement and the issuance of shares pursuant to the merger agreement.
Therefore, there will be a quorum at the Central Parking special meeting and
enough votes cast for approval of the merger agreement and the issuance of
shares pursuant to the merger agreement to ensure passage without the vote of
any other Central Parking shareholder.
The affirmative vote of the holders of a majority of the outstanding shares of
Allright common stock is required to adopt the merger agreement. Your failure to
vote will have the effect of a vote against the merger agreement. AEW, Apollo,
Gregory P. Shay, Timothy L. Grady and CBA Mortgage Partners, L.P., assuming the
exercise of all options and warrants expected to be vested upon closing, own
95.9% of the outstanding shares of Allright common stock, have agreed that they
will vote their shares of Allright common stock in favor of adoption of the
merger agreement. Therefore, there will be a quorum at the Allright special
meeting and
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enough votes cast for adoption of the merger agreement to ensure its passage
without the vote of any other Allright shareholder.
CENTRAL PARKING SHAREHOLDER VOTE REQUIRED TO APPROVE THE CHARTER AMENDMENT (SEE
PAGE 104)
The favorable vote of the holders of a majority of the shares of Central Parking
common stock entitled to be cast is required to approve the charter amendment
increasing the number of authorized shares of common stock from 50 million to
100 million. Your failure to vote will have the effect of a vote against the
charter amendment.
OWNERSHIP OF CENTRAL PARKING AFTER THE MERGER (SEE PAGE 120)
We estimate that Central Parking will issue a total of 7.6 million shares of
Central Parking common stock to Allright shareholders in the merger. Based on
that number, following the merger, Allright shareholders will own approximately
20.4% of the outstanding Central Parking common stock (assuming all Allright and
Central Parking stock options are exercised). This information is based on the
number of shares of Allright and Central Parking common stock outstanding on
January 11, 1999.
ACCOUNTING TREATMENT (SEE PAGE 37)
The merger is expected to be accounted for by Central Parking as a pooling of
interests, which means that, for accounting and financial purposes, we will
treat our companies as if the merger had occurred on October 31, 1996, the date
Allright acquired Allright Corporation.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES (SEE PAGE 37)
It is intended that the merger qualify as a tax-free reorganization such that
none of Central Parking, Allright or any of their shareholders will recognize
gain or loss for federal income tax purposes as a result of the merger. Allright
shareholders are expected to owe federal income tax only on gain realized in the
merger up to the amount of cash received for fractional shares of Central
Parking common stock.
Tax matters are very complicated and the tax consequences of the merger to you
will depend on the facts of your own situation. You should consult your tax
advisors for a full understanding of the tax consequences of the merger to you.
APPRAISAL RIGHTS (SEE PAGE 38 AND ANNEX C)
Under Tennessee law, Central Parking shareholders do not have any right to an
appraisal of the value of their Central Parking shares in connection with the
merger.
Under Section 262 of the General Corporation Law of the State of Delaware, any
Allright shareholder who does not wish to receive Central Parking common stock
in exchange for his shares of Allright common stock in the merger has the right
to dissent from the merger and to seek an appraisal of, and to be paid the fair
value for, his shares of Allright common stock, subject to the satisfaction by
such shareholder of the conditions for appraisal rights pursuant to Section 262.
Such conditions include Section 262's requirement that the shareholder deliver
to Allright, prior to the vote being taken on the merger at the special meeting,
written notice of his or her intent to demand payment for his or her shares of
Allright common stock
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if the merger is effected and not vote in favor of the merger. The full text of
Section 262 is included as Annex C to this joint proxy statement/prospectus.
INTERESTS OF OFFICERS AND DIRECTORS IN THE MERGER (SEE PAGE 43)
Certain directors of Allright and officers of Allright Corporation have
employment agreements, stock options and other benefit plans and other
arrangements that may provide them with interests in the merger that are
different from, or in addition to, those of the other Allright shareholders.
Such interests relate to, among other things:
- provisions in the merger agreement related to the execution of retention,
employment and management continuity agreements in connection with the
merger;
- the terms of certain severance agreements and employment agreements
between Allright and certain members of management providing for, in
certain circumstances, cash payments, acceleration of options and other
benefits upon a change of control of Allright (which would include the
merger); and
- provisions in the merger agreement relating to certain employee benefit
plans to be assumed by Central Parking in connection with the merger.
The items listed above involve a total dollar amount of less than $2.5 million
and also involve the acceleration of a total of 2,080 options for Allright's
chief executive officer and its other four most highly compensated executives.
In addition, certain current holders of Central Parking common stock as well as
Allright holders of Central Parking common stock after the merger will receive
certain registration rights relating to Central Parking common stock under a
registration rights agreement.
FAIRNESS OPINION OF CENTRAL PARKING'S FINANCIAL ADVISOR (SEE PAGE 30 AND ANNEX
B)
In deciding to approve the merger, Central Parking's board considered an opinion
from its financial advisor, The Blackstone Group, L.P., that the exchange ratio
is fair to the holders of Central Parking common stock from a financial point of
view. The Blackstone opinion does not constitute a recommendation to any holder
of Central Parking common stock or Allright common stock as to how to vote on
the proposed merger or any matter related thereto. Such opinion is attached as
Annex B to this joint proxy statement/prospectus. We encourage you to read the
opinion in its entirety.
COMPARATIVE PER SHARE MARKET PRICE INFORMATION (SEE PAGE 47)
Central Parking common stock is listed on the New York Stock Exchange. On
September 21, 1998, the last full trading day prior to the public announcement
of the proposed merger, Central Parking common stock closed at $46.125. On
January 11, 1999, Central Parking common stock closed at $31.00. Allright common
stock is not listed on an exchange and there is no public market for Allright
common stock.
LISTING OF CENTRAL PARKING COMMON STOCK
Central Parking has applied to list the shares of its common stock to be issued
in the merger on the New York Stock Exchange.
6
<PAGE> 13
EFFECT OF TERMINATION (SEE PAGE 85)
In the event the merger agreement is terminated for any reason, Central Parking
has agreed, generally speaking, not to solicit, or enter into any agreements to
operate any facilities which Allright or any of its subsidiaries operated or
have binding agreements to operate as of the date of the merger agreement or the
date of termination of the merger agreement. In addition, Central Parking has
agreed not to employ or solicit any employee of Allright as of the date of the
merger agreement or the date of termination of the merger agreement. The term of
these restrictions is for three years if the merger is not completed because of
Central Parking's breach of the merger agreement or because of a material
adverse change to Allright, or for eighteen months if the merger is not
completed for any other reason. These restrictions, if imposed, would prevent
Central Parking from competing with Allright for Allright's existing locations.
CERTAIN RELATED AGREEMENTS (SEE PAGES 89 AND 100)
Registration Rights Agreement. In order to provide a mechanism for significant
shareholders to dispose of their Central Parking common stock with a minimized
impact on Central Parking's trading market, Central Parking agreed to allow
certain shareholders to require Central Parking to register such shares under
the federal securities laws. These rights were granted in a registration rights
agreement entered into in connection with the merger. Pursuant to this
agreement, the Allright shareholders will have the right to sell up to $250
million worth of Central Parking common stock received in the merger in one or
more registered public offerings of Central Parking common stock to be conducted
subsequent to the merger, as well as the right to sell up to all of the Central
Parking common stock they received in the merger pursuant to a registration
statement to be filed and kept continuously effective by Central Parking. Monroe
J. Carell, Jr. and certain related holders will also have the right to sell up
to $100 million worth of Central Parking common stock in such offerings and up
to an additional $150 million worth of Central Parking common stock pursuant to
such continuously effective registration statement.
Transaction Support Agreements. To ensure that certain significant shareholders
of Central Parking vote in favor of the merger, Central Parking, The Carell
Children's Trust and Monroe J. Carell, Jr., personally and on behalf of certain
trusts and foundations, have entered into agreements with Allright, and certain
of its shareholders, in which Monroe J. Carell, Jr. and The Carell Children's
Trust, have each agreed, among other things, to vote their Central Parking
common stock in favor of approval of the merger and other related agreements and
transactions, and not to vote the Central Parking common stock in a manner which
would otherwise prevent or delay the consummation of the transactions
contemplated by the merger agreement. The Carell Children's Trust owns
approximately 24.2% of the outstanding shares of Central Parking common stock.
Mr. Carell and the trusts and foundations on whose behalf he signed collectively
own approximately 36.5% of the outstanding shares of Central Parking common
stock.
Allright, Gregory P. Shay, Timothy L. Grady and CBA Mortgage Partners, L.P. have
entered into agreements similar to those discussed above with Central Parking
and Central Parking Sub, in which Messrs. Shay and Grady and CBA Mortgage
Partners, L.P. who, assuming the exercise of all options and warrants expected
to be vested on closing, in total own approximately 6.3% of the outstanding
shares of Allright common stock have each agreed, among other things, to vote
their Allright common stock in favor of approval of the merger and other related
agreements and transactions, and not to vote the Allright common stock in
7
<PAGE> 14
a manner which would prevent or delay the consummation of the transactions
contemplated by the merger agreement.
The transaction support agreements do not prohibit Mr. Carell or Mr. Shay from
acting in accordance with their fiduciary duties as officers or directors of
Central Parking or Allright, respectively.
RECENT DEVELOPMENTS
On November 23, 1998, Central Parking issued a press release announcing
preliminary results for the quarter and year ended September 30, 1998. In that
release, Central Parking stated that net earnings for the fourth fiscal quarter
of 1998 were expected to be approximately $0.23 per diluted share versus a
consensus published estimate of $0.28 per diluted share. Central Parking
believes that several factors in September affected Central Parking's margins in
the fourth quarter, including the timing of certain calendar-related events and
less-than-expected revenue increases from Kinney System Holding Corp. Central
Parking also recognized a higher effective income tax rate for the year. In
addition, Central Parking stated in the press release that its planning for
fiscal 1999 is based on achieving an anticipated growth in earnings comparable
to that achieved in fiscal 1998. On November 23, 1998, Central Parking's common
stock closed at $42.50. On November 24, 1998, the day after the press release
described above was issued, Central Parking's common stock closed at $31.0625.
On December 4, 1998, Central Parking issued its earnings release with respect to
the quarter ended September 30, 1998. In the release, Central Parking reported
revenues for the fourth quarter of $112.0 million compared with $64.8 million in
the year-earlier period. Operating earnings for the quarter were $12.2 million
compared with $7.9 million. Net earnings for the quarter totaled $6.7 million
compared with $6.6 million in the year-earlier period. Total revenues for the
fiscal year ended September 30, 1998 were $383.2 million compared with $220.5
million for fiscal 1997. Operating earnings for fiscal 1998 were $46.9 million
compared with $27.9 million in fiscal 1997. Net earnings for fiscal 1998 totaled
$26.6 million compared with $20.2 million in fiscal 1997.
8
<PAGE> 15
SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA
Set forth below is selected historical and unaudited pro forma condensed
combined financial data of Central Parking and selected historical consolidated
financial data of Allright and its predecessor, Allright Corporation.
The Central Parking historical consolidated balance sheet and statement of
earnings data as of and for the five fiscal years ended September 30, 1998 were
derived from the audited consolidated financial statements of Central Parking.
The Allright Corporation historical consolidated balance sheet and statement of
earnings data as of and for the three fiscal years ended June 30, 1996, and for
the period from July 1, 1996 to October 30, 1996, were derived from the audited
consolidated financial statements of Allright Corporation. The Allright
historical consolidated balance sheet data as of June 30, 1997 and 1998, and the
historical consolidated statement of earnings data for the period from October
31, 1996 to June 30, 1997 and for the fiscal year ended June 30, 1998, were
derived from the audited historical consolidated financial statements of
Allright. The Allright historical consolidated balance sheet and statement of
operations data as of and for the three month periods ended September 30, 1997
and 1998 were derived from the unaudited consolidated financial statements of
Allright. Allright's historical results of operations for the three months ended
September 30, 1998 are not necessarily indicative of the actual results that may
be experienced for fiscal year 1999. On October 31, 1996, Allright Acquisition
Company, Inc., a wholly owned subsidiary of Allright, acquired Allright
Corporation. Allright Acquisition Company, Inc. merged with and into Allright
Corporation at the closing of the transaction. The acquisition was accounted for
as a purchase, and accordingly, the purchase price was allocated to the assets
and liabilities of Allright Corporation based on their estimated fair values at
the acquisition date. Accordingly, the consolidated financial statements of
Allright are not comparable to those of Allright Corporation, in material
respects, since these financial statements report financial position, results of
operations and cash flows of these two separate entities.
The selected unaudited pro forma information gives effect to Central Parking's
acquisitions in its fiscal year 1997 of Civic Parking LLC, Square Industries,
Inc., and Car Park Corporation, and Central Parking's acquisitions in its fiscal
year 1998 of Diplomat Parking Corporation, Kinney System Holding Corp., Central
Parking System of Louisiana, Inc., and Turner Parking Systems, Inc.,
collectively referred to as the purchase acquisitions. All such purchase
acquisitions were accounted for using the purchase method of accounting. The
purchase method of accounting requires that all assets and liabilities of the
acquired companies be adjusted to their respective estimated fair market values
as of the dates of acquisition. The unaudited pro forma information assumes the
purchase acquisitions occurred October 1, 1996 with respect to the pro forma
statements of earnings for the years ended September 30, 1997 and 1998. The
selected unaudited pro forma information also gives effect to the merger of a
wholly owned subsidiary of Central Parking with Allright using the pooling of
interests method of accounting. The pooling of interests method of accounting
combines assets and liabilities at their historical bases, and restates the
results of operations as if the Central Parking subsidiary and Allright had
merged as of October 31, 1996, the date that Allright, the successor company,
acquired Allright Corporation, the predecessor company.
The pro forma fully combined results for the fiscal year ended September 30,
1997 reflect Central Parking's historical results of operations for its fiscal
year ended September 30, 1997 combined with Allright's historical results of
operations for the period from October 31, 1996
9
<PAGE> 16
to September 30, 1997 as if the merger had occurred on October 31, 1996. The pro
forma fully combined results for the fiscal year ended September 30, 1998
reflect Central Parking's historical results of operations for the year ended
September 30, 1998 combined with Allright's historical results of operations for
its fiscal year ended June 30, 1998 as if the merger had occurred on October 31,
1996. The pro forma fully combined balance sheet data reflects Central Parking's
historical September 30, 1998 balance sheet information combined with Allright's
historical June 30, 1998 balance sheet information, and assumes the merger
occurred on September 30, 1998.
Central Parking's historical earnings per share data reflects the three-for-two
stock split on December 12, 1997 and the adoption in the first quarter of fiscal
1998 of Statement of Financial Accounting Standards No. 128, "Earnings per
Share." The pro forma earnings per share amounts give effect to the purchase
acquisitions and assumes 7.6 million shares of Central Parking common stock are
issued to Allright shareholders in the merger. The pro forma fully combined
earnings from continuing operations per share amounts for fiscal year 1997
assumes that the 7.6 million common shares were outstanding for the eleven-month
period Allright historical operations were included in the pro forma fully
combined statement of earnings.
The selected unaudited pro forma information is not necessarily representative
of what Central Parking's results of operations or financial position would have
been had the purchase acquisitions and the merger in fact occurred on the
respective dates set forth in the "Unaudited Pro Forma Condensed Combined
Financial Statements," and is not intended to project the Central Parking's
results of operations or financial position for any future period or date.
The information set forth below should be read in conjunction with the
historical "Consolidated Financial Statements and Notes" thereto of Central
Parking, Allright Corporation, and Allright, the "Unaudited Pro Forma Condensed
Combined Financial Statements" and Notes thereto, and the respective
"Management's Discussion and Analysis of Financial Condition and Results of
Operation" for Central Parking and Allright, all of which information is
included elsewhere herein.
10
<PAGE> 17
SELECTED HISTORICAL FINANCIAL DATA OF CENTRAL PARKING CORPORATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
--------------------------------------------------
1994 1995 1996 1997 1998
------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
STATEMENT OF EARNINGS DATA:
Revenues:
Parking........................................ $82,890 $94,383 $109,272 $180,886 $328,285
Management contract............................ 28,438 30,630 32,534 39,568 54,890
------- ------- -------- -------- --------
Total revenues............................. 111,328 125,013 141,806 220,454 383,175
Costs and expenses:
Cost of parking................................ 76,112 86,050 97,686 157,382 280,288
Cost of management contracts................... 9,812 9,650 9,769 11,793 15,000
General and administrative..................... 14,196 15,711 17,419 22,507 33,866
Goodwill and non-compete amortization.......... -- -- -- 920 7,140
------- ------- -------- -------- --------
Total costs and expenses................... 100,120 111,411 124,874 192,602 336,294
------- ------- -------- -------- --------
Operating earnings......................... 11,208 13,602 16,932 27,852 46,881
------- ------- -------- -------- --------
Interest expense................................... 39 0 0 4,582 7,373
Dividends on company-obligated mandatorily
redeemable convertible securities of a subsidiary
trust............................................ -- -- -- -- 3,160
Net gains on sales of property and equipment....... 2,214 81 1,192 3,137 71
Earnings before income taxes....................... 14,143 15,507 21,068 32,412 44,224
Income taxes....................................... 5,179 5,563 7,232 12,207 17,614
Net earnings....................................... $ 8,964 $ 9,944 $ 13,836 $ 20,205 $ 26,610
Earnings per common share:
Basic.......................................... N/A $ 0.43 $ 0.54 $ 0.78 $ 0.96
Diluted........................................ N/A $ 0.43 $ 0.53 $ 0.77 $ 0.94
OTHER DATA:
Depreciation and amortization...................... $ 2,594 $ 2,882 $ 3,420 $ 6,499 $ 15,283
</TABLE>
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30,
--------------------------------------------------
1994 1995 1996 1997 1998
------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.......................... $12,026 $10,218 $ 28,605 $ 9,979 $ 19,840
Working capital (deficit).......................... 1,987 2,676 19,707 (9,231) (24,124)
Goodwill........................................... -- -- -- 31,863 254,997
Total assets....................................... 60,029 70,440 107,212 234,014 544,873
Long-term debt and capital lease obligations, less
current portion.................................. -- -- -- 73,252 60,704
Mandatorily redeemable convertible preferred
securities of trust subsidiary................... -- -- -- -- 110,000
Shareholders' equity............................... 31,861 41,360 76,793 96,851 255,704
</TABLE>
The earnings per share data reflects the recapitalization of Central Parking on
September 29, 1995, three-for-two stock splits effective on each of March 19,
1996 and December 12, 1997, and the adoption of Statement of Financial
Accounting Standards ("SFAS") No. 128, "Earnings per Share."
11
<PAGE> 18
SELECTED HISTORICAL FINANCIAL DATA OF ALLRIGHT CORPORATION
AND ALLRIGHT HOLDINGS, INC.
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
ALLRIGHT CORPORATION (PREDECESSOR COMPANY) ALLRIGHT HOLDINGS, INC. (SUCCESSOR COMPANY)
--------------------------------------------- ----------------------------------------------------
JULY 1, 1996 THREE MONTHS ENDED
YEAR ENDED JUNE 30, TO OCTOBER 31, 1996 YEAR ENDED SEPTEMBER 30,
------------------------------ OCTOBER 30, TO JUNE 30, --------------------
1994 1995 1996 1996 JUNE 30, 1997 1998 1997 1998
-------- -------- -------- ------------ ---------------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF EARNINGS/
(LOSS) DATA:
Total revenues............ $164,952 $172,997 $172,354 $60,079 $118,558 $217,384 $ 51,021 $ 59,234
Cost and expense:
Cost of parking.......... 132,981 138,764 138,604 45,268 94,374 169,811 40,415 46,458
Depreciation and
amortization........... 6,322 6,446 6,257 2,019 5,328 10,810 2,407 2,941
General and
administrative......... 8,375 8,849 9,271 8,340 6,207 11,919 2,412 3,586
-------- -------- -------- ------- -------- -------- -------- --------
Total costs and
expenses.......... 147,678 154,059 154,132 55,627 105,909 192,540 45,234 52,985
-------- -------- -------- ------- -------- -------- -------- --------
Operating
earnings.......... 17,274 18,938 18,222 4,452 12,649 24,844 5,787 6,249
-------- -------- -------- ------- -------- -------- -------- --------
Interest expense.......... 6,902 6,914 5,915 1,786 13,915 22,859 5,493 6,500
Net gains(losses) on sales
of property and
equipment................ 979 690 1,101 110 (19) (710) (41) (3)
Earnings (loss) before
income taxes, cumulative
effect of accounting
changes, and
extraordinary items...... 12,511 13,390 14,137 3,016 (715) 2,294 525 244
Income taxes.............. 4,927 5,878 5,955 1,186 1,151 2,226 433 264
Income (loss) before
cumulative effect of
accounting change and
extraordinary item....... 7,584 7,512 8,182 1,830 (1,866) 68 92 (20)
Cumulative effect of
accounting change........ 927 -- -- -- -- -- -- --
Extraordinary item,
defeasance of bonds...... -- -- -- -- (1,534) -- -- --
Net earnings (loss)....... $ 6,657 $ 7,512 $ 8,182 $ 1,830 ($ 3,400) $ 68 $ 92 $ (20)
OTHER DATA:
Depreciation and
amortization, including
debt issue costs and
goodwill................. $ 6,322 $ 6,446 $ 6,257 $ 2,019 $ 7,048 $ 13,391 $ 3,053 $ 3,586
</TABLE>
<TABLE>
<CAPTION>
ALLRIGHT CORPORATION
(PREDECESSOR COMPANY) ALLRIGHT HOLDINGS, INC. (SUCCESSOR COMPANY)
---------------------------------- ----------------------------------------------------
AS OF JUNE 30, AS OF SEPTEMBER 30,
------------------------------------------------------------------ --------------------
1994 1995 1996 1997 1998 1997 1998
-------- -------- ------------ ---------------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash
equivalents.............. $ 16,652 $ 3,652 $ 7,754 $ 7,329 $ 19,655 $ 6,831 $ 30,904
Working capital
(deficit)................ (12,809) (30,884) (29,086) (10,494) (8,710) (9,308) 1,469
Total assets.............. 191,520 188,176 197,292 363,799 408,269 363,973 436,667
Long-term debt and capital
lease obligations, less
current portion.......... 62,345 50,460 43,305 200,473 222,615 199,797 242,768
Shareholders' equity...... 90,231 91,468 104,025 75,414 85,894 77,012 85,670
</TABLE>
12
<PAGE> 19
UNAUDITED SELECTED PRO FORMA CONDENSED
COMBINED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA FULLY COMBINED
---------------------------------------------
FISCAL YEARS ENDED SEPTEMBER 30,
---------------------------------------------
1997 1998
--------------------- ---------------------
<S> <C> <C>
STATEMENT OF EARNINGS DATA:
Revenues:
Parking and management contract
revenues........................... $573,125 $653,122
Cost and expense:
Cost of parking and management
contracts.......................... 449,634 500,238
General and administrative............ 66,127 69,827
Amortization of goodwill and
noncompete agreements.............. 10,747 11,219
-------- --------
Total costs and expenses...... 526,508 581,284
-------- --------
Operating earnings............ 46,617 71,838
-------- --------
Interest income......................... 4,055 4,508
Interest expense........................ 40,905 35,569
Dividends on mandatorily redeemable
convertible securities of a subsidiary
trust................................. -- 3,160
Net gains (losses) on sales of property
and equipment......................... 2,298 (639)
Equity in partnership and joint venture
earnings.............................. 5,582 5,543
Earnings from continuing operations
before income taxes................... 16,855 42,232
Income taxes............................ 10,991 19,238
Earnings from continuing operations..... $ 5,864 $ 22,994
======== ========
Earnings from continuing operations per
common share:
Basic................................. $ 0.17 $ 0.64
Diluted............................... $ 0.17 $ 0.63
OTHER DATA:
Depreciation and amortization........... $ 29,890 $ 31,576
======== ========
</TABLE>
<TABLE>
<CAPTION>
PRO FORMA FULLY COMBINED
------------------------
AS OF SEPTEMBER 30, 1998
------------------------
<S> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............................... $ 39,495
Working capital (deficit)............................... (55,714)
Goodwill................................................ 287,290
Total assets............................................ 956,062
Long-term debt and capital lease obligations, less
current portion....................................... 283,319
Mandatorily redeemable convertible securities of trust
subsidiary............................................ 110,000
Shareholders' equity.................................... 322,218
</TABLE>
13
<PAGE> 20
COMPARATIVE PER SHARE DATA
Set forth below is per share data of Central Parking and Allright on an
historical and pro forma fully combined basis. The Central Parking historical
information gives effect to the recapitalization of Central Parking on September
29, 1995, and three-for-two stock splits each effective on March 19, 1996 and
December 12, 1997. In addition, the earnings per share data has been restated to
reflect Central Parking's adoption in the first quarter of fiscal 1998 of
Statement of Financial Accounting Standards No. 128 "Earnings per Share." The
pro forma fully combined information gives effect to the merger of a wholly
owned subsidiary of Central Parking and Allright, accounted for as a pooling of
interests, assuming that the outstanding shares of Allright are exchanged for
7.6 million shares of Central Parking common stock. The pro forma fully combined
information also gives effect to the purchase acquisitions and reflects the
restatement of weighted average common shares outstanding assuming the purchase
acquisitions occurred October 1, 1996 and the merger between an indirect wholly
owned subsidiary of Central Parking and Allright occurred October 31, 1996. Pro
forma dividend information is based on Central Parking's historical dividend
rates for historical and pro forma periods. Since Allright Corporation and
Allright were not public companies, the share and per share data is not
applicable. Further, Allright has not paid any dividends during the historical
periods presented. Historical and pro forma book value per common share data is
based on amounts and common shares at the end of each period presented. The
information set forth below should be read in conjunction with Central
Parking's, Allright Corporation's and Allright's historical Consolidated
Financial Statements and the Notes thereto, the "Unaudited Pro Forma Condensed
Combined Financial Statements" and Notes thereto, and "Management's Discussion
and Analysis of Financial Condition and Results of Operations" for Central
Parking and Allright included elsewhere in this joint proxy
statement/prospectus.
<TABLE>
<CAPTION>
FISCAL YEARS ENDED SEPTEMBER 30,
-------------------------------------
CENTRAL PARKING CORPORATION 1995 1996 1997 1998
HISTORICAL PER SHARE DATA: ------- ------- ------- -------
<S> <C> <C> <C> <C>
Income from continuing operations:
Basic..................................... $ 0.43 $ 0.54 $ 0.78 $ 0.96
Diluted................................... $ 0.43 $ 0.53 $ 0.77 $ 0.94
Weighted average common shares, in
thousands:
Basic..................................... 23,058 25,762 25,991 27,857
Diluted................................... 23,058 26,042 26,330 28,326
Dividends per common share.................. $ -- $0.0500 $0.0575 $0.0600
Book value per common share................. $ 1.79 $ 2.93 $ 3.68 $ 8.65
</TABLE>
14
<PAGE> 21
<TABLE>
<CAPTION>
FISCAL YEARS ENDED THREE MONTHS ENDED
JUNE 30, SEPTEMBER 30,
--------------------- -----------------------
ALLRIGHT HOLDINGS, INC. HISTORICAL 1997 1998 1997 1998
PER SHARE DATA: --------- --------- ---------- ----------
<S> <C> <C> <C> <C>
Income from continuing operations:
Basic............................. N/A N/A N/A N/A
Diluted........................... N/A N/A N/A N/A
Weighted average common shares, in
thousands:
Basic............................. N/A N/A N/A N/A
Diluted........................... N/A N/A N/A N/A
Dividends per common share.......... $ -- $ -- $ -- $ --
Book value per common share......... $1,020.20 $1,082.81 $ 1,031.35 $ 1,079.73
</TABLE>
<TABLE>
<CAPTION>
FISCAL YEARS
-------------------------
UNAUDITED PRO FORMA FULLY COMBINED 1997 1998
PER SHARE DATA: ----------- -----------
<S> <C> <C>
Income from continuing operations:
Basic................................................... $ 0.17 $ 0.64
Diluted................................................. 0.17 0.63
Weighted average common shares, in thousands:
Basic................................................... 33,910 35,816
Diluted................................................. 34,249 36,285
Dividends per common share................................ $0.0575 $0.0600
Book value per common share............................... N/A $ 8.67
</TABLE>
15
<PAGE> 22
RISK FACTORS
Central Parking shareholders and Allright shareholders should carefully consider
the following matters, together with the other information contained in this
joint proxy statement/prospectus (including the matters addressed in "The
Merger -- Forward-Looking Statements May Prove Inaccurate") before determining
whether to vote to approve the merger agreement.
IF WE ARE UNABLE TO SUCCESSFULLY INTEGRATE ALLRIGHT, WE COULD LOSE KEY
EMPLOYEES, CUSTOMERS AND FAIL TO REALIZE THE EXPECTED BENEFITS OF THE
MERGER. The merger involves the integration of two companies that have
previously operated independently. Although Central Parking has acquired and
integrated various companies into its organizational and financial structure in
the past, Allright is a larger company than any of the companies Central Parking
has acquired previously. No assurance can be given that Central Parking will be
able to integrate the operations of Allright without encountering difficulties
or experiencing the loss of key Central Parking or Allright employees or
customers, or that the benefits expected from such integration will be realized.
Moreover, the merger will require significant integration of the two companies'
information systems at a time when both companies are taking steps to address
their year 2000 issues and are in the process of converting their information
systems. As a result of the merger, Central Parking will substantially increase
the number of persons it employs, the number of facilities it operates, and the
geographic markets it services. Although Central Parking believes that it can
successfully integrate and manage the acquired operations and achieve certain
economies of scale, there can be no assurance that Allright will be successfully
integrated into Central Parking's operations, that cost savings or operating
efficiencies will be realized to the extent anticipated by Central Parking, or
that the acquired operations will achieve levels of profitability that justify
Central Parking's investments.
THE FAILURE TO SUCCESSFULLY INTEGRATE PAST AND FUTURE ACQUISITIONS COULD
HAVE A NEGATIVE IMPACT ON CENTRAL PARKING'S BUSINESS AND THE MARKET PRICE OF ITS
COMMON STOCK. In addition to the merger, Central Parking completed three
acquisitions in fiscal 1997 and four acquisitions in fiscal 1998, including the
Kinney System Holding Corp. acquisition in February 1998, and plans to complete
additional acquisitions in the future. With respect to the acquisition of Kinney
System Holding Corp., Central Parking has achieved lower than expected increases
in revenue. Central Parking can give no assurance that any acquired facility or
company will be successfully integrated into its operations. Also, because of
the price paid by Central Parking or because of the performance of acquired
operations after such acquisitions, there can be no assurance that the results
of the acquired operations will not be dilutive to Central Parking's per share
earnings. Any acquisition contemplated or completed by Central Parking may
result in adverse short-term effects on Central Parking's reported operating
results, divert management's attention, introduce difficulties in retaining,
hiring and training key personnel, and introduce risks associated with
unanticipated problems or legal liabilities, some or all of which could have a
negative effect on Central Parking's business and financial results.
Central Parking receives information regarding potential acquisitions from time
to time, however, there are currently no material acquisitions other than the
merger which Central Parking believes are more likely than not to occur. Central
Parking believes the stock market currently expects a continued significant rate
of acquisitions by Central Parking. There can be no assurance that Central
Parking will be able to consummate parking facility or company acquisitions in
the future at the rate currently expected, if at all.
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<PAGE> 23
THE TRADING PRICE OF CENTRAL PARKING COMMON STOCK FLUCTUATES AND ALLRIGHT
SHAREHOLDERS COULD RECEIVE LESS THAN THE $46.00 PER SHARE ASSUMED IN THE
MERGER. Upon completion of the merger, each share of Allright common stock will
be converted into Central Parking common stock based on a calculation that
assumes a value of $46.00 per share of Central Parking common stock. During the
twelve-month period ending on January 11, 1999 (the most recent practicable date
prior to the printing of this joint proxy statement/ prospectus), the closing
price of Central Parking common stock varied from a low of $25.875 to a high of
$52.625 and on that date closed at $31.00. Although the $46.00 per share assumed
value was negotiated by the parties after taking into account the then-current
trading price of Central Parking common stock, there is no guarantee that
Central Parking common stock will be worth $46.00 in the future. Therefore,
since the price of the Central Parking common stock is fixed for purposes of the
exchange ratio and will not be adjusted in the event of any increase or decrease
in the price of Central Parking common stock, Allright's shareholders could
receive Central Parking common stock that is worth less than $46.00, which will
lower the total consideration each Allright shareholder will receive in the
merger. Such variations may be the result of changes in the business, operations
or prospects of Central Parking, Allright or the combined company, market
assessments of the likelihood that the merger will be consummated and the timing
thereof, regulatory considerations, general market and economic conditions and
other factors. As set forth above, if the market value of Central Parking common
stock is lower than $46.00 on the closing date of the merger, then the fixed
valuation of Central Parking common stock would result in holders of Allright
common stock receiving less total consideration than they would have received if
the market value of Central Parking common stock on the closing date of the
merger was equal to or higher than $46.00 per share. Because the completion of
the merger may occur at a date later than the special meetings, there can be no
assurance that the price of Central Parking common stock on the date of the
special meetings will be indicative of the price at the completion of the
merger. At the time of the special meetings, Allright shareholders will not know
the exact value of the Central Parking common stock that they will receive when
the merger is completed.
In addition to the possibility that Central Parking common stock will not be
worth $46.00 at the completion of the merger, Allright shareholders will also
have a continuing risk associated with holding Central Parking common stock. Due
to the large number of shares of Central Parking common stock Allright
shareholders will own, and due to various securities law restrictions on certain
Allright shareholders selling their Central Parking common stock, it may not be
possible for the Allright shareholders to immediately liquidate their holdings
of Central Parking common stock. Therefore, until such time as the Allright
shareholders dispose of all of their Central Parking common stock, such
shareholders may experience a reduction in the value of their Central Parking
common stock in the event of an overall loss of market value for Central Parking
common stock.
Allright shareholders are urged to obtain current market quotations for Central
Parking common stock.
IF WE DO NOT OBTAIN TIMELY ANTITRUST CLEARANCE FROM THE DEPARTMENT OF
JUSTICE OR A STATE ATTORNEY GENERAL OBJECTS TO THE MERGER ON ANTITRUST GROUNDS,
WE MAY NOT BE ABLE TO COMPLETE THE MERGER. The consummation of the merger is
conditioned upon the expiration or termination of the applicable waiting period
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. Central Parking
and Allright both made the filings required under Hart-Scott-Rodino on October
8, 1998. On November 6, 1998, Central Parking and Allright
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<PAGE> 24
each received a request for additional information relating to their
Hart-Scott-Rodino filings. In addition, Central Parking has received notices
from the States of Tennessee, Ohio and Texas that they are reviewing the merger
from an antitrust perspective. Each state has requested certain information
relating to the merger in the form of a civil investigative demand. New York,
Colorado and Illinois have also indicated that they may issue such demands. At
any time before or after consummation of the merger, the Department of Justice,
the Federal Trade Commission, a state governmental authority or a private person
or entity could take such action under the antitrust laws as it deems necessary
or desirable in the public interest, including seeking to enjoin the merger or
seeking divestiture of substantial assets of Central Parking or Allright or
their subsidiaries. In the event the Department of Justice seeks a divestiture
of assets by either Central Parking or Allright and Central Parking or Allright,
as required, agrees to such divestiture (which neither party has an obligation
to do) the merger agreement provides that the equity purchase price for Allright
will be adjusted based upon a formula set forth in the agreement. This formula
provides for an adjustment equal to 35% multiplied by the difference between (A)
the appraised value of the divested property or operations and (B) 16 times
EBITDA for such property or operations for the prior fiscal year. As a result,
there can be no assurance that the completion of the merger will not be delayed
or challenged on antitrust grounds.
IF CENTRAL PARKING IS UNABLE TO MAINTAIN ITS HISTORICAL PERCENTAGE GROWTH
RATE, THE MARKET PRICE OF ITS STOCK MAY BE ADVERSELY AFFECTED. Central Parking
believes that the market price of its common stock includes an expectation of
continued growth at a rate similar to its historical percentage growth rate. As
Central Parking continues to expand its operations, its ability to maintain its
historical percentage growth rate is expected to become increasingly difficult.
The merger with Allright will significantly increase the size of the company,
which is likely to reduce the impact of future acquisitions on the results of
operations of Central Parking. Central Parking's growth rate also will be
directly affected by the increasingly competitive environment for acquisitions
of other operators and Central Parking's ability to obtain suitable financing
for acquisitions. In addition, the growth rate will be affected by the results
of operations of added parking facilities, which will depend largely upon
Central Parking's ability to integrate acquired operations. There can be no
assurance that Central Parking's failure to maintain its historical percentage
growth rate will not negatively affect the market price of its stock.
IF SIGNIFICANT SHAREHOLDERS OF CENTRAL PARKING SELL A SUBSTANTIAL AMOUNT OF
THEIR STOCK AT THE SAME TIME, THESE SALES COULD HAVE AN ADVERSE IMPACT ON THE
MARKET PRICE OF CENTRAL PARKING COMMON STOCK. In connection with the merger, we
estimate that Central Parking will issue 7.6 million shares of Central Parking
common stock. After the merger there will be several shareholders who own
significant blocks of Central Parking common stock. If each of these significant
shareholders sold a substantial amount of Central Parking common stock as
allowed under the Securities Act at the same time, such sales could have a
significant negative impact on the market price of Central Parking common stock.
In order to provide a mechanism for these significant shareholders to dispose of
their shares of Central Parking common stock with a minimized impact on Central
Parking's trading market, Central Parking agreed to allow certain shareholders
to require Central Parking to register such shares under the federal securities
laws. Therefore, Central Parking, Allright and certain affiliates entered into a
registration rights agreement. The registration rights agreement requires
Central Parking to register up to $250 million worth of Central Parking common
stock issued pursuant to the merger in one or more registered public offerings
and up to $100
18
<PAGE> 25
million worth of Central Parking common stock currently held by certain Central
Parking shareholders. These offerings will potentially result in a large number
of shares of Central Parking common stock being sold in the market which, in
turn, could result in a reduction in the market price of Central Parking common
stock.
THE SALE OF A SUBSTANTIAL NUMBER OF SHARES OF CENTRAL PARKING COMMON STOCK
BY MONROE CARELL, CHAIRMAN AND CHIEF EXECUTIVE OFFICER OF CENTRAL PARKING, THE
CARELL CHILDREN'S TRUST AND VARIOUS OTHER CARELL FAMILY TRUSTS AND FOUNDATIONS
UNDER THE REGISTRATION RIGHTS AGREEMENT, COULD NEGATIVELY AFFECT THE MARKET
PRICE OF CENTRAL PARKING COMMON STOCK. The Registration Rights Agreement grants
Monroe Carell, Jr., The Carell Children's Trust and various other Carell family
trusts and foundations rights to sell up to $100 million of Central Parking
common stock in an initial underwritten offering after the merger and up to $150
million in subsequent offerings. Although Monroe Carell and the other entities
described above will remain significant shareholders following such sales, the
sale of substantial amounts of stock by insiders, such as Monroe Carell, could
be perceived negatively by the securities market. As a result, these sales could
adversely affect the market price of Central Parking common stock.
CENTRAL PARKING WILL BE UNABLE TO RAISE MONEY THROUGH COMMON STOCK
OFFERINGS UNTIL IT COMPLETES ITS OBLIGATIONS UNDER THE REGISTRATION RIGHTS
AGREEMENT. The registration rights agreement provides certain limitations and
restrictions upon Central Parking's ability to issue new shares of Central
Parking common stock. Until shareholders of Allright have received gross
proceeds of at least $250 million from the sale of Central Parking common stock
and certain current shareholders of Central Parking have received at least $100
million from the sale of Central Parking common stock in either registered
offerings or otherwise, Central Parking cannot sell any shares of its common
stock on its own behalf, subject to certain exceptions. As a result, Central
Parking may not have access to the capital markets for a significant period of
time. There can be no assurance or guarantee that the restrictions upon Central
Parking's ability to raise funds through common stock offerings will not have a
negative effect on Central Parking.
INCREASED INDEBTEDNESS RESULTING FROM THE MERGER COULD ADVERSELY AFFECT
CENTRAL PARKING'S ABILITY TO BORROW ADDITIONAL FUNDS IN THE FUTURE. In
addition, as a result of the merger, Central Parking's indebtedness will
increase from approximately $68.6 million, as of December 31, 1998, to
approximately $333.6 million, which may affect its ability to borrow additional
funds in the future. Thus, Central Parking may have limited sources to raise
additional funds if needed in its operations or for additional acquisitions.
There can be no assurance that Central Parking's increased debt level will not
have a negative effect on Central Parking.
THE INCREASED NUMBER OF LEASED AND OWNED FACILITIES RESULTING FROM THE
MERGER WILL INCREASE THE RISK THAT CENTRAL PARKING WILL NOT BE ABLE TO COVER ITS
FIXED COSTS. As a result of the merger, the combined company will lease and own
significantly more facilities than Central Parking currently leases and owns.
Although there is more potential for income from leased and owned facilities
than from management contracts, they also carry more risk if there is a downturn
in property performance or commercial real estate occupancy rates because a
significant part of the costs to operate such facilities typically is fixed. For
example, in the case of leases, there are typically minimum lease payments, and
in the case of owned facilities, there are the normal risks of ownership and
costs of capital. In addition, mainte-
19
<PAGE> 26
nance and operating expenses for both leased and owned facilities are borne by
Central Parking and are not passed through to the owner, as is the case with
management contracts.
Generally, performance of Central Parking's and Allright's parking facilities
depend, in part, on their ability to negotiate favorable contract terms, their
ability to control operating expenses, financial conditions prevailing generally
and in areas where parking facilities are located, the nature and extent of
competitive parking facilities in the area, weather conditions in areas where
parking facilities are located and the real estate market generally.
IF OUR INFORMATION SYSTEMS OR PARKING OPERATIONS EXPERIENCE INTERRUPTIONS
DUE TO YEAR 2000 NON-COMPLIANCE, OUR REVENUES MAY BE ADVERSELY AFFECTED. As the
year 2000 approaches, an issue impacting all companies has emerged regarding how
existing application software programs and operating systems can accommodate
this date. In brief, many existing programs and systems in the marketplace were
designed to accommodate a two digit date position which represents the year
(e.g., "98" is stored on the system and represents the year 1998). Consequently,
the year 2000 could be inaccurately processed as the year 1900.
Central Parking has conducted a comprehensive review of its existing computer
systems, including an assessment of the nature and potential extent of the
impact of the year 2000 issue. As a result, Central Parking's information
systems are being replaced and are expected to be year 2000 compliant by April
1999. Central Parking is also in the process of upgrading its automated parking
operations, but does not believe that the year 2000 issue is a major issue for
its parking operations, and to the extent any operations are not year 2000
compliant, manual overrides are in place to prevent major disruptions in
operations if a year 2000 issue arises. Costs of implementing year 2000
procedures to date have not been significant, and management does not believe
that future costs associated with remediation will have a material effect on
Central Parking's business or financial results. However, there can be no
assurance that the year 2000 remediation procedures will be completed in time or
that the costs of such procedures will not be substantially greater than Central
Parking currently believes the costs will be. The failure of Central Parking to
complete the implementation of its year 2000 project, or a substantial rise in
the costs of such project, could have a negative effect on Central Parking's
business and financial results.
Additionally, Central Parking is communicating, by means of a year 2000
questionnaire, with its significant suppliers, partners, payors and vendors to
ensure those third parties are also working to remediate their year 2000 issues,
if applicable. Although Central Parking cannot require third parties to respond,
follow-up with each party will be conducted to try and resolve any year 2000
issues. Central Parking can give no assurance that the third parties will
respond to Central Parking's questionnaire at all, or for responses that are
received, that such responses will be accurate. The failure of third parties to
adequately address their year 2000 issues could have a negative effect on
Central Parking's business and financial results.
WE HAVE FOREIGN OPERATIONS THAT MAY BE ADVERSELY AFFECTED BY FOREIGN
CURRENCY EXCHANGE RATE FLUCTUATIONS. Central Parking operates in the United
Kingdom, Germany, Mexico, the Republic of Ireland, Chile, Malaysia, Canada, and
Spain, maintains a business development office in the Netherlands, and intends
to expand its business in these and other international locations. For the year
ended September 30, 1998, revenues from foreign operations represented 6.0% of
Central Parking's total revenues. Of these foreign revenues, revenues from
United Kingdom operations represented 96.3% of such revenues, excluding earnings
from joint ventures. Central Parking receives revenues and incurs expenses in
various foreign currencies in connection with its foreign operations and, as a
result, Central Parking is
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<PAGE> 27
subject to currency exchange rate fluctuations. Central Parking intends to
continue to invest in foreign leased or owned parking facilities, either
independently or through joint ventures, where appropriate, and may become
increasingly exposed to foreign currency fluctuations. Presently, Central
Parking has limited exposure to foreign currency risk and anticipates
implementing a hedge program if such risk materially increases.
IF WE INCREASE OPERATIONS IN EUROPE, THE EURO CONVERSION MAY ADVERSELY
AFFECT OUR BUSINESS. On January 1, 1999, eleven of the fifteen member countries
of the European Union established fixed conversion rates between their existing
sovereign currencies and a new currency called the "euro." These countries
adopted the euro as their common legal currency on that date. The euro will
trade on currency exchanges and be available for non-cash transactions.
Thereafter and until January 1, 2002, the existing sovereign currencies will
remain legal tender in these countries. On January 1, 2002, the euro is
scheduled to replace the sovereign legal currencies of these countries. While
the vast majority of Central Parking's operations within the European Union are
currently in the United Kingdom, a European Member which is not scheduled to
participate in the euro conversion, Central Parking has operations in countries
which are scheduled to adopt the euro. Central Parking is in the process of
assessing the impact of the euro conversion to its operations in the
participating countries, including the need to adopt new information technology,
parking related equipment and other systems to accommodate euro-denominated
transactions, as well as the impact to currency risk and contractual
relationships. Based on management's assessment of the impact of the euro
conversion, Central Parking does not believe that the euro conversion will have
a material impact on its operations or financial condition.
THE INCREASE IN PROPERTIES OWNED AND OPERATED BY CENTRAL PARKING MAY
INCREASE CENTRAL PARKING'S EXPOSURE FOR ENVIRONMENTAL LIABILITIES. As a result
of the merger, the combined company will own or operate significantly more
properties than Central Parking currently owns or operates. In connection with
the ownership or operation of parking facilities, Central Parking may be
potentially liable for environmental problems, including any such problems which
are asserted against the properties currently owned or operated by Allright.
Under various federal, state, and local environmental laws, ordinances, and
regulations, a current or previous owner or operator of real property may be
liable for the cost of removal or remediation of hazardous or toxic substances
on, under, or in such property. Such laws typically impose liability without
regard to whether the owner or operator knew of, or was responsible for, the
presence of such hazardous or toxic substances. There can be no assurance that a
material environmental claim will not be asserted against Central Parking or
against its or Allright's owned or operated parking facilities. The cost of
defending against claims of liability, or of remediating a contaminated
property, could have a negative effect on Central Parking's business and
financial results.
IF WE CANNOT MAINTAIN POSITIVE RELATIONSHIPS WITH LABOR UNIONS REPRESENTING
OUR EMPLOYEES, A WORK STOPPAGE MAY ADVERSELY AFFECT OUR BUSINESS. Approximately
3,900 employees of Central Parking and 591 employees of Allright are represented
by labor unions. There can be no assurance that Central Parking or Allright will
be able to renew existing labor union contracts on acceptable terms. Employees
could exercise their rights under the labor union contract, which could include
a strike or walk-out. In such cases, there are no assurances that Central
Parking or Allright would be able to staff sufficient employees for its
short-term needs. Any such labor strike or the inability of Central Parking or
Allright to negotiate a satisfactory contract upon expiration of the current
agreements could have a negative effect on Central Parking's or Allright's
business and financial results.
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<PAGE> 28
THE MERGER
The discussion of the merger is subject to, and qualified in its entirety by
reference to, the Agreement and Plan of Merger dated as of September 21, 1998,
as amended January 5, 1999 (the "Merger Agreement"), a copy of which is attached
to this joint proxy statement/prospectus as Annex A, and is incorporated by
reference. The parties to the Merger Agreement are Central Parking Corporation,
a Tennessee corporation (together with its subsidiaries, "Central Parking"),
Central Merger Sub, Inc., a Tennessee corporation and wholly owned subsidiary of
Central Parking ("Central Parking Sub"), Allright Holdings, Inc., a Delaware
corporation (together with its subsidiaries, "Allright"), Apollo Real Estate
Investment Fund II, L.P., a Delaware limited partnership ("Apollo"), and AEW
Partners, L.P., a Delaware limited partnership ("AEW"). Pursuant to the Merger
Agreement, Central Parking Sub will merge with and into Allright, with Allright
surviving the merger as an indirect, wholly owned subsidiary of Central Parking
(the "Merger").
GENERAL
This joint proxy statement/prospectus is being furnished to shareholders of
Central Parking in connection with the solicitation of proxies by the Board of
Directors of Central Parking (the "Central Parking Board") for use at the
special meeting of Central Parking shareholders (including any adjournment or
postponement thereof) to be held on February 17, 1999. At the Central Parking
special meeting, shareholders of Central Parking will be asked to consider and
vote upon:
- the approval of the Merger Agreement and the issuance of Central Parking
common stock as contemplated by the Merger Agreement (the "Merger
Proposal");
- the approval of an amendment to Central Parking's Amended and Restated
Charter to increase the number of authorized shares of common stock,
$0.01 par value per share, from 50 million to 100 million (the "Charter
Amendment Proposal"); and
- other matters properly brought before the Central Parking special
meeting.
This joint proxy statement/prospectus is also being furnished to shareholders of
Allright in connection with the solicitation of proxies by the Board of
Directors of Allright (the "Allright Board") for use at the special meeting of
Allright shareholders (including any adjournment or postponement thereof) to be
held on February 17, 1999. At the Allright special meeting, the Allright
shareholders will be asked to consider and vote upon the adoption of the Merger
Agreement, and other matters properly brought before the Allright special
meeting.
This joint proxy statement/prospectus also constitutes the prospectus of Central
Parking filed with the Securities and Exchange Commission as a part of a
Registration Statement on Form S-4 under the Securities Act of 1933, with
respect to an estimated 7.6 million shares of Central Parking common stock to be
issued to shareholders of Allright pursuant to the Merger Agreement.
The Merger Agreement provides that each share of Allright common stock, $0.10
par value per share, outstanding immediately prior to the effective time (other
than shares owned by Allright as treasury stock or by Central Parking or any
subsidiary of Central Parking) will be converted into such number of shares
determined by the exchange ratio. The exchange ratio is determined by dividing
the Equity Purchase Price by $46.00 and dividing that quotient by the number of
shares of Allright common stock outstanding on a fully diluted basis (the
"Exchange Ratio").
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<PAGE> 29
The total Equity Purchase Price of Allright is $564,390,050, adjusted as
follows:
- Approved acquisitions. For acquisitions completed after April 30, 1998,
the amount of cash consideration used and transaction expenses and
capital expenditures incurred for such acquisitions will be added to the
purchase price.
- Transaction expenses. If the expenses incurred by Allright in connection
with the Merger exceed $5 million, the excess will be subtracted from the
purchase price and if such expenses are under $5 million, the shortfall
will be added to the purchase price.
- Working capital. If Allright's working capital deficit is more than $6
million, the deficit amount above $6 million will be subtracted from the
purchase price.
- EBITDA. If Allright's June 30, 1998 earnings before income taxes,
depreciation and amortization ("EBITDA") (with certain adjustments to be
made to EBITDA pursuant to the Merger Agreement) is below $34.0 million,
the amount below $34.0 million times sixteen (16) will be subtracted from
the purchase price.
- Options and warrants. The aggregate exercise price of outstanding and
unexercised Allright warrants and non-qualified options will be added to
the purchase price.
- Permitted sales. The net proceeds from any permitted sale, lease or
transfer of any property or assets will be subtracted from the purchase
price.
- Assumed debt. The principal amount of any long-term debt or capitalized
leases assumed by Central Parking will be subtracted from the purchase
price.
- Excess severance. If Allright's contractual severance obligations exceed
a certain amount, the excess will be subtracted from the purchase price.
- Other. A percentage of certain gain or loss from divestitures made by
Allright will be added or subtracted, respectively, from the purchase
price.
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<PAGE> 30
For a more detailed description of the Equity Purchase Price, see "The Merger
Agreement -- Conversion of Securities; Merger Consideration." The following is
an illustration of the calculation of the Exchange Ratio. The calculation is for
illustrative purposes only and is based on the best estimates of Central Parking
as of January 5, 1999. THE CALCULATION OF THE EXCHANGE RATIO IS SUBJECT TO
VARIOUS ADJUSTMENTS AS OF THE CLOSING OF THE MERGER. THEREFORE, THE ACTUAL
FIGURES REQUIRED TO COMPLETE THE CALCULATION CANNOT ACCURATELY BE DETERMINED
UNTIL THAT TIME, AND THE ACTUAL FIGURES MAY BE SUBSTANTIALLY DIFFERENT THAN THE
FIGURES USED IN THE FOLLOWING ILLUSTRATION.
<TABLE>
<S> <C>
Starting purchase price..................................... $ 564,390,050
+ the aggregate exercise price of Allright warrants and
certain Allright options;............................... 5,485,000
+ certain Allright expenses related to this
transaction;............................................ --
+ the purchase price and expenses related to the
acquisition of certain parking facilities;.............. 47,237,640
+ a percentage of certain gains on the sale of certain
properties;............................................. --
- the principal amount of any long-term indebtedness or
capitalized leases of Allright;......................... (257,870,000)
- Allright's working capital deficit above certain
levels;................................................. (4,580,000)
- certain Allright expenses related to this transaction
above certain levels;................................... (3,000,000)
- a percentage of certain losses on the sale of certain
properties;............................................. --
- the net proceeds from the sale of certain assets of
Allright;............................................... (1,000,000)
- certain Allright employee severance costs; and.......... (328,000)
- a multiple of Allright's June 30, 1998 EBITDA below a
certain level........................................... --
-------------
Total equity purchase price................................. $ 350,334,690
-------------
Total Central Parking common stock to be issued in the
Merger (350,334,690 / 46)................................. 7,615,972
-------------
Total shares of Allright common stock, warrants and certain
options to purchase Allright common stock (estimated)..... 85,903
-------------
Exchange ratio (7,615,972 / 85,903)......................... 88.658
=============
</TABLE>
The above calculation of the Exchange Ratio assumes:
- transaction expenses are $8 million;
- acquisitions are financed through debt;
- net proceeds from permitted sales are used to reduce debt;
- working capital deficit is $10,580,000;
- total severance obligations exceed specified threshold; and
- exercise of all Allright incentive stock options.
The Merger will become effective (the "Effective Time") at the time of filing of
articles of merger with the Secretary of State of the State of Delaware (or at
such later time as is specified in the articles of merger), which is expected to
occur as soon as practicable after the last of the conditions precedent to the
Merger set forth in the Merger Agreement has been satisfied or waived. The
Effective Time is expected to occur as soon as practicable after the special
meetings.
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<PAGE> 31
In connection with the Merger Agreement, certain parties also (A) entered into a
Registration Rights Agreement, dated as of September 21, 1998, as amended
January 5, 1999 by and among Central Parking, Apollo, AEW, and certain
affiliates of Central Parking (the "Registration Rights Agreement"), (B) entered
into various transaction support agreements dated as of September 21, 1998, by
and among Central Parking, Allright and certain shareholders of either Central
Parking or Allright (collectively, the "Transaction Support Agreements"), and
(C) agreed to enter into a non-competition agreement to be dated as of the
closing, by and among Central Parking, AEW, Apollo and certain other entities
(the "Non-Competition Agreement" and collectively with the Registration Rights
Agreement and the Transaction Support Agreements, the "Related Agreements").
CENTRAL PARKING'S REASONS FOR THE MERGER; RECOMMENDATION OF THE CENTRAL PARKING
BOARD OF DIRECTORS
On September 21, 1998, the Central Parking Board:
- determined that the terms of the Merger Agreement and the transactions
contemplated thereby, including the Merger and the issuance of the
Central Parking common stock pursuant to the Merger, and the terms of
Related Agreements, are fair to and in the best interests of Central
Parking and its shareholders;
- approved the Merger Agreement, the Related Agreements and the
transactions contemplated thereby; and
- recommended that Central Parking shareholders approve the Merger
Agreement.
In reaching the foregoing conclusions and recommendations, the Central Parking
Board considered a number of factors, including the following:
- the Merger is expected to enhance Central Parking's position as one of
the world's leading parking services providers;
- the opportunity for cost savings and increased efficiencies by combining
the operations of the two companies, especially in cities where both
companies have operations;
- the combination of management and operational expertise and resources of
the two companies is expected to create the opportunity for improved
operations and is expected to better position Central Parking to
capitalize on growth opportunities in the parking industry;
- Central Parking will gain access to the Allright brand name, which is a
leading national brand;
- the Merger will give Central Parking access to Allright's owned
properties, which historically have provided more durable cash flows than
leased or managed properties and offer development potential;
- Central Parking's geographic base will be broadened by the Merger, which
will add locations in the midwest, southwest and California to Central
Parking's existing locations; and
- the potential for new business through relationships with Apollo, AEW and
their respective affiliates, each of which has extensive real estate
contacts and assets.
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<PAGE> 32
In addition to the factors outlined above, the Central Parking Board made its
determination after careful consideration of, and based on, certain additional
factors, information and reports, including the following:
- reports from management and legal and accounting advisors on the specific
terms of the relevant agreements, including the Merger Agreement and the
Related Agreements, and other matters, including the fact that the Merger
is expected to be accounted for as a pooling of interests;
- the companies' respective historical financial conditions, results of
operations and estimated future results (including those of Central
Parking as a stand-alone entity), current financial market conditions and
historical market prices; trading information for Central Parking common
stock; the consideration to be paid to Allright shareholders in the
Merger; and the percentage of the combined company to be owned by Central
Parking shareholders following the Merger; and
- the financial and other analysis presented by Central Parking's financial
advisor, The Blackstone Group, L.P. ("Blackstone"), including the oral
opinion of Blackstone (subsequently confirmed in writing) that the
Exchange Ratio was fair to the Central Parking shareholders from a
financial point of view as of the date of such opinion. See "-- Opinion
of Central Parking's Financial Advisor."
The Central Parking Board also considered:
- the risk that the benefits sought in the Merger would not be obtained;
- the risk that the Merger would not be consummated;
- the effect of the public announcement of the Merger on revenues, customer
and supplier relationships, operating results and ability to retain
employees, and on the trading price of Central Parking common stock;
- the potentially substantial management time and effort that will be
required to consummate the Merger and integrate the operations of the two
companies;
- the impact of the Merger on Central Parking and Allright employees;
- the impact of the Registration Rights Agreement on Central Parking's
ability to raise capital; and
- other matters described under "Risk Factors" and "--Forward Looking
Statements May Prove Inaccurate."
In the judgment of the Central Parking Board, the potential benefits of the
Merger outweighed these considerations.
The foregoing discussion of the information and factors considered by the
Central Parking Board is not intended to be exhaustive but includes all material
factors considered. The Central Parking Board did not assign relative weight to
the above factors. Rather, it viewed its position and recommendation as being
based on the totality of the information presented and considered. In addition,
individual members of the Central Parking Board may have given different weight
to different factors.
THE CENTRAL PARKING BOARD UNANIMOUSLY RECOMMENDS THAT THE CENTRAL PARKING
SHAREHOLDERS VOTE "FOR" THE MERGER PROPOSAL.
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<PAGE> 33
BACKGROUND OF THE BUSINESS RELATIONSHIP AND THE MERGER
On January 12, 1998, Central Parking retained Blackstone to evaluate certain
strategic alternatives, including a possible transaction with Allright. On
January 30, 1998, Central Parking and Allright entered into a confidentiality
agreement with respect to certain information regarding Allright to be provided
to Central Parking. On February 17, 1998, Monroe Carell Jr., Chairman and Chief
Executive Officer of Central Parking, and representatives of Blackstone met with
representatives of the Allright Board in a preliminary meeting in New York to
explore the feasibility of pursuing a transaction. Some general financial
information was exchanged following the meeting.
On April 28, 1998, certain executives of Central Parking and representatives of
Blackstone met with representatives of the Allright Board and executives of
Allright, Apollo and AEW and representatives of Bear, Stearns & Co. Inc.,
financial advisors to Apollo and AEW, to discuss parameters for due diligence
and other activities leading to a possible transaction. On May 5, 1998, Central
Parking sent a letter to Allright requesting certain due diligence materials,
and on or about May 15, 1998, Allright sent Central Parking a letter requesting
certain due diligence materials. On May 19, 1998, Central Parking and Allright
entered into a confidentiality agreement covering certain information regarding
Central Parking provided to Allright. During late May and early June 1998,
representatives of Central Parking and its advisors and representatives of
Allright and their advisors reviewed due diligence materials in data rooms set
up by Central Parking and Allright. Numerous due diligence meetings and phone
conferences were conducted during the months of June, July, August and September
between representatives of Central Parking, Apollo, AEW and the Allright Board.
Face-to-face negotiations took place on June 29, July 12, July 20, August 5 and
August 24, 1998, in which representatives of Central Parking, Apollo, AEW and
the Allright Board met in New York to discuss a number of issues relating to the
transaction, including due diligence and documentation matters.
The Boards of Central Parking and Allright discussed the fact that after the
Merger certain shareholders of Central Parking would own a substantial amount of
the outstanding Central Parking common stock and such shareholders may want to
sell some or all of such stock. These significant shareholders included not only
Apollo and AEW, but also Monroe J. Carell, Jr., The Carell Children's Trust and
various other Carell family trusts and foundations which are currently Central
Parking shareholders. The Central Parking Board realized that if each of these
significant shareholders decided to sell a substantial amount of stock pursuant
to Rule 144 of the Securities Act at approximately the same time, such sales in
the open market could have a significant negative impact on the Central Parking
common stock market price. The Central Parking Board concluded that it was
desirable to make it less likely that such shareholders would sell in an
uncoordinated manner, particularly during the months immediately following the
Merger. As a result, Central Parking offered the Registration Rights Agreement
to both the Allright shareholders and significant Central Parking shareholders,
which set forth an orderly method by which each of its significant shareholders
may dispose of their Central Parking common stock in accordance with the federal
securities laws.
In addition, given the fact that certain shareholders of both Central Parking
and Allright beneficially own in the aggregate a percentage of the common stock
outstanding of their respective companies sufficient to approve the Merger, the
Boards of Directors of both companies thought it was in their respective best
interests during the period pending the Merger to ensure the Merger would be
consummated by having the controlling shareholders
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<PAGE> 34
enter into the Transaction Support Agreements or otherwise agree to vote in
favor of the Merger. As a result, the Central Parking Board of Directors
believed that it was in the best interests of Central Parking to offer the
Registration Rights Agreement to Monroe J. Carell, Jr., The Carell Children's
Trust and various other Carell family trusts and foundations in order to obtain
their agreement to vote in favor of the Merger.
At a special meeting held on September 3, 1998, the Central Parking Board met to
discuss the proposed terms and conditions of the transaction. At the meeting,
the status of the negotiations was reviewed; the results of Central Parking's
due diligence review were presented; representatives of Blackstone presented an
analysis of the financial terms of the proposed transaction; a representative of
Harwell Howard Hyne Gabbert & Manner, Central Parking's outside legal counsel,
outlined the terms of the proposed transaction and presented the Central Parking
Board's legal duties and responsibilities; and representatives of KPMG LLP,
Central Parking's independent public accountants, discussed applicable pooling
and other accounting issues.
On September 9, 1998, representatives of Central Parking made a presentation
regarding the business of Central Parking to representatives of the Allright
Board. Negotiations between representatives of Central Parking and the Allright
Board continued until final agreement on terms of the Merger Agreement and the
Related Agreements was reached on September 21, 1998. The assumed value of the
Central Parking common stock was set at $46.00 after negotiations by the
parties, which took into account the then-current trading price of Central
Parking common stock. During this period, the Central Parking Board and the
remaining members of the Allright Board were kept informed of the progress of
the negotiations. Pursuant to unanimous consent resolutions dated as of
September 21, 1998, the Central Parking Board and the Allright Board both
approved entering into the proposed Merger Agreement and Related Agreements. The
Merger Agreement, the Registration Rights Agreement and the Transaction Support
Agreements were signed on September 21, 1998. A press release announcing the
proposed Merger was issued on September 21, 1998.
On January 5, 1999, the parties agreed to amend the Merger Agreement to extend
the time allowed for the special meetings. The parties also agreed to amend the
Registration Rights Agreement to, among other things, extend the time during
which the Allright Holders may request an underwritten offering of their shares
of Central Parking common stock.
ALLRIGHT'S REASONS FOR THE MERGER; RECOMMENDATION OF THE ALLRIGHT BOARD OF
DIRECTORS
After reviewing the terms of the Merger Agreement and the Related Agreements and
certain information concerning Central Parking, the Allright Board unanimously
determined that the Merger is advisable and in the best interests of Allright
and its shareholders. The decision to accept the $46 assumed value of the
Central Parking common stock to be issued in the Merger was reached by an
analysis of the results, operations and future prospects of Central Parking by
the Allright Board. Given the then-market value of the Central Parking common
stock and the Allright Board's knowledge of the parking industry, the Allright
Board determined, after considering the risk that the Central Parking common
stock would trade below $46 per share, that $46 per share was a fair value.
Accordingly, the Allright Board has unanimously adopted the Merger Agreement,
the Related Agreements, and the transactions contemplated thereby and
unanimously recommends that the holders of Allright common stock vote "for"
adoption of the Merger Agreement and the transactions contemplated thereby at
the Allright special meeting.
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<PAGE> 35
In reaching its decision to adopt the Merger Agreement and the transactions
contemplated thereby, members of the Allright Board consulted with Allright's
management, as well as its legal counsel, accountants and financial advisor,
Bear, Stearns & Co. Inc., and considered a number of factors, including without
limitation, the following:
- the consideration to be received by Allright's shareholders in the
Merger, including the fact that the estimated aggregate consideration
after adjustments for holders of Allright common stock represents, in the
Allright Board's opinion, an attractive price based on Allright's
historical performance, and also represents a significant premium (on a
per share basis) over the price that Apollo, AEW and certain other
investors paid for Allright common stock in connection with the
acquisition of Allright Corporation by Allright in October 1996. See "The
Merger -- General;"
- the fact that the issuance of shares of Central Parking common stock in
the Merger would be registered under the Securities Act and would be
subject to certain registration rights under the Registration Rights
Agreement and that the shares of Central Parking common stock were
expected to be tradeable on the New York Stock Exchange ("NYSE"), greatly
increasing the liquidity of Allright's shareholders;
- the ability of Allright's shareholders to continue to participate in the
growth of the business conducted by Allright and Central Parking after
the Merger and to benefit from the potential appreciation in the value of
the Central Parking common stock, while obtaining tax-free treatment for
the shares of Central Parking common stock received as Merger
consideration. See "Certain Federal Income Tax Considerations;"
- Central Parking's and Allright's respective businesses (including the
range of services provided), assets, liabilities, strategic objectives,
competitive positions and prospects. The integration and combination of
management, resources, and operational expertise of the two companies, as
well as the resulting broad geographical base of the combined company;
and
- the changing nature of the parking services industry, including the need
to capitalize on opportunities for growth, cost savings, and increased
efficiencies. The Allright Board believed that the combined company would
be better able to take advantage of present as well as future growth
opportunities in the parking industry.
The Allright Board also considered the risks that:
- the Merger would not be consummated;
- the value of the Central Parking common stock could fluctuate;
- the benefits sought in the Merger would not be obtained;
- the impact of the Merger on Allright employees; and
- other matters described under "Risk Factors" and "-- Forward Looking
Statements May Prove Inaccurate."
The foregoing discussion of the information and factors considered and given
weight by the Allright Board is not intended to be exhaustive. In view of the
wide variety of factors considered in connection with its evaluation of the
terms of the Merger, the Allright Board did not find it practicable to, and did
not, quantify or otherwise attempt to assign relative weights to the specific
factors considered in reaching their determinations. In addition,
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<PAGE> 36
individual members of the Allright Board may have given different weights to
different factors.
THE ALLRIGHT BOARD UNANIMOUSLY RECOMMENDS THAT HOLDERS OF ALLRIGHT COMMON STOCK
VOTE "FOR" ADOPTION OF THE MERGER AGREEMENT.
OPINION OF CENTRAL PARKING'S FINANCIAL ADVISOR
On September 21, 1998, Blackstone delivered its written opinion (the "Blackstone
Opinion") to the Central Parking Board, stating that, as of the date of such
opinion and subject to the various considerations set forth in the opinion, the
Exchange Ratio is fair to the holders of Central Parking common stock from a
financial point of view.
The full text of the Blackstone Opinion dated as of September 21, 1998 is
attached as Annex B and is incorporated by reference. Holders of shares of
Central Parking common stock are urged to, and should, read such opinion in its
entirety. The Blackstone Opinion is directed only to the fairness of the
Exchange Ratio to the holders of Central Parking common stock from a financial
point of view and does not constitute a recommendation to any holder of Central
Parking common stock as to how to vote on the proposed Merger or any matter
related thereto. The summary of the Blackstone Opinion as set forth in this
joint proxy statement/prospectus is qualified in its entirety by reference to
the full text of such opinion.
In connection with the Blackstone Opinion, Blackstone reviewed, among other
things:
- the Merger Agreement and the Related Agreements;
- certain publicly available information concerning the business, financial
condition, and operations of Central Parking which was believed to be
relevant;
- audited financial statements prepared in accordance with generally
accepted accounting principles ("GAAP") for Allright for the fiscal years
1995, 1996, and 1997 and unaudited financial statements for fiscal year
1998;
- certain internal financial analyses and forecasts relating to Central
Parking and Allright prepared by their respective managements; and
- forecasts of certain cost synergies expected to be achieved as a result
of the Merger, which were prepared by Central Parking's management (the
"Synergies").
Blackstone also held discussions with members of the senior management of
Central Parking to understand Central Parking's historical financial
performance, prospects for the parking industry, Central Parking's strategic
goals and competitive positioning, and the strategic merits of the Merger.
Furthermore, Blackstone held discussions with representatives from Apollo, AEW
and Allright's management to understand Allright's historical financial
performance, strategic goals and competitive positioning and management's fiscal
year ending June 30, 1998 and calendar year 1998 financial projections.
In addition, Blackstone:
- reviewed the historical market prices, operating statistics, and trading
parameters for Central Parking common stock and;
- analyzed the respective contributions of certain income statement and
balance sheet items by Central Parking and Allright to the combined
company;
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<PAGE> 37
- compared certain financial and stock market information for Central
Parking and Allright with similar information for certain other companies
the securities of which are publicly traded;
- reviewed the financial terms of certain recent business combinations in
the parking industry;
- performed a discounted cash flow analysis on Allright;
- reviewed the pro forma effect of the Merger on Central Parking's earnings
per share and balance sheet; and
- performed such other studies and analyses which were believed by
Blackstone to be relevant.
In arriving at its opinion, Blackstone relied without assuming responsibility
for independent verification, upon the accuracy and completeness of all of the
financial and other information reviewed by it that was publicly available, that
was supplied or otherwise made available to it by Central Parking and Allright
or that was otherwise reviewed by it. Blackstone further relied upon the
assurances of the management of Central Parking that it was not aware of any
facts that would make such information provided by it inaccurate, incomplete or
misleading. Without limiting the generality of the foregoing, Blackstone assumed
that the financial forecasts prepared by Central Parking and Allright and
provided to it, including without limitation, forecasts of Synergies, were
reasonably determined on a basis reflecting the best currently available
judgment and estimates of Central Parking as to the future financial performance
of Central Parking and Allright. Blackstone expressed no view as to such
financial forecasts or the assumptions on which they were based. In addition,
Blackstone did not conduct a physical inspection of the properties and
facilities of Central Parking or Allright, nor did it make an independent
evaluation or appraisal of the assets and liabilities of Central Parking or
Allright.
Blackstone assumed that the Merger contemplated by the Merger Agreement will be
accounted for as a pooling of interests under GAAP and that it will qualify as a
tax-free reorganization for U.S. federal income tax purposes under Section
368(a) of the Internal Revenue Code of 1986, as amended (the "Code"). The
Blackstone Opinion was necessarily based upon economic, market, monetary and
other conditions as they existed and could be evaluated, and the information
made available to it, as of the date thereof. Furthermore, Blackstone expressed
no opinion as to the prices at which Central Parking common stock trades or
would trade at any time. Blackstone assumed that in the course of obtaining the
necessary regulatory or other consents or approvals (contractual or otherwise)
for the Merger, no restrictions, including any divestiture requirements or
amendments or modifications, would be imposed that would have a material adverse
effect on the contemplated benefits of the Merger.
The following is a brief summary of the analyses and examinations performed by
Blackstone that were presented to the Central Parking Board on September 3, 1998
(materials updated as of September 18, 1998) and were utilized by Blackstone in
preparation of the Blackstone Opinion.
Calculation of Consideration. As Allright will be receiving a fixed number of
shares in the Merger based on a $46.00 implied share price, the value of the
consideration received by Allright shareholders will vary with fluctuations in
the price of Central Parking's common stock. Blackstone reviewed the Merger
based on a range of Central Parking common stock
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<PAGE> 38
prices selected by Blackstone of: (1) $46.00 per share ("Price Scenario 1"), (2)
$46.75 per share -- Central Parking's closing price on September 18, 1998
("Price Scenario 2"), and (3) $44.066 per share -- Central Parking's average
price for the last 20 trading days as of September 18, 1998 ("Price Scenario
3").
Analysis of Selected Comparable Publicly Traded Companies. Blackstone compared
the transaction multiples for the acquisition of Allright (the "Acquisition
Multiple") to certain actual and estimated financial and stock market
information for Central Parking, the only pure-play publicly traded comparable
parking company, and to a group of service-oriented consolidator companies
comprised of Outdoor Systems Inc, Allied Waste Industries, US Filter Corp.,
Accustaff Inc., Consolidated Graphics Inc., Comfort Systems USA Inc., Lason
Inc., Service Experts Inc., Group Maintenance America Corp., Miller Industries,
Inc., and White Cap Industries Inc. (collectively, the "Comparable Companies").
Blackstone selected the Comparable Companies based on position within their
respective industry groups, size characteristics, acquisition history, and
growth prospects. The Institutional Brokers Estimate System ("IBES") 5-Year
Projected Growth Rate was approximately 26.7% for Central Parking, as compared
to an average of 27.3% for the Comparable Companies (with a range of 23.4% to
36.3%). Blackstone noted that Allright's compound annual EBITDA growth from June
30, 1996 to June 30, 1998 was 21.9%. Considering the acquisitive nature of the
Comparable Companies, Blackstone reviewed both latest twelve months ("LTM") and
forward multiples (based on the average of available analyst estimates for
projected operating results) to more accurately reflect the contribution of
recent acquisitions. In its analysis, Blackstone placed greater emphasis on the
total enterprise value multiples, i.e., EBIT or EBITDA multiples, and less
emphasis on the share price multiples, i.e., earnings multiples, because of
Allright's higher leverage ratios relative to both Central Parking and the
Comparable Companies. Allright's higher leverage ratios relative to both Central
Parking and the Comparable Companies, combined with Allright's higher cost of
debt relative to Central Parking, led to relatively higher interest expense as a
percent of EBIT or EBITDA and relatively lower earnings as a percent of EBIT or
EBITDA, thus causing Blackstone to put less emphasis on price multiples than on
total enterprise value multiples. This analysis indicated the following:
<TABLE>
<CAPTION>
ACQUISITION MULTIPLE COMPARABLE COMPANIES
------------------------------------------------------ CENTRAL ---------------------
PRICE SCENARIO 1 PRICE SCENARIO 2 PRICE SCENARIO 3 PARKING AVERAGE RANGE
---------------- ---------------- ---------------- ------- ------- -----------
<S> <C> <C> <C> <C> <C> <C>
TEV(1)/LTM(2)
EBITDA............. 16.1x 16.2x 15.7x 22.9x 12.7x 7.4x-25.9x
TEV/Projected 1998
EBITDA............. 14.1 14.2 13.7 22.3 10.0 6.3x-17.4x
TEV/LTM EBIT(3)...... 21.4 21.7 20.9 32.4 17.1 8.7x-31.6x
TEV/Projected 1998
EBIT............... 18.3 18.5 17.9 28.0 13.2 7.3x-25.2x
Price/LTM Earnings... 139.8 142.1 133.9 48.1 23.3 13.2x-46.7x
Price/1998
Earnings........... 65.0 66.1 62.3 47.2 18.4 11.6x-37.5x
</TABLE>
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<TABLE>
<CAPTION>
COMPARABLE COMPANIES
CENTRAL ---------------------
ALLRIGHT PARKING AVERAGE RANGE
-------- ------- ------- -----------
<S> <C> <C> <C> <C>
Debt + Preferred Stock/Total Book
Capitalization(4)........................... 73.8% 41.6% 41.7% 24.2%-65.9%
LTM EBITDA Margin............................. 17.0% 19.7% 17.0% 7.8%-46.3%
LTM EBIT Margin............................... 12.7% 13.9% 12.1% 6.0%-29.1%
LTM Net Income Margin......................... 1.2% 7.8% 5.3% 2.8%-7.8%
</TABLE>
(1) Defined as the market value of common equity plus the liquidation value of
preferred equity, the principal amount of debt and minority interest less
cash and cash equivalents.
(2) Defined as Last Twelve Months
(3) Defined as Earnings Before Interest and Taxes
(4) Defined as debt plus preferred stock plus the book value of common equity
Analysis of Selected Precedent Transactions. Blackstone reviewed and analyzed
selected financial, operating and stock market information relating to completed
parking industry merger and acquisition transactions with total enterprise
values of above $50 million since January 1, 1992, which were deemed by
Blackstone to be comparable and relevant. The transactions analyzed by
Blackstone include Apcoa, Inc.'s merger with Standard Parking, Central Parking's
acquisition of Kinney System Holding Corp., Chase Capital Partners' acquisition
of SunPark, Inc., First Union Management's acquisition of Imperial Parking,
Central Parking's acquisition of Square Industries, Inc., Apollo and AEW's
acquisition of Allright, and Onex Corp.'s acquisition of Imperial Parking, Ltd.
(collectively, the "Comparable Transactions"). Blackstone compared certain
financial and market statistics for the Comparable Transactions with those for
the Merger. In its analysis, Blackstone placed greater emphasis on the total
enterprise value multiples because of Allright's higher leverage ratios relative
to the Comparable Transactions. The analysis showed the following:
<TABLE>
<CAPTION>
COMPARABLE
ACQUISITION MULTIPLE TRANSACTIONS
------------------------------------------------------ ---------------------
PRICE SCENARIO 1 PRICE SCENARIO 2 PRICE SCENARIO 3 AVERAGE RANGE
---------------- ---------------- ---------------- ------- -----------
<S> <C> <C> <C> <C> <C>
TEV/LTM EBITDA....... 16.1x 16.2x 15.7x 11.7x 9.0x-16.3x
TEV/LTM EBIT......... 21.4 21.7 20.9 16.8 12.1x-23.4x
Price/LTM Earnings... 139.8 142.1 133.9 25.4 13.2x-42.6x
</TABLE>
Relative Contribution Analysis. Pro forma for the Merger, holders of Central
Parking common stock would own an approximate 79.7% stake and holders of
Allright common stock would own an approximate 20.3% stake of the combined
company. Blackstone calculated and analyzed the relative contribution of Central
Parking and Allright to the combined company with respect to fiscal year ending
September 30, 1997 and fiscal year ending September 30, 1998 for income
statement items and September 30, 1997 and June 30, 1998 (April 30, 1998 for
Allright) for balance sheet items. Blackstone analyzed revenues, EBITDA, EBIT,
net income, total assets, book value, net property plant and equipment and total
debt. All forecasts for this analysis were provided by the respective
managements of Central Parking and Allright, and the analysis did not take into
account any potential cost savings or synergies as a result of, or any other
effects from, the Merger.
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The relative contribution analysis indicated that Central Parking and Allright
would contribute to the combined company the following.
<TABLE>
<CAPTION>
CENTRAL ALLRIGHT
------- --------
<S> <C> <C>
1997 Revenues............................................... 54.8% 45.2%
1998 Revenues............................................... 63.5% 36.5%
1997 EBITDA................................................. 55.6% 44.4%
1998 EBITDA................................................. 64.0% 36.0%
1997 EBIT................................................... 58.7% 41.3%
1998 EBIT................................................... 65.3% 34.7%
1997 Net Income............................................. NA(1) NA(1)
1998 Net Income............................................. 89.1% 10.9%
1997 Total Assets........................................... 39.5% 60.5%
1998 Total Assets........................................... 57.2% 42.8%
1997 Book Value............................................. 57.8% 42.2%
1998 Book Value............................................. 75.9% 24.1%
1997 Net PP&E............................................... 25.7% 74.3%
1998 Net PP&E............................................... 33.5% 66.5%
1997 Total Debt............................................. 26.9% 73.1%
1998 Total Debt............................................. 45.3% 54.7%
</TABLE>
- ---------------
(1) Allright's net income was negative in 1997.
Pro Forma Merger Analysis. Blackstone analyzed the pro forma impact of the
Merger on the earnings per share of Central Parking's common stock for the
fiscal years 1999, 2000 and 2001. Blackstone assumed the 1998 Fiscal Year
management forecast for Central Parking and used Central Parking's IBES EPS
estimates and long-term growth rates for Fiscal Year 1999, 2000 and 2001
projections. Blackstone, in conjunction with Central Parking management, assumed
a range of EBITDA growth rates to derive Allright's projections. Blackstone also
assumed the after-tax income statement and cash flow statement contribution of
the Synergies as previously described and that the Merger would be accounted for
as a pooling of interests transaction, and that the Merger would be effected at
the Exchange Ratio. This analysis indicated that the Merger would be mildly
accretive to Central Parking's earnings per share in Fiscal Year 1999 and
significantly accretive to Central Parking's earnings per share in Fiscal Years
2000 and 2001.
Discounted Cash Flow Valuation. In order to determine a range of values for
Allright based upon a discounted cash flow analysis, Blackstone assumed the
Allright projections, a range of discount rates of 8.0% to 11.0% and a range of
EBITDA exit multiples from 8.0 times to 12.0 times. Blackstone calculated
Allright's total enterprise value to be from $436 million to $670 million,
excluding the Synergies and $515 million to $749 million, including the
Synergies.
As a whole, the above-outlined analyses supported Blackstone's conclusion that
the Exchange Ratio is fair to holders of Central Parking common stock from a
financial point of view.
The summary set forth above does not purport to be a complete description of the
presentation by Blackstone to the Central Parking Board or the analyses
performed by Blackstone in arriving at the Blackstone Opinion. The preparation
of a fairness opinion involves various determinations as to the most appropriate
and relevant methods of financial analysis and the application of these methods
to the particular circumstances and, therefore,
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<PAGE> 41
such an opinion is not readily suited to summary description. The preparation of
a fairness opinion does not involve a mathematical evaluation or weighing of the
results of the individual analyses performed, but requires Blackstone to
exercise its professional judgment -- based on its experience and
expertise -- in considering a wide variety of analyses taken as a whole. Each of
the analyses conducted by Blackstone was carried out in order to provide a
different perspective on the transaction and add to the total mix of information
available. Blackstone did not form a conclusion as to whether any individual
analysis, considered in isolation, supported or failed to support an opinion as
to fairness. Rather, in reaching its conclusion, Blackstone considered the
results of the analyses in light of each other and ultimately reached its
opinion based on the results of all analyses taken as a whole.
The analyses were prepared solely for the purpose of Blackstone providing the
Blackstone Opinion to the Central Parking Board as to the fairness of the
Exchange Ratio from a financial point of view to holders of Central Parking
common stock and do not purport to be appraisals or necessarily reflect the
prices at which businesses or securities actually may be sold, which are
inherently subject to uncertainty. Any estimates incorporated in the analyses
performed by Blackstone are not necessarily indicative of actual past or future
values or results, which may be significantly more or less favorable than any
such estimates. No public company utilized as a comparison is identical to
Central Parking or Allright and none of the comparable acquisition transactions
or other business combinations utilized as a comparison are identical to the
Merger. Accordingly, an analysis of Comparable Companies and Comparable
Transactions is not mathematical; rather it involves complex considerations and
judgments concerning companies and other factors that could affect the public
trading value of the Comparable Companies or company to which they are being
compared. Similarly, analyses based upon forecasts of future results are not
necessarily indicative of actual future results, which may be significantly more
or less favorable than suggested by such analyses. Because such analyses are
inherently subject to uncertainty, being based upon numerous factors or events
beyond the control of Central Parking and Allright or their respective advisors,
none of Central Parking, Allright, Blackstone or any other person assumes
responsibility if future results or actual values are materially different from
those forecasts or assumptions.
As described above, the Blackstone Opinion and the Blackstone presentation to
the Central Parking Board was only one of many factors taken into consideration
by the Central Parking Board in making its determination to approve the Merger
Agreement. In addition, the terms of the Merger Agreement were determined
through negotiations between Central Parking and Allright and were approved by
the Central Parking Board. Although Blackstone provided advice to Central
Parking during the course of these negotiations, the decision to enter into the
Merger Agreement and to accept the Exchange Ratio was solely that of the Central
Parking Board.
Central Parking retained Blackstone because of its experience and expertise to
act as its financial advisor in connection with its evaluation of Central
Parking's strategic alternatives. Blackstone has an internationally recognized
merger and acquisition advisory business. Blackstone has also advised on other
merger and acquisition transactions in the parking industry. Blackstone, as part
of its investment banking business, is continually engaged in the valuation of
businesses and their securities in connection with mergers and acquisitions.
Blackstone is familiar with Central Parking, having provided certain investment
banking services to Central Parking from time to time, and having acted as its
financial advisor in connection with, and having participated in certain of the
negotiations leading to, the Merger.
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<PAGE> 42
Through a letter agreement dated April 21, 1997 (the "Blackstone Engagement
Letter"), Central Parking engaged Blackstone to represent it in potential future
transactions. The Blackstone Engagement Letter was amended on January 12, 1998
with regard to representation during the Merger and further modified on
September 9, 1998. Pursuant to these documents, Central Parking has agreed to
pay Blackstone:
- an initial fee of $100,000 on the date of execution of the Blackstone
Engagement Letter;
- an additional retainer fee of $100,000 payable on each six-month
anniversary of January 12, 1998 during the term of the Blackstone
Engagement Letter;
- a $500,000 fee should an opinion be rendered by Blackstone;
- an additional transaction fee in an amount equal to the greater of $1.25
million or 1.4% on the first $250 million of consideration paid in a
transaction (defined as the value of all cash, securities and other
properties, paid or payable, directly or indirectly in connection with
the Merger) plus 1.0% on the amount over $250 million, less any of the
foregoing fees, including opinion fees, paid to Blackstone (but not
credited twice in the event of more than one transaction).
Blackstone's fee is capped at $7.5 million. In addition, Central Parking has
agreed to reimburse Blackstone for its reasonable out-of-pocket expenses,
including the fees and disbursements of its attorneys, and to indemnify
Blackstone and certain related persons against certain liabilities, including
certain liabilities under the federal securities laws, arising out of its
engagement.
FORWARD-LOOKING STATEMENTS MAY PROVE INACCURATE
This document, and documents that have been incorporated by reference, include
various forward-looking statements about Central Parking, Allright and the
combined company that are subject to risks and uncertainties including their
year 2000 efforts. Forward-looking statements include the information concerning
future results of operations of Central Parking, Allright and the combined
company after the effective time of the Merger, set forth under "Questions and
Answers About The Merger," "Summary," "-- Background of the Business
Relationship and the Merger," "-- Central Parking's Reasons for the Merger;
Recommendation of the Central Parking Board," "-- Allright's Reason for the
Merger; Recommendation of the Allright Board" "-- Opinion of Central Parking's
Financial Advisor" and those preceded by, followed by or that otherwise include
the words "believes," "expects," "anticipates," "intends," "estimates" or
similar expressions. For those statements, Central Parking and Allright claim
the protection of the safe harbor for forward-looking statements contained in
the Private Securities Litigation Reform Act of 1995.
You should understand that the following important factors, in addition to those
discussed elsewhere in this document and the documents which are incorporated by
reference (See "Where You Can Find More Information"), could affect the future
financial results of Central Parking, Allright and the combined company and
could cause actual results to differ materially from those expressed in
forward-looking statements contained or incorporated by reference in this
document:
- successfully integrating Allright and Kinney System Holding Corp., as
well as past and future acquisitions, in light of challenges in retaining
key employees, synchronizing business processes and efficiently
integrating facilities, marketing, and operations;
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- successful implementation of Central Parking's operating and growth
strategy, including possible strategic acquisitions;
- the continuation of the National Basketball Association strike;
- fluctuations in quarterly operating results caused by a variety of
factors including the timing of gains on sales of owned facilities,
preopening costs, the effect of weather on travel and transportation
patterns, and local, national and international economic conditions;
- the ability of Central Parking to form and maintain its strategic
relationships with certain large real estate owners and operators;
- global and/or regional economic factors and potential changes in laws and
regulations, including, without limitation, changes in federal, state and
international laws regulating the environment; and
- a significant delay in the expected closing of the Merger.
ACCOUNTING TREATMENT
The Merger is expected to be accounted for by Central Parking as a pooling of
interests which means that, for accounting and financial purposes, the companies
will be treated as if the Merger was consummated on October 31, 1996, the date
Allright acquired Allright Corporation. Allright is deemed to be the successor
company to Allright Corporation for accounting purposes. The Merger is
conditioned on receipt of a letter from Central Parking's independent public
accountants that the Merger will qualify as a pooling of interests and receipt
of a letter from Allright's independent public accountants stating their belief
that Allright qualifies as a combining company for purposes of pooling of
interests accounting.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary description of the material federal income tax
consequences of the Merger. This summary is not a complete description of all
the consequences of the Merger. Each shareholder's individual circumstances may
affect the tax consequences of the Merger to him or her. In addition, no
information is provided with respect to the tax consequences of the Merger under
applicable foreign, state or local laws. Therefore, each Allright shareholder is
advised to consult his or her own tax advisor as to the specific tax
consequences of the Merger to him or her.
Neither Central Parking nor Allright has requested or will receive an advance
ruling from the Internal Revenue Service as to the federal income tax
consequences of the Merger to either of the companies or their respective
shareholders. Allright has received an opinion of Skadden, Arps, Slate, Meagher
& Flom LLP, its counsel, dated January 11, 1999, and Central Parking has
received an opinion of KPMG LLP, its tax advisor, dated January 8, 1999
addressing certain U.S. federal income tax consequences of the Merger as
described below. Such opinions have been rendered, in part, on the basis of
facts, representations and assumptions set forth or referred to in such opinions
which are consistent with the expected state of facts existing at the Effective
Time. In rendering their opinions, such counsel and advisor have required and
relied upon representations and covenants, including those contained in
certificates of officers of Central Parking and Allright. The opinions are to
the effect that, for U.S. federal income tax purposes:
- the Merger will constitute a reorganization within the meaning of Section
368(a) of the Code;
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- no gain or loss will be recognized by Central Parking, Central Parking
Sub or Allright as a result of the Merger;
- no gain or loss will be recognized by the shareholders of Allright on the
exchange of their Allright common stock for Central Parking common stock
pursuant to the Merger (except with respect to cash received in lieu of a
fractional share interest in Central Parking common stock); and
- the tax basis of the Central Parking common stock received by
shareholders who exchange their Allright common stock for Central Parking
common stock in the Merger will be the same as the tax basis of Allright
common stock surrendered in exchange (reduced by any amount allocable to
a fractional share interest for which cash is received).
In addition, it is a condition to the obligation of the parties to proceed with
the Merger that Allright shall have received an opinion from Skadden, Arps,
Slate, Meagher & Flom LLP, its counsel, and Central Parking shall have received
an opinion from KPMG LLP, its tax advisor, in each case dated as of the
Effective Time, concerning the federal income tax consequences of the Merger
discussed above. Such opinions may be based in part on certain representations
and covenants made to the parties' representatives by officers of Central
Parking and Allright.
No gain or loss will be recognized by Central Parking, Central Parking Sub or
Allright by reason of their participation in the Merger. The tax basis of the
Allright assets immediately after the Effective Time of the Merger will be the
same as the basis of those assets in Allright's hands immediately prior to the
Effective Time. The holding period of Allright's assets immediately after the
Effective Time of the Merger will include the holding period of such assets held
by Allright immediately prior to the Effective Time of the Merger. Holders of
Allright options or warrants should consult with their tax advisor regarding the
tax impact on the exercise of the options or warrants.
The federal income tax discussion set forth above is included for general
information only. Allright shareholders are urged to consult their own tax
advisors for more specific and definitive advice as to the federal income tax
consequences to them of the surrender of their shares of Allright common stock
pursuant to the Merger, as well as advice as to the application and effect of
state, local and foreign income and other tax laws and possible amendments to
such laws.
APPRAISAL RIGHTS
Pursuant to Section 262 of the Delaware General Corporation Law (the "DGCL"),
any holder of Allright common stock who does not wish to accept the
consideration to be paid pursuant to the Merger Agreement may elect to have the
fair value of such shareholder's shares of Allright common stock (exclusive of
any element of value arising from the accomplishment or expectation of the
Merger) judicially determined and paid to such shareholder in cash, together
with a fair rate of interest, if any, provided that such shareholder complies
with the provisions of Section 262.
The following discussion is not a complete statement of the law pertaining to
appraisal rights under Delaware law, and is qualified in its entirety by the
full text of Section 262, which is provided in its entirety as Annex C to this
joint proxy statement/prospectus. All references in Section 262 and in this
summary to a "shareholder" are to the record holder of the shares of Allright
Common Stock as to which appraisal rights are asserted.
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Under Section 262, where a proposed merger is to be submitted for approval at a
meeting of shareholders, a constituent corporation must notify each of its
shareholders of record who were such as of the record date for such meeting and
for whom appraisal rights are available, not less than 20 days prior to the
meeting, that appraisal rights are available, and must include in such notice a
copy of Section 262. This joint proxy statement/prospectus constitutes such
notice to shareholders of Allright. Any shareholder who wishes to exercise such
appraisal rights or who wishes to preserve the right to do so should review
carefully Annex C to this joint proxy statement/prospectus because failure to
comply with the procedures specified in Section 262 timely and properly will
result in the loss of appraisal rights. Moreover, because of the complexity of
the procedures for exercising the right to seek appraisal of the Allright common
stock, Allright believes that shareholders who consider exercising such rights
should seek the advice of counsel.
Any holder of Allright common stock wishing to exercise the right to dissent
from the Merger and demand appraisal under Section 262 of the DGCL must satisfy
each of the following conditions:
- Such shareholder must deliver to Allright a written demand for appraisal
of such shareholder's shares before the vote on the Merger Agreement at
the Allright special meeting. This written demand for appraisal must be in
addition to and separate from any proxy or vote against the Merger
Agreement. Merely voting against, abstaining from voting or failing to
vote in favor of adoption of the Merger Agreement will not constitute a
demand for appraisal within the meaning of Section 262.
- Such shareholder must not vote for adoption of the Merger Agreement. A
failure to vote will satisfy this requirement, but a vote in favor of the
Merger Agreement, by proxy or in person, or the return of a signed proxy
that does not specify a vote against adoption of the Merger Agreement or a
direction to abstain in connection with the proposal, will constitute a
waiver of such shareholder's right of appraisal and will nullify any
previously filed written demand for appraisal because, in the absence of
express contrary instructions, such shares of Allright common stock will
be voted in favor of the proposal. Accordingly, a shareholder who desires
to perfect appraisal rights with respect to any of such shareholder's
shares of Allright common stock must, as one of the procedural steps
involved in such perfection, either refrain from executing and returning
the enclosed proxy card and from voting in person in favor of the proposal
to approve the Merger Agreement, or check either the "Against" or the
"Abstain" box next to the proposal on such card or affirmatively vote in
person against the proposal or register in person an abstention with
respect thereto.
- Such shareholder must continuously hold such shares from the date of
making the demand through the Effective Time. Accordingly, a shareholder
who is the record holder of shares of Allright common stock on the date
the written demand for appraisal is made but who thereafter transfers such
shares prior to the Effective Time will lose any right to appraisal in
respect of such shares.
A demand for appraisal should be executed by or on behalf of the shareholder of
record, fully and correctly, as such shareholder's name appears on such stock
certificates, should specify the shareholder's name and mailing address, the
number of shares of Allright common stock owned and that such shareholder
intends thereby to demand appraisal of such shareholder's Allright common stock.
If the shares are owned of record in a fiduciary capacity, such as by a trustee,
guardian or custodian, execution of the demand should be made in that capacity,
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and if the shares are owned of record by more than one person as in a joint
tenancy or tenancy in common, the demand should be executed by or on behalf of
all owners. An authorized agent, including one or more joint owners, may execute
a demand for appraisal on behalf of a shareholder; however, the agent must
identify the record owner or owners and expressly disclose the fact that, in
executing the demand, the agent is acting as agent for such owner or owners.
A record holder such as a broker who holds shares as nominee for several
beneficial owners may exercise appraisal rights with respect to the shares held
for one or more beneficial owners while not exercising such rights with respect
to the shares held for one or more beneficial owners; in such case, the written
demand should set forth the number of shares as to which appraisal is sought,
and where no number of shares is expressly mentioned the demand will be presumed
to cover all shares held in the name of the record owner. Shareholders who hold
their shares in brokerage accounts or other nominee forms and who wish to
exercise appraisal rights are urged to consult with their brokers to determine
the appropriate procedures for the making of a demand for appraisal by such a
nominee.
A shareholder who elects to exercise appraisal rights should mail or deliver a
written demand to: Allright Holdings, Inc., c/o Allright Corporation, 1313 Main
Street, Houston, Texas 77002, Attention: General Counsel.
Within ten days after the Effective Time, Allright must give written notice that
the Merger has become effective to each shareholder who has complied with
Section 262. Any shareholder entitled to appraisal rights may, within 20 days
after the date of mailing such notice, demand in writing from Allright the
appraisal of such shareholder's shares. Within 120 days after the Effective
Time, but not thereafter, either Allright or any shareholder who has complied
with the requirements of Section 262 may file a petition in the Delaware Court
of Chancery demanding a determination of the value of the shares of Allright
common stock held by all dissenting shareholders. Allright does not presently
intend to file such a petition, and shareholders seeking to exercise appraisal
rights should not assume that Allright will file such a petition or that
Allright will initiate any negotiations with respect to the fair value of such
shares. Accordingly, shareholders who desire to have their shares appraised
should initiate any petitions necessary for the perfection of their appraisal
rights within the time periods and in the manner prescribed in Section 262.
Inasmuch as Allright has no obligation to file such a petition, the failure of a
shareholder to do so within the period specified could nullify such
shareholder's previous written demand for appraisal. In any event, at any time
within 60 days after the Effective Time (or at any time thereafter with the
written consent of Allright), any shareholder who has demanded appraisal has the
right to withdraw the demand and to accept payment of the consideration provided
in the Merger Agreement.
Within 120 days after the Effective Time, any shareholder who has complied with
the provisions of Section 262 to that point in time will be entitled to receive
from Allright, upon written request, a statement setting forth the aggregate
number of shares not voted in favor of the Merger Agreement and with respect to
which demands for appraisal have been received and the aggregate number of
holders of such shares. Allright must mail such statement to the shareholder
within 10 days of receipt of such request.
If a petition for an appraisal is timely filed, after a hearing on such
petition, the Delaware Chancery Court will determine which shareholders are
entitled to appraisal rights and will appraise the "fair value" of their shares,
exclusive of any element of value arising from the accomplishment or expectation
of the Merger, together with a fair rate of interest, if any, to
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be paid upon the amount determined to be the fair value. The costs of the action
may be determined by the Delaware Chancery Court and taxed upon the parties as
the Delaware Chancery Court deems equitable. Upon application of a dissenting
shareholder, the Delaware Chancery Court may also order that all or a portion of
the expenses incurred by any shareholder 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 of
the shares entitled to appraisal. SHAREHOLDERS CONSIDERING SEEKING APPRAISAL
SHOULD BE AWARE THAT THE FAIR VALUE OF THEIR SHARES AS DETERMINED UNDER SECTION
262 COULD BE MORE THAN, THE SAME AS, OR LESS THAN THE CONSIDERATION THEY WOULD
RECEIVE PURSUANT TO THE MERGER AGREEMENT IF THEY DID NOT SEEK APPRAISAL OF THEIR
SHARES AND THAT INVESTMENT BANKING OPINIONS ARE NOT OPINIONS AS TO FAIR VALUE
UNDER SECTION 262.
In determining fair value, the Delaware Chancery Court is to take into account
all relevant factors. In Weinberger v. UOP, Inc., the Delaware Supreme Court
discussed the factors that could be considered in determining fair value in an
appraisal proceeding, stating that "proof of value by any techniques or methods
which are generally considered acceptable in the financial community and
otherwise admissible in court" should be considered, and that "fair price
obviously requires consideration of all relevant factors involving the value of
a company." The Delaware Supreme Court stated that, in making this determination
of fair value, the court must consider market value, asset value, dividends,
earnings prospects, the nature of the enterprise and any other facts which could
be ascertained as of the date of the merger that throw any light on future
prospects of the merged corporation. In Weinberger, the Delaware Supreme Court
stated that "elements of future value, including the nature of the enterprise,
which are known or susceptible of proof as of the date of the merger and not the
product of speculation, may be considered." Section 262 provides that fair value
is to be "exclusive of any element of value arising from the accomplishment or
expectation of the merger." In Cede & Co. v. Technicolor, Inc., the Delaware
Supreme Court stated that such exclusion is a "narrow exclusion [that] does not
encompass known elements of value."
Any shareholder who has duly demanded an appraisal in compliance with Section
262 will not, after the Effective Time, be entitled to vote the shares subject
to such demand for any purpose or be entitled to the payment of dividends or
other distributions on those shares (except dividends or other distributions
payable to holders of record of shares as of a record date prior to the
Effective Time).
At any time within 60 days after the Effective Time, any shareholder will have
the right to withdraw such demand for appraisal and to accept the terms offered
in the Merger; after this period, the shareholder may withdraw such demand for
appraisal only with the consent of Allright. If no petition for appraisal is
filed with the Delaware Chancery Court within 120 days after the Effective Time,
or if such shareholder has withdrawn such demand for appraisal as discussed in
the preceding sentence, shareholders' rights to appraisal shall cease, and all
holders of shares of Allright common stock will be entitled to receive the
Merger consideration. Any shareholder may withdraw such shareholder's demand for
appraisal by delivering to Allright a written withdrawal of such shareholder's
demand for appraisal and acceptance of the Merger, except that any such attempt
to withdraw made more than 60 days after the Effective Time will require written
approval of Allright and no appraisal proceeding in the Delaware Chancery Court
shall be dismissed as to any shareholder without the approval of the Delaware
Chancery Court, and such approval may be conditioned upon such terms as the
Delaware Chancery Court deems just. If Allright does not approve a shareholder's
request to withdraw a demand for appraisal when such approval is required or
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the Delaware Chancery Court does not approve the dismissal of an appraisal
proceeding, the shareholder would be entitled to receive only the appraised
value determined in any such appraisal proceeding, which value could be lower
than the value of the Merger consideration.
Failure to comply strictly with the procedures set forth in Section 262 of the
DGCL will result in the loss of a shareholder's statutory appraisal rights.
REGULATORY MATTERS
Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, (the "HSR Act"),
and the rules promulgated by the Federal Trade Commission (the "FTC"), the
Merger may not be consummated until notifications have been given and certain
information has been furnished to the FTC and the Antitrust Division of the
United States Department of Justice (the "Antitrust Division") and specified
waiting period requirements have expired or been terminated. Central Parking and
Allright filed the required notification and report forms under the HSR Act with
the FTC and the Antitrust Division on October 8, 1998.
On November 6, 1998, Central Parking and Allright each received from the
Antitrust Division a Request for Additional Documents and Other Additional
Information (a "Second Request") with respect to the Merger. The time period for
the Antitrust Division to review the Merger will terminate 20 days following
substantial compliance by both Central Parking and Allright with the Second
Request. Thereafter, the waiting period may be extended only by court order or
the consent of the parties. Consequently, there can be no assurance that the
consummation of the Merger will not be delayed by reason of the HSR Act.
Central Parking also has received notice that the attorneys general in
Tennessee, Ohio and Texas are reviewing the transaction from an antitrust
perspective. Each of these states has issued a formal request for documents and
other information relating to the Merger in the form of a civil investigative
demand. In addition, attorneys general in New York, Colorado and Illinois have
indicated that they are considering the issuance of civil investigative demands.
It is possible that other states could also issue such demands.
At any time before or after consummation of the Merger, the Antitrust Division,
the FTC, a state governmental authority or a private person or entity could seek
to enjoin the Merger under the antitrust laws or seek the divestiture of
substantial assets of Central Parking. In the event the Department of Justice
seeks a divestiture of assets by either Central Parking or Allright and Central
Parking or Allright, as required, agrees to such divestiture (which neither
party has an obligation to do) the merger agreement provides that the equity
purchase price for Allright will be adjusted based upon a formula set forth in
the agreement. This formula provides for an adjustment equal to 35% multiplied
by the difference between (A) the appraised value of the divested property or
operations and (B) 16 times EBITDA for such property or operations for the prior
fiscal year. There can be no assurance that a challenge to the Merger on
antitrust grounds will not be made or, if such a challenge is made, of the
result. The obligations of Central Parking and Allright to consummate the Merger
are subject to the condition that any waiting period applicable to the
consummation of the Merger under the HSR Act shall have expired or been
terminated and that none of Allright, Allright Corporation, Central Parking or
Central Parking Sub shall be subject to any order, decree, ruling or other
action of a court of competent jurisdiction which restrains, delays or otherwise
prohibits the transactions contemplated by the Merger Agreement. See "Risk
Factors" and "The Merger Agreement -- Conditions to the Consummation of the
Merger" for further information.
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FEDERAL SECURITIES LAWS CONSEQUENCES; RESALE RESTRICTIONS
This joint proxy statement/prospectus does not cover resales of Central Parking
common stock to be received by the holders of Allright common stock upon
consummation of the Merger and no person is authorized to make any use of this
joint proxy statement/prospectus in connection with any such resale.
All shares of Central Parking common stock issued pursuant to the Merger will be
freely transferable, except that shares of Central Parking common stock received
by persons who are deemed to be "affiliates" (as such term is defined under the
Securities Act) of Allright may be resold by them only in transactions permitted
by the resale provisions of Rule 145 (or Rule 144 in the case of such persons
who become affiliates of Central Parking) or as otherwise permitted under the
Securities Act. Persons who may be deemed to be affiliates of Allright or
Central Parking generally include individuals or entities that control, are
controlled by, or are under common control with, such party and may include
certain officers and directors of Allright or Central Parking as well as
significant shareholders.
CONDUCT OF THE BUSINESS IF THE MERGER IS NOT CONSUMMATED
If the Merger is not consummated, it is expected that the respective businesses
and operations of Allright or Central Parking will continue to be conducted
substantially as they currently are being conducted. Pursuant to the Merger
Agreement, Central Parking has agreed, generally speaking, that if the Merger is
terminated for any reason, Central Parking will not solicit or enter into any
agreements to operate any facilities which Allright or any of its subsidiaries
operated or have binding agreements to operate as of the date of the Merger
Agreement or the date of termination of the Merger Agreement. In addition, if a
termination of the Merger Agreement occurs, Central Parking will not employ or
solicit any employee of Allright as of the date of the Merger Agreement or the
date of termination of the Merger Agreement. The term of these restrictions are
for three years if the Merger is not completed because of Central Parking's
breach of the Merger Agreement or because of a material adverse change to
Allright, or for eighteen months if the Merger is not completed for any other
reason. The non-compete provision contained in the Merger Agreement could have a
material adverse effect on Central Parking's business. See "The Merger
Agreement -- Effect of Termination; Non-Competition."
CERTAIN TRANSACTIONS; INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain directors and executive officers of Central Parking and Allright, as
well as others, have interests in the Merger in addition to their interests
solely as Central Parking shareholders and Allright shareholders.
Officers and Directors of the Surviving Corporation and Central Parking. The
Merger Agreement provides that the directors and officers of Central Parking
Sub, some of which are also directors and officers of Central Parking, will
become the directors and officers of the surviving corporation after the
Effective Time, including Monroe J. Carell, Jr., James H. Bond, Stephen A.
Tisdell and Henry J. Abbott. See "The Merger Agreement -- Certificate of
Incorporation and Bylaws; Directors and Officers." The Merger Agreement also
provides that, upon consummation of the Merger, Apollo and AEW will each be
entitled to designate one individual to the Central Parking Board. See "The
Merger Agreement -- Certain Covenants -- Central Parking Board of Directors."
AEW intends to designate Marc L. Davidson as its nominee to the Central Parking
Board and Apollo intends to designate William S. Benjamin as its nominee to the
Central Parking Board.
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Options. The Merger Agreement provides that each option granted by Allright
(each an "Allright Option") to purchase shares of Allright common stock
outstanding and unexercised prior to the Merger shall automatically be converted
into a right to receive an option to purchase Central Parking common stock. The
amount of options to purchase Central Parking common stock into which each
Allright Option will be converted will be the product of the number of shares of
Allright common stock subject to the original Allright Option times the Exchange
Ratio. Certain agreements pursuant to which Allright Options were granted,
including the 1998 Plan (as defined below), provide for the acceleration of
vesting of a certain number of Allright Options upon a change of control of
Allright. On the date hereof, the number of unexercised Allright Options held by
each of the five most highly compensated executive officers of Allright
(including the chief executive officer) (the "Allright Executive Officers") is:
Mr. Shay (2,917), Mr. Grady (740), Mr. Dane (105), Mr. Chen (110) and Mr. Stone
(105). Certain of such Allright Options may be exercised prior to the Merger.
Retention/Employment/Management Continuity Agreements. In addition to any
employment agreement or management continuity agreement to be entered into as
discussed below, certain members of Allright management, including certain of
the Allright Executive Officers, have entered into retention agreements with
Allright, which provide for a certain lump sum cash payment to be made to such
employees upon consummation of the Merger. An employee will forfeit such payment
if the employee is no longer employed by Allright prior to the closing date of
the Merger. The amount of payments to be made under the retention agreements for
the Allright Executive Officers are expected to be: Mr. Dane ($600,000), Mr.
Grady ($444,000), Mr. Chen ($40,000) and Mr. Stone ($65,000). Mr. Grady's
retention agreement also provides that if Mr. Grady's employment is terminated
without cause by Allright prior to September 4, 1999, he shall be entitled to a
lump sum severance payment of $378,000. Mr. Grady's retention agreement further
provides that if the Merger Agreement is terminated for any reason, Mr. Grady
and Allright will negotiate in good faith for 60 days to enter into a new
employment agreement. If at the end of such 60 day period no employment
agreement has been entered into, Allright will pay Mr. Grady a lump sum cash
severance payment of $450,000.
Certain members of Allright management, including certain Allright Executive
Officers, are expected to enter into employment agreements at the Effective Time
with the surviving corporation. The employment agreements will provide that upon
consummation of the Merger, the employee will be entitled to receive a certain
payment from the surviving corporation. In addition, on the second anniversary
of the closing date of the Merger, the employee will be entitled to receive an
additional lump sum cash payment. The employee shall forfeit any right to
receive payments if terminated for cause or if the employee terminates his
employment other than for good reason. If the employee's employment is
terminated (A) by the employee for good reason, (B) by the employer other than
for cause, or (C) by the employee's death, any amounts due to the employee under
the employment agreement not yet paid shall be accelerated and become payable
within seven days following the employee's termination. The Allright Executive
Officers expected to enter into employment agreements and the payments expected
to be made thereunder are: Mr. Dane ($300,000 at closing and $300,000 at second
anniversary of closing) and Mr. Stone ($32,500 at closing and $32,500 at second
anniversary of closing).
Certain members of Allright management, including certain Allright Executive
Officers, are expected to enter into management continuity agreements at the
Effective Time with the surviving corporation. If an employee enters into an
employment agreement as discussed
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above, such employee will not also enter into a management continuity agreement.
The management continuity agreements are expected to provide that the surviving
corporation will pay to the employee a lump sum cash payment on the six month
anniversary of the closing date. The employee shall forfeit any right to receive
payments if terminated for cause or if the employee terminates his employment.
If the employee's employment is terminated by the employer other than for cause
(including by reason of the employee's disability) or by the employee's death,
any amounts due to the employee under the management continuity agreement not
yet paid shall be accelerated and become payable within seven days following the
employee's termination. The Allright Executive Officers expected to enter into
management continuity agreements and the payments expected to be made thereunder
are: Mr. Grady ($444,000) and Mr. Chen ($40,000).
Employment/Severance Agreements. Allright has entered into an employment
agreement with Mr. Shay. Mr. Shay's employment agreement expires on March 1,
2001 (subject to earlier termination in certain circumstances), with automatic
one year renewal periods. Mr. Shay receives a base salary of $275,000 per year,
plus a certain bonus based upon performance measures, and is entitled to
participate in Allright's benefit plans. In addition, Mr. Shay was granted an
option to purchase 2,917 shares of Allright common stock which vests at a rate
of 61 shares per month. On the date of grant, the option price exceeded the
value of the Allright common stock. This option fully accelerates upon the
occurrence of certain events, including the Merger, and partially accelerates
upon certain other events, including Mr. Shay's termination other than for
"Cause" (as defined in the employment agreement). Mr. Shay's employment
agreement contains a provision restricting Mr. Shay's ability to compete with
Allright for a period of 18 months following Mr. Shay's termination of
employment with Allright. In addition, Mr. Shay's employment agreement provides
Mr. Shay with the option, in lieu of $75,000 of annual base salary, to receive
options to purchase 75 shares of Allright common stock, prorated monthly, at an
exercise price of $1.00 per share, which are immediately exercisable.
Mr. Grady has also entered into an employment agreement with Allright. Mr.
Grady's employment agreement had an original expiration date of September 3,
1998, but was automatically extended for one year as provided therein. The
agreement renews automatically for one year periods unless a party thereto
provides the other 30 days notice of its intention not to renew the agreement.
Mr. Grady receives a base salary of $210,000 per year, plus a certain bonus
based upon performance measures, and is entitled to participate in Allright's
benefit plans. In addition, Mr. Grady was granted an option to purchase 740
shares of Allright common stock. On the date of grant, the option price exceeded
the value of the Allright common stock. Such options vest at a rate of 25% on
each anniversary of the employment agreement, with such grant being fully vested
at the end of Mr. Grady's fourth year of employment. In the event of a "change
of control" (which would include the Merger), the vesting of such options
accelerates to permit the immediate exercise of twice the number of shares which
would otherwise have been exercisable at the commencement of the change of
control. Mr. Grady's employment agreement contains a provision restricting Mr.
Grady's ability to compete with Allright for a period of 18 months following Mr.
Grady's termination of employment with Allright.
Messrs. Chen, Dane and Stone have each entered into a Non-Solicitation Agreement
with Allright, which contains certain non-solicitation provisions and certain
severance provisions. The non-solicitation provisions generally prohibit the
employee from soliciting or encouraging any customer, landlord, supplier,
employee or other party to terminate or adversely
45
<PAGE> 52
modify its relationship with Allright. The severance provision provides, among
other things, that if the employee is terminated by Allright without "cause" (as
defined in the agreement), the employer may choose to pay the employee one year
(six months in the case of Mr. Chen) of his salary and benefits then in effect
and the employee shall remain subject to the non-solicitation provision
contained in the agreement for such time, or release the employee from the
non-solicitation provision contained in the agreement and not pay the employee
any further compensation.
Mr. Bernard M. Meyer, the former Chief Executive Officer of Allright
Corporation, entered into a letter agreement with Allright on December 15, 1997,
pursuant to which Mr. Meyer was awarded stock options to purchase 100 shares of
Allright common stock with an exercise price of $1,300 per share, and pursuant
to which Mr. Meyer receives certain other benefits.
Employee Benefit Plans. Pursuant to the Allright 1998 Employee Stock Option
Plan (the "1998 Plan"), certain members of Allright management received
incentive stock options to purchase Allright common stock. Any options issued
under the 1998 Plan which are not vested prior to the closing date will
accelerate to permit the immediate vesting and exercise upon the consummation of
the Merger. The Allright Executive Officers who have received options under the
1998 Plan include: Mr. Dane (105 options), Mr. Chen (110 options) and Mr. Stone
(105 options).
Director and Officer Indemnification. Pursuant to the Merger Agreement, Central
Parking will assume all arrangements providing rights to indemnification and
exculpation from liabilities for acts or omissions occurring at or prior to the
Effective Time now existing in favor of the current or former directors,
officers, employees or agents of Allright. Central Parking shall cause such
rights to continue in full force and effect, without amendment, for six years
after the Effective Time. For six years after the Effective Time, Central
Parking or the surviving corporation shall maintain in effect Allright's current
directors' and officers' liability insurance covering acts or omissions
occurring prior to the Effective Time or in the alternative, Central Parking may
purchase a "tail" on Allright's existing insurance policy for a term of no less
than six years. See "The Merger Agreement -- Certain Covenants --
Indemnification, Exculpation and Insurance."
Registration Rights. Certain current holders of Central Parking common stock
and certain holders of Central Parking common stock after the Merger will have
registration rights with respect to their Central Parking common stock pursuant
to the Registration Rights Agreement after consummation of the Merger. See
"Registration Rights Agreement."
Affiliate Transactions. Marc L. Davidson, Michael McGillis and Thomas H. Nolan,
Jr. are each members of the Allright Board and are employed by AEW or its
affiliates. William S. Benjamin, Lee S. Neibart and Stuart Koenig are also each
members of the Allright Board and are employed by Apollo or its affiliates.
Allright has entered into certain transactions with certain affiliates of AEW
and Apollo for the provision of parking services. In addition, Central Parking
has entered into certain transactions in the ordinary course of business with
Allright, Apollo and AEW for the provision of parking services. All such
transactions were entered into on an arm's length basis.
Blackstone Transactions. Affiliates of Blackstone from time to time have
participated or may in the future participate with AEW and/or Apollo and their
respective affiliates in various investment and other business opportunities in
the ordinary course of business. These various investment opportunities have
been unrelated to Blackstone's representation of Central Parking and are
immaterial to the Merger, Blackstone, Apollo and AEW.
46
<PAGE> 53
COMPARATIVE PRICE RANGE OF
COMMON STOCK AND DIVIDEND POLICY
Central Parking's common stock is listed on the NYSE under the symbol "CPC." The
following table sets forth, for the periods indicated, the high and low sales
prices for the Central Parking common stock as reported by the NYSE. Such
amounts reflect the three-for-two stock split in December 1997.
<TABLE>
<CAPTION>
HIGH LOW
------ ------
<S> <C> <C>
FISCAL 1997
First Quarter............................................... $24.58 $21.08
Second Quarter.............................................. 22.75 16.33
Third Quarter............................................... 23.25 15.92
Fourth Quarter.............................................. 32.92 22.17
FISCAL 1998
First Quarter............................................... $46.81 $31.42
Second Quarter.............................................. 49.38 38.44
Third Quarter............................................... 48.44 40.31
Fourth Quarter.............................................. 52.63 41.31
FISCAL 1999
First Quarter............................................... $48.69 $25.44
Second Quarter (through January 11, 1999)................... $32.25 $29.75
</TABLE>
On September 21, 1998, the last full trading day before the Merger was
announced, the last reported sale price of the Central Parking common stock on
the NYSE was $46.125 per share. On January 11, 1999, the last practicable day
before the printing of this joint proxy statement/prospectus, the last reported
sale price of the Central Parking common stock on the NYSE was $31.00 per share
and there were approximately 10,200 holders of the Central Parking common stock,
based on the number of record holders and the number of individual participants
represented by security position listings.
Allright common stock is not traded on any exchange and there is no public
market for the outstanding shares of Allright common stock. Allright has not
paid any dividends on its capital stock during the last two fiscal years. See
"Description of Allright -- No Established Trading Market; Dividends."
Since April 1997, Central Parking has distributed a quarterly cash dividend of
$0.015 per share of Central Parking common stock. Central Parking had previously
declared a dividend of $0.0125 per share of Central Parking common stock
following the end of each quarter since its initial public offering in October
1995.
The Central Parking Board currently intends to declare a cash dividend each
quarter depending on Central Parking's profitability and capital necessary to
finance operations and expansion. Central Parking reserves the right, however,
to retain all or a substantial portion of its earnings to finance the operation
and expansion of Central Parking's business. As a result, the future payment of
dividends will depend upon, among other things, Central Parking's profitability,
capital requirements, financial condition, growth, business opportunities, and
other factors that the Central Parking Board may deem relevant, including
restrictions in any then-existing credit agreement. Central Parking's credit
facility contains certain restrictions on Central Parking's ability to pay
dividends; however, Central Parking does not believe these restrictions limit
its ability to pay currently anticipated cash dividends. In addition, Central
Parking Finance Trust (the "Trust"), a Delaware statutory business trust, of
which all of the common stock is owned by Central Parking, issued preferred
securities (the "Trust Issued Preferred Securities") which prohibit the payment
of dividends on Central Parking common stock if the quarterly distributions on
the Trust Issued Preferred Securities are not made for any reason.
47
<PAGE> 54
UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma condensed combined financial statements are
derived from the historical consolidated financial statements of Central
Parking, the historical financial statements of the Purchase Acquisitions (as
defined below), and the historical consolidated financial statements of
Allright. Central Parking's fiscal year ends on September 30. Allright's fiscal
year ends on June 30.
The unaudited pro forma condensed combined financial statements give effect to
Central Parking's acquisitions in its fiscal year 1997 of Civic Parking LLC
("Civic"), Square Industries, Inc ("Square") and Car Park Corporation ("Car
Park"), and Central Parking's acquisitions in its fiscal year 1998 of Diplomat
Parking Corporation ("Diplomat"), Kinney System Holding Corp. ("Kinney"),
Central Parking System of Louisiana, Inc ("CPS-Louisiana") and Turner Parking
Systems Inc ("Turner"), collectively referred to as the "Purchase
Acquisitions.". These Purchase Acquisitions were accounted for using the
purchase method of accounting. The purchase method of accounting requires that
all assets and liabilities of the acquired companies be adjusted to their
respective estimated fair market values as of the dates of acquisition. The
unaudited pro forma condensed combined financial statements also give effect to
the Merger using the pooling of interests method of accounting. The pooling of
interests method of accounting combines assets and liabilities at their
historical bases and restates the results of operations as if Central Parking
and Allright had been combined as of October 31, 1996 the date that Allright
acquired Allright Corporation.
The unaudited pro forma condensed combined balance sheet combines the historical
consolidated balance sheets of Central Parking as of September 30, 1998 and
Allright as of June 30, 1998, and assumes the Merger occurred on September 30,
1998. The unaudited pro forma condensed combined statement of earnings for the
fiscal year ended September 30, 1997, combines the historical:
- consolidated results of operations of Central Parking for its fiscal year
ended September 30, 1997;
- results of operations of Civic for the three-month period ended December
31, 1996;
- consolidated results of operations of Square for the period from October
1, 1996 through January 17, 1997;
- results of operations of Car Park for the period from October 1, 1996
through May 29, 1997;
- results of operations of Diplomat for the twelve-month period ended
September 30, 1997;
- consolidated results of operations of Kinney for its fiscal year ended
December 31, 1997;
- results of operations of CPS-Louisiana for the twelve-month period ended
September 30, 1997;
- results of operation of Turner for its fiscal year ended December 31,
1997; and
- consolidated results of operation of Allright for the eleven-month period
from October 31, 1996 through September 30, 1997.
48
<PAGE> 55
The unaudited pro forma condensed combined statement of earnings for the fiscal
year ended September 30, 1998, combines the historical:
- consolidated results of operation of Central Parking for its fiscal year
ended September 30, 1998;
- consolidated results of operations of Kinney for the period from October
1, 1997 through February 11, 1998;
- results of operations of CPS-Louisiana for the period from October 1,
1997 through March 30, 1998;
- results of operation of Turner for the period from October 1, 1997
through March 31, 1998; and
- consolidated results of operation of Allright for its fiscal year ended
June 30, 1998.
Certain reclassifications have been made to Allright's historical consolidated
financial statements to conform to Central Parking's presentation.
The unaudited pro forma condensed combined statements of earnings were prepared
assuming that the Purchase Acquisitions were consummated on October 1, 1996, and
gives effect to the financing of the Purchase Acquisitions. Such statements do
not reflect certain estimated operational and financial combination benefits
which are a direct result of the Purchase Acquisitions. The unaudited pro forma
condensed combined statements of earnings do not include nonrecurring
Merger-related charges. The unaudited pro forma condensed combined financial
statements do not give effect to any cost savings which may be realized
following the Merger. The assumptions and adjustments which are deemed
appropriate by Central Parking management are described in the accompanying
notes to unaudited pro forma condensed combined financial statements. The
unaudited pro forma financial statements do not reflect the acquisition in July
1998 of Sterling Parking, Inc. by Central Parking because such acquisition had
an immaterial effect on the unaudited pro forma financial statements.
The unaudited pro forma financial statements are provided for informational
purposes. They are not necessarily representative of what Central Parking's
consolidated results of operations or financial position would have been had the
Purchase Acquisitions and the Merger in fact occurred on the respective dates
set forth above, and are not intended to project Central Parking's consolidated
results of operations or financial position for any future period or date. The
information set forth below should be read in conjunction with the Central
Parking's, Allright Corporation's, and Allright's Consolidated Financial
Statements and Notes and the respective "Management's Discussion and Analysis of
Financial Condition and Results of Operations" for Central Parking and Allright,
all of which are included elsewhere herein.
49
<PAGE> 56
CENTRAL PARKING CORPORATION
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
SEPTEMBER 30, 1998
(ALL DOLLAR AMOUNTS ARE EXPRESSED IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
CENTRAL
HISTORICAL PARKING
-------------------------- EFFECTS OF PRO FORMA
CENTRAL PARKING ALLRIGHT MERGER COMBINED
--------------- -------- ---------- ---------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................ $ 19,840 $ 19,655 $ -- $ 39,495
Accounts receivable and current portion of notes
receivable............................................. 28,734 6,034 -- 34,768
Prepaid rent and other expenses.......................... 18,167 4,528 -- 22,695
Prepaid and refundable income taxes...................... 1,266 -- 2,920 4,186
Deferred income taxes.................................... 545 -- -- 545
-------- -------- -------- --------
Total current assets............................... 68,552 30,217 2,920 101,689
Investments, at amortized cost............................. 5,087 -- -- 5,087
Notes receivable, less current portion..................... 25,110 21,414 -- 46,524
Property, equipment, and leasehold improvements, net....... 118,176 264,330 -- 382,506
Contract and lease rights, net............................. 17,773 44,699 -- 62,472
Goodwill, net.............................................. 254,997 32,293 -- 287,290
Investment in partnerships and joint ventures.............. 37,344 3,032 -- 40,376
Other assets............................................... 17,834 12,284 -- 30,118
-------- -------- -------- --------
$544,873 $408,269 $ 2,920 $956,062
======== ======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt and capital lease
obligations............................................ $ 2,225 $ 656 $ -- $ 2,881
Management and other accounts payable.................... 69,053 14,457 -- 83,510
Accrued expenses......................................... 20,453 23,814 25,800 70,067
Income taxes payable..................................... 945 -- -- 945
-------- -------- -------- --------
Total current liabilities.......................... 92,676 38,927 25,800 157,403
Long-term debt and capital lease obligations, less current
portion.................................................. 60,704 222,615 -- 283,319
Deferred compensation...................................... 3,797 7,562 -- 11,359
Deferred income taxes...................................... 2,162 30,168 (3,500) 28,830
Minority interest.......................................... -- 23,103 -- 23,103
Other long-term liabilities................................ 19,830 -- -- 19,830
-------- -------- -------- --------
Total liabilities.................................. 179,169 322,375 22,300 523,844
Company-obligated mandatorily redeemable convertible
securities of subsidiary holding solely parent
debentures............................................... 110,000 -- -- 110,000
Shareholders' equity:
Common stock, $.01 par value; 50,000,000 (historical) and
100,000,000 (pro forma) shares authorized, 29,569,767
(historical) and 37,169,767 (pro forma) issued and
outstanding, respectively.............................. 296 1 74 371
Additional paid-in capital............................... 166,740 89,734 (74) 256,400
Foreign currency translation adjustment.................. 359 (509) -- (150)
Retained earnings........................................ 88,811 (3,332) (19,380) 66,099
Deferred compensation on restricted stock................ (502) -- -- (502)
-------- -------- -------- --------
Total shareholders' equity......................... 255,704 85,894 (19,380) 322,218
-------- -------- -------- --------
$544,873 $408,269 $ 2,920 $956,062
======== ======== ======== ========
</TABLE>
50
<PAGE> 57
CENTRAL PARKING CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED
STATEMENT OF EARNINGS
YEAR ENDED SEPTEMBER 30, 1997
(ALL AMOUNTS ARE EXPRESSED IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
COMBINED COMBINED ALLRIGHT
CENTRAL PARKING PURCHASE PRO FORMA CENTRAL PARKING HISTORICAL
HISTORICAL ACQUISITIONS PURCHASE PRO FORMA 10/31/96- EFFECT OF
9/30/97 HISTORICAL(1) ADJUSTMENTS(2) CONSOLIDATED 9/30/97(4) MERGER(5)
--------------- ------------- -------------- --------------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Parking and management
contracts...................... $220,454 $185,651 $ (2,448) $403,657 $169,468 $ --
Cost and expenses:
Cost of parking and management
contracts...................... 169,175 152,834 (1,159) 320,850 128,784 --
General and administrative....... 22,507 27,252 (4,919) 44,840 21,287 --
Amortization of goodwill and
noncompete agreements.......... 920 -- 8,755 9,675 1,072 --
Acquisition costs................ -- 2,864 (2,864) -- -- --
-------- -------- -------- -------- -------- --------
Total costs and expenses... 192,602 182,950 (187) 375,365 151,143 --
-------- -------- -------- -------- -------- --------
Operating earnings (loss)........ 27,852 2,701 (2,261) 28,292 18,325 --
Other income (expenses):
Interest income.................. 1,842 1,539 (403) 2,978 1,077 --
Interest expense................. (4,582) (4,842) (12,073) (21,497) (19,408) --
Net gains (losses) on sales of
property and equipment......... 3,137 (779) -- 2,358 (60) --
Equity in partnership and joint
venture earnings............... 4,163 851 457 5,471 111 --
Other............................ -- (1,169) 612 (557) (235) --
-------- -------- -------- -------- -------- --------
Earnings (loss) from
continuing operations
before income taxes...... 32,412 (1,699) (13,668) 17,045 (190) --
Income tax expense................ 12,207 2,507 (5,307) 9,407 1,584 --
-------- -------- -------- -------- -------- --------
Earnings (loss) from continuing
operations..................... $ 20,205 $ (4,206) $ (8,361) $ 7,638 $ (1,774) $ --
======== ======== ======== ======== ======== ========
Basic weighted average common
shares outstanding............... 25,991 26,943
======== ========
Basic earnings from continuing
operations per common share...... $ 0.78 $ 0.28
======== ========
Diluted weighted average common
shares and potential diluted
common shares.................... 26,330 27,282
======== ========
Diluted earnings from continuing
operations per common share...... $ 0.77 $ 0.28
======== ========
<CAPTION>
CENTRAL PARKING
PRO FORMA
FULLY COMBINED
---------------
<S> <C>
Revenues:
Parking and management
contracts...................... $573,125
Cost and expenses:
Cost of parking and management
contracts...................... 449,634
General and administrative....... 66,127
Amortization of goodwill and
noncompete agreements.......... 10,747
Acquisition costs................ --
--------
Total costs and expenses... 526,508
--------
Operating earnings (loss)........ 46,617
Other income (expenses):
Interest income.................. 4,055
Interest expense................. (40,905)
Net gains (losses) on sales of
property and equipment......... 2,298
Equity in partnership and joint
venture earnings............... 5,582
Other............................ (792)
--------
Earnings (loss) from
continuing operations
before income taxes...... 16,855
Income tax expense................ 10,991
--------
Earnings (loss) from continuing
operations..................... $ 5,864
========
Basic weighted average common
shares outstanding............... 33,910
========
Basic earnings from continuing
operations per common share...... $ 0.17
========
Diluted weighted average common
shares and potential diluted
common shares.................... 34,249
========
Diluted earnings from continuing
operations per common share...... $ 0.17
========
</TABLE>
51
<PAGE> 58
CENTRAL PARKING CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED
COMBINED STATEMENT OF EARNINGS
FOR THE YEAR ENDED SEPTEMBER 30, 1998
(ALL AMOUNTS EXPRESSED IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
COMBINED COMBINED ALLRIGHT
PURCHASE PRO FORMA CENTRAL PARKING HISTORICAL(4)
CENTRAL PARKING ACQUISITIONS PURCHASE PRO FORMA 7/1/97- EFFECT OF
HISTORICAL HISTORICAL(1) ADJUSTMENTS(2) CONSOLIDATED 6/30/98 MERGER(5)
--------------- ------------- -------------- --------------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Parking and management
contracts.................... $383,175 $52,723 -- $435,898 $217,224 $ --
Costs and expenses:
Cost of parking and management
contracts.................... 295,288 43,468 66 338,822 161,416 --
General and administrative..... 33,866 5,891 123 39,880 29,947 --
Amortization of goodwill and
non-compete agreements....... 7,140 -- 2,902 10,042 1,177 --
-------- ------- ------- -------- -------- -------
Total costs and
expenses............... 336,294 49,359 3,091 388,744 192,540 --
-------- ------- ------- -------- -------- -------
Operating earnings............. 46,881 3,364 (3,091) 47,154 24,684 --
-------- ------- ------- -------- -------- -------
Other income (expenses):
Interest income................ 2,719 526 (45) 3,200 1,308 --
Interest expense............... (7,373) (1,526) (3,811) (12,710) (22,859) --
Dividends on company-obligated
mandatorily redeemable
convertible securities of a
subsidiary trust............. (3,160) -- -- (3,160) -- --
Net gains (losses) on sales of
property and equipment....... 71 -- -- 71 (710) --
Minority interest.............. -- -- -- -- (289) --
Equity in partnership and joint
venture earnings............. 5,086 164 133 5,383 160 --
-------- ------- ------- -------- -------- -------
Earnings from continuing
operations before
income taxes........... 44,224 2,528 (6,814) 39,938 2,294 --
Income tax expense.............. 17,614 838 (1,440) 17,012 2,226 --
-------- ------- ------- -------- -------- -------
Earnings from continuing
operations................... $ 26,610 $ 1,690 $(5,374) $ 22,926 $ 68 $ --
======== ======= ======= ======== ======== =======
Basic weighted average common
shares outstanding............. 27,857 28,216
======== ========
Basic earnings from continuing
operations per common share.... $ 0.96 $ 0.81
======== ========
Diluted weighted average common
shares and dilutive potential
common shares.................. 28,326 28,685
======== ========
Diluted earnings from continuing
operations per common share.... $ 0.94 $ 0.80
======== ========
<CAPTION>
CENTRAL PARKING
PRO FORMA
FULLY COMBINED
---------------
<S> <C>
Revenues:
Parking and management
contracts.................... $653,122
Costs and expenses:
Cost of parking and management
contracts.................... 500,238
General and administrative..... 69,827
Amortization of goodwill and
non-compete agreements....... 11,219
--------
Total costs and
expenses............... 581,284
--------
Operating earnings............. 71,838
--------
Other income (expenses):
Interest income................ 4,508
Interest expense............... (35,569)
Dividends on company-obligated
mandatorily redeemable
convertible securities of a
subsidiary trust............. (3,160)
Net gains (losses) on sales of
property and equipment....... (639)
Minority interest.............. (289)
Equity in partnership and joint
venture earnings............. 5,543
--------
Earnings from continuing
operations before
income taxes........... 42,232
Income tax expense.............. 19,238
--------
Earnings from continuing
operations................... $ 22,994
========
Basic weighted average common
shares outstanding............. 35,816
========
Basic earnings from continuing
operations per common share.... $ 0.64
========
Diluted weighted average common
shares and dilutive potential
common shares.................. 36,285
========
Diluted earnings from continuing
operations per common share.... $ 0.63
========
</TABLE>
52
<PAGE> 59
CENTRAL PARKING CORPORATION
NOTES TO UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS
PRO FORMA CONDENSED COMBINED BALANCE SHEET
The Merger has been accounted for as a pooling of interests. Under the Merger
Agreement, Allright agrees to exchange all shares of outstanding Allright Common
Stock in exchange for an estimated 7.6 million shares of Central Parking Common
Stock. As a result of the Merger, the par value of stock exchanged for the net
assets of Allright must be recorded in the combination.
The accompanying unaudited pro forma condensed combined balance sheet reflects
certain nonrecurring charges directly attributable to the Merger. Central
Parking's estimate of such expenses includes:
<TABLE>
<S> <C>
Transaction Costs......................................... $16,000,000
Employment Contract and Severance Costs................... 9,800,000
-----------
Total........................................... $25,800,000
===========
</TABLE>
The severance and employment costs and $6.25 million of the transaction costs
have been tax effected using an assumed federal and state combined rate of 40%.
The employment contract and severance costs include (i) $5.3 million payable by
Allright at the consummation of the Merger in accordance with management
retention agreements which Allright has entered into with certain members of
management and which will be payable upon consummation of the Merger (the
"Retention Agreements"), (ii) $2.0 million related to the initial payments to be
made pursuant to the employment agreements which is expected to be entered into
with certain members of Allright management and which will be effective upon
consummation of the Merger (the "Employment Agreements"), and (iii) $2.5 million
of severance payments to certain other Allright employees. In addition to these
charges, Central Parking management expects to recognize as expense subsequent
to the consummation of the Merger approximately $1.3 million related to
management continuity agreements Central Parking expects to enter into with
certain members of Allright management (the "Management Continuity Agreements")
and $2.0 million related to the remaining payments pursuant to the Employment
Agreements. The costs related to the Management Continuity Agreements and the
second installments of the Employment Agreements will be recognized as expense
over the related service periods of six months and twenty-four months,
respectively, unless an employee is entitled to earlier payment under their
contract. Additional merger-related charges may be recognized by Central Parking
after the consummation of the Merger. Such items could relate to additional
severance payments, the write-off of Allright deferred debt issuance costs
should the related debt be refinanced by Central Parking, and other integration
related expenses.
53
<PAGE> 60
CENTRAL PARKING CORPORATION
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS -- (CONTINUED)
PRO FORMA CONDENSED COMBINED STATEMENT OF EARNINGS FOR THE YEAR ENDED SEPTEMBER
30, 1997
(1) The historical financial results of the Purchase Acquisitions presented in
the unaudited pro forma condensed combined statement of earnings for the year
ended September 30, 1997 are as follows (in thousands):
<TABLE>
<CAPTION>
CPS OF
SQUARE CIVIC CARPARK DIPLOMAT KINNEY LA.
HISTORICAL HISTORICAL HISTORICAL HISTORICAL HISTORICAL HISTORICAL
10/1/96 - 10/1/96 - 10/1/96- 10/1/96- 1/1/97- 10/1/96-
1/17/97 12/31/96 5/29/97 9/30/97 12/31/97 9/30/97
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Parking and management contracts..................... $ 22,298 $ 2,448 $1,552 $18,916 $134,946 $1,913
Cost and expenses:
Cost of parking and management contracts............. 18,763 1,313 1,303 15,995 111,453 1,411
General and administrative........................... 2,654 173 69 7,095 16,026 564
Amortization of goodwill and noncompete agreements... -- -- -- -- -- --
Acquisition costs.................................... 2,864 -- -- -- -- --
-------- ------- ------ ------- -------- ------
Total costs and expenses........................ 24,281 1,486 1,372 23,090 127,479 1,975
-------- ------- ------ ------- -------- ------
Operating earnings (loss)............................ (1,983) 962 180 (4,174) 7,467 (62)
Other income (expenses):
Interest income...................................... -- 2 -- 18 1,498 19
Interest expense..................................... 203 (1,008) -- -- (4,037) --
Dividends on mandatorily redeemable convertible
securities of a subsidiary trust................... -- -- -- -- -- --
Net gains (losses) on sales of property and
equipment.......................................... -- -- -- -- (779) --
Equity in partnership and joint venture earnings..... -- -- -- -- 836 15
Other................................................ (964) -- -- (205) -- --
-------- ------- ------ ------- -------- ------
Earnings (loss) from continuing operations
before income taxes........................... (2,744) (44) 180 (4,361) 4,985 (28)
Income tax expense................................... 68 -- -- 233 2,219 (13)
-------- ------- ------ ------- -------- ------
Earnings (loss) from continuing operations...... $ (2,812) $ (44) $ 180 $(4,594) $ 2,766 $ (15)
======== ======= ====== ======= ======== ======
<CAPTION>
TURNER COMBINED
HISTORICAL PURCHASE
1/1/97- ACQUISITIONS
12/31/97 HISTORICAL
---------- ------------
<S> <C> <C>
Revenues:
Parking and management contracts..................... $3,578 $185,651
Cost and expenses:
Cost of parking and management contracts............. 2,596 152,834
General and administrative........................... 671 27,252
Amortization of goodwill and noncompete agreements... -- --
Acquisition costs.................................... -- 2,864
------ --------
Total costs and expenses........................ 3,267 182,950
------ --------
Operating earnings (loss)............................ 311 2,701
Other income (expenses):
Interest income...................................... 2 1,539
Interest expense..................................... -- (4,842)
Dividends on mandatorily redeemable convertible
securities of a subsidiary trust................... -- --
Net gains (losses) on sales of property and
equipment.......................................... -- (779)
Equity in partnership and joint venture earnings..... -- 851
Other................................................ -- (1,169)
------ --------
Earnings (loss) from continuing operations
before income taxes........................... 313 (1,699)
Income tax expense................................... -- 2,507
------ --------
Earnings (loss) from continuing operations...... $ 313 $ (4,206)
====== ========
</TABLE>
54
<PAGE> 61
CENTRAL PARKING CORPORATION
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS -- (CONTINUED)
(2) The combined pro forma adjustments related to the Purchase Acquisitions for
the year ended September 30, 1997 are as follows (in thousands):
<TABLE>
<CAPTION>
SQUARE CIVIC CARPARK DIPLOMAT KINNEY CPS OF LA.
PRO FORMA PRO FORMA PRO FORMA PRO FORMA PRO FORMA PRO FORMA
ADJUSTMENTS ADJUSTMENTS ADJUSTMENTS ADJUSTMENTS ADJUSTMENTS ADJUSTMENTS
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Parking and management
contracts................. -- $ (2,393)(G) -- -- -- --
$ (55)(H)
Costs and expenses:
Cost of parking and
management contracts...... (23)(A) (1,195)(G) -- -- 177(M) --
(85)(A)
(33)(H)
General and
administrative............ (97)(D) (173)(G) -- (4,969)(K) 320(O) --
Amortization of goodwill and
noncompete agreements..... 342(B) -- 137(B) 826(J) 6,586(N) 494(U)
Acquisition costs........... (2,864)(C) -- -- -- -- --
------- ----------- -------- -------- --------- --------
Total costs and
expenses.............. (2,642) (1,486) 137 (4,143) 7,083 494
------- ----------- -------- -------- --------- --------
Operating earnings (loss)... 2,642 (962) (137) 4,143 (7,083) (494)
Other income (expenses):
Interest income............. -- (283)(I) -- -- (120)(P) --
Interest expense............ (1,357)(E) 586(E) (158)(E) (1,355)(L) (9,597)(R) --
(192)(Q)
Dividends on mandatorily
redeemable convertible
securities of a subsidiary
trust..................... -- -- -- -- -- --
Net gains (losses) on sales
of property and
equipment................. -- -- -- -- -- --
Equity in partnership and
joint venture earnings.... -- 513(G) -- -- (56)(S) --
Other....................... 612(D) -- -- -- -- --
------- ----------- -------- -------- --------- --------
Earnings (loss) from
continuing operations
before income taxes... 1,897 (146) (295) 2,788 (17,048) (494)
Income tax expense.......... (258)(F) (72)(F) 8(F) (515)(F) (4,588)(T) --
------- ----------- -------- -------- --------- --------
Earnings (loss) from
continuing
operations............ $ 2,155 $ (74) $ (303) $ 3,303 $ (12,460) $ (494)
======= =========== ======== ======== ========= ========
<CAPTION>
COMBINED
TURNER PRO FORMA
PRO FORMA PURCHASE
ADJUSTMENTS ADJUSTMENTS
----------- -----------
<S> <C> <C>
Revenues:
Parking and management
contracts................. -- $(2,448)
Costs and expenses:
Cost of parking and
management contracts...... -- (1,159)
General and
administrative............ -- (4,919)
Amortization of goodwill and
noncompete agreements..... 370(V) 8,755
Acquisition costs........... -- (2,864)
----- -------
Total costs and
expenses.............. 370 (187)
----- -------
Operating earnings (loss)... (370) (2,261)
Other income (expenses):
Interest income............. -- (403)
Interest expense............ -- (12,073)
Dividends on mandatorily
redeemable convertible
securities of a subsidiary
trust..................... -- --
Net gains (losses) on sales
of property and
equipment................. -- --
Equity in partnership and
joint venture earnings.... -- 457
Other....................... -- 612
----- -------
Earnings (loss) from
continuing operations
before income taxes... (370) (13,668)
Income tax expense.......... 118(F) (5,307)
----- -------
Earnings (loss) from
continuing
operations............ $(488) $(8,361)
===== =======
</TABLE>
The adjustments reflected in the pro forma condensed combined statements of
earnings are as follows for the year ended September 30, 1997.
(A) To reflect the net change in depreciation resulting from the fair
value adjustments and changes in estimated asset lives.
(B) To record amortization of goodwill and noncompete agreements using
25 and 5 year lives, respectfully.
(C) To eliminate the effect of acquisition costs reflected in Square's
historical results of operations which were directly related to Square's
sale to Central Parking.
(D) To eliminate the effect of Square's (i) scheduled amortization of
deferred expenses and financing costs, and (ii) write-off of $612,000 of
deferred financing costs directly related to the acquisition.
(E) To reflect interest on acquisition-related borrowings. Interest is
calculated at an average rate of 6.75%.
(F) To record estimated federal and state income taxes at a combined
rate of 37.7% of estimated taxable income.
55
<PAGE> 62
CENTRAL PARKING CORPORATION
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS -- (CONTINUED)
(G) To reflect the elimination of 100% ownership of Civic as a result of
the sale of a 50% interest to Equity Office Holdings-St. Louis Parking, LLC
and to record a 50% joint venture interest as equity in partnership and
joint venture earnings.
(H) To eliminate the revenues and expenses related to a bus lot not
acquired, but included in the historical financial statements of Civic for
the period October 1 through December 31, 1996.
(I) To reflect a decrease in income earned on cash investments used for
purposes of the acquisition of Civic.
(J) To record amortization of goodwill and noncompete agreements using
25 and 5 year lives, respectively.
(K) To eliminate the effect of expense related to compensatory stock
options granted to a Diplomat stockholder directly related to the
acquisition of Diplomat by Central Parking.
(L) To reflect interest on Diplomat acquisition-related borrowings.
Interest is calculated at an average interest rate of 6.25%.
(M) To reflect the net change in depreciation resulting from the fair
value adjustments.
(N) To reflect amortization of goodwill related to Kinney using a 30
year life.
(O) To reflect expense associated with the five-year consulting
contracts with the former shareholders of Kinney.
(P) To reflect amortization of the adjustment to fair value on note
receivable due from New York City over remaining ten year term of the note.
(Q) To reflect amortization of the deferred financing fees over the five
year term of the related acquisition debt. Amortization of deferred
financing fees related to debt that was repaid at closing is removed.
(R) To reflect interest expense on acquisition-related borrowings.
Interest is calculated at a rate of 6.875%. Interest expense on debt repaid
at closing is removed.
(S) To eliminate the effect of losses from equity in partnership
earnings for partnerships that were not transferred in the acquisition of
Kinney and to record amortization over a 30 year period relating to the
$3,826,000 purchase accounting write-up on the investment in unconsolidated
subsidiary acquired.
(T) To record estimated federal and state income taxes at Kinney's
combined rate of 43.25% of estimated taxable income.
(U) To reflect amortization of goodwill related to CPS-Louisiana using a
5 year life.
(V) To reflect amortization of goodwill related to Turner using a 10
year life.
56
<PAGE> 63
CENTRAL PARKING CORPORATION
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS -- (CONTINUED)
The basic and diluted weighted average shares outstanding on a pro forma
consolidated basis were also adjusted for the issuance of 882,422 shares in
connection with the acquisition of Kinney, 52,631 shares issued in connection
with the acquisition of the additional 50% of CPS-Louisiana, and 16,842 shares
issued in connection with the acquisition of Turner as if such shares were
outstanding for year ended September 30, 1997.
(3) The pro forma condensed combined statement of earnings for the year ended
September 30, 1997 does not reflect certain estimated operational and financial
combination benefits which are the direct result of the Square and Kinney
acquisitions. Such estimated amounts total $1,164,000 for Square and $5,588,000
for Kinney. Had such amounts been reflected in the pro forma condensed combined
statement of earnings for the year ended September 30, 1997, the Central Parking
pro forma fully combined earnings from continuing operations would have been
$9,759,000, and diluted earnings from continuing operations per common share
would have been $0.28.
(4) Allright historical results of operations includes results from October 31,
1996 (the date of acquisition of Allright Corporation by Allright) to September
30, 1997. See Selected Historical Financial Data for Allright Corporation
(Predecessor Company) historical results prior to October 31, 1996. Certain
reclassifications have been made to Allright's historical consolidated financial
statements to conform to Central Parking's presentation.
(5) The effect of the Merger for purposes of the Unaudited Pro Forma Condensed
Combined Statement of Earnings for the year ended September 30, 1997 excludes
certain nonrecurring merger expenses directly attributable to the Merger.
Central Parking has estimated that such expenses will include:
<TABLE>
<S> <C>
Transaction Costs......................................... $16,000,000
Employment Contract and Severance Costs................... 9,800,000
-----------
Total........................................... $25,800,000
===========
</TABLE>
The employment contract and severance costs include (i) $5.3 million payable by
Allright at the consummation of the Merger in accordance with the Retention
Agreements, (ii) $2.0 million related to the initial payments to be made
pursuant to the Employment Agreements, and (iii) $2.5 million of severance
payments to certain other Allright employees. In addition to these charges,
Central Parking management expects to recognize as expense subsequent to the
consummation of the Merger approximately $1.3 million related to the Management
Continuity Agreements and $2.0 million related to the remaining payments
pursuant to the Employment Agreements. The costs related to the Management
Continuity Agreements and the second installments of the Employment Agreements
will be recognized as expense over the related service periods of six months and
twenty-four months, respectively, unless an employee is entitled to earlier
payment under their contract. Additional merger-related charges may be
recognized by Central Parking after the consummation of the Merger. Such items
could relate to additional severance payments, the write-off of Allright
deferred debt issuance costs should the related debt be refinanced by Central
Parking, and other integration related expenses.
57
<PAGE> 64
CENTRAL PARKING CORPORATION
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS -- (CONTINUED)
The related impact on pro forma fully combined basic and diluted weighted
average shares outstanding assumes 7.6 million shares are issued to shareholders
of Allright in the Merger and gives effect to the Purchase Acquisitions. Given
that the results of Allright are included only for the period from October 31,
1996 to September 30, 1997 (i.e., eleven months of operations), the 7.6 million
shares have been weighted only for the period for which Allright's historical
operating results are included in the Central Parking fiscal year 1997 pro forma
fully combined statements of earnings (approximately 92% of the year) for
purposes of computing pro forma fully combined earnings from continuing
operations per share amounts for fiscal year 1997.
PRO FORMA CONDENSED COMBINED STATEMENT OF EARNINGS FOR THE YEAR ENDED SEPTEMBER
30, 1998
(1) The historical financial results of the Purchase Acquisitions presented in
the unaudited pro forma condensed combined statements of earnings for the year
ended September 30, 1998 are as follows (in thousands):
<TABLE>
<CAPTION>
CPS OF COMBINED
KINNEY LOUISIANA TURNER PURCHASE
HISTORICAL HISTORICAL HISTORICAL ACQUISITIONS
10/1/97 - 2/11/98 10/1/97 - 3/30/98 10/1/97 - 3/31/98 HISTORICAL
----------------- ----------------- ----------------- ------------
<S> <C> <C> <C> <C>
Revenues:
Parking and management
contracts................ $50,012 $801 $1,910 $52,723
Costs and expenses:
Cost of parking and
management contracts..... 41,484 585 1,399 43,468
General and
administrative........... 5,150 303 438 5,891
Amortization of goodwill
and noncompete
agreements............... -- -- -- --
------- ---- ------ -------
Total costs and
expenses.......... 46,634 888 1,837 49,359
------- ---- ------ -------
Operating earnings
(loss)................... 3,378 (87) 73 3,364
Other income (expenses):
Interest income............ 522 3 1 526
Interest expense........... (1,510) (16) -- (1,526)
Dividends on mandatorily
redeemable convertible
securities of a
subsidiary trust......... -- -- -- --
Net gains (losses) on sales
of property and
equipment................ -- -- -- --
Equity in partnership and
joint venture earnings... 129 35 -- 164
------- ---- ------ -------
Earnings (loss) from
continuing
operations before
income taxes...... 2,519 (65) 74 2,528
Income tax expense......... 838 -- -- 838
------- ---- ------ -------
Earnings (loss) from
continuing
operations........ $ 1,681 $(65) $ 74 $ 1,690
======= ==== ====== =======
</TABLE>
58
<PAGE> 65
CENTRAL PARKING CORPORATION
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS -- (CONTINUED)
(2) The Combined Pro Forma adjustments for the year ended September 30, 1998 are
as follows (in thousands):
<TABLE>
<CAPTION>
CPS OF COMBINED
KINNEY LOUISIANA TURNER PRO FORMA
PRO FORMA PRO FORMA PRO FORMA PURCHASE
ADJUSTMENTS ADJUSTMENTS ADJUSTMENTS ADJUSTMENTS
----------- ----------- -------------- -----------
<S> <C> <C> <C> <C>
Revenues:
Parking and management
contracts............ $ -- $ -- $ -- $ --
Cost and expenses:
Cost of parking and
management
contracts............ 66(A) -- -- 66
General and
administrative....... 123(C) -- -- 123
Amortization of goodwill
and noncompete
agreements........... 2,470(B) 247(B) 185(B) 2,902
------- ----- ----- -------
Total costs and
expenses..... 2,659 247 185 3,091
------- ----- ----- -------
Operating earnings
(loss)............... (2,659) (247) (185) (3,091)
Other income (expenses):
Interest income......... (45)(D) -- -- (45)
Interest expense........ 327(E) -- -- (3,811)
(4,138)(F)
Dividends on mandatorily
redeemable
convertible
securities of a
subsidiary trust..... -- -- -- --
Net gains (losses) on
sales of property and
equipment............ --
Equity in partnership
and joint venture
earnings............. 133(G) -- -- 133
------- ----- ----- -------
Earnings (loss)
from
continuing
operations
before income
taxes........ (6,382) (247) (185) (6,814)
------- ----- ----- -------
Income tax expense...... (1,440)(H) -- -- (1,440)
------- ----- ----- -------
Earnings (loss) from
continuing
operations........... $(4,942) $(247) $(185) $(5,374)
======= ===== ===== =======
</TABLE>
The adjustments reflected in the pro forma condensed combined statements of
earnings are as follows for the year ended September 30, 1998:
(A) To reflect the net change in depreciation resulting from the fair
value adjustments and changes in estimated asset lives.
59
<PAGE> 66
CENTRAL PARKING CORPORATION
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS -- (CONTINUED)
(B) To record amortization of goodwill using a 30 year life for Kinney,
a 5 year life for CPS-Louisiana and a 10 year life for Turner.
(C) To record the expense associated with the five-year consulting
agreements entered into in connection with the former shareholders of
Kinney.
(D) To record amortization of adjustment to fair value of certain notes
receivable.
(E) To reflect the elimination of deferred financing fees and debt paid
off in the transaction, net of amortization of financing fees on the
additional borrowings to fund the acquisition.
(F) To reflect interest expense on acquisition related borrowings.
Interest is calculated at a rate of 6.875%. Interest expense on debt repaid
at closing is removed.
(G) To eliminate earnings on partnerships and joint ventures not
acquired in the acquisition.
(H) To record estimated federal and state income taxes at a combined
rate of 43.25% of estimated taxable income.
The basic and diluted weighted average shares outstanding on a pro forma
consolidated basis were also adjusted for the issuance of 882,422 shares in
connection with the acquisition of Kinney, 52,631 shares issued in connection
with the acquisition of the additional 50% of CPS-Louisiana, and 16,842 shares
issued in connection with the acquisition of Turner as if such shares were
outstanding for the year ended September 30, 1998.
(3) The pro forma condensed combined statement of earnings for the year ended
September 30, 1998 does not reflect certain estimated operational and financial
combination benefits which are the direct result of the Kinney acquisition. Such
estimated amounts total $2,095,000. Had such amounts been reflected in the pro
forma condensed combined statement of earnings for the year ended September 30,
1998, the Central Parking pro forma fully combined earnings from continuing
operations would have been $24,183,000, and diluted earnings from continuing
operations per common share would have been $0.67.
(4) Reflects Allright's historical results of operations for its fiscal year
ended June 30, 1998. Certain reclassifications have been made to Allright's
historical consolidated financial statements to conform to Central Parking's
presentation.
(5) The effect of the proposed merger for purposes of the Unaudited Pro Forma
Condensed Combined Statement of Earnings for the year ended September 30, 1998
excludes certain nonrecurring merger expenses directly attributable to the
Merger. Central Parking has estimated that such expenses will include:
<TABLE>
<S> <C>
Transaction Costs......................................... $16,000,000
Employment and Severance Costs............................ 9,800,000
-----------
Total........................................... $25,800,000
===========
</TABLE>
The employment contract and severance costs include (i) $5.3 million payable by
Allright at the consummation of the Merger in accordance with the Retention
Agreements,
60
<PAGE> 67
CENTRAL PARKING CORPORATION
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS -- (CONTINUED)
(ii) $2.0 million related to the initial payments to be made pursuant to the
Employment Agreements, and (iii) $2.5 million of severance payments to certain
other Allright employees. In addition to these charges, Central Parking
management expects to recognize as expense subsequent to the consummation of the
Merger, approximately $1.3 million related to Management Continuity Agreements
and $2.0 million related to the remaining payments pursuant to the Employment
Agreements. The costs related to the Management Continuity Agreements and the
second installments of the Employment Agreements will be recognized as expense
over the related service periods of six months and twenty-four months,
respectively, unless an employee is entitled to earlier payment under their
contracts. Additional merger-related charges may be recognized by Central
Parking after the consummation of the Merger. Such items could relate to
additional severance payments, the write-off of Allright deferred debt issuance
costs should the related debt be refinanced by Central Parking, and other
integration related expenses.
The related impact on pro forma fully combined weighted average shares and
earnings from continuing operations per share gives effect to the Purchase
Acquisitions and assumes 7.6 million shares are issued to shareholders of
Allright in the Merger.
61
<PAGE> 68
CENTRAL PARKING'S MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion of Central Parking's results of operations and
financial condition should be read in conjunction with the Consolidated
Financial Statements and Notes thereto, which are included in this joint proxy
statement/prospectus.
OVERVIEW
Central Parking operates parking facilities under three types of arrangements:
leases, fee ownership and management contracts.
Parking revenues consist of Central Parking's revenues from leased and owned
facilities. Cost of parking relates to both leased and owned facilities and
includes rent, payroll and related benefits, depreciation (if applicable),
maintenance, insurance, and general operating expenses. Parking revenues in
fiscal 1998 increased to $328.3 million from $180.9 million in fiscal 1997, an
increase of $147.4 million, or 81.5%. Of the $147.4 million increase, $102.6
million, or 69.6% of the increase, resulted from the acquisition of Diplomat,
Kinney, Turner, and Sterling leased and owned locations. The remaining increase
of $44.8 million, or 30.4%, is from a combination of the addition of 46 net
locations, increased rates and higher utilization of parking spaces at existing
facilities.
Parking revenues from owned facilities were $6.2 million, $13.6 million, and
$17.7 million for fiscal 1996, 1997 and 1998, respectively. Owned properties
parking revenues, as a percentage of parking revenues, accounted for 5.7% in
1996, 7.5% in 1997, and 5.4% in 1998. Ownership of parking facilities, either
independently or through joint ventures, typically requires a larger capital
investment than managed or leased facilities, but provides maximum control over
the operation of the parking facility and the greatest profit potential of the
three types of operating arrangements. As the owner, all changes in facility
revenue and expenses flow directly to Central Parking. Additionally, Central
Parking has the potential to realize benefits of appreciation in the value of
the underlying real estate if the property is sold. Central Parking assumes
complete responsibility for all aspects of each owned property, including all
structural, mechanical, and electrical maintenance or repairs and property
taxes.
Parking revenues from leased facilities were $103.1 million, $167.3 million and
$310.6 million for fiscal 1996, 1997 and 1998, respectively. Leased properties
parking revenues, as a percentage of parking revenues, accounted for 94.3% in
1996, 92.5% in 1997 and 94.6% in 1998. Leases generally provide for a
contractually established payment to the facility owner which is either a fixed
annual amount, a percentage of gross revenues, or a combination thereof. As a
result, Central Parking's revenues and profits in its lease arrangements are
dependent upon the performance of the facility. Leased facilities require a
longer commitment and a larger capital investment by Central Parking than
managed facilities but generally provide a more stable source of revenue and a
greater opportunity for long-term revenue growth. Under its leases, Central
Parking is typically responsible for all facets of the parking operations,
except for structural, mechanical, electrical maintenance or repairs, or
property taxes. Lease arrangements are typically for terms of three to ten
years, with renewal options.
Management contract revenues include revenues from managed facilities. In fiscal
year 1998, management contract revenues increased 38.7% to $54.9 million,
primarily as a result of the addition of 330 managed facilities acquired in the
transactions with Diplomat, Kinney, Turner, and Sterling, and from the net
addition of 95 additional management locations. Management contract revenues
amounted to $32.5 million, $39.6 million, and $54.9 million
62
<PAGE> 69
for fiscal years 1996, 1997, and 1998, respectively. Management contract
revenues consist of management fees (both fixed and percentage of revenues) and
fees for ancillary services such as insurance, accounting, equipment leasing,
and consulting. The cost of management contracts includes insurance premiums and
claims and other indirect overhead. Central Parking's responsibilities under a
management contract as a facility manager include hiring, training, and staffing
parking personnel, and providing collections, accounting, record keeping,
insurance, and facility marketing services. In general, Central Parking is not
responsible under its management contracts for structural, mechanical, or
electrical maintenance or repairs, or for providing security or guard services
or for paying property taxes. The typical management contract is for a term of
one to three years and generally is renewable for successive one-year terms, but
is cancelable by the property owner on short notice. The Company's renewal rates
for each of the past five fiscal years were in excess of 91%.
Central Parking's management contract clients have the option of obtaining
insurance independently or purchasing insurance from Central Parking under the
management contract. Because of its size and claims experience, Central Parking
can purchase such insurance at discounts to comparable market rates and,
management believes, at lower rates than Central Parking's clients can generally
obtain on their own. Accordingly, Central Parking generates profits on the
insurance provided under its management contracts. See "Description of Central
Parking -- Insurance."
A summary of the facilities operated by Central Parking as of September 30, 1998
is as follows:
<TABLE>
<CAPTION>
PERCENT
OF TOTAL
MANAGED LEASED OWNED TOTAL FACILITIES SPACES
------- ------ ------ ----- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Total U.S. and Puerto Rico......... 1,185 958 67 2,210 90.6% 919,111
----- ----- ------ ----- ---- ---------
United Kingdom..................... 79 80 -- 159 6.5% 55,527
Mexico(1).......................... 34 27 -- 61 2.5% 31,796
Germany(1)......................... -- 4 -- 4 0.1% 1,336
Canada............................. 3 1 -- 4 0.1% 8,850
Spain(1)........................... -- 1 -- 1 0.1% 542
Malaysia........................... 1 -- -- 1 0.1% 5,400
----- ----- ------ ----- ---- ---------
Total foreign............ 117 113 -- 230 9.4% 103,451
----- ----- ------ ----- ---- ---------
Total facilities......... 1,302 1,071 67 2,440 100% 1,022,562
===== ===== ====== ===== ==== =========
</TABLE>
- ---------------
(1) Operated through 50% owned joint ventures.
63
<PAGE> 70
The table below sets forth certain information regarding Central Parking's
managed, leased and owned facilities in the periods indicated.
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
--------------------------
1996 1997 1998
------ ------ ------
<S> <C> <C> <C>
MANAGED FACILITIES:(1)
Beginning of period.......................... 715 770 877
Acquired during period....................... -- 36 330
Added during period.......................... 114 164 196
Deleted during period(2)(3)(4)............... (59) (93) (101)
----- ----- -----
End of period................................ 770 877 1,302
----- ----- -----
Renewal rate(4).............................. 92.4% 91.1% 91.8%
LEASED FACILITIES:(1)
Beginning of period.......................... 485 552 709
Acquired during period....................... -- 82 317
Added during period(3)....................... 94 99 99
Deleted during period(4)..................... (27) (24) (54)
----- ----- -----
End of period................................ 552 709 1,071
----- ----- -----
OWNED FACILITIES:(1)(5)
Beginning of period.......................... 31 37 58
Acquired during period(2).................... -- 20 8
Purchased during period...................... 6 5 1
Sold during period........................... -- (4) --
----- ----- -----
End of period................................ 37 58 67
----- ----- -----
Total facilities (end of period)..... 1,359 1,644 2,440
===== ===== =====
PERCENTAGE GROWTH IN NUMBER OF FACILITIES:
Managed...................................... 7.7% 13.9% 48.5%
Leased....................................... 13.8 28.4 51.1
Owned........................................ 19.4 56.8 15.5
----- ----- -----
Total facilities..................... 10.4% 21.0% 48.4%
===== ===== =====
</TABLE>
- ---------------
(1) Includes 38 managed, 39 leased and 15 owned facilities operated under joint
venture agreements at September 30, 1998.
(2) Fiscal 1996 and 1997 include four facilities that Central Parking previously
managed and subsequently purchased.
(3) Includes Central Parking's lease in fiscal 1996, 1997 and 1998 of one
facility, 11 facilities, and two facilities, respectively, that were
previously managed.
(4) Excluded from the renewal rate calculation in the above table at September
30, 1997 are six managed on-street locations and two leased on-street
locations which are reflected as current year deletions.
(5) Includes Central Parking's corporate headquarters in Nashville, Tennessee.
Net gains derived from sales of property and equipment were $1.2 million, $3.1
million and $71 thousand for fiscal 1996, 1997 and 1998, respectively.
64
<PAGE> 71
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, information derived
from Central Parking's consolidated financial statements expressed as a
percentage of total revenues.
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
------------------------
1996 1997 1998
------ ------ ------
<S> <C> <C> <C>
Parking revenues......................................... 77.1% 82.1% 85.7%
Management contract revenues............................. 22.9 17.9 14.3
----- ----- -----
Total revenues................................. 100.0 100.0 100.0
Cost of parking and management contracts................. 75.8 76.7 77.1
General and administrative expenses and goodwill and non-
compete amortization................................... 12.3 10.6 10.7
----- ----- -----
Operating earnings....................................... 11.9 12.6 12.2
Interest income (expense), net........................... 1.6 (1.2) (1.2)
Dividends on company -- obligated mandatorily redeemable
convertible securities of a wholly-owned subsidiary
trust.................................................. -- -- (0.8)
Net gains on sales of property and equipment............. 0.8 1.4 --
Equity in partnership and joint venture earnings......... 0.5 1.9 1.3
----- ----- -----
Earnings before income taxes............................. 14.8 14.7 11.5
Income taxes............................................. 5.0 5.5 4.6
----- ----- -----
Net earnings................................... 9.8% 9.2% 6.9%
===== ===== =====
</TABLE>
Year Ended September 30, 1998 Compared to Year Ended September 30, 1997
Parking revenues include revenue from leased and owned facilities. Parking
revenues in fiscal 1998 increased to $328.3 million from $180.9 million in
fiscal 1997, an increase of $147.4 million, or 81.5%. Of the $147.4 million
increase, $102.6 million, or 69.6% of the increase, resulted from the following
acquisition of leased and owned locations: Diplomat, $19.6 million; Kinney,
$81.7 million; Turner, $1.1 million; and Sterling, $0.2 million. With respect to
the Kinney acquisition, Central Parking achieved lower than expected increases
in revenues, particularly in the fourth quarter of fiscal 1998. Kinney was
acquired on February 12, 1998 and its partial year parking revenues of $81.7
million represent 24.9% of total fiscal year parking revenues. Central Parking's
operating results may be significantly impacted by the results derived from the
Kinney acquired locations. The remaining increase of $44.8 million, or 30.4%, is
from a combination of the addition of 46 net locations, increased rates and
higher utilization of parking spaces at existing facilities.
Management contract revenues in fiscal 1998 increased to $54.9 million from
$39.6 million in fiscal 1997, an increase of $15.3 million, or 38.7%. Of the
$15.3 million increase, $7.6 million, or 49.9%, resulted from the acquisitions
of Diplomat, $2.1 million; Kinney, $4.9 million; Turner, $0.5 million; and
Sterling, $0.1 million. The remaining 50.1% increase resulted primarily from the
addition of 95 net new locations.
Revenues from foreign operations increased to $23.0 million in 1998 from $18.1
million in 1997. The increase of 26.8% in revenues from foreign operations
resulted primarily from the net addition of 51 locations in the United Kingdom
and increased revenues on existing locations.
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Cost of parking in fiscal 1998 increased to $280.3 million from $157.4 million
in fiscal 1997, an increase of $122.9 million, or 78.1%. Rent expense increased
$74.7 million, principally as a result of new locations from acquisitions and
additional percentage rent on existing locations. Of the remaining $48.2 million
increase in cost of parking, payroll expense accounted for $26.6 million. The
payroll expense increase was attributable to a combination of acquisitions, new
locations and increases in existing payroll. Cost of parking, as a percentage of
parking revenues, decreased to 85.4% in fiscal 1998 from 87.0% in fiscal 1997.
This decrease was attributable predominantly to the spreading of a number of
fixed costs, primarily rent and property costs, over a larger revenue base.
Cost of management contracts in fiscal 1998 increased to $15.0 million from
$11.8 million in the comparable period in 1997, an increase of $3.2 million, or
27.2%. This increase was attributable to an increase in the number of managed
locations and higher costs incurred at existing locations associated with
increased revenues. Cost of management contracts, as a percentage of management
contract revenues, decreased to 27.3% in fiscal 1998 from 29.8% in fiscal 1997.
The decrease in the percentage of management contract cost as a percentage of
management contract revenue is a result of increased management fees from a
combination of new and existing locations. The renewal rates for management
contracts of 91.8% in 1998, and 91.1% in 1997, are consistent with Central
Parking's 5 year average renewal rates.
General and administrative expenses, excluding goodwill and non-compete
amortization, increased to $33.9 million from $22.5 million in fiscal 1997, an
increase of $11.4 million, or 50.5%. This increase was primarily a result of an
increase in payroll expense of $7.7 million associated with the additional
general and administrative expenses of acquired operations, as well as opening
of additional managed, leased, and owned locations and additional incentive
compensation payments as a result of increased profits. General and
administrative expenses decreased as a percentage of total revenue from 10.2% in
1997 to 8.8% in 1998. This is a result of spreading of general and
administrative expenses over a broader revenue base.
Amortization expense of goodwill and non-compete agreements increased
significantly from $920,000 in fiscal 1997 to $7.1 million in fiscal 1998, an
increase of $6.2 million. This increase was a result of $232.8 million in
goodwill and non-compete assets recorded in connection with the acquisitions of
Diplomat, Kinney, the remaining 50% of CPS-Louisiana, Turner, and Sterling.
Goodwill and non-compete agreements are amortized over periods ranging from 5 to
30 years.
Interest income in fiscal 1998 increased to $2.7 million from $1.8 million in
fiscal 1997. This increase of $877 thousand was primarily attributable to
increased investment in notes receivable. Interest expense totaled $7.4 million
in 1998 compared to $4.6 million in 1997. The increased interest expense was a
result of borrowing to fund additional asset purchases and acquisitions during
the year. With respect to Central Parking's two credit facilities which
represent substantially all of Central Parking's indebtedness, the weighted
average balance outstanding for fiscal 1998 was approximately $83.0 million at a
weighted average interest rate of 6.75%.
Dividends on company-obligated mandatorily redeemable convertible securities of
a subsidiary holding solely parent debentures amounted to $3.2 million for
fiscal year 1998. Such Preferred Securities in the amount of $110 million were
issued on March 18, 1998 and bear a dividend rate of 5.25% (See Note 9 to
Central Parking's 1998 consolidated financial statements).
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Equity in partnership and joint venture earnings for fiscal 1998 increased to
$5.1 million from $4.2 million in fiscal 1997. The increase of $923,000 resulted
primarily from increases in domestic partnerships and joint ventures of
$692,000, due largely to partnership interests acquired in connection with
Kinney, and an increase in equity in joint venture earnings of the German joint
venture of $296,000 over balances in the prior year.
Central Parking's effective income tax rate was 39.8% for fiscal 1998 compared
to 37.7% for fiscal 1997. The rate increase was attributable to the increase in
Central Parking's federal income tax rate, the comparative decrease in the
amount of tax exempt income, and the addition of nondeductible goodwill
amortization (see Note 12 to Central Parking's Consolidated Financial
Statements).
Year Ended September 30, 1997 Compared to Year Ended September 30, 1996
Parking revenues in fiscal 1997 increased to $180.9 million from $109.3 million
in fiscal 1996, an increase of $71.6 million, or 65.5%. Of the $71.6 million
increase, $41.0 million, or 57.3% of the increase, resulted from the acquisition
of Square and Car Park leased and owned locations. The remaining increase of
$30.6 million, or 42.7%, is from a combination of the net addition of 76
locations, increased rates and higher utilization of parking spaces at existing
facilities.
Management contract revenues in fiscal 1997 increased to $39.6 million from
$32.5 million in fiscal 1996, an increase of $7.1 million, or 21.6%. Of the $7.1
million increase, $2.8 million or 34.6% of the increase resulted from the Square
and Car Park acquisitions. The remaining increase of $4.3 million, or 60.6%, is
attributable to the net addition of 71 locations and increased management fees
on existing locations.
Revenues from foreign operations increased to $18.1 million in 1997 from $13.2
million in 1996. The increase of 37.4% in revenues from foreign operations
resulted primarily from the net addition of 20 locations in the United Kingdom
and increased revenues on existing locations.
Cost of parking in fiscal 1997 increased to $157.4 million from $97.7 million in
fiscal 1996, an increase of $59.7 million, or 61.1%. Rent expense increased
$30.9 million, principally as a result of new locations from acquisitions and
additional percentage rent on existing locations. Of the remaining $28.8 million
increase in cost of parking, payroll expense accounted for $12.5 million. The
payroll expense increase was attributable to a combination of acquisitions, new
locations and increases on existing payroll. Cost of parking, as a percentage of
parking revenues, decreased to 87.0% in fiscal 1997 from 89.4% in fiscal 1996.
This decrease was attributable predominantly to the spreading of a number of
fixed costs, primarily rent and property costs, over a larger revenue base.
Cost of management contracts in fiscal 1997 increased to $11.8 million from $9.8
million in the comparable period in 1996, an increase of $2.0 million, or 20.7%.
This increase was attributable to an increase in the number of managed locations
and higher costs incurred at existing locations associated with increased
revenues. Cost of management contracts, as a percentage of management contract
revenues, decreased to 29.8% in fiscal 1997 from 30.0% in fiscal 1996. The
decrease in the percentage of management contract cost as a percentage of
management contract revenue is a result of increased management fees from a
combination of new and existing locations. The decrease in renewal rates for
management contracts to 91.1% in 1997, from 92.4% in 1996, is primarily
attributable to the loss of one large contract which included 9 management
locations. This trend is not expected to continue.
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General and administrative expenses excluding goodwill amortization in fiscal
1997 increased to $22.5 million from $17.4 million in fiscal 1996, an increase
of $5.1 million, or 21.2%. This increase was primarily a result of an increase
in payroll expense of $4.2 million associated with the additional general and
administrative expenses of acquired operations, as well as the opening of
additional managed, leased, and owned locations and additional incentive
compensation payments as a result of increased profits. General and
administrative expenses excluding goodwill decreased as a percentage of total
revenues from 12.3% in 1996 to 10.2% in 1997. This is a result of spreading
general and administrative expenses over a broader revenue base.
Amortization of goodwill and non-compete agreements in fiscal 1997 amounted to
$920,000. Central Parking had no expenses from amortization of goodwill in
fiscal 1996. Amortization expense of goodwill was a result of $32.7 million in
goodwill and non-compete assets, recorded in connection with the acquisitions of
Square and Car Park.
Interest income in fiscal 1997 decreased to $1.8 million from $2.3 million in
fiscal 1996. This decrease of $461,000 was primarily attributable to decreased
cash and cash equivalents during the year. Interest expense totaled $4.6 million
in 1997 compared to zero in 1996. The increased interest expense was a result of
borrowing to fund additional asset purchases and acquisitions during the year.
The weighted average balance outstanding for the period during which Central
Parking had debt outstanding, beginning December 31, 1996, was approximately
$88.7 million at a weighted average interest rate of 7.1%.
Equity in partnership and joint venture earnings for fiscal 1997 increased to
$4.2 million from $641,000 in fiscal 1996. The increase of $3.5 million resulted
primarily from Civic Parking, LLC ($2.9 million) and increases in joint venture
earnings of the Mexican joint venture ($514,000 in 1997 versus $152,000 in
1996).
Central Parking's effective income tax rate was 37.7% for fiscal 1997 compared
to 34.3% for fiscal 1996. The rate increase was attributable to the increase in
Central Parking's federal income tax rate, the comparative decrease in the
amount of tax exempt income, the addition of nondeductible goodwill amortization
and the increase in the effective state income tax (see Note 12 to Central
Parking's Consolidated Financial Statements).
QUARTERLY RESULTS
Central Parking experiences fluctuations in its quarterly net earnings as a
result, in part, of recognition of intermittent gains on sales of properties.
Additionally, Central Parking has and may continue to experience fluctuations in
revenues and related expenses due to acquisitions; preopening costs; travel and
transportation patterns affected by weather and calender related events; and
local and national economic conditions. Central Parking's increased
concentration of parking facilities in the northeastern and mid-atlantic part of
the United States, primarily a result of the Kinney, Square and Diplomat
acquisitions, has increased the risk of weather related fluctuations such as
severe winter snow storms. Additionally, Central Parking services the parking
for a number of sports stadiums and arenas and can be impacted by strikes and
the success of various sports teams in playoff and championship series. The
following table sets forth certain quarterly statement of earnings data for each
of Central Parking's last eight fiscal quarters and the percentage of net
revenues represented by the line items presented (except in the case of per
share amounts). The quarterly statements were impacted by the acquisition of
Square (January 1997), Car Park (May 1997), Diplomat (October 1997), Kinney
(February 1998), CPS -- Louisiana (March 1998), Turner (April
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<PAGE> 75
1998), and Sterling (July 1998), and net gains on sales of property and
equipment of $3.1 million in the quarter ended September 30, 1997. The quarterly
statement of earnings data set forth below was derived from unaudited financial
statements of Central Parking and includes all adjustments, consisting only of
normal recurring adjustments, which Central Parking considers necessary for a
fair presentation thereof. The per share numbers have been restated to reflect
the three for two stock splits (see Note 10(d) to Central Parking's Consolidated
Financial Statements).
<TABLE>
<CAPTION>
FISCAL 1997 FISCAL 1998
------------------------------------- ---------------------------------------
FIRST SECOND THIRD FOURTH FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER
------- ------- ------- ------- ------- ------- -------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total revenues....... $40,997 $55,297 $59,399 $64,761 $70,269 $90,088 $110,770 $122,048
Operating earnings... 5,129 7,109 7,706 7,908 8,804 12,034 13,855 12,188
Net gains on sales of
property and
equipment.......... 3 2 3 3,129 3 15 (17) 70
Earnings before
income taxes....... 6,000 6,993 8,242 11,177 9,099 10,316 12,923 11,886
Net earnings......... $ 3,899 $ 4,416 $ 5,275 $ 6,615 $ 5,642 $ 6,328 $ 7,948 $ 6,692
Basic earnings per
common share....... $ 0.15 $ 0.17 $ 0.21 $ 0.25 $ 0.22 $ 0.24 $ 0.27 $ 0.23
Diluted earnings per
common share....... $ 0.15 $ 0.17 $ 0.20 $ 0.25 $ 0.21 $ 0.23 $ 0.27 $ 0.23
As a percentage of
total revenues:
Operating
earnings......... 12.5% 12.9% 13.0% 12.2% 12.5% 13.4% 12.5% 10.9%
Net gains on sales
of property and
equipment........ -- -- -- 4.8 -- -- -- 0.1
Earnings before
income taxes..... 14.6 12.6 13.9 17.3 12.9 11.5 11.7 10.6
Net earnings....... 9.5 8.0 8.9 10.2 8.0 7.0 7.2 6.0
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities for fiscal 1998 was $50.1 million, an
increase of $27.7 million from net cash of $22.4 million provided by operating
activities during the same period in fiscal 1997. The primary factors which
contributed to this change were increased net earnings, increased depreciation
and amortization, and increases in accounts payable and accrued expenses during
fiscal 1998.
Net cash used in investing activities was $239.2 million for fiscal 1998, an
increase of $147.1 from net cash of $92.1 million used in investing activities
during fiscal 1997. The acquisitions of Diplomat, Kinney, Turner, and Sterling
utilized cash of $213.6 million, net of cash acquired and property and equipment
purchases represented $25.6 million.
Net cash provided by financing activities for fiscal 1998 was $198.7 million,
and increase of $147.7 million over the $51.0 million provided during fiscal
1997. Primary factors which contributed to this increase are net proceeds from
issuance of the Preferred Securities of $106.5 million, net proceeds from
issuance of notes payable of $99.7 million, proceeds from issuance of common
stock and exercise of options of $91.4 million, less repayment of notes payable
of $102.9 million.
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Depending on the timing and magnitude of Central Parking's future investments
(either in the form of leased or purchased properties, joint ventures, or
acquisitions), the working capital necessary to satisfy current obligations is
anticipated to be generated from operations and Central Parking's credit
facility over the next twelve months. In the ordinary course of business,
Central Parking is required to maintain and, in some cases, make capital
improvements to the parking facilities it operates; however, as of September 30,
1998, Central Parking had no material outstanding commitments for capital
expenditures. If Central Parking identifies investment opportunities requiring
cash in excess of Central Parking's cash flows and the existing credit facility,
Central Parking may seek additional sources of capital, including the sale or
issuance of Central Parking common stock or convertible securities, or amending
the credit facility to obtain additional indebtedness. Central Parking's ability
to raise additional capital by issuing additional shares of common stock is
expected to be limited over the next several years as a result of the
Registration Rights Agreement. While Central Parking does not expect this
limitation to affect its working capital needs, it could have an impact on
Central Parking's ability to complete significant acquisitions. The recent
decrease in the market value of Central Parking common stock also could have an
impact on Central Parking's ability to complete significant acquisitions or
raise additional capital. Central Parking believes that it has the ability to
increase its credit facility if needed for significant acquisitions, although no
assurances can be given that such increases would be available at the time
needed to complete any such acquisition.
On February 11, 1998, Central Parking established a credit facility providing
for an aggregate availability of up to $300 million consisting of a five-year
$200 million revolving credit facility, including a sublimit of $25 million for
standby letters of credit, and a $100 million five-year term loan with scheduled
repayments of $25 million per year, beginning in year two (the "Credit
Facility"). On March 18, 1998, the Company completed offerings of equity and
convertible trust issued preferred securities, from which the Company obtained
$195.6 million in net proceeds. The Company repaid and terminated the $100
million term loan with proceeds from these offerings. The remaining $95.6
million in proceeds was applied to reduce the outstanding balance under the $200
million revolving credit facility. The Credit Facility bore interest until June
30, 1998 at a rate of LIBOR plus 1.25%. On June 30, 1998, the interest rate on
the Credit Facility and the commitment fee on the unused portion reverted to a
grid pricing based upon the achievement of various financial ratios. The Credit
Facility contains certain covenants including those that require Central Parking
to maintain certain financial ratios, restrict further indebtedness and limit
the amount of dividends payable. Central Parking used the Credit Facility to
replace Central Parking's prior revolving credit facility and to finance the
Kinney acquisition. At September 30, 1998, the amount outstanding under this
Credit Facility was $48.2 million and the interest rate was 6.5% (LIBOR plus 75
basis points). At September 30, 1998, Central Parking had available $147.1
million under the Credit Facility.
In March 1998, Civic obtained financing with a financial institution for $60
million. Civic distributed the loan proceeds to its shareholders. Central
Parking owns a 50% interest in Civic, a limited liability company, and as a
result, received net proceeds of $30.3 million from this transaction which
reduced Central Parking's carrying value of its investment in partnerships and
joint ventures. The proceeds from the refinancing were used by Central Parking
to pay down the Credit Facility.
On September 2, 1998, Central Parking received a "best efforts" commitment which
expires March 31, 1999, to establish a new credit facility providing for an
aggregate of up to $400
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million (the "New Credit Commitment") consisting of a five-year $200 million
revolving credit facility including a sublimit of $25 million for standby
letters of credit, and a $200 million five-year term loan with scheduled
repayment consisting of $50 million per year, beginning in year two. The New
Credit Commitment will bear interest at either prime rate plus 0.5% or LIBOR
plus a margin of 1.12% and after three months revert to grid pricing at a margin
of 0.25% to 1.25% based upon Central Parking achieving a number of financial
ratios or ratings. The New Credit Commitment will contain certain covenants
including those that require Central Parking to maintain certain financial
ratios, restrict further indebtedness and limit the amount of dividends paid.
Central Parking intends to use the New Credit Commitment to replace Central
Parking's Credit Facility and to refinance the existing debt of Allright.
International Foreign Currency Exposure
Central Parking operates wholly owned subsidiaries in the United Kingdom,
Malaysia, Canada and the Netherlands. Total revenues from wholly owned foreign
operations amounted to 9.3%, 8.2% and 6.0% for fiscal years 1996, 1997 and 1998,
respectively. Additionally, Central Parking operates through joint ventures in
Germany, Mexico and Spain. Central Parking intends to invest in foreign leased
or owned facilities, usually through joint ventures, and may become increasingly
exposed to foreign currency fluctuations. Central Parking, in limited
circumstances, has denominated contracts in U.S. dollars to limit currency
exposure. Presently, Central Parking has limited exposure to a foreign currency
risk and has no hedge programs. Central Parking anticipates implementing a hedge
program if such risk materially increases. For the year ended September 30,
1998, revenues from the United Kingdom operations represented 96.3% of total
revenues generated by foreign operations, excluding earnings from joint
ventures.
Economic and Monetary Union
On January 1, 1999, eleven of the fifteen members countries of the European
Union established fixed conversion rates between their existing sovereign
currencies and a new currency called the "euro." These countries have adopted
the euro as their common legal currency on that date. The euro will trade on
currency exchanges and be available for non-cash transactions. Thereafter and
until January 1, 2002, the euro is scheduled to replace the sovereign legal
currencies of these countries. While the vast majority of Central Parking's
operations within the European Union are currently in the United Kingdom, a
European Member which is not scheduled to participate in the euro conversion,
Central Parking has operations in countries which are scheduled to adopt the
euro. Central Parking is in the process of assessing the impact of the euro
conversion to its operations in the participating countries, including the need
to adopt new information technology, parking related equipment and other systems
to accommodate euro-denominated transactions, as well as the impact to currency
risk and contractual relationships. Based on management's assessment of the
impact of the euro conversion, Central Parking does not believe that the euro
conversion will have a material impact on its operations or financial condition.
IMPACT OF INFLATION AND CHANGING PRICES
The primary sources of revenues to Central Parking are parking revenues from
owned and leased locations and management contract revenue (net of expense
reimbursements) on
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managed parking facilities. Central Parking believes that inflation has had a
limited impact on its overall operations for fiscal years ended September 30,
1996, 1997 and 1998.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board issued SFAS No. 130,
"Reporting Comprehensive Income". This pronouncement is effective for fiscal
years beginning after December 15, 1997 and requires the reporting of
comprehensive income within the financial statements. Central Parking will adopt
SFAS 130 in fiscal year 1999. Management does not anticipate that the
pronouncement will significantly impact the presentation of Central Parking's
consolidated financial statements.
In June 1997, the Financial Accounting Standards Board issued SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information", which
supersedes SFAS No. 14. This pronouncement is effective for fiscal years
beginning after December, 15, 1997. Central Parking will adopt SFAS 131 in
fiscal year 1999. Management does not anticipate that the pronouncement will
significantly impact the presentation of Central Parking's consolidated
financial statements.
In February 1998, the Financial Accounting Standards Board issued SFAS No. 132,
"Employers' Disclosures about Pensions and Other Postretirement Benefits," which
amends SFAS Nos. 87, 88, and 106. This pronouncement is effective for fiscal
years beginning after December 15, 1997. Central Parking will adopt SFAS 132 in
fiscal year 1999. Management does not anticipate that the pronouncement will
significantly impact the presentation of Central Parking's consolidated
financial statements.
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities," which supercedes
SFAS Nos. 80, 105, and 119. This Statement is effective for all fiscal quarters
of fiscal years beginning after June 15, 1999. Management is evaluating the
impact of SFAS 133 to Central Parking's consolidated financial statements.
IMPAIRMENT OF LONG-LIVED ASSETS
Central Parking adopted the provisions of SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of", on
October 1, 1996. This Statement requires that long-lived assets and certain
identifiable intangibles be reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future net cash flows expected
to be generated by the asset. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount which the carrying amount
of the assets exceed the fair value of the assets. Assets to be disposed of are
reported at the lower of the carrying amount or fair value less costs to sell.
Central Parking periodically reviews the carrying value of long-lived intangible
assets such as goodwill, contract rights, and non-compete agreements to
determine if the net book values of such assets continue to be recoverable over
the remainder of the original estimated useful life. In performing this review
for recoverability, Central Parking estimates the future cash flows expected to
result from the use of the asset and its eventual disposition. If the sum of the
expected future cash flows (undiscounted and without interest charges) is less
than the carrying amount of the asset, an impairment loss is recognized. Since
the assets involved are held and used in the operations of Central Parking,
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<PAGE> 79
consideration is also given to actions or remediations Central Parking might
take in order to achieve the original estimates of cash flows. Adoption of this
Statement did not have a material impact on Central Parking's financial
position, results of operations, or liquidity.
YEAR 2000
Central Parking has considered the impact of year 2000 issues on its computer
systems and applications and has developed remediation plans. These plans are
part of Central Parking's ongoing business strategies to incorporate advanced
technologies in its information systems, and were contemplated in advance of
year 2000 issues. The expenditures for system upgrades will be accounted for as
regular capital expenditures and will be depreciated over their estimated useful
lives of 3-5 years. The ongoing expenses of training and testing will be
expensed as they are incurred. It is estimated that Central Parking will spend
in excess of $2 million upgrading its computer information systems in accordance
with its plans for technological enhancement, and that such expenditures will
not be material to Central Parking's operations or liquidity. Central Parking
believes that the upgraded information systems will be year 2000 compliant.
System hardware and software that in management's estimation is not year 2000
compliant have been fully depreciated. Central Parking estimates that its
information systems will be year 2000 compliant by April 1999. This should allow
Central Parking adequate time to continue to test and determine the compliance
of such systems. Management believes that this is enough time to fully test and
foresee all significant remaining year 2000 issues on its information systems
and, therefore, does not have any other contingency plan in place for its
information systems.
Central Parking uses some fee calculation devices that compute parking fees and
statistical data, and also automate the ingress and egress control mechanisms at
certain parking facilities. Central Parking believes that less than 20% of its
operations have fee calculation devices with any year 2000 issues with regard to
carrying out its parking business. Based on discussions with the vendors of
these devices, Central Parking believes the vendors will make available
reasonably priced upgrades to address year 2000 issues prior to December 31,
1999. However, the vendors have given no assurance that such fee computation
devices will be year 2000 compliant on any given date before December 31, 1999.
In the event remediation is not complete at any of these sites prior to the year
2000, and a failure of such fee calculation devices were to occur due to
processing incompatibilities in the year 2000, manual override systems are now
in place at all locations. Given the limited technology required to operate such
facilities, management believes all material operations could adequately be
performed manually. Such contingency plans are currently deployed in the events
of power failures or other business interruptions at locations where these
devices are located.
Central Parking is communicating, by means of year 2000 questionnaires, with
each of its major vendors to determine third party compliance with year 2000
issues. Although Central Parking cannot require its vendors to respond,
follow-up with each party will be conducted to try and determine and resolve any
year 2000 issues. Central Parking is also requiring all vendors to warrant that
all software and hardware purchased by Central Parking is fully year 2000
compliant. While Central Parking does not expect to be materially affected by
any third party's year 2000 issues, no assurances can be given that a third
party's failure to adequately address their year 2000 issues could not
materially effect Central Parking's business or financial results.
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THE MERGER AGREEMENT
The following summary of the material provisions of the Merger Agreement does
not purport to be complete and is qualified in its entirety by reference to the
Merger Agreement, a copy of which is attached as Annex A to this joint proxy
statement/prospectus and is incorporated by reference. Holders of Central
Parking common stock and Allright common stock are urged to read the Merger
Agreement carefully. Capitalized terms used in this section but not defined in
this joint proxy statement/prospectus shall have the meanings attributed to them
in the Merger Agreement.
THE MERGER
Under the Merger Agreement and on the terms and conditions set forth in the
Merger Agreement, Central Parking Sub will be merged with and into Allright,
with Allright continuing as the surviving corporation. Following the Merger,
Allright will be an indirect, wholly owned subsidiary of Central Parking.
CLOSING; EFFECTIVE TIME
The closing of the Merger shall take place on the second business day following
the satisfaction or waiver of the conditions to the Merger, or at such other
time as the parties may agree (the "Closing Date"). The Merger shall become
effective upon the filing of the Certificate of Merger with the Secretary of
State of the State of Delaware. See "-- Conditions to Consummation of the
Merger."
CERTIFICATE OF INCORPORATION AND BYLAWS; DIRECTORS AND OFFICERS
The Certificate of Incorporation and Bylaws of Allright, as in effect at the
Effective Time, shall continue as the Certificate of Incorporation and Bylaws of
the surviving corporation, until amended as provided in such certificate and
bylaws. The directors and officers of Central Parking Sub at the Effective Time
shall be the directors and officers of the surviving corporation, until their
respective successors are duly elected and qualified, or their earlier death,
resignation or removal.
CONVERSION OF SECURITIES; MERGER CONSIDERATION
By virtue of the Merger, all capital stock held in the treasury of Allright or
held by any of Allright's subsidiaries shall be cancelled and cease to exist and
no payment shall be made for this stock. At the Effective Time, all rights of
outstanding shares of Allright common stock shall cease to exist, other than the
right to receive Central Parking common stock.
At the Effective Time, each share of Allright common stock issued and
outstanding immediately prior to the Effective Time (other than shares held in
treasury, as described above), shall be automatically cancelled and converted
into and represent the number of shares of Central Parking common stock equal to
the Exchange Ratio. The Exchange Ratio is ultimately determined by a calculation
of several variables, the most complicated of which is the Equity Purchase
Price. In general, the Equity Purchase Price is the total purchase price to be
paid for Allright by Central Parking and Central Parking Sub. Specifically, the
price is equal to $564,390,050 plus and minus certain adjustments to be
determined at the time of closing. See below for a more detailed description of
these adjustments. A complete understanding of the calculations of the Exchange
Ratio and the Equity Purchase Price requires a detailed reading of the relevant
provisions of the Merger Agreement. However, the following is a brief summary of
the calculations used to determine the number of shares of
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Central Parking common stock represented by each share of Allright common stock
issued and outstanding immediately prior to the Effective Time.
The Exchange Ratio equals the Equity Purchase Price divided by $46.00, divided
by the number of shares of Allright common stock outstanding on a fully diluted
basis as of the Effective Time. The outstanding Allright common stock excludes
any shares of Allright common stock issued or issuable to a seller in exchange
for assets in connection with an acquisition permitted under the Merger
Agreement,
The adjustments to the "Equity Purchase Price" are defined in detail in the
Merger Agreement. However, the adjustments can be summarized as follows:
To be added to the Equity Purchase Price:
- - acquisition expenses, meaning the amount paid, including capital expenditures,
by Allright from April 30, 1998 through the date of the closing in connection
with the acquisition of parking facilities;
- - the excess, if any, of $5 million over the covered transaction expenses (the
total of all paid and accrued expenses of Allright, Apollo, and AEW in
connection with the Merger and the related transactions);
- - the working capital adjustment (certain adjustments to be made to the working
capital of Allright are detailed in the Merger Agreement); in general, the
working capital adjustment can only be a negative number or zero and
represents the working capital deficit amount over $6 million);
- - the aggregate exercise price of outstanding and unexercised Allright warrants
and non-qualified options; and
- - any gain resulting from a divestiture of assets or operations that is
necessary in order to terminate the waiting period required by the
Hart-Scott-Rodino Act; such gain is equal to the product of, only if such
product is a positive number, 35% multiplied by the difference between (A) the
appraised value of the divested property or operations, as determined by an
appraiser, and (B) 16 times EBITDA for such property or operations for the
prior fiscal year.
To be subtracted from the Equity Purchase Price:
- - the principal amount of any long-term debt and capitalized lease obligations
of Allright, excluding current portions, as of the Closing Date and assumed by
Central Parking or Central Parking Sub pursuant to the Merger;
- - the excess, if any, of the covered transaction expenses (the total of all paid
and accrued expenses of Allright, Apollo, and AEW in connection with the
Merger and the related transactions, over $5 million);
- - 16 multiplied by the amount, if any, by which Allright's EBITDA, with certain
adjustments to be made pursuant to the Merger Agreement, is below $34.0
million;
- - any loss resulting from a divestiture of assets or operations that is
necessary in order to terminate the waiting period required by the
Hart-Scott-Rodino Act; such loss is equal to the product of, only if such
product is a positive number, 35% multiplied by the difference between (A) 16
times EBITDA for such property or operations for the prior fiscal year and (B)
the appraised value of such property or operations, as determined by an
appraiser;
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- - any net proceeds from the permitted sale, lease, transfer or disposition of
any property or assets; and
- - any excess severance, meaning the amount by which Allright's contractual
severance obligations (with exclusions as set forth in the Merger Agreement)
exceeds $6.3 million.
The calculation of the Equity Purchase Price will be set forth in a closing
statement, that will be prepared by Allright based on its good faith estimates
of the amounts indicated and provided to Central Parking for its review and
approval (which shall not be unreasonably withheld), not less than five business
days prior to the date of closing. Allright shall use its best efforts to
deliver to Central Parking as soon as possible (but no later than fifteen
business days prior to the date of closing), additional financial information
required by the Merger Agreement.
CERTAIN ADJUSTMENTS
If after the date of the Merger Agreement and on or prior to the date of
closing, Central Parking issues additional shares through any reclassification,
recapitalization, split-up, combination or exchange of shares, or any dividend
payable in stock or other securities is declared with a record date within such
period, or any similar event occurs, the number of shares to which an Allright
shareholder is entitled to receive will be adjusted accordingly to provide the
same economic effect as contemplated by the Merger Agreement prior to such
reclassification, recapitalization, split-up, combination, exchange or dividend
or similar event.
TREATMENT OF STOCK OPTIONS AND WARRANTS
At the Effective Time, each Allright Option which is outstanding and unexercised
will be converted automatically into an option to purchase shares of Central
Parking common stock (each, a "Central Parking Option"). The number of shares of
Central Parking common stock to be subject to the new Central Parking Option
shall be equal to the number of shares of Allright common stock subject to the
original Allright Option multiplied by the Exchange Ratio. Any fractional shares
of Central Parking common stock resulting from such multiplication shall be
rounded down to the nearest share. The exercise price per share of Central
Parking common stock under the new Central Parking Option shall be equal to the
exercise price per share of Allright common stock under the original Allright
Option divided by the Exchange Ratio. The resulting exercise price shall be
rounded up to the nearest cent. The duration and other terms of the Central
Parking Options shall be the same as the Allright Options except that all
references to Allright shall be deemed to be references to Central Parking. At
the Effective Time, the Allright Options Plan shall be assumed by Central
Parking and, following the Effective Time, Central Parking shall take all steps
necessary to provide that shares of Central Parking common stock issuable upon
the exercise of all outstanding Central Parking Options shall be covered by an
effective registration statement as soon as practicable after the Effective
Time.
If any Allright Options are intended to be "incentive stock options" (as defined
in Section 422 of the Code)("ISOs"), the exercise price, the number of shares
and the terms and conditions of exercise of the Central Parking Options issued
shall be determined in order to comply with Section 424(a) of the Code.
At the Effective Time, each outstanding and unexercised Allright Warrant shall
cease to represent a right to acquire shares of Allright common stock and shall
be converted automatically into a warrant to purchase shares of Central Parking
common stock (each, a
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"Central Parking Warrant"). The number of shares of Central Parking common stock
subject to the Central Parking Warrant shall equal the number of shares of
Allright common stock subject to the original Allright Warrant times the
Exchange Ratio, rounded down to the nearest share. The exercise price per share
of Central Parking common stock under the new Central Parking Warrant shall be
equal to the exercise price per share of Allright common stock under the
original Allright Warrant divided by the Exchange Ratio, rounded up to the
nearest cent.
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains certain customary mutual representations and
warranties which are described in more detail in the Merger Agreement.
CERTAIN COVENANTS
Conduct of Business by Allright. Allright has covenanted and agreed that,
except (A) in certain circumstances as previously disclosed in writing to
Central Parking; (B) with the consent of Central Parking; or (C) as contemplated
by the Merger Agreement,
- Allright will operate in the ordinary course of business, consistent with
past practice;
- Allright will not change its Certificate of Incorporation or Bylaws or
other constituent documents of Allright or any of its subsidiaries;
- Allright will not, except in the ordinary course of business consistent
with past practices, materially increase the compensation payable or to
become payable to any officer, employee, consultant or agent or grant any
bonus or retirement or similar benefit or arrangement;
- subject to certain exceptions, Allright will not make a capital
expenditure or commitment to make a capital expenditure in excess of $1.2
million in the aggregate per quarter;
- Allright will not enter into or renew a lease which involves the payment
of more than $500,000 annual rent (in the event that Central Parking
refuses to consent to any proposed lease, Central Parking will not enter
into any transaction concerning the subject matter of such proposed
lease);
- Allright will not acquire any business or acquire any equity interest in
any person not an affiliate for more than $100,000 individually or $1.0
million in the aggregate with all other such acquisitions (in the event
that Central Parking refuses to consent to any proposed transaction,
Central Parking will not enter into a transaction concerning the subject
matter of such proposed transaction);
- except for borrowings under credit facilities or lines of credit existing
on September 21, 1998 or incurred to finance expenditures or acquisitions
permitted by the Merger Agreement, Allright will not incur any
indebtedness or issue any debt securities or assume, guarantee or
endorse, or otherwise become responsible for the obligations of any
person, or make any loans, advances or capital contributions to, any
person other than its wholly owned subsidiaries, except in the ordinary
course of business consistent with past practice;
- to the extent reasonably practicable, Allright will maintain the business
organization of Allright and its subsidiaries, the opportunity for
Central Parking to retain the services of the present employees of
Allright and the goodwill of the customers and others having business
relations with Allright;
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- Allright will not take any action or fail to take any action that would,
or would be reasonably likely to, result in any of Allright's
representations and warranties set forth in the Merger Agreement not
being true in all material respects;
- Allright will use its reasonable best efforts to comply with all material
legal requirements applicable to it and to the conduct of its business;
- Allright will not sell, lease, transfer or dispose of any properties not
in the ordinary course of business and, after consultation with Arthur
Andersen LLP, will not dispose of any properties which, in the reasonable
opinion of Arthur Andersen, would jeopardize the Merger from being
qualified as a pooling of interests transaction; and
- Allright and its subsidiaries will not declare any dividend or make any
distribution with respect to their capital stock or partnership interest
which is not made to minority interest holders or partners pursuant to
existing agreements, or which is not in the ordinary course of business.
In the event Central Parking does not provide a written refusal for Allright to
enter into any transaction proposed above within five business days after
receiving notification of such proposal (with data reasonably requested by
Central Parking to evaluate such proposal), Central Parking shall be deemed to
have consented to such proposed transaction, and Allright may enter into any
such proposed transaction as if Central Parking had provided its written
consent.
Conduct of Business by Central Parking. Central Parking has covenanted and
agreed that, except (A) in certain circumstances as previously disclosed in
writing to Allright; (B) with the consent of Allright; or (C) as contemplated by
the Merger Agreement,
- Central Parking will operate in the ordinary course of business
consistent with past practice;
- Central Parking will not change the Central Parking Charter or Bylaws or
other constituent documents of Central Parking or any subsidiaries;
- Central Parking will not spend more than $20 million individually or $75
million in the aggregate to purchase or otherwise acquire real estate or
fixed or capital assets, except for any such asset acquired in connection
with normal replacement and maintenance programs properly charged to
current operations or pursuant to or as required by existing contractual
obligations and except as to the renewal of presently existing leases
which are scheduled to expire according to their respective terms;
- Central Parking will not take any action to acquire any business or
acquire any equity interest in any person not an affiliate for more than
$20 million individually or $75 million in the aggregate with all other
such acquisitions (in the event that Allright refuses to consent to any
proposed transaction, Allright shall refrain from entering into a
transaction concerning the subject matter of such proposed transaction);
- except for borrowings under credit facilities or lines of credit existing
on September 21, 1998 or incurred to finance expenditures or acquisitions
permitted by the Merger Agreement, Central Parking will not incur any
indebtedness or issue any debt securities or assume, guarantee or
endorse, or otherwise become responsible for the obligations of any
person, or make any loans, advances or capital contributions to, any
person other than its wholly owned subsidiaries, except in the ordinary
course of business consistent with past practice;
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- Central Parking will not take any action or fail to take any action that
would, or would be reasonably likely to, result in any of Central
Parking's and Central Parking Sub's representations and warranties set
forth in the Merger Agreement not being true in all material respects;
- Central Parking will use its reasonable best efforts to comply with all
material legal requirements applicable to it and to the conduct of its
business;
- after consultation with KPMG LLP, Central Parking will not sell, lease
transfer or dispose of any of its properties to the extent such sale may,
in the reasonable opinion of KPMG LLP, jeopardize the Merger from being
qualified as a pooling of interests transaction; and
- other than regular quarterly dividends distributed in the normal course
of business, Central Parking will not declare, set aside or pay any
dividends on (whether in cash, stock or other securities), make any other
distributions in respect of, or enter into any agreement with respect to
the voting of, any of its capital stock or the capital stock, partnership
interests, membership interests or other equity, as the case may be, of
its subsidiaries, or split, combine, issue, authorize for issuance,
exchange or reclassify any of its capital stock or issue or authorize the
issuance of any other securities. Central Parking may issue Central
Parking common stock to a seller or sellers for acquisitions permitted
under the Merger Agreement, upon the exercise of any stock options for
Central Parking common stock that are, in each case, outstanding as of
September 21, 1998 in accordance with their present terms and pursuant to
any plans of Central Parking in the ordinary course of business.
In the event Allright does not provide a written refusal for Central Parking to
enter into any transaction above within five business days after receiving
notification of such proposal (with data reasonably requested by Allright to
evaluate such proposal), Allright shall be deemed to have consented to such
proposed transaction (other than certain specified transactions, for which
affirmative consent is necessary) and Central Parking may enter into any such
proposed transaction as if Allright had provided written consent.
Special Meetings. Pursuant to the Merger Agreement, Central Parking has agreed
to give notice of, convene and hold a meeting of its shareholders in accordance
with the Tennessee Business Corporation Act ("TBCA") and the requirements of the
NYSE for the purpose of obtaining Central Parking shareholders' approval of the
Merger Agreement and the transactions contemplated by it in accordance with the
TBCA and the rules and regulations of the NYSE.
Allright has agreed to either give notice of, convene and hold a meeting of its
shareholders in accordance with the DGCL or obtain an action by written consent,
executed by the requisite percentage of Allright shareholders and in accordance
with the DGCL, for the purpose of obtaining Allright's shareholders approval in
connection with the Merger in accordance with the DGCL.
Investigation; Non-Solicitation. Central Parking and Allright each have agreed
to afford to one another reasonable access during normal business hours to its
properties, contracts, commitments, books and records and any report, schedule
or other document filed or received by it pursuant to the requirements of
federal or state securities laws. Central Parking and Allright have each agreed
to use its reasonable best efforts to furnish promptly to one another such
additional financial and operating data and other information regarding its
businesses
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and properties as the other may from time to time reasonably request in writing;
provided, however, that nothing requires either Central Parking or Allright or
any of their respective subsidiaries to disclose any information to the other if
such disclosure would cause competitive harm to such disclosing party (in such
party's reasonable judgment) if the transactions contemplated by the Merger
Agreement are not consummated, or would be in violation of applicable laws or
regulations of any governmental entity.
Allright has agreed to allow Central Parking and its representatives reasonable
access to information concerning, and Allright has agreed to meet with Central
Parking and its representatives in connection with, (A) any $50,000 leases,
which are scheduled to expire within six months of the Closing Date, (B) any
$50,000 lease for which Allright has knowledge (based on reasonable information)
that the respective landlord has asserted or has threatened to assert a breach
of any consent or assignment provision contained in such lease as a result of
the Merger, and (C) the retention of key management personnel. A representative
appointed by Allright shall be present at any meeting between Allright, or any
of its employees, directors and officers, on the one hand, and Central Parking,
or any of its employees, directors and officers, on the other hand. Unless
otherwise required by law and until the Effective Time, the parties have agreed
to hold any such information which is nonpublic in confidence in accordance with
the provisions of the Confidentiality Agreements between Central Parking and
Allright, dated as of January 30, 1998 and May 19, 1998 (the "Confidentiality
Agreements").
Approvals and Consents; Cooperation; Notification. The parties have agreed to
use their respective best efforts, and cooperate with each other, to obtain as
promptly as practicable all governmental and third party authorizations,
approvals, consents or waivers required in order to consummate the transactions
contemplated by the Merger Agreement, including, without limitation, the Merger.
The parties have agreed to take all actions necessary to file as soon as
practicable all notifications, filings and other documents required to obtain
all governmental authorizations, approvals, consents or waivers, including,
without limitation, under the HSR Act, and to respond as promptly as practicable
to any inquiries received from the FTC, the Antitrust Division of the Department
of Justice or any other governmental entity for additional information or
documentation and to respond as promptly as practicable to all inquiries and
requests received from any State Attorney General or other governmental entity.
The HSR Act filings were made by both Allright and Central Parking on October 8,
1998, and on November 6, 1998 they each received from the Antitrust Division a
Second Request for information.
If any divestiture of property or operations at a particular parking facility is
necessary in order to terminate the waiting period required by the HSR Act in
connection with the Merger, Central Parking and Allright agree to retain a
mutually agreeable real estate appraisal firm for the purpose of appraising
those facilities or operations which must be divested. In connection with the
divestiture, the Equity Purchase Price shall be adjusted for any divestiture
gain or divestiture loss. See "-- Conversion of Securities; Merger
Consideration."
Central Parking Board of Directors. Promptly after the Effective Time, the
Central Parking Board shall be expanded to eleven members. At such time, Apollo
and AEW shall each be entitled, in its sole discretion, to designate one
individual to the Central Parking Board, who shall serve in accordance with and
for the time period specified by the Certificate of Incorporation and Bylaws of
Central Parking. Apollo and AEW have indicated that their designees will be
William S. Benjamin and Marc L. Davidson, respectively. If at any time
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Apollo or AEW, individually own, directly or indirectly, less than $50 million
worth of outstanding Central Parking common stock, Central Parking shall, at the
next election of the Central Parking Board, have the right to decrease the
number of appointees to the Central Parking Board with respect to such holder.
For purposes of the foregoing, the value of the Central Parking common stock
held by Apollo and AEW shall be determined by multiplying the number of shares
of Central Parking common stock then beneficially owned by such holders by the
average of the closing sale prices per share of Central Parking common stock on
the NYSE for the prior 20 trading days.
Tax Treatment of Merger. It is the intent of the parties that the Merger be
treated for federal income tax purposes as a tax-free reorganization pursuant to
Section 368(a) of the Code and that the Merger Agreement shall constitute a
"Plan of Reorganization" for purposes of the Code. The parties have agreed not
to take any actions which would prevent the Merger from qualifying as such a
reorganization, to report the transactions under the Merger Agreement consistent
with such treatment and to take no positions to the contrary unless otherwise
required by law.
Expenses; Severance. All out-of-pocket transaction costs and expenses incurred
by Central Parking in connection with the Merger Agreement, whether or not the
Merger is consummated, shall be paid by Central Parking. All covered transaction
expenses incurred by Allright, AEW and Apollo in connection with the Merger
Agreement, if the Merger is consummated, shall be paid by Allright. If the
Merger is not consummated, Allright, AEW and Apollo shall be responsible for
their own expenses incurred in connection with the Merger Agreement and related
transactions. However, if the Merger is not consummated solely by reason of a
material breach of the Merger Agreement by Allright, Allright has agreed to pay
any and all out-of-pocket transaction costs and expenses incurred in connection
with the Merger Agreement and related transactions of Central Parking and
Central Parking Sub up to a maximum of $5 million.
If the Merger is not consummated solely by reason of a material breach of the
Merger Agreement by Central Parking, Central Parking has agreed to pay any and
all out-of-pocket transaction costs and expenses incurred in connection with the
Merger Agreement and related transactions of Allright, AEW and Apollo up to a
maximum of $5 million. If the Merger is not consummated as a result of the fact
that either KPMG LLP or Arthur Andersen failed to issue a letter concerning the
pooling of interests qualification of the Merger, the party whose accountant was
unable to deliver its pooling letter as required shall pay to the other party an
amount of $2.5 million for expenses incurred in connection with the execution of
the Merger Agreement; provided, neither party shall be liable for such expenses
if it had not breached a representation, warranty or covenant.
If the Merger is consummated, Central Parking shall be solely responsible for
any obligation and payment to be made under any severance agreement, retention
agreement, stay-on bonus, non-compete agreement, compensation plan or severance
or retention provision of any employment, non-compete or retention agreement
which is incurred as a result of the entering into of the Merger Agreement,
including but not limited to payments required to be made immediately after the
Effective Time pursuant to retention bonus agreements.
Allright has agreed to use its reasonable best efforts to cause certain persons
to enter into the retention bonus agreements and employment agreements and
management continuity agreements with Allright. Central Parking has agreed to
cause Allright to enter into such employment agreements and management
continuity agreements at such time.
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Employment Matters. Central Parking has agreed to honor Allright's existing
employee benefit plans, to the same extent that Allright and its subsidiaries
would be required to perform them in the event that the Merger was not
consummated. Central Parking has agreed to honor all obligations of Allright
under any severance agreement, retention agreement or employment agreement
previously disclosed to Central Parking. Central Parking has also agreed to
provide severance to those employees of Allright who will be terminated after
the Closing Date and who do not have severance agreements or severance
provisions in any employment agreements in effect with Allright as of the
Closing Date on terms not less favorable than it would provide to any of its
similarly situated employees. Individuals who are employed by Allright
immediately prior to the Closing Date shall remain employees of the surviving
corporation immediately following the Closing Date (each such employee, an
"Affected Employee"); provided, however, that nothing shall limit or otherwise
restrict the ability of the surviving corporation to terminate, lay-off or
reduce the work hours of any Affected Employees following their initial
continued employment following the Effective Time. Affected Employees will be
given full credit, for purposes of eligibility, vesting, benefit accrual and
determination of the level of benefits under any employee benefit plans or
arrangements maintained by Central Parking or the surviving corporation, for
such Affected Employees' service with Allright to the same extent recognized by
Allright immediately prior to the Closing Date, provided however that the
Affected Employees' eligibility to participate in, and benefits under, such
plans and arrangements shall otherwise be determined under the terms of such
plans.
Central Parking has agreed to waive all limitations as to preexisting
conditions, exclusions and waiting periods with respect to participation and
coverage requirements applicable to the Affected Employees under any welfare
benefit plans that such employees may be eligible to participate in after the
Closing Date, other than limitations or waiting periods that are already in
effect with respect to such employees and that have not been satisfied as of the
Closing Date under any welfare plan maintained for the Affected Employees
immediately prior to the Closing Date. Central Parking has also agreed to
provide each Affected Employee with credit for any co-payments and deductibles
paid prior to the Closing Date in satisfying any applicable deductible or
out-of-pocket requirements under any welfare plans that such employees are
eligible to participate in after the Closing Date. For a period of two years
immediately following the Closing Date, the coverage and benefits provided to
Affected Employees pursuant to employee benefit plans or arrangements maintained
by Central Parking or the surviving corporation shall be, in the aggregate, not
less favorable than those provided to similarly situated employees of Central
Parking and the surviving corporation.
Indemnification, Exculpation and Insurance. Central Parking and Central Parking
Sub agreed to continue for six years after the Effective Time certain rights to
indemnification and exculpation from liabilities for acts or omissions occurring
at or prior to the Effective Time now existing in favor of the current or former
directors, officers, employees or agents of Allright. In addition, from and
after the Effective Time, directors or officers of Allright who become directors
or officers of Central Parking or any subsidiary will be entitled to the same
indemnity rights and protections as are afforded to other directors and officers
of Central Parking or such subsidiary.
For six years after the Effective Time, Central Parking or the surviving
corporation has agreed to maintain in effect Allright's current directors' and
officers' liability insurance covering acts or omissions occurring prior to the
Effective Time with respect to those persons who are currently covered by such
directors' and officers' liability insurance policy on terms no less
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favorable in the aggregate than those of such policy in effect on the date of
the signing of the Merger Agreement. However, Central Parking may substitute
policies of Central Parking containing terms no less favorable to such directors
or officers or, in the alternative, Central Parking may purchase a "tail" on
Allright's existing insurance policy for a term of not less than six years.
NYSE Listing. Central Parking will use best efforts to cause the Central
Parking common stock issuable pursuant to the Merger to be approved for listing
on the NYSE, subject to official notice of issuance as promptly as practicable,
and in any event prior to the Closing Date.
Affiliates. Allright and Central Parking have agreed to use their reasonable
best efforts to cause all persons who, at the time of the Central Parking
special meeting, may be deemed to be affiliates of Allright as that term is used
under Rule 145 under the Securities Act and who will become the beneficial
owners of Central Parking common stock pursuant to the Merger, or affiliates of
Allright or Central Parking for purposes of qualifying the Merger for pooling of
interests accounting treatment under Opinion 16 of the Accounting Principles
Board ("APB 16") and applicable Securities and Exchange Commission (the
"Commission") rules and regulations, to execute "affiliate letters" in customary
form prior to the Effective Time. In addition, Central Parking has agreed to use
its reasonable best efforts to publish on the earliest possible date after the
end of the first month after the Effective Time in which there are at least 30
days of post-Merger combined operations (which month may be the month in which
the Effective Time occurs), combined sales and net income figures as
contemplated by and in accordance with the terms of Commission Accounting Series
Release No. 135.
Pooling of Interests. Each of Allright and Central Parking have agreed to use
reasonable best efforts to cause the Merger to be accounted for as a pooling of
interests under APB 16 and applicable Commission rules and regulations. Each of
Allright and Central Parking agreed not to take any action that would cause such
accounting treatment not to be obtained. Any breach by the Central Parking
shareholders under the Transaction Support Agreements with respect to certain
obligations shall be deemed a breach of the Merger Agreement by Central Parking.
Conveyance Taxes. Allright has agreed to pay any taxes or fees imposed by any
governmental entity, which become payable in connection with the transactions
contemplated by the Merger Agreement, on behalf of the Allright shareholders and
Central Parking shareholders.
CONDITIONS TO CONSUMMATION OF THE MERGER
The obligations of the parties to effect the Merger are subject to customary
conditions including:
- the Central Parking shareholder approval shall have been obtained;
- there shall not be any order, decree, ruling or other action of a court
of competent jurisdiction which restrains, delays or otherwise prohibits
the transactions contemplated by this Agreement;
- the shares of Central Parking common stock issuable to the Allright
shareholders pursuant to the Merger shall have been approved for listing
on the NYSE, subject to official notice of issuance; and
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- any waiting period applicable to the consummation of the Merger under the
HSR Act shall have expired or been terminated.
- the representations and warranties set forth in the Merger Agreement
shall be true and correct when made and as of the Closing Date (except to
the extent that any such representation and warranty had been made as of
a specific date), and shall have performed the obligations to be
performed by it under the Merger Agreement prior to the Closing Date;
- there shall not have occurred any Allright or Central Parking material
adverse effect since the date of the Merger Agreement;
- KPMG LLP, tax advisor to Central Parking shall have delivered an opinion
substantially to the effect that, among other things, the Merger will be
treated for federal income tax purposes as a reorganization within the
meaning of Section 368(a);
- Arthur Andersen LLP, and KPMG LLP shall deliver a letter regarding
certain pooling of interests issues and matters pursuant to APB 16;
- AEW and Apollo shall have executed and delivered to Central Parking the
Noncompetition Agreement.
- Skadden, Arps, Slate, Meagher & Flom LLP, counsel to Allright, shall have
delivered an opinion substantially to the effect that, among other
things, the Merger will be treated for federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Code;
TERMINATION; NON-CONSUMMATION
The Merger Agreement may be terminated at any time prior to the Effective Time:
- by mutual agreement of all of the parties;
- by Allright or Central Parking upon notice given to the other in the
event that the other shall, contrary to the terms of the Merger
Agreement, fail or refuse to consummate the transactions contemplated or
to take any other action necessary to consummate the transactions
contemplated, after affording such defaulting party a thirty-day period
after notice in which to cure;
- by Allright or Central Parking upon notice given to the other if the
Closing shall not have taken place on or before the earlier of February
19, 1999 or 23 business days after the Form S-4 Registration Statement
has been declared effective or such later date as Allright and Central
Parking shall have agreed; provided that the failure of the Closing to
occur on or before such date is not the result of the breach of the
covenants, agreements, representations or warranties of the party seeking
such termination. In the event the Closing has not taken place due solely
to the fact that the waiting period under the HSR Act shall not have
expired or been terminated, the period referred to above may be extended
at the option of either Allright or Central Parking to no later than
March 20, 1999; or
- by Allright or Central Parking upon written notice to the other party if
any court or governmental authority of competent jurisdiction shall have
issued a final permanent order, enjoining or otherwise prohibiting the
transactions contemplated by the Merger Agreement.
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EFFECT OF TERMINATION; NON-COMPETITION
In the event of the termination of the Merger Agreement, the Merger Agreement
shall become wholly void and of no further force and effect and, other than in
the event of a termination for certain breaches of the Merger Agreement, there
shall be no liability on the part of any of the parties (with certain
exceptions), or their respective officers or directors. In the event of the
termination of the Merger Agreement arising from certain breaches of the Merger
Agreement, the terminating party shall be indemnified by the other party for any
or all damages, costs and expenses sustained or incurred as a result of such
termination. The obligations of the parties to the Merger Agreement under
certain sections of the Merger Agreement survive any termination. The terms of
the Confidentiality Agreements shall survive according to their terms,
notwithstanding the termination of the Merger Agreement.
Central Parking has agreed to not use any of the information obtained with
respect to Allright or any landlord of a property leased or managed by Allright
to compete, directly or indirectly, with Allright, whether with respect to
customers, suppliers, employees or with regard to pricing, distribution or
otherwise at any time after the date of the signing of the Merger Agreement
until the Effective Time. In addition, for a period of time as set forth below,
Central Parking has agreed to refrain from making any offer or proposal, or
responding to any solicitation, or entering into any agreement to, operate,
acquire, lease or manage any parking facility which Allright operated, owned,
leased or managed, or is subject to a binding agreement (if such binding
agreement was disclosed to Central Parking) to do any of the foregoing, as of
the date of the Merger Agreement or the date of termination of the Merger
Agreement. Central Parking also agreed not to encourage any owner, lessor,
partner or customer with respect to such parking facility to terminate or
otherwise adversely modify its business relationship with Allright in any matter
whatsoever. In addition, for the time period set forth below, Central Parking
has agreed to refrain from directly or indirectly employing, attempting to
employ, recruiting or otherwise soliciting, inducing or influencing any person
to leave employment with Allright who was employed by Allright either on the
date of the Merger Agreement or on the date of termination of the Merger
Agreement. For the purposes above, in the event the Merger is not consummated
because the condition concerning the bring-down by Allright of representations
and warranties not being satisfied or the existence of a Allright material
adverse effect, or upon a material breach of the Merger Agreement by Central
Parking, the restrictions on Central Parking's ability to conduct the above
activities shall be for a period of three years, and if the Merger is not
consummated for any other reason, such restrictions shall be in effect for a
period of eighteen months.
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION
The representations, warranties and covenants of each of Allright, Central
Parking and Central Parking Sub made in the Merger Agreement shall survive until
the first anniversary of the Closing Date (the "Indemnity Period"), except for
certain representations and warranties made in connection with Allright's
financial statements and certain environmental matters, which shall not survive.
Generally, the representations, warranties and covenants shall not survive any
termination of the Merger Agreement. The parties intended to shorten the statute
of limitations and agreed that no claims or causes of action may be brought
against each of AEW, Apollo, Allright, Central Parking and Central Parking Sub
or any of its directors, officers, employees, affiliates, controlling persons,
agents or representatives based upon, directly or indirectly, any of the
representations, warranties or agreements contained in
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the Merger Agreement after the Indemnity Period or, except as described in
"-- Effect of Termination; Noncompetition," any termination of the Merger
Agreement.
From and after the Closing Date, AEW and Apollo have severally agreed to
indemnify and hold harmless, Central Parking, the surviving corporation and
their respective directors, officers, employees, affiliates, controlling
persons, agents and representatives and their successors and assigns
(collectively, the "Central Parking Indemnitees") from and against all
liability, demands, claims, actions or causes of action, assessments, losses,
damages, costs and expenses (excluding any such claims, losses or damages
related to certain breaches of representations and warranties concerning
Allright's financial statements and certain environmental matters)
(collectively, "Central Parking Damages") asserted against or incurred by any
Central Parking Indemnitee as a result of or arising out of a breach of any
representation, warranty or covenant contained in the Merger Agreement, when
made and as of the Closing Date as though such representation or warranty was
made as of the Closing Date. Notwithstanding the foregoing, AEW and Apollo shall
not be liable for any breaches of representations and warranties resulting in
Central Parking Damages if Central Parking or its representatives had knowledge
of such breaches (based on reasonable information) on the Closing Date.
The obligations of AEW and Apollo to indemnify the Central Parking Indemnitees
are subject to the following limitations:
- no indemnification shall be made by AEW or Apollo unless the aggregate
amount of Central Parking Damages exceeds $4 million, and then only for
the amount by which the Central Parking Damages exceed $4 million,
- each of Apollo and AEW shall be liable for 50% of all Central Parking
Damages in excess of $4 million, in the aggregate, and not exceeding $34
million, in the aggregate; provided, however, that AEW or Apollo shall
not be liable for the obligations of the other; and
- AEW and Apollo shall be obligated to indemnify the Central Parking
Indemnitees only for those claims giving rise to Central Parking Damages
as to which the Central Parking Indemnitees have given each of AEW and
Apollo written notice thereof prior to the end of the Indemnity Period.
From and after the Closing Date, Central Parking has agreed to indemnify and
hold harmless the shareholders of Allright as of the Closing Date (and, in the
case where such shareholders are not natural persons, their respective
directors, officers, employees, affiliates, controlling persons, agents and
representatives) and their permitted successors and assigns (collectively, the
"Allright Indemnitees") from and against all liability, demands, claims, actions
or causes of action, assessments, losses, damages, costs and expenses
(collectively, "Allright Damages") asserted against or incurred by any Allright
Indemnitee as a result of or arising out of a breach of any representation,
warranty or covenant contained in the Merger Agreement, when made and as of the
Closing Date as though such representation or warranty was made as of the
Closing Date. Notwithstanding the foregoing, Central Parking shall not be liable
for any breaches of representations and warranties resulting in Allright Damages
if Allright had knowledge of such breaches (based on reasonable information) on
the Closing Date.
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The obligations of Central Parking to indemnify the Allright Indemnitees with
respect to a breach of a representation or warranty contained in the Merger
Agreement are subject to the following limitations:
- no indemnification shall be made by Central Parking unless the aggregate
amount of Allright Damages exceeds $4 million, and then only for the
amount by which the Allright Damages exceed $4 million and do not exceed
$34 million, in the aggregate; and
- Central Parking shall be obligated to indemnify the Allright Indemnitees
only for those claims giving rise to Allright Damages as to which the
Allright Indemnitees have given Central Parking written notice thereof
prior to the end of the Indemnity Period.
From and after the Closing Date, AEW and Apollo have agreed to indemnify and
hold harmless the Central Parking Indemnitees from and against all liability,
demands, claims, actions or causes of action, assessments, losses, damages,
costs and expenses (collectively, the "Environmental Damages" and, together with
the Central Parking Damages, the "Damages") asserted against or incurred by any
Central Parking Indemnitee solely with respect to those matters contained in the
report of Law Engineering & Environmental Services, Inc., dated July 19, 1996
(the "Law Report"). The obligations of AEW and Apollo to indemnify for these
environmental matters terminate upon the thirty month anniversary of the Closing
Date (the "Environmental Indemnity Period"). The obligations of AEW and Apollo
to indemnify the Central Parking Indemnitees for Environmental Damages are
subject to the following limitations:
- with respect to each individual property, each of Apollo and AEW shall be
liable up to a maximum of 25% of all Environmental Damages (the remaining
50% shall be the sole liability and responsibility of Central Parking)
described in the Law Report under the column entitled "nominal cost" for
that property, and in no event shall either be liable for over $5
million, in the aggregate, for all properties, and in no event shall AEW
or Apollo be liable for the obligations of the other or Central Parking;
- AEW and Apollo shall be obligated to indemnify the Central Parking
Indemnitees only for those claims giving rise to Environmental Damages as
to which the Central Parking Indemnitees have given each of AEW and
Apollo written notice thereof prior to the end of the Environmental
Indemnity Period; and
- no indemnification shall be made by AEW or Apollo for environmental clean
up costs incurred with respect to a particular property to the extent
such clean up costs are not required to be incurred by the Central
Parking Indemnitees by a federal, state or local governmental or
regulatory agency or incurred by the Central Parking Indemnities in
connection with the sale or refinancing of such property to the extent
required by the buyer or the lender thereto, as the case may be.
AEW, Apollo and Central Parking have agreed, with respect to an affiliated
partnership (the "Partnership"), of which an Allright subsidiary is a partner
(the "Allright Partner"), that if the other partners of the Partnership shall
assert the right (the "Purchase Claim") to purchase the entire interest of the
Allright Partner, then Central Parking, AEW and Apollo shall jointly make
determinations regarding the defense or other disposition of the Purchase Claim,
including the terms of any disposition of the Allright Partner pursuant to the
Purchase Claim, and shall share in any Purchase Claim Costs. Each of AEW and
Apollo shall be liable for 25% of the first $4 million in Purchase Claim Costs
up to a maximum obligation
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by each of $1 million, and Central Parking shall be liable for 50% of the first
$4 million in Purchase Claim Costs and 100% of any Purchase Claim Costs beyond
$4 million. "Purchase Claim Costs" includes the difference, if any, between
approximately $2.3 million and the purchase price paid by such remaining partner
for the entire interest of the Allright Partner, determined in accordance with
the provisions of the partnership agreement of the Partnership plus any
documented out-of-pocket costs of Central Parking, AEW and Apollo in responding
to the Purchase Claim. Purchase Claim Costs shall not constitute Central Parking
Damages for any purposes under the Merger Agreement.
MISCELLANEOUS
Amendment. The Merger Agreement and schedules may be amended by the parties,
but only by an instrument or instruments in writing signed and delivered on
behalf of each of the parties.
Extension; Waiver. At any time prior to the date of closing, any party to the
Merger Agreement may extend the time for the performance of any of the
obligations or other acts of any of the other parties, waive any inaccuracy in
the representations and warranties of any of the other parties contained in the
Merger Agreement, any schedule or in any document delivered pursuant to the
Merger Agreement, and waive compliance with any of the agreements or conditions
of any of the other parties. Any agreement by a party to any such extension or
waiver shall be valid if in writing signed and delivered on behalf of such
party.
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REGISTRATION RIGHTS AGREEMENT
The following summary of the material provisions of the Registration Rights
Agreement does not purport to be complete and is qualified in its entirety by
reference to the Registration Rights Agreement, a copy of which has been filed
as an Exhibit to the Form S-4 and is incorporated to this joint proxy
statement/prospectus by reference. Holders of Central Parking common stock and
Allright common stock are urged to read the Registration Rights Agreement
carefully. Capitalized terms used in this section but not defined in this joint
proxy statement/prospectus shall have the meanings attributed to them in the
Registration Rights Agreement.
GENERAL
The Boards of Central Parking and Allright discussed the fact that certain
shareholders of Central Parking after the Merger would own a substantial amount
of the outstanding Central Parking common stock and such shareholders may want
to sell some or all of such stock. These significant shareholders included not
only Apollo and AEW, but also Monroe J. Carell, Jr., The Carell Children's Trust
and various other Carell family trusts and foundations which are currently
Central Parking shareholders. The Central Parking Board realized that if each of
these significant shareholders decided to sell a substantial amount of stock
pursuant to Rule 144 of the Securities Act at approximately the same time, such
sales in the open market could have a significant negative impact on the Central
Parking common stock market price. The Central Parking Board concluded that it
was desirable to provide a mechanism for all of its significant shareholders to
dispose of their Central Parking common stock in an orderly manner that would
minimize the impact on Central Parking's trading market. As a result, the
parties entered into the Registration Rights Agreement, which set forth an
orderly method by which each of its significant shareholders may dispose of its
Central Parking common stock in accordance with the federal securities laws. The
following is a description of the material provisions of the Registration Rights
Agreement.
REGISTRABLE SECURITIES
The securities entitled to the benefits of the Registration Rights Agreement
(the "Registrable Securities") are, subject to certain exceptions and
adjustments:
- - the shares of Central Parking common stock issued to the holders of Allright
common stock in connection with the Merger or pursuant to options or warrants
to purchase Allright common stock and
- - that number of shares of Central Parking common stock that, when ultimately
disposed of by the Carell Holders in one or more transactions after the date
of the Registration Rights Agreement, will yield gross proceeds to the Carell
Holders of $250 million.
THE INITIAL UNDERWRITING
At any time after the date that Central Parking initially publishes financial
results reflecting the first thirty days of combined operations of Central
Parking and Allright after consummation of the Merger, and before the date
fifteen months following the publication date, the Carell Holders, or holders of
Allright common stock who receive Central Parking common stock in the Merger
(the "Allright Holders" and, together with the Carell Holders, the "Holders")
owning at least 80% of the Registrable Securities then owned by all the Allright
Holders, shall have the right to demand Central Parking to register under the
Securities Act
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up to the Initial Underwriting Amount (as defined below) for such Holder or
Holders in an Underwritten Offering (the "Initial Underwriting"). The Initial
Underwriting notice may only be given during the first nine months following the
publication date if either (A) it is joined in by Allright Holders owning at
least 80% of the Registrable Securities then owned by all Allright Holders or
(B) the average sale price of the Central Parking common stock for all trades on
the NYSE during the 30 trading day period prior to the giving of the Initial
Underwriting notice is not less than $35.00 (as equitably adjusted for any stock
splits, stock dividends, stock combinations or similar transactions). All
Holders not initially demanding the Initial Underwriting may still participate
in the Initial Underwriting by complying with certain provisions contained in
the Registration Rights Agreement. All rights to demand the Initial Underwriting
shall expire immediately after an Initial Underwriting notice is properly
delivered to Central Parking, but shall be subject to certain reinstatement
provisions contained in the Registration Rights Agreement.
The Registrable Securities to be sold in the Initial Underwriting (including
pursuant to any underwriters' overallotment option) shall be allocated among the
various Holders participating in the Initial Underwriting up to but not
exceeding their respective Initial Underwriting Amounts in the following order
of priority:
- AEW and Apollo (subject to pro rata reductions below) shall each be
entitled to receive:
- 50% of the first $100 million in gross proceeds (100% of such gross
proceeds if only one is participating);
- 0% of the next $50 million in gross proceeds;
- 33 1/3% of the next $150 million in gross proceeds (66 2/3% of such
gross proceeds if only one is participating);
- 50% of the next $50 million in gross proceeds (100% if only one is
participating);
- the Carell Holders shall be entitled to receive:
- 0% of the first $100 million in gross proceeds;
- 100% of the next $50 million in gross proceeds;
- 33 1/3% of the next $150 million in gross proceeds, and
- 0% of the next $50 million in gross proceeds; and
- any Allright Holders other than Apollo or AEW shall be entitled to
receive a percentage of the gross proceeds allocated to Apollo and AEW
under the Registration Rights Agreement equal to the percentage
represented by the number of Registrable Securities then held by such
Allright Holder divided by the number of Registrable Securities then held
by all Allright Holders participating in the Initial Underwriting.
In the event that there shall be gross proceeds in excess of $350 million and
Central Parking shall determine not to allocate such excess to shares of Central
Parking common stock to be sold by Central Parking, the Holders shall be
allocated additional Registrable Securities to be sold in proportion to their
holding of all remaining Registrable Securities.
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"Initial Underwriting Amount" means:
- in the case of either Apollo or AEW, $125 million (or such lesser amount,
to the extent that other Allright Holders participate in an Underwritten
Offering, or AEW and Apollo elect to distribute Registrable Securities to
Cheslock Bakker),
- in the case of the Carell Holders, $100 million, and
- in the case of any other Holders, the product of the amount of
Registrable Securities received by such Holder at the Closing multiplied
by a fraction, the numerator of which is the amount of Registrable
Securities which must be sold to yield gross proceeds of $125 million to
Apollo and the denominator of which is the amount of Registrable
Securities received by Apollo at the Closing.
SHELF REGISTRATION
Central Parking has agreed to use its reasonable best efforts to promptly
process, file and cause to become effective a Registration Statement on Form S-3
(the "Shelf") to cover resales of Registrable Securities, the initial filing to
be made not later than 30 days before the Shelf Registration Date (as defined
below) in the event that the Initial Underwriting is consummated or 30 days
after the Shelf Registration Date in the event that the Initial Underwriting
notice is not given or the Initial Underwriting is abandoned. Each Allright
Holder which owns, on the date of the initial filing of the Shelf, Registrable
Securities (each such Holder, an "Eligible Holder") shall have the right to
resell such Registrable Securities under the Shelf until the date that such
Eligible Holder sells all of such Registrable Securities, whether or not under
the Shelf (such Holder's "Termination Date").
The Carell Holders shall have the right to resell that amount of Registrable
Securities under the Shelf which has an aggregate Market Value, on the initial
filing date of the Shelf, of $250 million, less the gross proceeds received by
the Carell Holders in all sales of Registrable Securities before the initial
filing date (excluding gross proceeds received in exempted transfers). The
Carell Holders shall lose their right to sell under the Shelf once they have
sold, in one or more transactions occurring after the initial filing date of the
Shelf, whether under the Shelf or otherwise, at least that amount of shares of
Central Parking common stock equal to the amount of Registrable Securities of
the Carell Holders registered under the Shelf (the Carell Holders' "Termination
Date"). Central Parking has agreed to use its reasonable best efforts to keep
the Shelf continuously effective and usable for resale of Registrable Securities
until all Eligible Holders lose their rights to resell Registrable Securities
under the Shelf.
Central Parking has agreed to include within the method of distribution for the
Shelf the possible distribution by the Allright Holders of Registrable
Securities to their respective investors. An Allright Holder may distribute
Registrable Securities to such investors before it receives gross proceeds from
or sells Registrable Securities equal to at least its Initial Underwriting
Amount, but may not transfer to its investors any registration rights granted
under the Registration Rights Agreement, unless Central Parking has failed to
cause the Shelf to become effective within 45 days after the Shelf Registration
Date.
In the event that an Allright Holder has sold that amount of Registrable
Securities equal to at least its Initial Underwriting Amount, it shall be
restricted from reselling Registrable Securities under the Shelf until the
Carell Holders shall have received gross proceeds of at
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least $100 million in one or more sales of Registrable Securities, whether under
the Shelf or otherwise.
In the event that the Carell Holders shall have received gross proceeds of at
least $100 million with respect to one or more sales of Registrable Securities,
whether under the Shelf or otherwise, they shall be restricted from reselling
Registrable Securities under the Shelf until each of Apollo and AEW shall have
received gross proceeds of at least its Initial Underwriting Amount in one or
more sales of Registrable Securities, whether under the Shelf or otherwise. The
foregoing restrictions shall not, however, restrict the ability of any Holder to
distribute Registrable Securities to its investors.
Central Parking has the right, at any time after the Allright Holders,
collectively, own less than 7% of all the Registrable Securities received by the
Allright Holders in the Merger, to terminate the Shelf and promptly process and
file, and use its reasonable best efforts to cause to become effective, a
Registration Statement on Form S-3 (the "Second Shelf") to cover resales of all
Registrable Securities then registered for resale under the Shelf, as well as
other shares of Central Parking common stock, and any other securities of
Central Parking, that Central Parking desires to register for resale at such
time. Central Parking has agreed that it will cause the Second Shelf to remain
effective at least up to the date until which Central Parking would, under the
terms of the Registration Rights Agreement, be required to maintain the
effectiveness of the Shelf. Central Parking has further agreed that the Holders
shall not have any restrictions on their ability to resell Registrable
Securities under the Second Shelf which are greater than the restrictions on
their ability to resell Registrable Securities under the Shelf.
"Shelf Registration Date" means:
- in the event that the Initial Underwriting is consummated, the date set
forth in the underwriting agreement for the Initial Underwriting as the
first day after the closing of the Initial Underwriting that Central
Parking, Apollo, AEW and the Carell Holders will be allowed to effect
open market sales of shares of Central Parking common stock without the
consent of the Underwriters' representative;
- in the event that the Initial Underwriting Notice is not given prior to
the date fifteen months following the publication date, such date; or
- in the event that the Initial Underwriting Notice is given but the
Initial Underwriting is abandoned with the concurrence of Apollo, AEW and
the Carell Holders, the date of such abandonment.
THE EXTRA UNDERWRITING
In the event that, either Apollo or AEW shall have failed to receive gross
proceeds of at least its Initial Underwriting Amount from selling Registrable
Securities or the Carell Holders shall have failed to receive gross proceeds of
at least $100 million from selling Registrable Securities, each Holder who has
failed to receive such amounts (provided Allright Holders owning at least 60% of
the Registrable Securities then owned by all the Allright Holders agree), shall
have the right, at any time commencing on the Shelf Registration Date and ending
on the twelve month anniversary of the Shelf Registration Date, to demand, by
written notice, Central Parking to use its reasonable best efforts to register
under the Securities Act up to the Initial Underwriting Amount of such Holder or
Holders, less the amount of gross proceeds received by such Holder or Holders in
any sales of Registrable Securities after the
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Shelf Registration Date, for resale by such Holder or Holders in an Underwritten
Offering (the "Extra Underwriting"). All other Holders who then shall have
failed to receive gross proceeds of at least their respective Initial
Underwriting Amounts, may participate in the Extra Underwriting by complying
with certain provisions of the Registration Rights Agreement. All rights with
respect to the Extra Underwriting shall expire immediately after an Extra
Underwriting notice is properly delivered to Central Parking, but shall be
subject to certain reinstatement provisions contained in the Registration Rights
Agreement.
In the event that, either Apollo or AEW shall have failed to receive gross
proceeds of at least its Initial Underwriting Amount from selling Registrable
Securities or the Carell Holders shall have failed to receive gross proceeds of
at least $100 million from selling Registrable Securities, each Holder who has
failed to receive such amounts (provided Allright Holders of at least 60% of the
Registrable Securities then owned by all the Allright Holders agree) shall have
a right to demand, at any time commencing on the Extra Underwriting End Date, by
written notice, Central Parking to use its reasonable best efforts to register
under the Securities Act up to the Initial Underwriting Amount of such Holder or
Holders, less the amount of gross proceeds received by, such Holder in the
Initial Underwriting and the Extra Underwriting, if any, and in any other sales
of Registrable Securities after the Shelf Registration Date, for resale by such
Holder or Holders in an Underwritten Offering (the "Second Extra Underwriting").
All other Holders who then shall have failed to receive gross proceeds of at
least their respective Initial Underwriting Amounts, may participate in the
Second Extra Underwriting by complying with certain provisions of the
Registration Rights Agreement. All rights, with respect to the Second Extra
Underwriting, shall expire immediately after a Second Extra Underwriting notice
is properly delivered to Central Parking, but shall be subject to certain
reinstatement provisions contained in the Registration Rights Agreement.
If Carell Holders give the Second Extra Underwriting notice and none of the
Allright Holders elect to participate in the Second Extra Underwriting, the
Allright Holders shall retain their right with respect to the Second Extra
Underwriting. If Allright Holders give the Second Extra Underwriting notice and
none of the Carell Holders elect to participate in the Second Extra
Underwriting, the Carell Holders shall retain their right with respect to the
Second Extra Underwriting.
The Registrable Securities to be sold in the Extra Underwriting and Second Extra
Underwriting (including pursuant to any underwriters' overallotment option)
shall be allocated among the various Holders participating in either extra
underwriting up to but not exceeding their respective Initial Underwriting
Amounts in the same order of priority as established for the Initial
Underwriting (except that the Initial Underwriting Amount for each Holder shall
be reduced to the extent such Holder sold Registrable Securities after the date
of the Registration Rights Agreement and before such extra underwriting).
In the event that one or more Holders exercises its demand right, then each
Eligible Holder (including the Holder or Holders exercising such demand right
and regardless of whether or not such Eligible Holder elects to participate in
the Extra Underwriting or Second Extra Underwriting related to such notice) may
not sell any Registrable Securities under the Shelf at any time after 30 days
after receiving such notice and before the Extra Underwriting End Date. The
above restrictions shall not, however, restrict the ability of any Holder to
distribute Registrable Securities to its investors.
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INCIDENTAL REGISTRATION
If at any time Central Parking proposes to register any Central Parking common
stock under the Securities Act (other than in connection with any acquisition or
business combination transaction and other than in connection with stock options
and employee benefit plans and compensation) either in connection with a primary
offering for cash for the account of Central Parking, a secondary offering or a
combined primary and secondary offering, Central Parking shall provide all
Holders with the opportunity to register for resale Registrable Securities held
by such Holders.
UNDERWRITER LIMITATIONS
If, in connection with an underwritten offering other than the Initial
Underwriting, the Extra Underwriting or the Second Extra Underwriting, the
Underwriters' representative of the offering registered thereon shall inform
Central Parking in writing that in its opinion there is a maximum number of
shares of Central Parking common stock that may be successfully included in such
offering; then in the event such registration statement relates to an offering
initiated by Central Parking for its account, Central Parking may include in
such registration the number of shares it proposes to offer. If such number is
less than the maximum number of shares to be included, then the number of shares
of Central Parking common stock requested to be included in such registration by
any person other than Central Parking may be included, pro rata in proportion to
the number of shares of Central Parking common stock owned by such persons
requesting to participate in such offering, to the extent available up to the
maximum number of shares to be included. In the event such a registration
statement is initiated by any person other than Central Parking or a Holder,
such person shall have the right, in its sole discretion, to include in such
registration the number of shares of Central Parking common stock it proposes to
offer and, if such number is less than the maximum number, then the number of
shares of Central Parking common stock requested to be included by any other
person may be included pro rata in proportion to the number of shares of Central
Parking common stock owned by such person, to the extent available, up to the
maximum number.
Notwithstanding the foregoing, in the event that Central Parking decides to
conduct an underwritten offering other than the Initial Underwriting, the Extra
Underwriting and the Second Extra Underwriting, and at such time any of Apollo,
AEW or the Carell Holders shall have failed to receive gross proceeds from the
sale of Registrable Securities since the date of the Registration Rights
Agreement at least equal to at least their respective Initial Underwriting
Amounts, and if the Underwriters' representative of such underwritten offering
shall inform Central Parking in writing that in its opinion there is a maximum
number of shares of Central Parking common stock that may be successfully
included beyond the number of shares to be sold by Central Parking, then each of
the above Holders who shall have so failed to receive such gross proceeds, and
all other Holders who shall have failed to sell that amount of Registrable
Securities equal to their respective Initial Underwriting Amounts, may include
in such registration that number of Registrable Securities which, in the opinion
of the Underwriters' Representative, when sold would yield gross proceeds
sufficient to bring each such Holder's gross proceeds from the sale of
Registrable Securities after the date of the Registration Rights Agreement to
such Holder's Initial Underwriting Amount. To the extent that the maximum number
of shares to be included is insufficient to accomplish the foregoing, the
Registrable Securities to be sold in such underwritten offering (including
pursuant to any underwriters' overallotment option) shall be allocated among the
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various Holders participating in such underwritten offering up to but not
exceeding their respective Initial Underwriting Amounts in the same order of
priority established for the Initial Underwriting.
Any reduction of the shares of Central Parking common stock requested to be
included in any Registration Statement pursuant to the Registration Rights
Agreement shall be limited to the extent such reduction would place Central
Parking in breach of any of its contractual obligations existing as of the date
of the Registration Rights Agreement.
CENTRAL PARKING LIMITATIONS
Central Parking has agreed that, until the earlier to occur of the Extra
Underwriting End Date and the Initial Liquidity Date, it will not:
- sell any shares of Central Parking common stock other than pursuant to
the Merger Agreement, in qualified mergers, acquisitions and purchases,
upon exercise of options or conversion of outstanding securities or
options granted in the ordinary course of business;
- permit any underwritten offering, not for the account of Central Parking,
involving the sale of shares of Central Parking common stock other than
the Initial Underwriting, the Extra Underwriting, the shelf registration
statement filed by Central Parking on Form S-3 on June 1, 1998, as such
registration statement may be amended from time to time, and any
underwritten offering required by the Kinney Registration Rights (as
defined below);
- grant to any Holder, registration rights not provided for in the
Registration Rights Agreement, or waive any conditions in the
Registration Rights Agreement with respect to any Holder, without waiving
such conditions with respect to all other Holders;
- otherwise facilitate a sale by any person with the Holders of shares of
Central Parking common stock;
- grant registration rights to any person which would permit such person to
participate in the Initial Underwriting, the Shelf or the Extra
Underwriting, or to have such person's shares of Central Parking common
stock registered for resale, prior to the Initial Liquidity Date; or
- grant to any person registration rights that contemplate Underwritten
Offerings which preclude the exercise of the customary "piggyback" rights
granted to certain Holders under the Registration Rights Agreement.
Furthermore, during the period of time beginning on the date of the Registration
Rights Agreement and ending on the Shelf Registration Date, or, in the event
that the underwriters' representative of the Initial Underwriting provides
Central Parking with its written consent to a plan by Central Parking to conduct
an offering (collectively, "Offerings"), of preferred stock or convertible
securities during the Lockout Period (as defined below) related to the Initial
Underwriting, ending on the closing of the Initial Underwriting, Central Parking
may not sell any shares of preferred stock or convertible securities. During the
period of time beginning on the day after the Shelf Registration Date and ending
on the earlier to occur of the Extra Underwriting End Date and the Initial
Liquidity Date, Central Parking may not sell shares of preferred stock and/or
convertible securities if, after consummation of such sale, the aggregate market
value of the preferred stock and/or convertible securities
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outstanding (as calculated on the day such transaction is completed) is greater
than the lesser of (A) 20% of the aggregate market value of certain Central
Parking debt and equity, and (B) 50% of the market value (calculated as of the
day such transaction is completed) of the outstanding shares of Central Parking
common stock held by any shareholders of Central Parking other than the Carell
Holders, directors and executive officers of Central Parking, and all other
shareholders of Central Parking who then beneficially own at least 5% of the
outstanding shares of Central Parking common stock. All Holders who shall have
then failed to receive gross proceeds of at least their respective Initial
Underwriting Amounts, or to sell that amount of Registrable Securities equal to
at least their respective Initial Underwriting Amounts, may participate in such
Offering by complying with certain provisions of the Registration Rights
Agreement.
In the event that one or more Holders elects to participate in an Offering,
Central Parking has agreed to include the offering of Registrable Securities by
such Holders in any "roadshow" marketing efforts conducted by Central Parking in
connection with such Offering. In the event, and only in the event, that a
Holder sells Registrable Securities in such an Offering, such Holder shall be
subject to restrictions on its ability to sell shares of Central Parking common
stock, to the extent that the underwriters' representative, or, in the event
such an Offering is not conducted on a "firm commitment" underwritten basis, the
substantial equivalent of an underwriters' representative (the "Lead
Purchaser"), asks participating sellers to refrain from selling shares of
Central Parking common stock during a Lockout Period.
In the event that Holders participate in an Offering of Convertible Securities
or Preferred Stock, then the Extra Underwriting Notice Period shall be deemed
not to continue to run during that period of time beginning on the first date
that a Holder or Holders notifies Central Parking of its or their desire to
participate in such Offering, and ending on the date that the Underwriters'
representative or the Lead Purchaser of such Offering selects as the first day
that the participating sellers may sell shares of Central Parking common stock
after the closing of such Offering, or, in the event that such Offering is not
consummated, on the date such Offering is abandoned (an "Offering End Date").
Such extension of the Extra Underwriting Notice Period shall only be deemed to
occur, however, in the event that an Offering End Date occurs before the Initial
Liquidity Date. Participation in an Offering of Convertible Securities or
Preferred Stock by one or more Holders shall not be deemed to be an exercise of
a demand right or a right to demand the Initial Underwriting.
"Extra Underwriting End Date" means (A) in the event that the Extra Underwriting
is consummated, the date set forth in the underwriting agreement for the Extra
Underwriting as the first day after the closing of the Extra Underwriting that
Central Parking, Apollo, AEW and the Carell Holders will be allowed to effect
open market sales of shares of Central Parking common stock without the consent
of the Underwriters' Representative, (B) in the event that the Extra
Underwriting Notice is not given prior to the date one year following the Shelf
Registration Date, such date or (C) in the event that the Extra Underwriting
Notice is given but the Extra Underwriting is abandoned with the concurrence of
Apollo, AEW and the Carell Holders, the date of such abandonment.
"Kinney Registration Rights" means the registration rights provided for in the
registration rights agreement, dated February 12, 1998, by and among Central
Parking, Lewis Katz and Saul Schwartz (the "Kinney Holders").
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PRICING DETERMINATIONS
The Carell Holders and representatives of the Allright Holders electing to
participate in the Initial Underwriting and/or the Extra Underwriting (such
representatives to be selected by Allright Holders owning a majority of the
Registrable Securities being offered by the Allright Holders for resale in such
Underwritten Offering), shall mutually determine the offering price per share
and underwriting discounts that shall apply in the Initial Underwriting and the
Extra Underwriting. Any Holder may withdraw its Registrable Securities from such
Underwritten Offering should it be dissatisfied with the proposed offering price
per share or underwriting discount, and any non-withdrawing Holders may include
additional Registrable Securities in such Underwritten Offering to replace
shares withdrawn by another Holder. In the event that Central Parking refuses to
execute the underwriting agreement related to the Initial Underwriting, the
Extra Underwriting or the Second Extra Underwriting, and subsequently such
underwriting is abandoned, then all rights to demand the Initial Underwriting,
the Extra Underwriting or the Second Extra Underwriting, as the case may be,
shall be restored, and the applicable notice period shall be reinstated for that
amount of days equal to the difference between (x) the amount of days comprising
such period, less (y) the amount of days that lapsed in such period before such
notice was delivered to Central Parking.
KINNEY REGISTRATION RIGHTS
The registration rights granted under the Registration Rights Agreement are
subordinate to the Kinney Registration Rights. In the event that the Kinney
Holders exercise a "demand" Kinney Registration Right during the Extra
Underwriting notice period and before the Extra Underwriting notice is properly
delivered to Central Parking, or during the Initial Underwriting notice period
and before Central Parking receives a demand for the Initial Underwriting, then
the applicable notice period shall be deemed not to continue to run during that
period of time beginning on the date a "demand" Kinney Registration Right is
exercised and ending on the date that the underwriters' representative of the
underwritten offering related to such exercise selects as the first day that
Central Parking and the Kinney Holders may sell shares of Central Parking common
stock after the closing of such underwritten offering, or, in the event that
such underwritten offering is not consummated, on the date such underwritten
offering is abandoned (a "Kinney Offering End Date"). Such extension of the
Extra Underwriting Notice Period or the Initial Underwriting Notice Period shall
only be deemed to occur, however, in the event that a Kinney Offering End Date
occurs before the Initial Liquidity Date.
BLACKOUT PERIODS
Central Parking shall be entitled to elect that a registration statement not be
usable, for a reasonable period of time, but not in excess of 30 days, with
respect to a registration statement relating to the Initial Underwriting, or 90
days, with respect to a registration statement related to any other sale of
Registrable Securities (a "Blackout Period"), if Central Parking determines in
good faith that the registration and distribution of Registrable Securities (or
the use of the registration statement or related prospectus) would interfere
with any pending material financing, acquisition, corporate reorganization or
any other material corporate development involving Central Parking. The
Registration Rights Agreement provides that the aggregate number of days
included in all Blackout Periods, when taken together with any lockout periods
and suspension periods, during any consecutive 12 months after the publication
date shall not exceed 90 days (or such longer period of time, to the extent that
the
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Underwriters' Representative of the Initial Underwriting requests a lockout
period for Central Parking and the Holders of longer than 90 days after the
Initial Underwriting).
"Suspension Period" means a period of time in which Holders are not allowed to
effect sales of Registrable Securities by delivering a prospectus included in a
registration statement which is required to be delivered by such Holder under
the Securities Act in connection with such sales, because Central Parking has
become aware that such prospectus includes an untrue statement of a material
fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances then existing. Central Parking has agreed to use its reasonable
best efforts to ensure that no suspension period exceeds 30 days.
SELECTION OF UNDERWRITERS
Subject to the right of Central Parking, the Carell Holders and representatives
of the Allright Holders to jointly determine otherwise, (A) Bear Stearns & Co.
Inc. shall be the lead-managing underwriter of the Initial Underwriting and the
Extra Underwriting, shall manage the "book" related to such underwritten
offerings, and shall be the Underwriters' representative of such underwritten
offerings and (B) NationsBanc Montgomery Securities LLC and J.C. Bradford & Co.
shall each be a co-managing underwriter with respect to such underwritten
offerings.
HOLDBACK AGREEMENT
If so requested by the Underwriters' representative in connection with an
offering of shares of Central Parking common stock covered by a registration
statement filed by Central Parking, the Holders participating in such
underwritten offering, and all other Holders who are Affiliates of Central
Parking at the time of such underwritten offering, shall agree not to effect any
sale or distribution (excluding distributions to their respective investors) of
the Registrable Securities other than pursuant to such underwritten offering,
including a sale pursuant to Rule 144, without the prior written consent of the
Underwriters' representative (which if given to any such Holder shall be deemed
to be given to all such Holders), during the 7-day period prior to, and during
the 90-day period beginning on, the date such registration statement or
amendment to such registration statement is declared effective under the
Securities Act by the Commission or, with respect to the Initial Underwriting,
for a longer period of time if so requested by the underwriters' representative
of the Initial Underwriting (any such period, a "Lockout Period"). The Holders
shall not be subject to Lockout Periods, when taken together with any Blackout
Periods and Suspension Periods, during any consecutive 12 months after the
Publication Date in excess of 90 days (or such longer period of time, to the
extent that the Underwriters' representative of the Initial Underwriting
requests a Lockout Period for Central Parking and the Holders of longer than 90
days after the Initial Underwriting). A Holder shall no longer be subject to
such restrictions following such Holder's Termination Date.
If so requested by the underwriters' representative in connection with an
underwritten offering of any Registrable Securities, Central Parking shall also
agree not to effect any sale or distribution of shares of Central Parking common
stock without the prior written consent of the Underwriters' representative
(other than in connection with any acquisition or business combination
transaction and other than in connection with stock options and employee benefit
plans and compensation) during the 7-day period prior to, and during the 90-day
period beginning on, the date the registration statement or amendment to a
registration statement
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relating to such underwritten offering is declared effective under the
Securities Act by the Commission or, with respect to the Initial Underwriting,
for a longer period of time if so requested by the underwriters' representative
of Initial Underwriting, and shall use its reasonable best efforts to obtain and
enforce similar agreements from any other persons if requested by the
Underwriters' representative.
REGISTRATION PROCEDURES
The Registration Rights Agreement requires Central Parking to comply with
customary registration procedures when satisfying its obligations thereunder to
facilitate the resale of Registrable Securities by the Holders.
REGISTRATION EXPENSES
With respect to the Initial Underwriting, the Extra Underwriting, and the Second
Extra Underwriting but not any other underwritten offering in which they may
participate, the Holders participating as sellers shall, on a pro-rata basis
based on the amount of Registrable Securities sold by each seller in such
underwritten offering, pay all expenses incident to the performance of or
compliance by Central Parking with its registration obligations under the
Registration Rights Agreement incurred in connection with the Registrable
Securities sold by such Holders. Each such Holder will also be responsible for
the payment of its own underwriting discounts, commissions and transfer taxes,
if any, relating to the sale or disposition of such Registrable Securities and
any of its own expenses, including the fees and expenses of any counsel retained
by it.
INDEMNIFICATION; CONTRIBUTION
The Registration Rights Agreement contains indemnification and contribution
obligations for both the Holders and Central Parking which are customary for
transactions of a similar nature.
PLEDGES OF REGISTRABLE SECURITIES
The Registration Rights Agreement provides that none of its provisions shall be
construed in any manner as to restrict the ability of any Holder to pledge all
or any portion of the Registrable Securities owned by such Holder, including the
registration rights related to such Registrable Securities, to any lender. In
the event that one or more pledgees succeed to all or a portion of the shares of
Central Parking common stock, and the registration rights related to such
shares, formerly owned by a Holder, such registration rights may only be
exercised if the then holders of a majority of such shares agree to exercise
such right. Accordingly, with respect to the exercise of any of the registration
rights granted under the Registration Rights Agreement, the original Holder of
Registrable Securities, and all pledgees of such Holder's Registrable
Securities, shall be deemed to be, collectively, one Holder. No holder of any
such shares of Central Parking common stock, however, whether a Holder or a
pledgee, shall be under any obligation to sell, transfer or register any of the
shares of Central Parking common stock it then owns in the event that a majority
of such holders elects to exercise any registration right granted under the
Registration Rights Agreement.
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OTHER RELATED AGREEMENTS
The following summary of the material provisions of the Transaction Support
Agreements does not purport to be complete and is qualified in its entirety by
reference to the Transaction Support Agreements, forms of which have been filed
as Exhibits to the Form S-4 and are incorporated herein by reference. Holders of
Central Parking Common Stock and Allright Common Stock are urged to read the
form of these agreements carefully. Capitalized terms used under the heading
"-- Transaction Support Agreements" but not defined in this joint proxy
statement/prospectus shall have the meanings attributed to them in the
Transaction Support Agreements. In addition, the following summary of the
expected material provisions of the Noncompetition Agreement does not purport to
be complete.
TRANSACTION SUPPORT AGREEMENTS
The primary purpose of the Transaction Support Agreements is to ensure that
significant holders of both Allright common stock and Central Parking common
stock will vote in favor of the Merger. Significant holders of Allright common
stock entered into these agreements with Central Parking and Central Parking
Sub. Significant holders of Central Parking common stock entered into these
agreements with Allright, Apollo and AEW. The following is a more detailed
explanation of the material provisions of the Transaction Support Agreements, as
well as a description of the significant holders who entered into such
agreements.
Central Parking, Monroe J. Carell, Jr., personally and on behalf of the Monroe
Carell, Jr. Foundation, the Monroe Carell, Jr. 1994 Grantor Retained Annuity
Trust and the Monroe Carell, Jr. 1995 Grantor Retained Annuity Trust (such
foundations and trusts, collectively, the "Trusts"), and the Carell Children's
Trust c/o Equitable Trust Company (the "Carell Children's Trust") have entered
into transaction support agreements with Allright, Apollo, and AEW, each dated
September 21, 1998. Monroe J. Carell, Jr. and the Trusts collectively own
approximately 36.5% of the outstanding shares of Central Parking common stock,
and the Carell Children's Trust owns approximately 24.2% of the outstanding
shares of Central Parking common stock. These holders have each agreed, among
other things,
- to vote their Central Parking common stock in favor of the Merger, the
Merger Agreement, the issuance of shares of Central Parking common stock
in connection with the Merger, and any consent solicited with respect to
the Merger,
- to appear, in person or by proxy, at all meetings of shareholders of
Central Parking called to vote on the Merger, the Merger Agreement and
the issuance of stock, and at any adjournment thereof, for the purpose of
obtaining a quorum,
- not to vote their Central Parking common stock in a manner which would
prevent or delay the consummation of the Merger and
- to take certain other action, if required, in order for the Merger to
qualify as a pooling of interests under APB 16.
Central Parking has agreed to take any action required on its part to permit
compliance with the obligations set forth in the Central Parking Voting Support
Agreements. The Central Parking Voting Support Agreements do not prohibit Monroe
J. Carell, Jr. from acting in accordance with his fiduciary duties as an officer
or director of Central Parking. Monroe J. Carell, Jr. has also agreed to request
a special meeting of Central Parking's shareholders to
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vote on the Merger in the event that Central Parking or its board of directors
does not call a shareholders' meeting for the purpose of approving the Merger.
Allright, Gregory P. Shay, Timothy L. Grady and CBA Mortgage Partners, L.P.
("CBA"), have entered into transaction support agreements with Central Parking
and Central Parking Sub, each dated September 21, 1998. Gregory P. Shay holds
3,867 shares (4.5%) of Allright common stock, and Timothy L. Grady holds 370
shares (0.4%) of Allright common stock, in each case assuming exercise of all
options expected to be vested upon closing. CBA is the record and beneficial
holder of 1,177 shares (1.4%) of Allright common stock (through $0.01 exercise
price warrants, which are currently exercisable). These holders have each
agreed, among other things,
- to vote the Allright common stock they beneficially own in favor of the
Merger, the Merger Agreement and any consent solicited with respect to
the Merger,
- to appear, in person or by proxy, at all meetings of shareholders of
Allright called to vote on the Merger, the Merger Agreement, and at any
adjournment thereof, for the purpose of obtaining a quorum, and
- not to vote the Allright common stock in a manner which would prevent or
delay the consummation of the Merger.
These agreements do not prohibit Mr. Shay from acting in accordance with his
fiduciary duties as a director of Allright. See "Principal Shareholders of
Allright."
NONCOMPETITION AGREEMENT
At the Effective Time, AEW, Apollo and certain other entities will enter into
the Noncompetition Agreement. Under this agreement, these parties will agree
that they will not, subject to certain exceptions, own a controlling interest
in, manage, or control any business or person competing with Central Parking
and/or its subsidiaries anywhere in the world. Subject to certain exceptions,
these restrictions shall expire six months after a party's designee no longer
serves on Central Parking's Board.
Subject to certain exceptions, the parties to the Noncompetition Agreement will
agree to refrain from using the names "Allright", "Edison", "National", "Central
Parking" or "Central" or any derivation thereof. In addition, for a period of up
to 18 months, the Bound Parties will agree to refrain from soliciting employees
of Central Parking for employment in the management or operation of any
competing business, subject to customary exceptions.
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CENTRAL PARKING SPECIAL MEETING
THE MEETING
The Central Parking special meeting will be held on February 17, 1999, at 11:00
a.m. (Central Standard Time) at Central Parking's headquarters, 2401 21st Avenue
South, Third Floor, Nashville, Tennessee.
PURPOSE OF THE MEETING
At the Central Parking special meeting the shareholders of Central Parking will
be asked to vote on the following matters:
- The approval of the Merger Proposal;
- To amend the Central Parking Charter to increase the number of authorized
shares of Central Parking common stock from 50 million to 100 million for
the reasons set forth below; and
- Such other business as may properly come before the Central Parking
special meeting or any adjournment or postponement thereof.
INCREASE IN THE AUTHORIZED SHARES OF COMMON STOCK
The Central Parking Board has unanimously approved and directed that the
shareholders consider an amendment to Article VIII (1) of the Central Parking
Charter. The amendment to Article VIII (1) would increase the number of
authorized shares of Central Parking's common stock from 50 million to 100
million. If this proposal is approved by the shareholders at the Central Parking
special meeting, the amendments to Article VIII (1) will become effective upon
the filing of a Certificate with the Secretary of State of Tennessee, which
filing is expected to take place shortly after the Central Parking special
meeting. The Central Parking Board believes that the amendment is in the best
interests of Central Parking and recommends that all of its shareholders vote to
adopt the Charter Amendment Proposal. The approval of the Charter Amendment
Proposal is not required for the approval of the Merger Proposal.
The rights of the holders of Central Parking common stock under the Central
Parking Charter would remain unchanged. Article VIII (1) of the Central Parking
Charter, as further amended by the proposed amendment, is set forth below:
VIII
1. The maximum number of shares which the Corporation shall have the
authority to issue is one hundred million (100,000,000) shares of common
stock, having a par value of $0.01 per share, which shares shall not be
subject to any preemptive rights, and one million (1,000,000) shares of
preferred stock having a par value of $0.01 per share.
As of January 11, 1999, there were 29,579,628 shares of Central Parking common
stock issued and outstanding. In addition, 944,901 shares of Central Parking
common stock remain reserved for issuance under Central Parking's Restricted
Stock Plan and Central Parking's 1995 Incentive and Nonqualified Stock Option
Plan for Key Personnel; 342,568 shares remain reserved for issuance under
Central Parking's 1996 Employee Stock Purchase Plan; 89,500 shares remain
reserved for issuance under Central Parking's 1995 Nonqualified
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Stock Option Plan for Directors; and 337,698 shares are reserved for issuance
under Central Parking's Deferred Stock Unit Plan. Accordingly, at January 11,
1999 and assuming the issuance of an estimated 7.6 million shares pursuant to
the Merger, a balance of 10,055,882 authorized shares of Central Parking's
common stock would be available for future use.
The Central Parking Board considers the proposed increase in the number of
authorized shares of Central Parking common stock desirable because it would
give Central Parking the necessary flexibility to issue Central Parking common
stock in connection with mergers and acquisitions, equity financings, stock
dividends and splits, benefit plans, and for other general corporate purposes.
These future issuances would be at the discretion of the Central Parking Board
without the expense and delay incidental to obtaining shareholder approval,
except as may be required by applicable law or by the rules of any stock
exchange on which Central Parking's securities may then be listed. For example,
the NYSE, on which the Central Parking common stock is listed, currently
requires shareholder approval as a prerequisite to listing shares in several
instances, including in connection with acquisitions where the present or
potential issuance of shares could result in an increase in the number of shares
of Central Parking common stock outstanding by 20% or more. Holders of Central
Parking common stock have no preemptive rights to subscribe to any additional
securities of any class that Central Parking may issue.
The authorized but unissued shares of Central Parking common stock could be used
by incumbent management to make more difficult a change in control of Central
Parking. Under certain circumstances such shares could be used to create voting
impediments or to frustrate persons seeking to effect a takeover or otherwise
gain control of Central Parking. For example, such shares could be privately
placed with purchasers who might side with the Central Parking Board in opposing
a hostile takeover bid.
The amendment could also have the effect of discouraging an attempt by another
person or entity, through the acquisition of a substantial number of shares of
Central Parking's common stock, to acquire control of Central Parking with a
view to imposing a merger, sale of all or any part of Central Parking's assets
or a similar transaction that may or may not be in the best interest of all of
the shareholders, because the issuance of new shares could be used to dilute the
stock ownership of a person or entity seeking to obtain control of Central
Parking. The amendment to the Central Parking Charter is not being proposed in
response to any effort known by management to acquire control of Central
Parking. At the date of this joint proxy statement/prospectus, Central Parking
has no plans, arrangements or understandings with respect to the issuance of the
shares of Central Parking Common Stock to be authorized. However, Central
Parking regularly considers equity offerings and acquisitions involving the
issuance of Central Parking common stock.
VOTING
Shareholders of record as of January 11, 1999 will be entitled to vote at the
Central Parking special meeting. At the close of business on that day, there
were outstanding 29,579,628 shares of Central Parking common stock, of which
Central Parking's officers, directors and principal shareholders owned an
aggregate of 11,701,825 of such shares (or approximately 39.6% of the
outstanding shares on January 11, 1999) and have indicated that they intend to
vote such shares in favor of the Merger. Each share of Central Parking common
stock is entitled to one vote, which may be given in person or by proxy
authorized in writing.
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To vote by proxy, a Central Parking shareholder should complete, sign, date and
return the enclosed proxy to the Secretary of Central Parking. The Central
Parking Board urges you to complete the proxy card whether or not you plan to
attend the Central Parking special meeting. If you attend the Central Parking
special meeting in person, you may, if you wish, vote in person on all matters
brought before the Central Parking special meeting even if you have previously
delivered your proxy. Any Central Parking shareholder who has given a proxy may
revoke it at any time prior to exercise by filing an instrument revoking it with
the Secretary of Central Parking, by duly executing a proxy bearing a later
date, or by attending the Central Parking special meeting and voting in person.
The mere presence at the Central Parking special meeting of a Central Parking
shareholder who has appointed a proxy will not revoke the appointment.
The affirmative vote of the majority of shares of Central Parking common stock
entitled to be cast at the Central Parking special meeting is required to
approve the Merger Proposal and the Charter Amendment Proposal. Holders of a
majority of Central Parking common stock sufficient to approve the Merger
Proposal have previously agreed that they will vote their shares at Central
Parking common stock in favor of the Merger Proposal. Therefore, there will be a
quorum at the Central Parking special meeting and sufficient votes cast for
approval and adoption of the Merger Proposal to ensure its passage without the
vote of any other Central Parking shareholder. Abstentions and broker non-votes
will be counted for purposes of determining the presence or absence of a quorum.
Proxies that reflect abstentions as to a particular proposal will be treated as
voted for the purpose of determining whether the proposal is approved or
rejected and will have the same effect as a vote against that proposal, while
proxies that reflect broker non-votes will not be counted as votes cast for
determining the outcome of the proposal.
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ALLRIGHT SPECIAL MEETING
THE MEETING
The Allright special meeting will be held on February 17, 1999, at 11:00 a.m.
(Central Standard Time) at Allright Corporation's headquarters, 1313 Main
Street, Houston, Texas 77002.
PURPOSE OF THE MEETING
At the Allright special meeting, the shareholders of Allright will be asked to
vote on the following matters:
- The adoption of the Merger Agreement; and
- Such other business as may properly come before the Allright special
meeting or any adjournment or postponement thereof.
VOTING
Shareholders of record as of January 11, 1999 will be entitled to vote at the
Allright special meeting. At the close of business on that day, there were
outstanding 79,376.5 shares of Allright common stock, each of which entitles the
registered holder thereof to one vote, which may be given in person or by proxy
authorized in writing.
The affirmative vote of the majority of shares of Allright common stock
outstanding at the Allright special meeting is required to adopt the Merger
Agreement. A majority of holders of Allright common stock sufficient to adopt
the Merger Agreement have previously agreed that they will vote their shares of
Allright common stock in favor of the Merger Agreement. Abstentions will be
counted for purposes of determining the presence or absence of a quorum. Proxies
that reflect abstentions will be treated as voted for the purpose of determining
whether the proposal is adopted or rejected and will have the same effect as a
vote against that proposal.
To vote by proxy, a shareholder should complete, sign, date and return the
enclosed proxy to the Secretary of Allright, c/o the Secretary of Allright
Corporation. The Allright Board urges you to complete the proxy card whether or
not you plan to attend the meeting. If you attend the meeting in person, you
may, if you wish, vote in person on all matters brought before the meeting even
if you have previously delivered your proxy. Any shareholder who has given a
proxy may revoke it at any time prior to exercise by filing an instrument
revoking it with the Secretary of Allright, c/o the Secretary of Allright
Corporation, by duly executing a proxy bearing a later date, or by attending the
meeting and voting in person. The mere presence at the meeting of a shareholder
who has appointed a proxy will not revoke the appointment.
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DESCRIPTION OF CENTRAL PARKING
GENERAL
Central Parking is a leading provider of parking services operating, as of
September 30, 1998, 2,440 parking facilities containing approximately 1,023,000
spaces in 35 states, the District of Columbia, Canada, Chile, Puerto Rico, the
United Kingdom, the Republic of Ireland, Spain, Germany, Mexico, and Malaysia.
Central Parking has a business development office in Amsterdam.
Central Parking provides parking management services at multi-level parking
facilities and surface lots. It also provides parking consulting, shuttle,
valet, parking meter enforcement, and billing and collection services. Central
Parking operates parking facilities under three general types of arrangements:
management contracts, leases, and fee ownership. As of September 30, 1998,
Central Parking operated 1,302 parking facilities under management contracts and
1,071 parking facilities under leases, and owned, either independently or
through joint ventures, 67 parking facilities.
INDUSTRY
The International Parking Institute estimates that there are 35,000 parking
facilities in the United States, which generate approximately $26.0 billion of
annual revenue, which is divided evenly between commercial and governmental
operators. The commercial parking services business is very fragmented,
consisting of a few national companies and approximately 1,000 small
privately-held local and regional operators. Central Parking believes that it
has the opportunity to consolidate portions of this fragmented, localized
industry by using its competitive advantages with regard to scale, financial
strength, technology, controls, and professionalism, all of which are becoming
increasingly important in the parking services business. For the same reasons,
Central Parking believes that it is well-positioned to be selected by municipal
and other governmental entities to operate their parking facilities and provide
parking-related services as such entities move toward outsourcing and
privatization.
During the 1980's, the high level of construction activity in the United States
resulted in a significant increase in the number of parking facilities. Since
that time, as construction activity has slowed, growth of certain parking
service companies, including Central Parking, has been a result of take-aways
from other parking companies. New construction and acquisition of additional
facilities are essential to growth for parking service companies because of the
limitations on growth in revenues of existing operations. Although some growth
in revenues from existing operations is possible through redesign, increased
operational efficiency, or increased facility use and prices, such growth is
ultimately limited by the size of a facility and market conditions.
Management believes that most commercial real estate developers and property
owners view services such as parking as potential profit centers rather than
cost centers. These parties outsource parking operations to parking management
companies in an effort to maximize profits and cash flow. Parking management
companies can increase profits, benefitting both the owners and themselves by
using managerial skills and experience, operating systems, and operating
controls unique to the parking industry.
Privatization of government parking operations and facilities provides new
opportunities for the parking industry. Industry estimates suggest that as much
as 50% of the revenues generated by the United States parking industry is
generated by facilities operated by
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municipalities and other governmental entities. Cities and municipal authorities
are beginning to retain private firms to operate facilities and provide
parking-related services in an effort to reduce operating budgets and increase
efficiency. Privatization in the United Kingdom has already provided significant
expansion opportunities for private parking companies. In the United States,
several cities have awarded or are considering awarding on-street parking
enforcement and parking meter service contracts to for-profit parking companies
such as Central Parking. For example, Central Parking has recently been awarded
contracts for collection of parking meter revenues in Miami Beach, Florida and
parking meter enforcement in Charlotte, North Carolina and Richmond, Virginia.
GROWTH STRATEGY
Central Parking plans to continue to add facilities to its operations by
focusing its marketing efforts on adding facilities at the local level,
targeting real estate asset managers and developers with a national presence,
pursuing strategic acquisitions of other parking service operators, and
expanding its international operations. Set forth below are the key elements of
Central Parking's growth strategy.
Increase Market Presence. Central Parking continually seeks to
establish and increase its operations in new and existing markets through
take-aways of competitors' contracts, obtaining new management and lease
contracts, entering into joint venture arrangements, and purchases of
parking facilities. Through emphasizing marketing at the local level and
establishing relationships with large-scale national asset managers and
developers, Central Parking expects to continue to expand its base of
operations. Management believes that Central Parking's relative size,
financial strength and systems, and automation capabilities give it a
competitive advantage in winning new business and make it an attractive
partner for joint venture and other opportunities. In addition, Central
Parking believes that its unique performance-based compensation system,
which is designed to reward managers for increasing the profitability of
their respective area of responsibility, has been a key contributor to
Central Parking's growth.
Pursue Strategic Acquisitions. Central Parking intends to continue to
pursue acquisition opportunities. Central Parking believes that many of its
smaller competitors have limited access to capital or do not have the
systems or economies of scale to compete effectively. Central Parking's
acquisition strategy is to focus on opportunities that enable Central
Parking to become a stronger, more efficient provider in selected markets,
generate significant economies of scale and cost savings and increase cash
flow. Cost savings typically result from the elimination of duplicative
management functions as well as from efficiencies resulting from
implementing Central Parking's systems and professional management
techniques and development. Central Parking has a senior vice president
dedicated exclusively to acquisitions and development. During calendar year
1997, Central Parking acquired Square (January 1997) in New York, Car Park
(May 1997) in San Francisco, and Diplomat (October 1997) in Washington,
D.C. During calendar 1998, Central Parking acquired Kinney (February 1998);
which operated 403 parking facilities primarily in New York, Boston,
Philadelphia, and Washington, D.C.; Turner (April 1998), which operated 34
parking facilities in Texas, Florida, California, Georgia and Washington,
D.C.; and Sterling (July 1998), which operates parking facilities in
Georgia, Florida, Virginia, California and Kentucky. In addition, Central
Parking purchased the remaining 50% interest in CPS-Louisiana (March 1998),
which operates parking facilities in Louisiana.
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Expand International Operations. Management believes that there are
significant international growth opportunities, particularly for
well-capitalized companies that are interested in making significant
investments in parking equipment and construction, either independently or
with foreign partners. Central Parking typically enters foreign markets
either through consulting projects or by forming joint ventures with
established local entities, both of which allow Central Parking to enter
foreign markets with reduced operating and investment risk. Since 1991,
Central Parking has established operations in the United Kingdom, Germany,
Mexico, Malaysia, Canada, Spain and the Republic of Ireland. Central
Parking believes there are significant expansion opportunities in these
countries as well as other countries.
OPERATING STRATEGY
Central Parking's primary objective is to increase the revenues and
profitability of its parking facilities through a variety of operating
strategies including the following:
Maintain Strict Cost Management and Cash Control. In order to provide
competitively priced services, Central Parking must contain costs. Managers
are trained to analyze staffing and cost control issues, and each facility
is carefully tracked on a monthly basis to determine whether financial
results are within budgeted ranges. Because of the substantial
performance-based component of their compensation, managers are
continuously motivated to contain the costs of their operations. Strict
cash control is also critical to Central Parking and its clients. Central
Parking's cash control procedures are based on a ticketing system
supervised by high level managers and include on-site spot checks, multiple
daily cash deposits, local audit functions, managerial oversight and
review, and internal audit procedures. It is Central Parking's policy that
all tickets and gate counts are reconciled daily against cash collected.
Management believes its cash control procedures are effective in minimizing
the loss of revenues at parking facilities.
Emphasize Sales and Marketing Efforts. Central Parking's management is
actively involved in developing and maintaining business relationships and
in exploring opportunities for growth. A cornerstone of Central Parking's
culture is its incentive compensation system which rewards managers who are
able to develop new business. Central Parking's marketing efforts are
designed to expand its operations by developing lasting relationships with
major real estate developers and asset managers, business and government
leaders, and other clients. Central Parking encourages its managers to
pursue new opportunities at the local level while simultaneously
selectively targeting key clients and projects at a national level.
Leverage Established Market Presence and Corporate
Infrastructure. Central Parking has an established presence in multiple
markets, representing platforms from which it can build. Because of the
relatively fixed nature of corporate overhead and the resources that can be
shared in specific markets, Central Parking has the opportunity to expand
its profit margins as it grows its presence in established markets. Central
Parking has consistently reduced general and administrative expenses,
excluding goodwill amortization, as a percentage of total revenues. General
and administrative expenses, excluding goodwill amortization, as a
percentage of total revenues were 12.3%, 10.2% and 8.8%, in fiscal 1996,
1997, and 1998, respectively.
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Empower Local Managers; Provide Corporate Support. Central Parking has
achieved what management believes is a successful balance between
centralized and decentralized management. Because its business is
dependent, to some extent, on personal relationships, Central Parking
provides its managers with a significant degree of autonomy in order to
encourage prompt and effective responses to local market demands. In
conjunction with this local operational authority, Central Parking
provides, through its corporate office, services that typically are not
readily available to independent operators such as management support,
marketing and business expertise, training, and financial and information
systems. Central Parking retains centralized control over those functions
necessary to monitor service quality and cash control integrity and to
maximize operational efficiency. Services performed at the corporate level
include billing, quality improvement oversight, financial and accounting
functions, policy and procedure development, systems design, and corporate
acquisitions and development.
Utilize Performance-Based Compensation. Central Parking's
performance-based compensation system rewards managers at the general
manager level and above for the profitability of their respective areas of
responsibility. Each person participating in the incentive program
generally receives a substantial portion of his or her compensation from
this performance-based compensation system. Incentive compensation payments
typically range from 20% to 80% of total compensation.
Maintain Well-Defined Professional Management Organization. In order to
ensure professionalism and consistency in Central Parking's operations, to
provide a career path opportunity for its managers, and to achieve a
balance between autonomy and accountability, Central Parking has
established a highly structured management organization. Organized into six
levels, Central Parking has a total of 400 managers and hires approximately
50 per year.
Central Parking recruits primarily college graduates or people with
previous parking services or hospitality industry experience, and requires
that they complete a formal training program. Management believes that
Central Parking's management training program is a significant factor in
Central Parking's success. New managers in Central Parking's management
trainee program are assigned to a particular facility where they are
supervised as they manage one to five employees. The management trainee
program lasts approximately one year and teaches a wide variety of skills,
including organizational skills, basic management techniques, and basic
accounting. Upon successful completion of the program, management trainees
are promoted to facility manager in charge of a particular parking
facility. As facility managers, they report up through a hierarchical
structure of managers. As managers develop and gain experience, they have
the opportunity to assume expanded responsibility, to be promoted to higher
management levels and to increase the performance-based component of their
compensation. This well-defined structure provides a career path that is
designed to be an attractive opportunity for prospective new hires. In
addition, management believes the well-planned training and advancement
program has enabled Central Parking to instill a high level of
professionalism in its employees. A final important benefit of Central
Parking's organizational structure is that it has allowed Central Parking
to balance localized autonomy with accountability and centralized support
and control.
Automate Facilities. Management believes that Central Parking's
application of sophisticated technology to its operations represents a
competitive advantage over
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smaller operators with more limited resources. Central Parking has
implemented computerized card tracking and accounting systems in certain of
its facilities and is experimenting with a variety of automated settlement
systems. Central Parking expects that these technology initiatives will
enhance revenue by increasing the efficiency and accuracy of payment
collections, reduce labor costs, and minimize lost revenue at parking
facilities.
Strategically Expand Service Offerings. Central Parking provides
services that are complementary to parking facility management, with a
particular emphasis on consulting services. Other ancillary services
include parking meter enforcement services, on-street parking services, car
pooling coordination, shuttle van services, and transportation management.
These ancillary services do not constitute a significant portion of Central
Parking's revenues, but management believes that the provision of ancillary
services can be important in obtaining new business and preparing Central
Parking for future changes in the parking industry.
Focus on Retention of Patrons. In order for Central Parking to succeed,
its parking patrons must have a positive experience at Central Parking
facilities. Accordingly, Central Parking stresses the importance of having
well lighted, clean facilities and cordial employees. Each facility manager
has primary responsibility for the environment at the facility, and is
evaluated on his or her ability to retain parking patrons. Central Parking
also monitors customer satisfaction through customer surveys and "mystery
parker" programs.
Maintain Disciplined Facility Site Selection Analysis. In existing
markets, the facility site selection process begins with identification of
a possible facility site and the analysis of projected revenues and costs
at the site by general managers and regional managers. The managers then
conduct an examination of a facility's potential demand based on traffic
patterns and counts, area demographics, and potential competitors. Pro
forma financial statements are then developed and a Central Parking
representative will meet with the property owner to discuss the terms and
structure of the agreement.
Central Parking seeks to distinguish itself from its competitors by
combining a reputation for professional integrity and quality management
with operating strategies designed to increase the revenues of parking
operations for its clients. Central Parking's clients include some of the
nation's largest owners and developers of mixed-use projects, major office
building complexes, sports stadiums, hotels, and toll roads. Parking
facilities operated by Central Parking include, among others, certain
terminals operated by BAA Heathrow International Airport (London), the
Prudential Center (Boston), Cinergy Field (Cincinnati), Coors Field
(Denver), and various parking facilities owned by the Hyatt and Westin
hotel chains, the Rouse Company, Faison Associates, May Department Stores,
Equity Office Properties, and Crescent Realty Estate. None of these clients
account for more than 5% of Central Parking's total revenues.
ACQUISITIONS
Central Parking's acquisition strategy focuses primarily on acquisitions that
will enable Central Parking to become a more efficient and cost-effective
provider in selected markets. Central Parking believes it can recognize
economies of scale by making acquisitions in markets where Central Parking
already has a presence, which allows Central Parking to reduce the overhead cost
of the acquired company by consolidating its management with that
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of Central Parking. In addition, Central Parking seeks acquisitions in
attractive new markets. Management believes acquisitions are an effective means
of entering new markets, thereby quickly obtaining both operating presence and
management personnel. Central Parking also believes it can improve acquired
operations by applying its operating strategies and professional management
techniques. Central Parking's acquisitions over the last two years, all of which
were accounted for under the purchase method of accounting, are as follows:
Civic Parking LLC. On December 31, 1996, Central Parking purchased for
cash Civic, which owns four parking garages in St. Louis: Kiener East,
Kiener West, Stadium East and Stadium West. The four garages, which had
previously been operated by Central Parking under management agreements,
have a total of 7,464 parking spaces. The purchase price was approximately
$91.0 million which was financed through working capital and $67.2 million
of borrowings under Central Parking's then-existing credit facility. Of the
$91.0 million, $46.0 million was held for resale to a joint venture partner
and $45.0 million was recorded as an investment in joint ventures. On April
16, 1997, Central Parking consummated the sale of 50% of Civic to its joint
venture partner, an affiliate of Equity Capital Holdings, LLC, for $46.0
million in cash. Central Parking continues to operate these garages
pursuant to a lease and operating agreement with Civic.
Square Industries, Inc. On January 18, 1997, Central Parking completed
a cash tender to acquire all of the outstanding shares of Square for $54.8
million, including transaction fees and other related expenses. In
addition, Central Parking assumed $23.2 million of existing Square debt.
The purchase price was financed through borrowings under Central Parking's
then-existing credit facility. At the time of the acquisition, Square
operated 116 parking facilities containing over 61,000 parking spaces,
located primarily in the Northeastern United States.
Car Park Corporation. On May 29, 1997, Central Parking acquired the
assets and related leases of Car Park for $3.5 million; consisting of 18
parking facilities with approximately 2,600 parking spaces located in the
San Francisco metropolitan region. The purchase price was financed through
$1.7 million of borrowings under Central Parking's then-existing credit
facility, and $1.8 million payable to the seller, which has been repaid in
full.
Diplomat Parking Corporation. On October 1, 1997, Central Parking
acquired the stock and certain assets of Diplomat for approximately $22.2
million in cash and notes payable, including transaction fees and other
related costs. The acquisition was financed through borrowings under
Central Parking's then-existing credit facility. At the time of the
acquisition, Diplomat operated 164 parking facilities containing over
37,000 parking spaces, located primarily in Washington D.C. and Baltimore,
Maryland.
Kinney System Holding Corp. On February 12, 1998, Central Parking
acquired Kinney, a privately-held company headquartered in New York City.
Kinney has been in the parking business for over 60 years. In addition to
enhancing Central Parking's market position in New York City, Kinney
increases Central Parking's presence in a number of other major
metropolitan areas such as Boston, Philadelphia and Washington, D.C. and
broadens its geographic coverage in the following nine states: Connecticut,
Florida, Kentucky, Maryland, Massachusetts, New Hampshire, New York,
Pennsylvania and Virginia. Kinney provides both self-parking and valet
parking services, and provides parking related services such as facility
design and development and consulting services.
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Kinney operated 403 parking facilities containing approximately 168,800
spaces, including approximately 76,700 in the New York City metropolitan
area, 42,800 in Boston, 30,100 in Philadelphia and 10,300 in Washington,
D.C. Kinney's facility mix is comprised of 225 leased sites, 170 managed
sites and 8 owned sites. The parking facilities operated by Kinney include
Yankee Stadium, the Waldorf-Astoria, Port Authority Bus Terminal, World
Financial Center and the General Motors Building in New York City, The
Ritz-Carlton -- Boston, Government Center in Boston, Spectrum-
Philadelphia, and the Four Seasons Hotel of Washington, D.C.
Consideration for the Kinney acquisition was approximately $208.8
million, including $171.8 million in cash and other consideration, and
$37.0 million (882,422 shares) in Central Parking common stock. In
connection with this transaction, Central Parking assumed $10.3 million in
capital leases, refinanced $24.2 million in existing Kinney debt and
assumed $4.6 million of Kinney debt. Central Parking financed the Kinney
acquisition through borrowings under the Credit Facility, and ultimately
from the issuance of Central Parking common stock and Central Parking
obligations pursuant to the Trust Issued Preferred Securities.
Central Parking System of Louisiana, Inc. Central Parking has
historically owned 50% of CPS-Louisiana and on March 30, 1998 purchased the
remaining 50% from Property Service Corporation for $2.5 million in Central
Parking common stock (52,631 shares). CPS-Louisiana manages and operates
leased parking facilities, manages and operates parking facilities owned or
leased by other parties, and provides financial and other advisory
services.
Turner Parking Systems, Inc. On April 1, 1998, Central Parking
purchased substantially all of the assets of Turner, a privately-held
parking company headquartered in Dallas, Texas, for $3.8 million, including
$3.0 million in cash and $800,000 (16,842 shares) in Central Parking common
stock. Central Parking financed the cash portion of the Turner purchase
with borrowings under the Credit Facility.
Sterling Parking, Inc. On July 1, 1998, Central Parking purchased
substantially all of the assets of Sterling Parking, Inc. ("Sterling"), a
privately-held parking company headquartered in Atlanta, Georgia, for $4.3
million, including $2.1 million in cash and $2.2 million (54,358 shares) in
Central Parking common stock. Central Parking financed the cash portion of
the Sterling purchase with borrowings under the Credit Facility. Sterling
operates 31 parking facilities in Georgia, Florida, Virginia, California,
and Kentucky.
SALES AND MARKETING
Central Parking's sales and marketing efforts are designed to expand its
operations by developing and maintaining relationships with major real estate
developers and asset managers, business and government leaders, and other
clients. Central Parking encourages its managers to pursue new opportunities at
the local level while simultaneously selectively targeting key clients and
projects at a national level.
Local. At the local level, Central Parking's sales and marketing efforts are
decentralized and directed towards identifying new expansion opportunities
within a particular city or region. Managers are trained to develop the business
contacts necessary to generate new opportunities and to monitor their local
markets for take-away and outsourcing opportunities. Central Parking provides
its managers with a significant degree of autonomy in order to encourage prompt
and effective responses to local market demands, which is complemented by
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management support and marketing training through Central Parking's corporate
offices. In addition, a manager's compensation is dependent, in part, upon his
or her success in developing new business. By developing business contacts
locally, Central Parking's managers often get the opportunity to bid on projects
when asset managers and property owners are dissatisfied with current operations
and also learn in advance of possible new projects.
National. At the national level, Central Parking's marketing efforts are
undertaken primarily by upper-level management, which targets developers,
governmental entities, the hospitality industry, mixed-use projects, and medical
facilities. These efforts are directed at operations that generally have
national name recognition, substantial demand for parking related services, and
the potential for nationwide growth. For example, Central Parking's current
clients include, among other national real estate companies and hotel chains,
the Rouse Company, Faison Associates, Equity Office Properties, May Department
Stores, Crescent Real Estate, Westin Hotels, and Hyatt Hotels. Management
believes that providing high-quality, efficient services to such companies will
lead to additional opportunities as those clients continue to expand their
operations. Management believes outsourcing by parking facility owners will
continue to be a source for additional facilities, and management believes
Central Parking's experience and reputation with large real estate asset
managers give it a competitive advantage in this area.
INTERNATIONAL EXPANSION
Central Parking's international operations began in the early 1990's with the
formation of an international division, which is now one of the fastest growing
areas of Central Parking. Central Parking typically enters foreign markets
either through consulting projects or by forming joint ventures with established
local entities. Consulting projects allow Central Parking to establish a
presence and evaluate the prospects for growth of a given market without
investing a significant amount of capital. Likewise, forming joint ventures with
local partners allows Central Parking to enter new foreign markets with reduced
operating and investment risks.
Operations in London began in 1991 with a single consulting agreement and since
then have grown to 159 facilities in the United Kingdom including two terminals
at Heathrow International Airport and parking meter enforcement and ticketing
services for three local governments that have privatized these services.
Central Parking began expansion into Mexico in July 1994 by forming a joint
venture with Fondo Opcion, an established Mexican developer, and now operates 61
facilities in Mexico. Central Parking also operates 4 facilities in Canada, one
facility in Spain and has entered into a management contract in Kuala Lumpur,
Malaysia related to the operation of a 5,400 space parking facility servicing
one of the largest development projects in the world. Central Parking also
operates on-street parking services in the United Kingdom, Germany, and the
Republic of Ireland. Central Parking established a business development office
in the Netherlands in 1995 to pursue expansion into other European countries. In
1996, Central Parking acquired a 50% equity interest in a joint venture, which
operates five facilities in Germany. In order to manage its international
expansion, Central Parking has allocated responsibilities for international
operations to an executive vice president.
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PARKING FACILITY PROPERTIES
Central Parking's operations are currently organized into 12 regions, 11 in
North America (10 in the United States, one in Mexico) and one which is
comprised primarily of the United Kingdom and Continental Europe. Each region is
supervised by a regional manager who reports directly to one of the senior vice
presidents. Regional managers oversee four to six general managers who each
supervise Central Parking's operations in a particular city. The following table
summarizes certain information regarding Central Parking's facilities as of
September 30, 1998.
<TABLE>
<CAPTION>
NUMBER PERCENTAGE
OF TOTAL OF TOTAL
REGIONS CITIES LOCATIONS MANAGED LEASED OWNED SPACES SPACES
- ------- ------ ---------- -------- ------- ------ --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Atlanta.............. Atlanta, 146 90 56 -- 82,659 8.1%
Birmingham,
Charleston (SC),
Charlotte, Columbia
(SC), Jackson (MS),
Mobile
Denver............... Denver/Colorado 160 92 58 10 72,291 7.1
Springs, Des
Moines, Kansas
City, Minneapolis,
Oklahoma City, St.
Louis
International........ United Kingdom -- 165 80 85 -- 62,805 6.1
Birmingham, London,
Oxford, Newcastle
Germany -- Berlin,
Dresden, Frankfurt
Spain and Malaysia
Florida.............. Jacksonville, 222 125 97 -- 89,946 8.8
Miami/Ft.
Lauderdale,
Orlando, Puerto
Rico, Tampa/St.
Petersburg
Los Angeles.......... Los Angeles, Orange 94 72 22 -- 51,340 5.0
County (CA),
Phoenix
Mid-Atlantic......... Baltimore, Norfolk, 352 201 142 9 142,798 14.0
Philadelphia,
Pittsburgh,
Richmond,
Washington D.C.
Mexico............... Cuernavaca, Mexico 61 34 27 -- 31,796 3.1
City, Monterrey
Mid Western.......... Charleston (WV), 120 79 40 1 72,914 7.1
Cincinnati,
Cleveland,
Columbus,
Indianapolis,
Milwaukee, Ottawa,
Toronto
Nashville............ Chattanooga, 263 112 129 22 56,141 5.5
Knoxville,
Lexington/
Frankfort,
Louisville,
Memphis,
Nashville(1)
New York............. Hartford, Jersey 379 139 225 15 142,655 14.0
City,
New York,
Providence,
Stamford
San Francisco........ Oakland, Salt Lake 63 37 26 -- 20,674 2.0
City, San
Francisco, Seattle
</TABLE>
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<TABLE>
<CAPTION>
NUMBER PERCENTAGE
OF TOTAL OF TOTAL
REGIONS CITIES LOCATIONS MANAGED LEASED OWNED SPACES SPACES
- ------- ------ ---------- -------- ------- ------ --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Texas................ Albuquerque, 279 180 89 10 134,402 13.1
Austin,
Corpus Christi,
Dallas, El Paso,
Houston, New
Orleans, San
Antonio, Tulsa
Other................ Boston, Chicago, 136 61 75 -- 62,141 6.1
Nashua
----- ----- ----- --- --------- -----
Total........ 2,440 1,302 1,071 67 1,022,562 100.0%
===== ===== ===== === ========= =====
</TABLE>
- ---------------
(1) Includes Central Parking's corporate headquarters in owned facilities.
Central Parking's facilities include both surface lots and structured parking
facilities (garages). Approximately 74% of Central Parking's owned parking
properties are in structured parking facilities, with the remainder in surface
lots. Management believes Central Parking's owned facilities generally are in
good condition and adequate for its present needs.
OPERATING ARRANGEMENTS
Central Parking operates parking facilities under three general types of
arrangements: management contracts, leases, and fee ownership. As of September
30, 1998, Central Parking operated 1,302 parking facilities through management
contracts, leased 1,071 parking facilities, and owned 67 parking facilities,
either independently or in joint ventures with third parties. The following
table sets forth certain information regarding the number of managed, leased, or
owned facilities as of the specified dates:
<TABLE>
<CAPTION>
AT SEPTEMBER 30,
---------------------
1996 1997 1998
----- ----- -----
<S> <C> <C> <C>
Managed Facilities..................................... 770 877 1,302
Leased Facilities...................................... 552 709 1,071
Owned Facilities....................................... 37 58 67
----- ----- -----
Total........................................ 1,359 1,644 2,440
===== ===== =====
</TABLE>
The general terms and benefits of these types of arrangements are described as
follows:
Management Contracts. Management contract revenues consist of
management fees (both fixed and percentage of revenues) and fees for
ancillary services such as insurance, accounting, equipment leasing, and
consulting. The cost of management contracts includes insurance premiums
and claims and other indirect overhead. Central Parking's responsibilities
under a management contract as a facility manager include hiring, training,
and staffing parking personnel, and providing collections, accounting,
record keeping, insurance, and facility marketing services. In general,
Central Parking is not responsible under its management contracts for
structural, mechanical, or electrical maintenance or repairs, or for
providing security or guard services or for paying property taxes. In
general management contracts are for terms of one to three years and are
renewable for successive one-year terms, but are cancelable by the property
owner on short notice. Although management contracts typically are for
relatively short terms, Central Parking's renewal rates for each of the
past five fiscal years were in excess of 91%. With respect to insurance,
Central Parking's clients have the option of obtaining insurance on their
own or having Central Parking provide insurance as part of the
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services provided under the management contract. Because of its size and
claims experience, Central Parking can purchase such insurance at discounts
to comparable market rates and, management believes, at lower rates than
Central Parking's clients can generally obtain on their own. Accordingly,
Central Parking generates profits on the insurance provided under its
management contracts. See "-- Litigation and Insurance."
Leases. Central Parking's rent under leases is generally a fixed annual
amount, a percentage of gross revenues, or a combination thereof. Leased
facilities generally require a longer commitment and a larger capital
investment by Central Parking than managed facilities but generally provide
a more stable source of revenue and a greater opportunity for long-term
revenue growth. The cost of parking includes rent, payroll and related
benefits, depreciation, maintenance, insurance, and general operating
expenses. Under its leases, Central Parking is typically responsible for
all facets of the parking operations, including pricing, utilities, and
ordinary and routine maintenance, but is generally not responsible for
structural, mechanical, or electrical maintenance or repairs, or property
taxes. Lease arrangements are typically for terms of three to ten years,
with a renewal term, and provide for a contractually established payment to
the facility owner regardless of the operating earnings of the parking
facility.
Fee Ownership. Ownership of parking facilities, either independently or
through joint ventures, typically requires a larger capital investment than
managed or leased facilities but provides maximum control over the
operation of the parking facility and the greatest profit potential of the
three types of operating arrangements. All changes in owned facility
revenue flow directly to Central Parking, and Central Parking has the
potential to realize benefits of appreciation in the value of the
underlying real estate if the property is sold. The ownership of a parking
facility brings Central Parking complete responsibility for all aspects of
the property, including all structural, mechanical, or electrical
maintenance or repairs.
Joint Ventures. Central Parking seeks joint venture partners who are
established local or regional developers pursuing financing alternatives
for development projects. Joint ventures typically involve a development
where the parking facility is a part of a larger multi-use project,
allowing Central Parking's joint venture partners to benefit from a capital
infusion to the project. Joint ventures offer the revenue growth potential
of ownership with a partial reduction in capital requirements. Central
Parking has interests in joint ventures that own or operate parking
facilities located in Nashville, Denver, Tulsa, St. Louis, Mexico City,
Berlin, Dresden, and Frankfort.
MBE Partnerships. Central Parking is currently a party to eleven
separate minority business enterprise partnerships. These are generally
partnerships formed by Central Parking and a minority businessperson to
manage a facility. Central Parking owns 60% to 70% of the partnership
interests in each partnership and typically receives management fees before
partnership distributions are made to the partners.
COMPETITION
The parking industry is fragmented and highly competitive, with few barriers to
entry. Central Parking faces direct competition for additional facilities to
manage, lease, or own and the facilities currently operated by Central Parking
face competition for employees and customers. Central Parking competes with a
variety of other companies to add new operations. Although there are relatively
few large, national parking companies that compete with Central
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Parking, developers, hotel companies, and national financial services companies
have the potential to compete with parking companies. Municipalities and other
governmental entities also operate parking facilities which compete with Central
Parking. Central Parking also faces competition from regional and local parking
companies and from owner-operators of facilities who are potential clients for
Central Parking's management services. Construction of new parking facilities
near Central Parking's existing leased or managed facilities could adversely
affect Central Parking's business.
Management believes that it competes for clients based on rates charged for
services; ability to generate revenues and control expenses for clients; range
and quality of services; and ability to expand operations. Central Parking
believes it has a reputation as a leader in the industry and as a provider of
high quality services. Central Parking also is one of the largest companies in
the parking industry and is not limited to a single geographic region. Central
Parking has the financial strength to make capital investments as an owner or
joint venture partner that smaller or more leveraged companies cannot make.
Central Parking's size also has allowed it to centralize administrative
functions that give the decentralized managerial operations cost-efficient
support. Moreover, Central Parking has obtained broad experience in managing and
operating a wide variety of facilities over the past 30 years. Additionally,
Central Parking is able to attract and retain quality managers through its
incentive compensation system that directly rewards successful sales and
marketing efforts and places a premium on profitable growth.
INSURANCE
Central Parking purchases comprehensive liability insurance covering parking
facilities it owns, leases, or manages. The primary amount of such coverage is
$1.0 million per occurrence and $1.0 million in the aggregate per facility. In
addition, Central Parking purchases group insurance with respect to all
full-time Central Parking employees, whether such persons are employed at owned,
leased, or managed facilities. Because of the size of the operations covered,
Central Parking purchases these policies at prices that, management believes,
represent a discount to the prices that would be charged to parking facility
owners on a stand-alone basis. Pursuant to its management contracts, Central
Parking charges its customers for insurance at rates it believes approximate
market rates based upon its review of the applicable market. In each case,
Central Parking's clients have the option of purchasing their own policies,
provided Central Parking is named as an additional insured; however, because
Central Parking's fees for insurance are generally competitive with market
rates, many of Central Parking's clients have chosen historically to purchase
such insurance through Central Parking. A reduction in the number of clients
that purchase insurance through Central Parking, however, could have a material
adverse effect on the operating earnings of Central Parking. In addition,
although Central Parking's cost of insurance has not fluctuated significantly in
recent years, a material increase in insurance costs due to increased claims
experienced by Central Parking could adversely affect the profit associated with
insurance charges pursuant to management contracts and could have a material
adverse effect on the operating earnings of Central Parking.
REGULATION
Central Parking's business is not substantially affected by direct governmental
regulation, although both municipal and state authorities sometimes directly
regulate parking facilities. The facilities in New York City are, for example,
subject to certain governmental restrictions
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concerning numbers of cars, pricing, and certain prohibited practices. Central
Parking is also affected by laws and regulations (such as zoning ordinances)
that are common to any business that owns real estate and by regulations (such
as labor and tax laws) that affect companies with a large number of employees.
In addition, several state and local laws have been passed in recent years that
encourage car pooling and the use of mass transit, including, for example, a Los
Angeles, California law prohibiting employers from reimbursing employee parking
expenses. Laws and regulations that reduce the number of cars and vehicles being
driven could adversely impact Central Parking's business.
Under various federal, state, and local environmental laws, ordinances and
regulations, a current or previous owner or operator of real property may be
liable for the costs of removal or remediation of hazardous or toxic substances
on, under, or in such property. Such laws typically impose liability without
regard to whether the owner or operator knew of, or was responsible for, the
presence of such hazardous or toxic substances. In connection with the ownership
or operation of parking facilities, Central Parking may be potentially liable
for such costs. Although Central Parking is currently not aware of any material
environmental claims pending or threatened against it or any of its owned or
operated parking facilities, there can be no assurance that a material
environmental claim will not be asserted against Central Parking or against its
owned or operated parking facilities. The cost of defending against claims of
liability, or of remediating a contaminated property, could have a material
adverse effect on Central Parking's financial condition or results of
operations.
Various other governmental regulations affect Central Parking's operation of
parking facilities, both directly and indirectly, including the Americans with
Disabilities Act ("ADA"). Under the ADA, all public accommodations, including
parking facilities, are required to meet certain federal requirements related to
access and use by disabled persons. For example, the ADA requires parking
facilities to include handicapped spaces, headroom for wheelchair vans,
attendants' booths that accommodate wheelchairs, and elevators that are operable
by disabled persons. Management believes that the parking facilities Central
Parking owns and operates are in substantial compliance with these requirements.
EMPLOYEES
As of September 30, 1998, Central Parking employed approximately 12,000
individuals, including 6,300 full-time and 5,700 part-time employees.
Approximately 3,900 U.S. employees are represented by labor unions. Various
union locals, including Teamsters Local No. 272, represent parking attendants
and cashiers at the New York City facilities. Other cities in which some of
Central Parking's employees are represented by labor unions are Washington,
D.C.; Miami; Philadelphia; San Francisco; Des Moines, Iowa; Jersey City, Newark,
and Atlantic City, New Jersey; Pittsburgh; White Plains, N.Y.; San Juan, Puerto
Rico; and Chicago. Central Parking frequently is engaged in collective
bargaining negotiations with various union locals but has not experienced any
labor strikes. Management believes that Central Parking's employee relations are
good.
SERVICE MARKS AND TRADEMARKS
Central Parking has registered its logo with the United States Patent Office.
Central Parking has applied for registration of the name "Central Parking
System," which application was initially opposed by two parties. Both parties
have withdrawn their opposition but continue to use the name "Central Parking"
exclusively in the Chicago and Atlantic City areas. Central Parking also owns
registered trademarks for Square and Kinney and operates various parking
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<PAGE> 125
locations under those names. Central Parking has applied for registration for
the names, "CPC" and "Central Parking Corporation." Central Parking uses the
name "Chicago Parking System" in Chicago and "CPS Parking" in Seattle and
Milwaukee. Central Parking has registered the name "Control Plus" and its symbol
in London and intends to use and register that name and symbol in association
with its on street parking activities in Richmond, Virginia. Central Parking has
registered, or intends to register, its name and logo in various international
locations where it does business.
LITIGATION
The ownership of property and provision of services to the public entails an
inherent risk of liability. Although Central Parking is engaged in routine
litigation incidental to its business, there is no legal proceeding to which
Central Parking is a party which, in the opinion of management, will have a
material adverse effect upon Central Parking's financial condition, results of
operations or liquidity. Central Parking takes steps to attempt to disclaim its
liability for personal injury and property damage claims by printing disclaimers
on its ticket stubs and by placing warning signs in the facilities it owns or
operates. Central Parking also carries liability insurance that management
believes meets industry standards; however, there can be no assurance that any
future legal proceedings (including any related judgments, settlements, or
costs) will not have a material adverse effect on Central Parking's financial
condition and results of operations.
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PRINCIPAL SHAREHOLDERS OF CENTRAL PARKING
The table below sets forth certain information regarding the beneficial
ownership of the Central Parking common stock, as of December 31, 1998, and as
adjusted to reflect the Merger based on an assumed Exchange Ratio of 88.658 (see
"The Merger -- General") of (A) each person known to Central Parking to
beneficially own, or who is expected to beneficially own, more than 5% of the
Central Parking common stock, (B) each current director of Central Parking and
each expected director of Central Parking after the Merger, (C) Central
Parking's Chief Executive Officer and the four other most highly compensated
executive officers, and (D) all directors and executive officers of Central
Parking as a group. Unless otherwise indicated, the persons listed below have
sole voting and investment power over the shares of Central Parking common stock
shown as beneficially owned by them.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR OWNED AFTER
TO THE MERGER(1) THE MERGER
-------------------- --------------------
NUMBER PERCENT NUMBER PERCENT
---------- ------- ---------- -------
<S> <C> <C> <C> <C>
Monroe J. Carell, Jr.(2)(3)............. 10,844,454 36.6% 10,844,454 29.1%
The Carell Children's Trust(4).......... 7,149,104 24.2 7,149,104 19.2
Monroe Carell, Jr. 1994 Grantor Retained
Annuity Trust(2)(5)................... 1,676,594 5.7 1,676,594 4.5
AEW Partners, L.P.(6)................... 0 * 3,385,671 9.1
Apollo Real Estate Investment Fund II,
L.P.(7)............................... 0 * 3,385,671 9.1
James H. Bond(8)........................ 338,982 1.1 338,982 *
Emanuel J. Eads(9)...................... 41,468 * 41,468 *
Jeff L. Wolfe(10)....................... 39,705 * 39,705 *
Alan J. Kahn(11)........................ 32,648 * 32,648 *
Cecil Conlee(12)........................ 25,426 * 25,426 *
John W. Eakin(13)....................... 29,030 * 29,030 *
Edward G. Nelson(14).................... 33,605 * 33,605 *
William C. O'Neil, Jr.(13).............. 34,655 * 34,655 *
P.E. Sadler(15)......................... 31,727 * 31,727 *
Lowell Harwood(16)...................... 28,186 * 28,186 *
Lewis Katz(17).......................... 672,859 2.3 672,859 1.8
William S. Benjamin(18)................. 0 * 0 *
Marc L. Davidson(19).................... 0 * 0 *
All directors and executive officers as
a group (20 persons) (20)............. 12,237,709 40.9% 12,237,709 32.6%
========== ==========
</TABLE>
- ---------------
* Indicates less than 1%
(1) For purposes of this table, a person or group of persons is deemed to have
"beneficial ownership" of any shares as of the date of this joint proxy
statement/prospectus that such person or group has the right to acquire
within 60 days after such date, or with respect to which such person
otherwise has or shares voting or investment power. For purposes of
computing beneficial ownership and the percentages of outstanding shares
held by each person or group of persons on a given date, shares which such
person or group has the right to acquire within 60 days after such date are
shares for which such person has beneficial ownership and are deemed to be
outstanding for purposes of
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<PAGE> 127
computing the percentage for such person, but are not deemed to be
outstanding for the purpose of computing the percentage of any other
person.
(2) Address: 2401 21st Avenue South, Suite 200, Nashville, Tennessee 37212.
(3) Includes 37,302 shares held in Central Parking's Deferred Unit Plan, which
Plan contains a power of attorney pursuant to which Mr. Carell votes such
shares, options to purchase 15,560 shares granted pursuant to the Key
Personnel Plan, 1,803,576 shares held by two trusts with respect to which
Mr. Carell is trustee and is entitled to an annuity and 149,999 shares held
by the Monroe Carell, Jr. Foundation. See footnotes 5 and 6. Excludes
7,149,104 shares held by The Carell Children's Trust and 93,030 shares held
by trusts benefitting Mr. Carell's grandchildren, with respect to which Mr.
Carell disclaims beneficial ownership.
(4) The Carell Children's Trust is a trust created by Mr. Carell in 1987 for
the benefit of his children, the trustee of which is Equitable Trust
Company, 800 Nashville City Center, 511 Union, Nashville, Tennessee 37219.
(5) The Monroe Carell, Jr. 1995 Grantor Retained Annuity Trust and The Monroe
Carell, Jr. 1994 Grantor Retained Annuity Trust are trusts created in 1995
and 1994 respectively, of which Mr. Carell is trustee and from which Mr.
Carell is entitled to an annuity until September 1999 with the remainder
passing to his children.
(6) Address: 225 Franklin Street Boston, MA 02110. Shares owned by AEW may be
deemed beneficially owned by, its general partner, AEW/L.P., and the
general partner of AEW/L.P., AEW, Inc.
(7) Address: 1301 Avenue of the Americas, New York, NY 10019. Shares owned by
Apollo may be deemed beneficially owned by its general partner, Apollo Real
Estate Advisors II, L.P. ("AREA II"), and the general partner of AREA II,
Apollo Real Estate Capital Advisors II, Inc.
(8) Includes 267,750 shares of restricted stock granted in connection with Mr.
Bond's Performance Agreement, 2,250 shares held by his spouse, 1,125 shares
held by the Emily Bond Trust of which Mrs. Bond is trustee, 733 shares held
by his daughter and options to purchase 27,000 shares of Central Parking
common stock.
(9) Includes options to purchase 20,249 shares of Central Parking common stock.
(10) Includes options to purchase 20,249 shares of Central Parking common stock,
2,250 shares held by Mr. Wolfe's spouse, and 1,125 shares held by the
Patricia Wolfe Children's Trust of which Mr. Wolfe is trustee, and for
which Mr. Wolfe disclaims beneficial ownership.
(11) Includes options to purchase 15,749 shares of Central Parking common stock.
(12) Includes 718 shares of restricted stock granted in lieu of director
compensation pursuant to Central Parking's Restricted Stock Plan and
options to purchase 20,250 shares of Central Parking common stock.
(13) Includes 118 shares of restricted stock granted in lieu of director
compensation pursuant to Central Parking's Restricted Stock Plan and
options to purchase 20,250 shares of Central Parking common stock.
(14) Includes 4,500 shares held by Mr. Nelson's spouse, of which Mr. Nelson
disclaims beneficial ownership, 118 shares of restricted stock granted in
lieu of director compensation pursuant to Central Parking's Restricted
Stock Plan and options to purchase 20,250 shares of Central Parking common
stock.
(15) Includes 582 shares of restricted stock granted in lieu of director
compensation pursuant to Central Parking's Restricted Stock Plan, options
to purchase 20,250 shares of
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Central Parking common stock granted pursuant to the Director Stock Option
Plan and 2,200 shares held by his spouse.
(16) Includes 1,177 shares of restricted stock granted in lieu of director
compensation pursuant to Central Parking's Restricted Stock Plan and
options to purchase 11,250 shares of Central Parking common stock.
(17) Includes 667,779 owned by a partnership of which Mr. Katz is a general
partner, options to purchase 5,000 shares of Central Parking common stock
and 43 shares of restricted stock granted in lieu of director compensation
pursuant to Central Parking's Restricted Stock Plan.
(18) Mr. Benjamin is expected to be Apollo's nominee to the Central Parking
Board after the Merger. The indicated number of shares for Mr. Benjamin
does not include shares to be acquired by Apollo in the Merger. Mr.
Benjamin is a principal of Apollo Real Estate Advisors II, L.P., the
general partner of Apollo, and disclaims beneficial ownership of all shares
not directly held by him.
(19) Mr. Davidson is expected to be AEW's nominee to the Central Parking Board
after the Merger. The indicated number of shares for Mr. Davidson does not
include shares to be acquired by AEW in the Merger. Mr. Davidson disclaims
beneficial ownership of all shares not directly held by him.
(20) Includes options to purchase 276,804 shares of Central Parking's common
stock, 271,219 shares of restricted stock and 37,302 shares held in Central
Parking's Deferred Unit Plan.
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DESCRIPTION OF ALLRIGHT
BUSINESS -- GENERAL
Allright is a holding company, the sole material asset of which is 100% of the
authorized, issued and outstanding shares of common stock, $0.10 par value, of
Allright Corporation. Beginning operations in 1926, Allright Corporation is one
of the world's largest and most experienced full-service parking management
companies. As of September 30, 1998, Allright operated approximately 2,315
facilities containing approximately 550,000 parking spaces, including 72
facilities in Canada containing approximately 30,000 parking spaces. As of
September 30, 1998, Allright operated facilities in over one hundred cities
across the United States and Canada, including facilities in thirty-three
states, the District of Columbia, and two Canadian provinces. Facilities
operated by Allright include such premier facilities as The Sears Tower Garage
in Chicago, Tabor Center Garage in Denver, Convention Center Garage in
Cincinnati, the Boston Commons Garage in Boston, the Lincoln Center Garage in
New York City and Rich Stadium in Buffalo.
OPERATIONS; STRUCTURE
Allright, in its name and through various subsidiaries and joint ventures,
operates parking facilities under three different types of arrangements: fee
ownership, leases, and management contracts. As of September 30, 1998, Allright,
directly or indirectly, owned 195 facilities, leased 1,473 facilities, and
operated 647 facilities through management contracts. The general terms of the
management contracts and leases to which Allright and its subsidiaries are a
party are similar to those to which Central Parking is a party as described
under "Description of Central Parking -- Operating Arrangements; Management
Contracts." Allright and its subsidiaries' management contract renewal rates for
the years ended June 30, 1996, 1997 and 1998, were 89%, 92% and 89%,
respectively.
The following table illustrates the number of facilities managed, leased, and
owned, directly and indirectly, by Allright in both the United States and Canada
as of September 30, 1998.
<TABLE>
<CAPTION>
PERCENT OF
TOTAL
MANAGED LEASED OWNED TOTAL FACILITIES SPACES
------- ------ ----- ----- ---------- -------
<S> <C> <C> <C> <C> <C> <C>
United States.................. 624 1,426 193 2,243 97 515,198
Canada......................... 23 47 2 72 3 29,909
--- ----- --- ----- --- -------
Total................ 647 1,473 195 2,315 100 545,107
=== ===== === ===== === =======
</TABLE>
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Allright's facilities are currently organized into 4 divisions, and these
divisions are further subdivided into 16 regions. Thirteen of the regions are
supervised by a regional manager who reports directly to a divisional manager.
The following table summarizes certain information regarding Allright's
facilities as of September 30, 1998:
<TABLE>
<CAPTION>
PERCENTAGE
NUMBER TOTAL OF TOTAL
DIVISION REGION CITIES OF LOCATIONS MANAGED LEASED OWNED SPACES SPACES
- -------- ------ ------ ------------ ------- ------ ----- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 A.... Birmingham, Chattanooga, 110 19 85 6 13,336 2.5%
Fort Myers, Gainesville,
Jacksonville, Knoxville,
Lynchburg, Mobile
1 B.... Atlanta, Charlotte, Miami, 122 19 83 20 19,969 3.7%
Savannah, Tampa, West
Palm Beach
1 C.... Cincinnati, Hebron, Dayton, 129 26 78 25 23,211 4.3%
Indianapolis, Newport
News, Roanoke, Roanoke
Airport, Winston-Salem
1 D.... Ann Arbor, Burlington, 116 107 9 -- 70,396 12.9%
Detroit, Holyoke, Lincoln,
Manchester, Montpelier,
Northampton, Pittsfield,
Pontiac, Richmond,
Scranton, Wilkes-Barre
2 A.... Long Beach, Los Angeles, 131 24 103 4 21,251 3.9%
San Diego
2 B.... Oakland, Reno, 119 33 85 1 16,825 3.1%
Sacramento, San Francisco
2 C.... Kansas City, Milwaukee, 166 34 116 16 34,014 6.2%
Milwaukee Airport,
Minneapolis, Omaha,
Seattle
3 A.... Baton Rouge, Little Rock, 301 56 222 23 32,932 6.0%
Louisville, Memphis,
Nashville, New Orleans,
Shreveport
3 B.... Austin, Beaumont, Dallas, 355 89 235 31 63,977 11.7%
El Paso, Fort Worth,
Houston, Lake Charles,
Peoria, Springfield
3 C.... Albuquerque, Corpus 208 50 139 19 60,495 11.1%
Christi, Denver, Denver
Airport, Las Vegas,
Phoenix, Phoenix Airport,
San Antonio, St. Louis
3 D.... Tulsa, Houston Airport 4 -- 1 3 2,601 0.5%
4 A.... Binghamton, Buffalo, 197 49 130 18 64,312 11.8%
Columbus, Poughkeepsie,
Poughkeepsie -- Transit,
Rochester, Rochester
Airport, Syracuse, Syracuse
Airport, Toledo
4 B.... Baltimore, Chicago, Jersey 171 28 121 22 31,709 5.8%
City, Newark, Philadelphia,
Washington D.C.
4 C.... Montreal, Ottawa, Toronto 72 23 47 2 29,909 5.5%
4 D.... Boston 11 1 5 5 2,302 0.4%
4 E.... Edison -- CT, Edison -- MD, 103 89 14 -- 57,868 10.6%
Edison -- NJ, Edison -- NY,
Edison -- PA, Edison -- VA
----- --- ----- --- ------- -----
TOTAL 2,315 647 1,473 195 545,107 100%
===== === ===== === ======= =====
</TABLE>
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STRATEGY & GROWTH
Management believes that Allright's size and experience are the cornerstones of
its success in the parking services industry. Technological applications to the
parking services industry and professional management strategies have
contributed to Allright's success. Since 1926, Allright Corporation's exclusive
business focus has been parking services. Over its seventy-two year history, the
company has accumulated an extraordinarily broad base of operational expertise
in virtually every segment of the parking industry. Allright's primary business
strategy has been to aggressively grow the company through both synergistic
acquisitions and the addition of new management contracts and leased facilities.
Allright's primary operating strategy has been to increase profitability of its
managed, leased, and fee owned facilities by focusing on core operations and
emphasizing: decentralized management; strict revenue control; advanced
management information technology; strategic marketing/sales programs; ancillary
parking services; and continual employee training programs. While implementing
both its operating and business strategies, Allright has always maintained a
basic philosophy focused on providing the highest quality of parking and client
service. As both an owner and operator, much of Allright's success stems from
its clear understanding that parking is a local business. Every facility has its
own uniqueness, and every client has its own needs and priorities.
In addition, the expertise and resources of Allright's controlling shareholders
have played a large part in Allright's growth. AEW is an investment partnership
managed by AEW Capital Management, L.P., a Boston-based full-service real estate
advisor, which represents pension funds, university endowments, retirement
programs, and other institutional investment groups. Apollo, a New York-based
real estate investment advisor, represents a broad spectrum of institutional
investors and has extensive experience with ownership and management of real
estate operating companies.
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As the chart below demonstrates, Allright has embarked on an aggressive growth
strategy:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
---------------------
1996 1997 1998
----- ----- -----
<S> <C> <C> <C>
MANAGED FACILITIES:
Beginning of year.................................... 247 254 364
Acquired during year................................. 0 102 213
Added during year.................................... 35 54 98
Deleted during year.................................. (28) (46)* (40)
----- ----- -----
End of year.......................................... 254 364 635
----- ----- -----
Renewal rate......................................... 89% 92% 89%
LEASED FACILITIES:
Beginning of year.................................... 1,307 1,273 1,315
Acquired during year................................. 0 39 63
Added during year.................................... 112 161 269
Deleted during year.................................. (146) (158) (153)
----- ----- -----
End of year.......................................... 1,273 1,315 1,494
----- ----- -----
Renewal Rate........................................... 89% 88% 88%
----- ----- -----
OWNED FACILITIES:
Beginning of year.................................... 174 178 179
Acquired during year................................. 0 0 3
Purchased during year................................ 5 7 19
Sold during year..................................... 1 6 7
----- ----- -----
End of year.......................................... 178 179 194
----- ----- -----
Total facilities (end of year)............... 1,705 1,858 2,323
===== ===== =====
SUMMARY:
Managed.............................................. 254 364 635
Leased............................................... 1,273 1,315 1,494
Owned................................................ 178 179 194
----- ----- -----
Total facilities............................. 1,705 1,858 2,323
===== ===== =====
</TABLE>
- ---------------
* 25 of the locations in Toronto were combined into 1 location for accounting
purposes and, for purposes of this chart, are categorized as "deleted" during
the year.
As of October 1, 1998 Allright has completed thirty-seven acquisitions since AEW
and Apollo acquired control of Allright in October 1996 for a total purchase
price of approximately $78 million. Allright's acquisitions have included both
fee asset acquisitions as well as corporate acquisitions. Recent material
corporate acquisitions and strategic ventures include the following:
Edison Parking Management, L.P. (the "Edison Partnership"). The Edison
Partnership is a limited partnership formed in June 1997 to operate parking
facilities throughout the Northeast United States under the "Edison ParkFast"
name. The controlling persons of Allright's joint venture partner have been
operating parking facilities in the Northeast under the "Edison ParkFast" name
since 1955. As of September 30, 1998, the Edison Partnership operated
approximately 103 locations in the greater metropolitan New York City area,
Philadelphia, Baltimore, and northern New Jersey, including Lincoln Center, the
Metropolitan Museum of Art, Columbia Presbyterian Hospital and various office
buildings, apartment houses, hotels, retail centers, commuter terminals, and
entertainment facilities.
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National Garages, Inc. ("National"). In December 1997, Allright purchased
National. National was founded in 1925 as a single city operation in Detroit,
Michigan and has since grown to over two hundred managed locations, primarily in
the Mid-Western United States. National provides services to various businesses,
including municipal agencies, hospitals, airports, private developers, retail
establishments, and banks. National has maintained its reputation as a pioneer
in the parking industry through, among other things, its high-speed ramp
designs, its Park-and-Shop concept and its patent on the ticket spitter/gate
system.
Allied Parking ("Allied"). On October 1, 1998, Allright closed the acquisition
of six long-term leasehold interests and the trademark name Allied Parking. This
was the first of a staged acquisition that will result in Allright purchasing up
to thirteen long-term leasehold interests. Allied is a New York City based
parking operator whose markets cover commercial, hotel, and to a lesser extent
residential properties. The concentration of the Allied locations is in midtown
Manhattan with the exception of two locations downtown and two locations on the
upper east side.
MBE PARTNERSHIPS
Allright is currently a party to several separate minority business enterprise
partnerships formed by Allright or a subsidiary of Allright and a minority
business person to manage various facilities. Allright typically owns, directly
or indirectly, a controlling interest in each partnership and typically receives
management fees before partnership distributions are made to the partners.
EMPLOYEES
As of September 30, 1998, Allright, directly and indirectly, employed
approximately 5,140 individuals, including both full-time and part-time
employees. Management believes that Allright's employee relations are good.
Approximately 591 United States employees are represented by labor unions.
Cities in which some of Allright's direct or indirect employees are represented
by unions are Detroit, Philadelphia, New York City, Syracuse, Seattle,
Birmingham, and Chicago. Allright has not experienced any work stoppages within
the past five years.
NO ESTABLISHED TRADING MARKET; DIVIDENDS
Allright is a privately-held company and there is no established public trading
market for any class of Allright's securities. As of September 30, 1998, there
were approximately 60 holders of Allright Common Stock.
Allright has not historically paid dividends but has retained its earnings for
future growth. Certain restrictions on paying dividends were also placed upon
Allright pursuant to a credit agreement, which is expected to be satisfied in
full on the Closing Date from the proceeds from Central Parking's Credit
Facility or the proceeds from a new credit facility to be obtained by Central
Parking (for which Central Parking has received a commitment letter), and at
such time the restrictions set forth in Allright's credit agreement, including
the restriction on dividends, will be eliminated.
INTERNATIONAL FOREIGN CURRENCY EXPOSURE
Allright operates subsidiaries in Canada. Currently, Allright has limited
exposure to foreign currency risk and has no hedge programs.
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<PAGE> 134
LITIGATION
Allright is involved in routine litigation relating to various contract
disputes, property damage and personal injury, none of which management of
Allright considers to be material to the business or operations of Allright.
CERTAIN INDEMNIFICATION RIGHTS
Nedinco Delaware Incorporated, a Delaware corporation, and Hang Lung Development
Company Ltd., a Hong Kong corporation, have agreed to indemnify Allright for
certain costs and liabilities incurred in connection with or arising out of the
operations of the Predecessor Company prior to October 31, 1996. As a result of
the indemnification, expenses related to items covered by the indemnification
are being paid directly by Nedinco Delaware Incorporated.
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ALLRIGHT'S MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of the results of operations should be read in
conjunction with the Consolidated Financial Statements and Notes thereto.
OVERVIEW
Allright is a holding company, the sole material asset of which is 100% of the
authorized, issued and outstanding shares of common stock of Allright
Corporation, which began operations in 1926. Allright Corporation is one of the
world's largest and most experienced full-service parking management companies.
As of September 30, 1998, Allright operated facilities in over one hundred
cities across the United States and Canada, including facilities in 35 states,
the District of Columbia, and two Canadian provinces. Allright operates parking
facilities under three different types of arrangements -- management contracts,
leases and fee ownership. As of September 30, 1998, Allright operated 647
parking facilities under management contracts, 1,473 parking facilities under
leases, and owned either independently or through joint ventures, 195 parking
facilities.
On October 31, 1996, Allright Acquisition Company, Inc., a Delaware corporation
and wholly owned subsidiary of Allright, acquired all of the common stock (the
"Acquisition") of Allright Corporation from Nedinco Delaware Incorporated
("Nedinco"), a Delaware corporation, for approximately $226,334,000, including
acquisition-related expenses of approximately $3,267,000. The Acquisition was
financed with proceeds from a capital contribution of $65,850,000 from Allright
and the remainder was financed through a credit agreement (the "CSFB Credit
Agreement") with CS First Boston Mortgage Capital Corp. ("CSFB"). The
Acquisition was accounted for as a purchase, and the total purchase price was
allocated to assets acquired and liabilities assumed based on their relative
fair market values at the date of purchase and resulted in goodwill of
approximately $33,596,000.
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<PAGE> 136
Amounts for fiscal 1997 reflect the pro forma results of operations of Allright
and the Predecessor Company, presented as if the Acquisition had been effected
July 1, 1996 (referred to herein as "fiscal pro forma 1997"). Unless otherwise
noted in the discussion below, the actual and fiscal pro forma 1997 financial
results are the same.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
FISCAL YEAR ENDED JUNE 30, SEPTEMBER 30,
------------------------------ -------------------
1996 1997(1) 1998 1997 1998
-------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Revenues:
Parking services revenues...... $167,709 $173,476 $206,448 $48,691 $56,244
Management fee revenues........ 4,645 5,161 10,936 2,330 2,990
Costs and expenses:
Cost of parking services....... 138,604 139,642 169,811 40,415 46,458
Depreciation and
amortization................ 6,257 6,738 9,633 2,069 2,649
General and administrative
expenses.................... 9,271 9,047 11,919 2,412 3,586
Issuance of stock to
management.................. -- -- -- -- --
Amortization of goodwill....... -- 1,125 1,177 338 292
-------- -------- -------- ------- -------
Income from parking operations... 18,222 22,085 24,844 5,787 6,249
Interest expense................. (5,915) (20,577) (22,859) (5,493) (6,500)
Interest and investment income... 729 973 1,308 344 586
Minority interest................ -- (163) (289) (72) (88)
Gain (loss) on sales of
property....................... 1,101 91 (710) (41) (3)
-------- -------- -------- ------- -------
Income (loss) before income taxes
and extraordinary item......... 14,137 2,409 2,294 525 244
Income taxes..................... (5,955) (3,328) (2,226) (433) (264)
-------- -------- -------- ------- -------
Income (loss) before
Extraordinary item............. 8,182 (919) 68 92 (20)
Extraordinary item............... -- (1,534) -- -- --
-------- -------- -------- ------- -------
Net income (loss)................ $ 8,182 $ (2,453) $ 68 $ 92 $ (20)
======== ======== ======== ======= =======
</TABLE>
- ---------------
(1) Gives effect to the Acquisition as if it had been effected July 1, 1996. The
foregoing unaudited pro forma amounts are based upon certain assumptions and
estimates, including, but not limited to, (a) interest expense on debt
incurred to finance the Acquisition, (b) depreciation expense related to the
net increase in the values of garages, buildings and leaseholds, (c)
amortization of goodwill over 30 years associated with the Acquisition and
(d) the related tax effects of (a), (b) and (c). Additionally, the
nonrecurring charge to the Predecessor Company for the $5,500,000
compensation charge related to the equity commitment made by Nedinco was
excluded from the 1997 unaudited pro forma condensed results of operations.
The unaudited pro forma information set forth above is not necessarily
indicative of the results that actually would have been achieved had such
transactions been consummated as of July 1, 1996, or that may be achieved in
the future.
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<PAGE> 137
RESULTS OF OPERATIONS
Three months ended September 30, 1998 compared to three months ended
September 30, 1997
Parking services revenues and management fee revenues in the three months ended
September 30, 1998 increased to $59.2 million from $51.0 million in the same
period in the prior year, an increase of $8.2 million. Of the $8.2 million, $3.3
million resulted from parking company acquisitions and individual lot
acquisitions. The remaining increase was attributable to a combination of the
net addition of 126 leased and managed locations and parking rate increases on
existing lots nationwide.
Cost of parking services in the three months ended September 30, 1998 increased
to $46.5 million from $40.4 million in the same period in the prior year, an
increase of $6.1 million. Rent and property tax expense increased $3.9 million
principally as a result of new locations and additional percentage rents on
existing locations. Payroll expense increased by $1.8 million resulting from the
additional personnel associated with acquisitions, new locations and increases
in existing payroll. The remaining increase relates to additional supplies and
maintenance costs as a result of parking additional cars on new and acquired
locations.
Depreciation and amortization in the three months ended September 30, 1998
increased to $2.6 million from $2.1 million in the same period in the prior
year, a $0.5 million increase. The increase resulted primarily from increased
capital expenditures and additional parking structures acquired in the prior
year.
General and administrative expenses in the three months ended September 30, 1998
increased to $3.6 million from $2.4 million in the same period in the prior
year, a $1.2 million increase. The primary reason for this increase is the
increase in both permanent and contract personnel cost associated with the
general and administrative expenses of new and acquired locations as well as
additional personnel to assist in the conversion of Allright's financial system
and re-engineering of the accounting functions.
Interest expense increased in the three months ended September 30, 1998 to $6.5
million from $5.5 million in the same period in the prior year, a $1.0 million
increase. The increased interest expense was a result of borrowing to fund new
acquisitions in the prior year.
Interest income increased to $0.6 million in the three months ended September
30, 1998 from $0.3 million in the same period in the prior year. The increase in
interest income was the result of additional short-term investments made during
the quarter. Net cash provided by operating activities for the three months
ended September 30, 1998 was $1.1 million, an increase of $0.5 million over net
cash provided by operating activities of $0.7 million in the same period in the
prior year. The increase is mainly due to the increase in depreciation and
amortization resulting from increased level of capital expenditures in the prior
year.
Year ended June 30, 1998 compared to fiscal pro forma year ended June 30, 1997
Parking service revenues and management fee revenues in fiscal 1998 increased to
$217.4 million from $178.6 million in fiscal pro forma 1997, an increase of
$38.8 million. Of the $38.8 million increase, $10.0 million resulted from
parking company acquisitions and individual lot acquisitions in fiscal 1998. A
combination of the net addition of 174 leased and managed locations and parking
rate increases on existing lots nationwide resulted in a $14.5 million increase
in revenue. The remaining increase of $14.3 million was primarily attributable
to a full 12 months of revenue, versus one month revenue in 1997, related to
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<PAGE> 138
Allright's 50 percent controlling interest in the Edison Partnership formed on
June 1, 1997, between Allright and Park Fast Parking Management L.P. ("Park
Fast").
Cost of parking services in fiscal 1998 increased to $169.8 million from $139.6
million in fiscal pro forma 1997, an increase of $30.2 million. Rent expense
increased $10.6 million, principally as a result of new locations from
acquisitions and additional percentage rent on existing locations. Payroll
expense increased by $6.3 million resulting from the additional personnel
associated with acquisitions, new locations and increases on existing payroll.
The remaining $13.3 million increase is primarily attributable to the Edison
Partnership. Cost of parking services as a percentage of operating revenues,
remained relatively consistent at 78.1% in fiscal 1998 compared to 78.2% in
fiscal pro forma 1997.
Depreciation and amortization in fiscal 1998 increased to $9.6 million from $6.7
million in fiscal pro forma 1997, an increase of $2.9 million. Of this increase,
$1.7 million is attributable to the amortization related to the Edison
Partnership management contracts. The remaining increase resulted primarily from
parking company acquisitions and lease acquisitions in fiscal 1998. The
Acquisition resulted in a pro forma adjustment in 1996 of $0.1 million related
to increased monthly leasehold amortization.
General and administrative expenses in fiscal 1998 increased to $11.9 million
from $9.0 million in fiscal pro forma 1997, an increase of $2.9 million. This
increase was primarily a result of an increase in payroll expense associated
with the additional general and administrative expenses of acquired operations,
as well as, opening of additional leased and owned locations and the costs
associated with acquiring additional personnel in the corporate office.
Amortization of goodwill in fiscal 1998 increased to $1.2 million from $1.1
million in fiscal pro forma 1997, an increase of $0.1 million. The amortization
of goodwill increase resulted primarily from parking company acquisitions in
1998. The Acquisition resulted in a pro forma adjustment of $0.4 million related
to additional amortization of goodwill.
Interest expense increased in fiscal 1998 to $22.9 million from $20.6 million in
fiscal pro forma 1997. The increased interest expense was a result of borrowing
to fund additional asset purchases and acquisitions during the year. Additional
debt financing was obtained for the Acquisition resulting in a pro forma
adjustment to interest expense of $4.9 million.
Interest income increased in fiscal 1998 to $1.3 million from $1.0 million in
fiscal pro forma 1997. The increase in interest income was the result of
additional short-term investments made during fiscal 1998.
Loss from extraordinary item in fiscal pro forma 1997 was $1.5 million compared
to zero in 1998. The decrease is due to the extraordinary loss recognized in
connection with the defeasance of industrial revenue bonds in fiscal pro forma
1997.
Fiscal pro forma year ended June 30, 1997 compared to year ended June 30, 1996
Parking service revenues and management fee revenues in fiscal pro forma 1997
increased to $178.6 million from $172.4 million in fiscal 1996, an increase of
$6.2 million. Of the $6.2 million increase, $3.5 million resulted from parking
company acquisitions and individual lot acquisitions in fiscal pro forma 1997.
The remaining increase was attributable to a combination of the net addition of
36 leased and managed locations and parking rate increases on existing lots
nationwide.
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<PAGE> 139
Cost of parking services in fiscal pro forma 1997 increased to $139.6 million
from $138.6 million in fiscal 1996, an increase of $1.0 million. Contract labor
expense increased $0.7 million, principally as a result of labor costs related
to the computer systems and contract labor related to the Edison Partnership.
Payroll expense accounted for $0.9 million being attributable to a combination
of acquisitions, new locations and increases on existing payroll. The remaining
decrease of $0.6 million is primarily attributable to a decrease in rent due to
a loss of a significant lease in the second quarter of fiscal 1996. Cost of
parking services as a percentage of parking revenues decreased to 78.2% in
fiscal pro forma 1997 from 80.4% in fiscal 1996. This decrease of 2.2% was
attributable predominantly to the spreading of a number of fixed costs,
primarily rent and property costs, over a larger revenue base.
Depreciation and amortization in fiscal pro forma 1997 increased to $6.7 million
from $6.3 million in fiscal 1996, an increase of $0.4 million. This increase
resulted primarily from increased capital expenditures including van purchases
for off-airport locations and a corporate re-imaging program. In addition, the
October 1996 Acquisition resulted in a pro forma adjustment in 1997 of $0.1
million related to increased monthly leasehold amortization and monthly
depreciation.
General and administrative expenses in fiscal pro forma 1997 decreased to $9.0
million from $9.3 million in fiscal 1996, a decrease of $0.3 million. This
decrease was primarily a result of the discontinuance of management fees paid to
the predecessor shareholders.
Amortization of goodwill in fiscal pro forma 1997 increased to $1.1 million from
a zero balance in fiscal 1996. The amortization of goodwill in 1997 is a direct
result of the Acquisition.
Interest expense increased in fiscal pro forma 1997 to $20.6 million from $5.9
million in fiscal 1996. The increased interest expense was a result of
borrowings to fund the Acquisition and additional asset purchases and
acquisitions during the year. Additional debt financing was obtained for the
Acquisition resulting in a pro forma adjustment to interest expense of $4.9
million.
Interest income increased in fiscal pro forma 1997 to $1.0 million from $0.7
million in fiscal 1996. The increase was a result of additional short-term
investments made during fiscal pro forma 1997.
Gain on sales of property, equipment and leases in fiscal pro forma 1997
decreased to $0.1 million from $1.1 million in fiscal 1996. The decrease of $1.0
million was primarily a result of a decrease in the sales of lots in fiscal pro
forma 1997.
Loss from extraordinary item in fiscal pro forma 1997 was $1.5 million compared
to zero in 1996. The increase is due to the extraordinary loss recognized in
connection with the defeasance of industrial revenue bonds in fiscal pro forma
1997.
ACQUISITIONS
On June 1, 1997, Allright acquired a 50 percent controlling interest in the
Edison Partnership. The Edison Partnership's assets consist of management
contracts contributed by Park Fast. The value of Park Fast's interest is
reflected as minority interest in the balance sheet of Allright.
On December 1, 1997, Allright purchased National, based in Detroit, which
operates 210 facilities located primarily in the Mid-West United States. The
purchase price of approxi-
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<PAGE> 140
mately $3.7 million was paid in cash and financed through working capital and a
draw of $2.2 million on Allright's Permitted Acquisition Loan (as defined
below).
During the period from October 31, 1996 through June 30, 1997, Allright acquired
four properties and four companies for an aggregate purchase price of $8.4
million. During fiscal year 1998, Allright acquired 19 properties and seven
companies for aggregate purchase prices of $35 million and $5.4 million,
respectively.
LIQUIDITY AND CAPITAL RESOURCES
Allright's primary sources of working capital are cash flow from operations.
Allright had negative working capital of $9.1 million and $10.4 million as of
June 30, 1998 and 1997, respectively which reflects the incongruent timing of
Allright's cash inflows and outflows. The principal use of cash flows is to
finance the expansion of Allright's operations. As of September 30, 1998,
Allright had working capital of $1.5 million as Allright drew down debt to fund
the acquisition of certain Allied Parking leases which closed on October 1,
1998.
Net cash used in investing activities for the three months ended September 30,
1997 was $2.0 million. Acquisitions of property and equipment was $4.6 million
offset by $2.0 million received from sale of assets. The increase in advance
rent payments accounted for the balance.
Net cash used in investing activities for the three months ended September 30,
1998 was $4.6 million. Acquisitions of property and equipment totaled $5.5
million offset by $1.6 million from sale of assets. Additional investment in
parking affiliates and the increase in long term note receivable accounted for
the balance.
Net cash provided by financing activities was $0.8 million for the three months
ended September 30, 1997. Borrowings from a credit facility of $1.4 million and
a common stock issuance to AEW and Apollo of $1.5 million was obtained to
finance acquisitions. Payment of certain long term obligations totaled $2.1
million.
Net cash provided by financing activities was $14.6 million for the three months
ended September 30, 1998. $18.4 million was borrowed from both long and short
term credit facilities to finance current and committed acquisitions (October 1,
1998). Payments of $1.6 million were utilized to retire certain long term
obligations and $2.1 million was distributed to an investment partner.
Net cash provided by operating activities for fiscal 1998 was $25.7 million, an
increase of $15.4 million over net cash provided by operating activities of
$10.3 million for fiscal pro forma 1997. The increase was attributed both to
increased net earnings and improvements in working capital.
Net cash provided by operating activities for fiscal pro forma 1997 was $10.3
million, a decrease of $8.8 million over net cash provided by operating
activities of $19.1 million for fiscal year 1996. The decrease was attributed
both to increased interest expense and decreased working capital.
Net cash used in investing activities for fiscal 1998 was $44.7 million.
Acquisitions of property and equipment were $46.6 million while acquisitions of
companies, including leasehold and management fee contracts totaled $4.4
million. Such acquisitions were offset by $6.4 million received from sale of
assets.
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Net cash used in investing activities for fiscal pro forma 1997 totaled $250.0
million. The acquisition of Allright Corporation utilized $222.0 million;
investments in partnerships, principally the Edison Partnership, was $16.0
million; property and equipment purchases utilized cash of $9.8 million; and
acquisition of leasehold and management fee contracts utilized cash of $3.8
million. Sale of assets offset the investment activities by $2.6 million.
Net cash used in investing activities for fiscal year 1996 was $9.0 million.
Acquisitions of property and equipment were $9.5 million while acquisitions of
leasehold and management fee contracts totaled $0.4 million. Such acquisitions
were offset by $2.3 million from sale of assets. An additional $1.5 million was
paid on advance rent and deposits.
Net cash provided by financing activities for fiscal 1998 was $31.4 million.
Borrowings from a CSFB revolving line of credit totaled $25.4 million offset by
$4.8 million utilized to retire certain long-term obligations. An additional
$10.8 million was obtained through the issuance of common stock to AEW and
Apollo during the year.
Net cash provided by financing activities for fiscal pro forma 1997 was $237.0
million. Total debt issued to finance the acquisition of Allright Corporation
was $168.0 million while capital contributions from AEW and Apollo amounted to
$67.4 million. Additional common stock issued to AEW and Apollo during the
fiscal year accounted for an additional $6.0 million.
Net cash used in financing activities for fiscal year 1996 was $6.1 million.
Payments on long term obligations were $11.9 million offset by net short term
borrowings of $5.8 million.
In October 1996, Allright obtained a revolving line of credit with a maximum
borrowing capacity of $75 million, maturing October 31, 1999 (the "Permitted
Acquisition Loan"). As of June 30, 1998, Allright had $43.7 million available
under the Permitted Acquisition Loan, which bears interest at LIBOR plus 3.75
percent. On March 5, 1998, Allright secured a line of credit and letter of
credit with Bank One Texas, National Association (the "Bank One Loan"), for a
maximum of $5.1 million. As of June 30, 1998, letters of credit outstanding
under the Bank One Loan were $1.7 million, leaving $3.4 million available.
The Acquisition. In October 1996, Allright entered into the CSFB Credit
Agreement for the purpose of financing the purchase of the Predecessor Company.
Allright secured $30 million under Tranche A, Sub-portion One, with an annual
interest rate of one-month LIBOR plus 3.00% up to October 30, 1998, and LIBOR
plus 3.25% thereafter, and an additional $125 million under Tranche A,
Sub-portion Two, with an annual interest rate of LIBOR plus 3% up to October 31,
1998, and LIBOR plus 3.25% thereafter. Allright also secured an additional $30
million under Tranche 2 with an annual interest rate of 12.25% up to October 30,
1998 and 12.50% thereafter. All Tranches are set to mature on October 30, 1999.
Upon consummation of the Merger, management believes that the existing debt will
be refinanced by Central Parking. In the event the Merger is not consummated,
management intends to either refinance the existing debt obligations with CSFB
or obtain new financing when they expire on October 30, 1999. Management
believes it will obtain this financing at similar or better terms. Allright used
the proceeds from these Tranches to finance the purchase of the Predecessor
Company, to pay off a majority of its existing notes and to defease all of its
Industrial Development Revenue Bonds ("IRBs") in the amount of $17,892,093, of
which Allright recorded an extraordinary loss of $1,534,000. While the IRBs have
been defeased, at June 30, 1997 and 1998, $15,800,000 and $15,515,000,
respectively, of the IRBs remain outstanding in a defeasance trust.
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<PAGE> 142
Issuance of Common Stock. On October 31, 1996, Apollo and AEW each obtained
32,925 shares of Allright common stock for a combined $65.8 million. Since that
date, AEW and Apollo have each obtained an additional 5,263 shares for a total
combined $15.8 million. From February 28, 1997 through June 30, 1998, an
executive of Allright has purchased a total of 900 shares of Allright, for a
combined $0.9 million. In addition 1,650 shares were issued to management for a
combined $1.65 million, and 400 shares were issued to a financial advisory firm
that assisted Allright during the Acquisition.
Leases. Allright leases parking properties pursuant to noncancellable operating
leases that expire at various dates through 2073. In addition to regular rental,
certain leases require payment of a percentage of gross receipts. The terms of
certain lease agreements also provide for payment by the lessee of taxes,
insurance and maintenance on the facilities. Certain long-term lease agreements
also have various terms of renewal, escalation clauses and provisions under
which Allright could share in any gains upon the sale of property during the
lease term. Allright also uses rental income from subleases to offset current
lease payments.
IMPACT OF INFLATION AND CHANGING PRICES
The primary sources of revenues to Allright are parking revenues from owned and
leased locations and management contract revenue (net of expense reimbursements)
on managed parking facilities. Allright believes that inflation has had a
limited impact on its overall operations for fiscal years ended June 30, 1998
and 1997.
YEAR 2000 ISSUES
Since the beginning of calendar 1998, Allright has developed a plan to replace
the majority of its computer systems, applications, and communications in order
to improve productivity and support the growth of Allright's parking operations.
These enhancements were not accelerated due to year 2000 issues, and Allright
believes that prior applications could have been upgraded for year 2000
compliance at a minimal cost. Allright has obtained certifications and
contractual commitments of year 2000 compliance from all vendors and suppliers
of new computer technologies. Allright went live with its new core financial
applications in July 1998 and is expected to completely replace all prior
applications by June 1999. Allright has completed its replacement of local and
wide area information networks, computer hardware, software, and connection
devices. Management believes that the system is operating sufficiently to
produce the necessary management reporting needed to operate its business on a
timely basis and that all reporting capabilities will be ready as necessary.
Allright uses revenue control devices that compute parking fees and statistical
data, and also automate the ingress and egress control mechanisms at certain
parking facilities. Much of this equipment was internally developed. Allright
has begun testing of internally developed equipment, and based on preliminary
analysis, does not expect that the total cost of remedial costs to be material.
Allright will require the providers of third-party revenue control equipment to
certify year 2000 compliance. Allright believes that its revenue control devices
will be year 2000 compliant by the end of calendar 1999. In the event that
certain equipment is determined to be non-compliant, Allright will replace this
equipment with readily available alternatives, including internally developed
technologies. Although the actual cost of replacement cannot be determined at
this time, it is not expected to be material. Allright has developed manual
procedures to override any year 2000 incompatibilities and no disruption of
business is anticipated. Allright believes that year 2000 issues will not have a
significant impact on its operations or liquidity.
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<PAGE> 143
ACCOUNTING PRONOUNCEMENTS
In June 1997, SFAS No. 130, "Reporting Comprehensive Income," was issued. SFAS
No. 130 establishes standards for reporting and display of comprehensive income
and its components in a full set of general-purpose financial statements.
Comprehensive income is the total of net income and all other nonowner changes
in equity. Allright is required to adopt SFAS No. 130 in the first quarter of
fiscal 1999. Reclassification of comparative financial statements provided for
earlier periods will be required. Allright believes that the display of
comprehensive income will only differ from the currently reported net income by
the foreign currency translation currently reported in the consolidated
statement of stockholders' equity.
RECENT DEVELOPMENTS
Allied Parking. On October 1, 1998, Allright purchased from Allied four leases
relating to parking facilities in Manhattan, with maturities ranging from 2006
to 2029 for $14.2 million in cash. Allied agreed to lease to Allright two more
lots for 19 years each in exchange for a prepaid lease payment of $4.9 million.
Allright also purchased the right to use the "Allied Parking" name for $835,000
in cash.
On November 8, 1998, Allright purchased an additional six leases from Allied
Parking with maturities ranging from 1999 to 2008 for $5.1 million cash.
Allright also purchased the right to use the "Allied Parking" name associated
with these leases for $300,000 in cash.
Merger with Central Parking. On September 21, 1998, the Merger Agreement was
signed pursuant to which Allright will merge with Central Parking Sub. The
Merger, which is expected to be accounted for as a pooling of interests
transaction, is based on an equity purchase price of $564 million, which is
subject to adjustment for, and reduction related to, among other things,
transaction costs, acquisitions and Allright indebtedness. For purposes of
computing the Exchange Ratio, the Central Parking common stock will have a
deemed price of $46.00 per share. The Merger remains subject to certain closing
conditions, including the expiration of the waiting period under the HSR Act.
The Merger is also subject to approval by the shareholders of both Central
Parking and Allright at the special meetings. The Merger is anticipated to close
in early 1999.
System Conversion. Allright expects that the conversion of all system critical
functions will be completed no later than the end of the first calendar quarter
of 1999. Management expects this conversion timetable to provide adequate
opportunity to fully test and address any unforeseen year 2000 issues.
Management believes that the system is operating sufficiently to produce the
necessary management reporting needed to operate Allright on a timely basis and
that all reporting capabilities will be ready as necessary.
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<PAGE> 144
PRINCIPAL SHAREHOLDERS OF ALLRIGHT
The table below sets forth certain information regarding the beneficial
ownership of Allright common stock, as of December 31, 1998, and as adjusted to
reflect the Merger based on an assumed Exchange Ratio of 88.658 (see "The
Merger -- General") of (A) each person known to Allright to beneficially own
more than 5% of the Allright common stock, (B) each director of Allright, (C)
Allright Corporation's chief executive officer and four other most highly
compensated executive officers, and (D) all directors of Allright and executive
officers of Allright Corporation as a group.
<TABLE>
<CAPTION>
ESTIMATED
ALLRIGHT COMMON CENTRAL PARKING
STOCK BENEFICIALLY COMMON STOCK
OWNED PRIOR TO OWNED AFTER
MERGER(1) MERGER
------------------ -------------------
NUMBER PERCENT NUMBER PERCENT
------- -------- --------- -------
<S> <C> <C> <C> <C>
AEW Partners, L.P.(2)........................ 38,188 48.1% 3,385,671 9.1
Apollo Real Estate Investment Fund II,
L.P.(3).................................... 38,188 48.1 3,385,671 9.1
Marc L. Davidson(2).......................... 0 * 0 *
Thomas J. Nolan, Jr.(2)...................... 0 * 0 *
Michael McGillis(2).......................... 0 * 0 *
William S. Benjamin(3)....................... 0 * 0 *
Lee S. Neibart(3)............................ 0 * 0 *
Stuart Koenig(3)............................. 0 * 0 *
Gregory P. Shay(4)........................... 3,867 4.7 342,840 *
Timothy L. Grady(5).......................... 370 * 32,803 *
Peter D. Dane(6)............................. 210 * 18,618 *
Monty Stone(7)............................... 210 * 18,618 *
Terry Chen(8)................................ 220 * 19,504 *
All directors and executive officers as a
group
(11 persons)............................... 4,667 5.7% N/A N/A
</TABLE>
- ---------------
* Indicates less than 1%
(1) For purposes of this table, a person or group of persons is deemed to have
"beneficial ownership" of any shares as of the date of this joint proxy
statement/prospectus that such person or group has the right to acquire
within 60 days after such date, or with respect to which such person
otherwise has or shares voting or investment power. For purposes of
computing beneficial ownership and the percentages of outstanding shares
held by each person or group of persons on a given date, shares which such
person or group has the right to acquire within 60 days after such date are
shares for which such person has beneficial ownership and are deemed to be
outstanding for purposes of computing the percentage for such person, but
are not deemed to be outstanding for the purpose of computing the percentage
of any other person.
(2) Address: c/o AEW Capital Management, L.P., 225 Franklin Street, Boston, MA
02110. Shares of Allright common stock owned by AEW may be deemed
beneficially owned by its general partner, AEW/L.P., and by the general
partner of AEW/L.P., AEW, Inc. The indicated number of shares of Allright
common stock for Messrs. Davidson, Nolan and McGillis does not include
shares held by AEW. Messrs. Davidson, Nolan and McGillis, directors of
Allright, are employed by AEW or its affiliates, and disclaim beneficial
ownership of all shares of Allright common stock not directly held by them.
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Mr. Davidson is expected to be AEW's nominee to the Central Parking Board
after consummation of the Merger.
(3) Address: c/o Apollo Real Estate Management II, L.P., 1301 Avenue of the
Americas, New York, NY 10019. Shares of Allright common stock owned by
Apollo may be deemed beneficially owned by its general partner, Apollo Real
Estate Advisors II, L.P. ("AREA II") and by AREA II's general partner,
Apollo Real Estate Capital Advisors II, Inc. The indicated number of shares
of Allright common stock for Messrs. Benjamin, Neibart and Koenig does not
include shares held by Apollo. Messrs. Benjamin, Neibart and Koenig,
directors of Allright, are principals of AREA II, the general partner of
Apollo, and disclaim beneficial ownership of all shares not directly held by
them. Mr. Benjamin is expected to be Apollo's nominee to the Central Parking
Board after consummation of the Merger.
(4) Address: c/o Allright Corporation, 1313 Main Street, Houston, TX 77002.
Includes options to purchase 1,342 shares which have vested and are
immediately exercisable as of the date hereof, and options to purchase 1,575
shares which are expected to be vested and exercisable upon consummation of
the Merger. Mr. Shay's employment agreement provides that he is entitled to
options to purchase an additional 6.25 shares of Allright each month in lieu
of salary otherwise due, which options will be immediately vested and
exercisable.
(5) Address: c/o Allright Corporation, 1313 Main Street, Houston, TX 77002.
Includes options to purchase 185 shares of Allright common stock which are
currently vested and exercisable and options to purchase 185 shares of
Allright common stock which are expected to be vested and exercisable upon
consummation of the Merger.
(6) Address: c/o Allright Corporation, 59 Temple Place, Suite 402, Boston MA,
02111. Includes options to purchase 105 shares of Allright common stock
exercisable within 60 days from the date hereof.
(7) Address: c/o Allright Corporation, 1313 Main Street, Houston, TX 77002.
Includes options to purchase 105 shares of Allright common stock exercisable
within 60 days from the date hereof.
(8) Address: c/o Allright Corporation, 1313 Main Street, Houston, TX 77002.
Includes options to purchase 110 shares of Allright common stock exercisable
within 60 days from the date hereof.
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MANAGEMENT OF ALLRIGHT CORPORATION
EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
NAME AGE POSITION WITH ALLRIGHT CORPORATION
- ---- --- ----------------------------------
<S> <C> <C>
Gregory P. Shay............................ 38 President, Chief Executive Officer
Timothy L. Grady........................... 42 Executive Vice President, Chief
Operating Officer
Terry Chen................................. 47 Chief Financial Officer
Peter D. Dane.............................. 50 Executive Vice President,
Division Manager, Northeast &
Canada
Richard Dane............................... 44 Division Manager, West
Monty Stone................................ 62 Division Manager, Southwest
Daniel Baldwin............................. 48 Division Manager, Southeast
Daniel McKee............................... 44 Regional Manager
</TABLE>
Gregory P. Shay, was named President and CEO of Allright Corporation on March 1,
1997. Mr. Shay joined Allright Corporation from the real estate advisory firm of
AEW Capital Management Corporation, where he had worked since 1992 and where he
was instrumental in AEW's acquisition of Allright in addition to other
acquisitions totaling over $1.5 billion. Prior to joining AEW, Mr. Shay worked
for Colony Capital Real Estate Advisors as Vice President -- Acquisitions in
1991; London & Leeds Development Corporation as Regional Vice President, Local
Partner from 1987-1991; and JMB Realty Corporation as Vice President,
Acquisitions from 1982-1987. Mr. Shay holds a BS in Mechanical Engineering and a
BA in Economics from Brown University. Mr. Shay currently serves on Allright's
Board of Directors.
Timothy L. Grady, Executive Vice President, oversees Allright Corporation's
nationwide administrative operations. These operations include the departments
of finance/accounting, human resources, marketing and information systems.
Before joining Allright in September 1997, Mr. Grady served as Senior Vice
President and Chief Financial Officer for Oshman's Sporting Goods, Inc. Prior to
Oshman's, he spent six years at Solo Serve Corporation in several capacities
including Senior Vice President and Chief Operating Officer and Vice President
of Finance. Mr. Grady holds an MBA from the University of Texas and a BS in
Accounting from Texas Lutheran College. He is also a CPA.
Terry Chen, joined Allright Corporation in 1991 as Chief Financial Officer. He
is responsible for all activities related to financial analysis, financial
reporting, financial administration, internal/external reporting and treasury.
Before coming to Allright, he served as CFO at the Children's Hospital at
Stanford (Stanford University) and prior to that he worked with the accounting
firm of Ernst & Young in Los Angeles, CA. Mr. Chen received a BA at Whittier
College in Los Angeles and an MBA from the University of California, Los
Angeles. He is also a CPA.
Peter Dane, Executive Vice President and Division Manager, joined Allright
Corporation in 1972, after graduating with honors from Harvard College. During
his tenure, Mr. Dane has worked as President of Allright's Philadelphia
subsidiary, President of the Philadelphia Airport, and as Regional Manager of
New England, Canadian, Mid-Atlantic and upstate
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New York operations. In 1985 he was promoted to Division Manager of the
Northwest United States and of all Canadian operations. Currently, Mr. Dane's
division oversees the states of Illinois, Maryland, Massachusetts, New Jersey,
New York, Ohio and Pennsylvania and the provinces of Ontario and Quebec. His
responsibilities also include acquisition management.
Richard Dane, Division Manager, joined Allright Corporation in 1975 upon
graduation from the University of Rhode Island. He was named Division Manager of
West Coast Operations in 1989. He oversees the operations of numerous cities in
California, Minnesota, Missouri, Nebraska, Washington, and Wisconsin.
Monty Stone, Division Manager, joined Allright in 1969 as Vice President of
Houston operations, after having sold his parking business to Allright
Corporation. He started his own parking business in 1964 and built his company
to include over 50 locations in Houston and San Antonio. Since merging with
Allright Corporation, he has lived in Houston serving as Division Manager of
operations in the Southwestern United States.
Daniel Baldwin, Division Manager, joined Allright full time after graduation
from William Jewell College in 1972. During his career, Mr. Baldwin has served
as City Manager in various cities and Regional Manager for the North Central and
South Central Regions. He was named Vice President, Southeast Division Manager
in 1993 and has his office in Birmingham, Alabama. He oversees 4 regions, which
include operations in 31 cities with over 450 locations.
Daniel McKee, Regional Manager, has been with Allright Corporation for 19 years.
He oversees Allright Corporation's operations in Arizona, Missouri, Kansas,
Colorado, New Mexico, and portions of Texas and Nevada. Mr. McKee sits on the
Downtown Denver, Inc. Board of Directors, is a member of the DDI Management
Council, and has also received mayoral appointments to serve on various advisory
boards and tasks forces.
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MANAGEMENT OF THE COMBINED COMPANY
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information with respect to the expected
directors and executive officers of the combined company as of the date of this
joint proxy statement/ prospectus. Although certain executive officers of
Allright are expected to become executive officers of the combined company, such
decisions have not been finalized.
<TABLE>
<CAPTION>
NAME AGE POSITION WITH CENTRAL PARKING
- ---- --- -----------------------------
<S> <C> <C>
Monroe J. Carell, Jr................. 67 Chairman of the Board, Chief Executive
Officer
James H. Bond........................ 56 President, Chief Operating Officer, Director
Stephen A. Tisdell................... 47 Chief Financial Officer
Emanuel J. Eads...................... 47 Executive Vice President
Jeff L. Wolfe........................ 39 Senior Vice President
Alan J. Kahn......................... 38 Senior Vice President -- European Operations
Greg Susick.......................... 39 Senior Vice President
William R. Porter.................... 44 Senior Vice President
Bijan Eghtedari...................... 38 Senior Vice President
Benjamin F. Parrish, Jr.............. 42 Senior Vice President and General Counsel
Benjamin D. Wolfley.................. 38 Vice President and Controller
John W. Eakin(1)(2).................. 44 Director
Edward G. Nelson(1).................. 66 Director
William C. O'Neil, Jr.(2)............ 64 Director
P.E. Sadler(1)....................... 61 Director
Cecil Conlee(2)...................... 62 Director
Lowell Harwood....................... 68 Director
Lewis Katz........................... 57 Director
William S. Benjamin.................. 34 Director
Marc L. Davidson..................... 39 Director
</TABLE>
- ---------------
(1) Member of Audit Committee
(2) Member of Compensation Committee
All directors hold office until the next annual meeting of shareholders or until
their successors are duly elected and qualified. Executive officers serve at the
discretion of the Board of Directors.
Monroe J. Carell, Jr. has served as Chief Executive Officer and Chairman of the
Board of Directors of Central Parking for over 18 years. Mr. Carell has also
served as a trustee of Vanderbilt University in Nashville, Tennessee, since 1991
and is a member of the Board of Trust of the Urban Land Institute. Mr. Carell is
also a member of the Board of Directors of Prison Realty Trust, a publicly held
real estate investment trust, and Vanderbilt University Medical Center.
James H. Bond has been employed by Central Parking since 1971 in various
positions including general manager and regional manager. He has served as
President, Chief Operating Officer, and a member of the Board of Directors of
Central Parking since October 1990.
Stephen A. Tisdell has served as Chief Financial Officer of Central Parking
since February 1993. From May 1992 to February 1993 he was President and owner
of Tisdell Consulting, an independent financial consulting company. Mr. Tisdell
served as Executive Vice President, Treasurer, and Secretary of Maison Blanche,
Inc., a retail clothing company from June 1991 until May 1992. From February
1987 until June 1991, he served as Group Vice President --
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Finance and Chief Accounting Officer of Service Merchandise Corporation, a
nationwide retail goods company.
Emanuel J. Eads has served as Executive Vice President since August 1998 and
previously as a Senior Vice President of Central Parking since 1985. Mr. Eads
has served in various other positions with Central Parking, including general
manager and regional manager, since 1974.
Jeff L. Wolfe has served as a Senior Vice President of Central Parking since May
1994 and has served in various other positions with Central Parking, including
general manager and regional manager, since 1988.
Alan J. Kahn has served as Senior Vice President -- European Operations since
April 1996 and has served in various other positions with Central Parking,
including general manager and regional manager, since 1988.
Greg Susick has served as Senior Vice President since 1996 and has served in
various other positions with Central Parking, including general manager and
regional manager, since 1989.
William R. Porter has served as Senior Vice President -- Acquisitions since
November 1996. From 1991 to 1996, Mr. Porter served as Executive Vice
President -- Marketing for Ace Parking, a parking management company.
Bijan Eghtedari has served as a Senior Vice President of Central Parking since
November 1998. From June 1990 to November 1998, he served in various other
positions with Central Parking, including general manager and regional manager.
Benjamin F. Parrish, Jr. has served as Senior Vice President and General Counsel
since August 1998. From 1993 to 1998, Mr. Parrish served as Senior Vice
President and General Counsel of Smith & Nephew, Inc., a medical products
company.
Benjamin D. Wolfley has served as Vice President -- Controller since February
1998. From 1993 to 1998, Mr. Wolfley served as Chief Financial Officer, Vice
President -- Finance and Controller of Kyzen Corporation, a specialty chemical
manufacturer. Mr. Wolfley served as Chief Financial Officer -- Controller of
Cannon Industries, Inc., an industrial development and venture capital firm,
from 1990 to 1993.
John W. Eakin has served as a director of Central Parking since August 1993. Mr.
Eakin has been President of Eakin-Smith, Inc., a real estate development and
management company, since September 1987. In April 1996, Mr. Eakin merged his
company with Highwoods Properties, Inc., an office and industrial real estate
investment trust. Mr. Eakin serves as a director of Highwoods Properties, Inc.
and has served on the advisory board of First American Bank since 1994. Mr.
Eakins is also a member of the Board of Directors of Prison Realty Trust.
Edward G. Nelson has served as a director of Central Parking since August 1993.
Mr. Nelson formed Nelson Capital Corp., a merchant banking firm, in 1985, and
has served as the President and Chairman of the Board of such firm since its
organization. Mr. Nelson serves as a director of each of Advocat Inc., a
long-term care facility owner and operator; ClinTrials Research Inc., a clinical
research organization; and Berlitz International, Inc., a language services
company. Mr. Nelson also serves as a trustee of Vanderbilt University.
William C. O'Neil, Jr. has served as a director of Central Parking since August
1993. Mr. O'Neil serves as a director of each of Advocat Inc., a long-term care
facility owner and operator; ATRIX Laboratories, Inc., a drug delivery company;
ClinTrials Research Inc., a clinical research organization Sigma Aldrich
Corporation, a manufacturer of research chemicals; and American HealthCorp.,
Inc., a specialty healthcare service company.
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Mr. O'Neil served as Chairman of the Board, President and Chief Executive
Officer of ClinTrials Research Inc. from September 1989 to January 1998.
P.E. Sadler has served as a director of Central Parking since 1996. Mr. Sadler
is the Chairman of the Board of ActaMed Corporation, a healthcare technology
company that he founded in 1992. In 1979, Mr. Sadler founded MicroBilt
Corporation and served as its Chairman and Chief Executive Officer. After
MicroBilt was acquired by First Financial Management Corporation in 1989, Mr.
Sadler remained as Chairman and Chief Executive Officer until 1991.
Cecil Conlee has served as a director of Central Parking since 1996. Mr. Conlee
has served as Chairman of the Board and Chief Executive Officer of CGR
Investors, a real estate investment and portfolio management services company,
since 1989. Mr. Conlee serves on the Board of Directors of Oxford Industries,
Inc., a clothing manufacturer, and Rodamco, N.V., a real estate investment
company. Mr. Conlee also serves as a trustee of Cornerstone Properties, Inc.,
International Council of Shopping Centers and Vanderbilt University. Mr. Conlee
is a member and past trustee of the Urban Land Institute, a director of Central
Atlanta Progress, and The Southern Center for International Studies.
Lowell Harwood has served as a director of Central Parking since June 1997. Mr.
Harwood served as Chairman of the Board and Chief Executive Officer of Square
from 1968 until its acquisition by Central Parking in January 1997. Mr. Harwood
is past President of the Metropolitan Parking Association of New York and a
former Treasurer of the National Parking Association. Mr. Harwood also serves as
a Trustee of Kean University and a member of the Foundation Board of Trustees of
Christ Hospital.
Lewis Katz has been a director of Central Parking since May 1998. Mr. Katz
served as the Chief Executive Officer of Kinney from November 1990 until Central
Parking acquired Kinney in February 1998. Mr. Katz serves as a director of
Orleans Homebuilders, Inc. (formerly FPA Corporation), a residential real estate
development company.
William S. Benjamin is expected to become a director of Central Parking after
consummation of the Merger and is a principal of Apollo Real Estate Advisors,
L.P. which together with its affiliates, serves as general partner of the Apollo
Real Estate Investment Funds, private real estate oriented investment entities.
Mr. Benjamin's responsibilities include the acquisition and management of real
estate-related investments throughout the United States and Western Europe.
Prior to joining Apollo in 1995, he was Vice President in the Real Estate
Investment Bank of Bankers Trust. Mr. Benjamin serves as a director of several
private operating companies in the U.S. and the United Kingdom.
Marc L. Davidson is expected to become a director of Central Parking after
consummation of the Merger and is a Portfolio Manager in AEW's Private Equity
Investment Group, with responsibility for approximately $1 billion in client
investments. As such, Mr. Davidson assists in evaluating and negotiating new
investment opportunities and works with asset managers and real estate operators
in executing each asset's business plan. Mr. Davidson joined AEW in 1995,
bringing 15 years of experience in real estate consulting, property management
and development. Prior to joining AEW, Mr. Davidson worked for five years at
Coopers & Lybrand as a Senior Manager in the Real Estate and Reorganization
Groups, where his areas of expertise included financial and feasibility
analysis, systems and internal control development, deal structuring, investment
analysis and evaluation. For the previous 10 years, he served as a Financial
Officer at Winthrop Management, The Linpro Company and Charter Development. A
Certified Public Accountant, Mr. Davidson is a graduate of Bentley College
(B.S.).
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DESCRIPTION OF CENTRAL PARKING CAPITAL STOCK
Central Parking's authorized capital stock currently consists of 50 million
shares of common stock, par value $.01 per share, and 1 million shares of serial
Preferred Stock, par value $.01 per share. If the Charter Amendment Proposal is
approved by the Central Parking shareholders, the authorized capital stock will
be increased to 100 million shares of Central Parking common stock. As of
January 11, 1999, there were (i) 29,579,628 shares of Central Parking common
stock issued and outstanding, including 271,219 shares subject to further
vesting pursuant to restricted stock agreements, (ii) 1,012,521 shares of
Central Parking common stock reserved for issuance upon exercise of outstanding
options, and (iii) no shares of preferred stock outstanding.
CENTRAL PARKING COMMON STOCK
Each holder of Central Parking common stock is entitled to one vote per share on
all matters to be voted on by the shareholders. The Charter does not provide for
cumulative voting and, accordingly, the holders of a majority of the outstanding
shares have the power to elect all directors and to control the resolution of
all issues put to a vote of the shareholders. There are no preemptive or other
subscription rights, conversion rights, or redemption or sinking fund provisions
with respect to shares of the Central Parking common stock. All shares of the
Central Parking common stock outstanding upon consummation of the Merger will be
validly issued, fully paid, and nonassessable. The shares of Central Parking
common stock have the following rights, subject, in each case, to the rights of
the holders of any outstanding preferred stock: (i) to receive dividends, if
any, as may be declared and paid from time to time by the Central Parking Board,
in its discretion, from funds legally available therefore; and (ii) upon
liquidation, dissolution, or winding up of Central Parking, to receive pro rata
all assets remaining available for distribution.
PREFERRED STOCK
The Central Parking Board may authorize, without further action by Central
Parking's shareholders, the issuance of up to 1 million shares of preferred
stock in one or more series, and may fix by resolution, to the extent permitted
by the TBCA, the terms and rights of each such series, including the voting
powers, full or limited, if any, of the shares of such series and the
designations, preferences, and relative, participating, optional, or other
special rights, and qualifications, limitations, or restrictions thereof. The
issuance of preferred stock by action of the Central Parking Board could
adversely affect the voting power, dividend rights and other rights of holders
of the Common Stock. Issuance of a series of Preferred Stock could also,
depending on the terms of such series, either impede or facilitate the
completion of a merger, tender offer, or other takeover attempt. Although the
Central Parking Board is required to make a determination as to the best
interests of the shareholders of Central Parking when issuing preferred stock,
the Central Parking Board could act in a manner that would discourage an
acquisition attempt or other transaction that some, or a majority, of the
shareholders might believe to be in the best interests of Central Parking or in
which shareholders might receive a premium for their stock over the then
prevailing market price.
CONVERTIBLE TRUST ISSUED PREFERRED SECURITIES
In March 1998, Central Parking created the Trust, which completed a private
placement of 4.4 million shares at $25.00 per share of 5.25% convertible Trust
Issued Preferred Securities pursuant to an exemption from registration under the
Securities Act. The Trust Issued
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Preferred Securities represent preferred undivided beneficial interests in the
assets of the Trust. Central Parking owns all of the common securities of the
Trust. The Trust exists for the sole purpose of issuing the Trust Issued
Preferred Securities and investing the proceeds thereof in an equivalent amount
of 5.25% Convertible Subordinated Debentures ("Convertible Debentures") of
Central Parking due 2028. The net proceeds to Central Parking from the Trust
Issued Preferred Securities private placement were $106.0 million. Each Trust
Issued Preferred Security is entitled to receive cumulative cash distributions
at an annual rate of 5.25% (or $1.312 per share) and is convertible at the
option of the holder thereof into shares of Central Parking common stock at a
conversion rate of 0.4545 shares of Central Parking common stock for each Trust
Issued Preferred Security (equivalent to $55.00 per share of Central Parking
common stock), subject to adjustment in certain circumstances. The Trust Issued
Preferred Securities do not have a stated maturity date but are subject to
mandatory redemption upon the repayment of the Convertible Debentures at their
stated maturity (April 1, 2028) or upon acceleration or earlier repayment of the
Convertible Debentures.
Central Parking's consolidated balance sheets reflect the Trust Issued Preferred
Securities of the Trust as company-obligated mandatorily redeemable convertible
securities of subsidiary holding solely parent debentures.
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COMPARISON OF RIGHTS OF HOLDERS OF CENTRAL
PARKING COMMON STOCK AND ALLRIGHT COMMON STOCK
GENERAL
Central Parking is incorporated under the laws of the State of Tennessee, and
the rights of Central Parking shareholders are governed by Tennessee law,
including the TBCA, the Central Parking Charter, and Central Parking Bylaws.
Allright is incorporated under the laws of the State of Delaware, and the rights
of Allright shareholders are governed by Delaware law, including the DGCL, the
Certificate of Incorporation of Allright (the "Allright Certificate") and the
Allright Bylaws. At the Closing, Allright shareholders will become shareholders
in Central Parking, and their rights as Central Parking shareholders will be
governed by Tennessee law, and will also be governed by the Central Parking
Charter and the Central Parking Bylaws, which differ from the Allright
Certificate and the Allright Bylaws. Certain of these differences are summarized
below.
The following summary is not intended to be an exhaustive examination or a
detailed description of the differences between the rights of Central Parking
and Allright shareholders and is qualified in its entirety by reference to
Tennessee law, Delaware law, the Central Parking Charter, the Central Parking
Bylaws, the Allright Certificate and the Allright Bylaws. Allright shareholders
should carefully review the information contained in the Central Parking
documents, all of which are on file with the Commission. Copies of the Central
Parking Charter and Central Parking Bylaws are available without charge, upon
request, from Central Parking. Copies of the Allright Certificate and the
Allright Bylaws are available without charge, upon request, from Allright.
DIRECTORS
Size of the Board of Directors. The Central Parking Charter provides that the
board of directors shall consist of at least three and no more than 15
directors, the exact number to be fixed by resolution adopted by a majority of
the directors then in office. The size of the Central Parking board of directors
may be increased beyond fifteen to reflect the rights of the holders of
preferred stock, if any. The Central Parking Board currently consists of 9
members and will be expanded to 11 pursuant to certain Allright shareholders'
right to designate two members of the board under the Merger Agreement. The
Allright Certificate provides that the size of the board of directors shall be
as set in the Allright Bylaws. The Allright Bylaws provide that the number of
directors constituting the full board of directors shall be at least one and no
more than 15, the exact number to be fixed by resolution of the board of
directors. The Allright Board currently consists of 7 members.
Meetings of the Board of Directors. The Central Parking Bylaws require the
board of directors hold a meeting to elect the officers of Central Parking
immediately following the adjournment of an annual meeting of shareholders.
Special meetings of the Central Parking Board may be called by the chairman, the
president or any two directors. The Allright Bylaws provide that regular
meetings of the board of directors may be held without notice or special
meetings of the Allright Board may be called by the chairman, the president, or
any director.
Removal of Directors. The Central Parking Charter and Central Parking Bylaws
provide that one or more or the entire board of directors may be removed at any
time for cause by the affirmative vote of the holders of a majority of the
outstanding shares of capital stock entitled to vote generally in the election
of directors (considered for this purpose as one class). The
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Central Parking Bylaws define cause with respect to the removal of directors as
(A) any fraudulent or dishonest act or activity by the director or (B) behavior
materially detrimental to the business of Central Parking. Pursuant to Delaware
law, any director or the entire board of directors of Allright may be removed,
with or without cause, by the affirmative vote of a majority of the shares
entitled to be voted at an election of directors.
Filling Vacancies on the Board of Directors. Pursuant to the Central Parking
Bylaws, newly created directorships resulting from an increase in the number of
directors and vacancies occurring in any directorship for any reason, including
removal of a director, may be filled by the vote of a majority of the directors
remaining in office, even if less than a quorum exists, or by the majority vote
of the holders of outstanding shares of stock entitled to vote. The Allright
Bylaws provide that vacancies and newly created directorships on the Board of
Directors may be filled by a majority of the remaining directors in office.
AMENDMENT OF CONSTITUENT DOCUMENTS
Charter and Certificate of Incorporation. The Central Parking Charter provides
that it may be amended consistent with Tennessee law. Tennessee law provides
that the board of directors may adopt certain specified amendments to a charter
without shareholder approval, otherwise the right to amend a charter is reserved
to the shareholders.
The Allright Certificate provides that it may be amended or repealed consistent
with Delaware law. Delaware law generally provides that the right to amend a
certificate of incorporation is reserved to the shareholders.
Bylaws. The Central Parking Charter and Central Parking Bylaws provide that the
Central Parking Bylaws may be amended, added to or repealed either by (i) a
majority vote of the shares represented at any duly constituted shareholders
meeting or (ii) by a majority vote of the Central Parking Board. The Allright
Bylaws specifically provide for amendment or repeal or adoption of new bylaws by
the vote of a majority of the outstanding shares entitled to be voted or by a
majority of the Allright Board.
SHAREHOLDERS
Shareholders Action by Written Consent. The TBCA and DGCL provide that, unless
a corporation's certificate of incorporation or charter provides otherwise, any
action that is required to be or may be taken at any annual or special meeting
of the shareholders may be taken by a written consent in lieu of a meeting. The
Allright Bylaws expressly permit Allright shareholders to act without a meeting
pursuant to a written consent. The Central Parking Charter does not preclude
shareholders from acting by a written consent in lieu of a meeting, provided
that certain preferred stock holders may exercise any special voting rights
given to them pursuant to the Central Parking Charter.
Notice of Shareholders Business. Pursuant to the Central Parking Bylaws, only
such business shall come before an annual meeting of shareholders as shall have
been properly brought before the meeting. A shareholder properly brings business
before a meeting by providing the secretary of Central Parking with a written
notice not less than 60 nor more than 90 days prior to the meeting date, unless
Central Parking shall not have publicly announced the meeting at least 70 days
prior to the meeting, in which case the shareholder must provide the written
notice not later than the tenth day after the shareholders were notified of the
meeting. The Allright Bylaws do not specify the procedure by which a shareholder
may bring business before an annual meeting.
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Special Meetings of Shareholders. The Central Parking Bylaws provide that a
special meeting of the shareholders may be called only by the president or a
majority of the board of directors. The Allright Bylaws provide that special
meetings of the shareholders may be called by the chairman, the president, any
vice president, the secretary, any assistant secretary or by any such officer at
the written request of a majority of the Allright Board, or the holders of a
majority of issued and outstanding stock entitled to vote at such meeting.
Proxies. The Central Parking Bylaws provide that no proxy shall be valid after
the expiration of eleven months from the date of its execution, unless the proxy
expressly provides otherwise, while the Allright Bylaws do not specify any such
restrictions with respect to proxies.
INDEMNIFICATION AND ELIMINATION OF DIRECTORS' MONETARY LIABILITY FOR BREACH OF
DUTY OF CARE
The constituent documents of Central Parking and Allright contain similar
provisions limiting the personal liability of directors and providing for the
indemnification and payment of expenses of directors and officers to the full
extent of the law. See "Description of Central Parking Capital Stock."
ANTI-TAKEOVER MEASURES
Vote Required for Certain Business Combinations. Neither the Central Parking
Charter nor the Allright Certificate contains any special voting or other
provisions relating to business combinations. However, Tennessee law has certain
legislation dealing with this subject.
Prevention of Self-Dealing Transactions. Allright may participate in a
transaction with its directors or officers if the material facts are disclosed
or known to the Allright Board and a majority of the disinterested directors
approve the transaction or the transaction is approved in good faith by a vote
of the shareholders of Allright, or the transaction is fair at the time it is
authorized, ratified or approved by the Allright Board, a committee of the
Board, or the shareholders.
The Central Parking Charter contains no similar provisions.
149
<PAGE> 156
LEGAL MATTERS
The validity of the shares of Central Parking common stock offered hereby will
be passed upon for Central Parking by Harwell Howard Hyne Gabbert & Manner,
P.C., Nashville, Tennessee. Skadden, Arps, Slate, Meagher & Flom LLP, counsel to
Allright, will deliver an opinion concerning certain federal tax consequences of
the Merger.
EXPERTS
The consolidated financial statements of Central Parking Corporation and
subsidiaries as of September 30, 1997 and 1998, and for each of the years in the
three-year period ended September 30, 1998, have been included herein in
reliance upon the report of KPMG LLP, independent certified public accountants,
included herein, and upon the authority of said firm as experts in accounting
and auditing. KPMG LLP, tax advisor to Central Parking will also deliver an
opinion concerning certain federal income tax consequences of the Merger.
The consolidated financial statements of Allright Holdings, Inc. and
Subsidiaries as of June 30, 1998 and 1997, and for the year ended June 30, 1998,
and the period from October 31, 1996 to June 30, 1997, and of the Predecessor
Company for the period from July 1, 1996 to October 30, 1996, included herein,
have been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their report with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in accounting and auditing
in giving said report.
The consolidated statements of operations, cash flows and stockholder's equity
of the Predecessor Company for the year ended June 30, 1996, have been audited
by Ernst & Young LLP, independent auditors, as set forth in their report thereon
and included herein. Such consolidated financial statements are included herein
in reliance upon such report giving upon the authority of such firm as experts
in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
Central Parking files annual, quarterly and special reports, proxy statements
and other information with the Commission. You may read and copy any reports,
statements or other information filed by Central Parking at the Commission's
public reference rooms in Washington, D.C., New York, New York and Chicago,
Illinois. Please call the Commission at 1-800-SEC-0330 for further information
on the public reference rooms. Central Parking's Commission filings are also
available to the public from commercial document retrieval services and at the
web site maintained by the Commission at "http://www.sec.gov."
Central Parking filed a Registration Statement on Form S-4 to register with the
Commission the Central Parking common stock to be issued to holders of Allright
common stock in the Merger. This joint proxy statement/prospectus is a part of
that Registration Statement and constitutes a prospectus of Central Parking in
addition to being a joint proxy statement of Central Parking and Allright for
their respective special meetings. As allowed by Commission rules, this joint
proxy statement/prospectus does not contain all the information you can find in
the Registration Statement or the exhibits to the Registration Statement.
This joint proxy statement/prospectus incorporates by reference the documents
set forth below that have been previously filed with the Commission. These
documents contain important information about Central Parking and its finances.
150
<PAGE> 157
CENTRAL PARKING COMMISSION FILINGS (File No. 001-13950)
- - Central Parking's Annual Report on Form 10-K for the fiscal year ended
September 30, 1998;
- - Central Parking's Current Report on Form 8-K dated December 2, 1998 relating
to fiscal 1998 preliminary earnings release;
- - Central Parking's Current Report on Form 8-K dated December 8, 1998 relating
to fiscal 1998 earnings;
- - The description of Central Parking's common stock contained in Central
Parking's Registration Statement on Form 8-A filed on September 15, 1995.
Central Parking is also incorporating by reference additional documents that it
may file with the Commission between the date of this joint proxy
statement/prospectus and the date of the Central Parking and Allright special
meetings.
Central Parking has supplied all information contained or incorporated by
reference in this joint proxy statement/prospectus relating to Central Parking,
and Allright has supplied all such information relating to Allright.
You should rely only on the information contained or incorporated by reference
in this joint proxy statement/prospectus to vote on the approval and adoption of
the Merger Agreement. Neither Central Parking nor Allright has authorized anyone
to provide you with information that is different from what is contained in this
joint proxy statement/prospectus. This joint proxy statement/prospectus is dated
January 14, 1999. You should not assume that the information contained in the
joint proxy statement/prospectus is accurate as of any date other than such
date, and neither the mailing of this joint proxy statement/prospectus to
shareholders nor the issuance of Central Parking common stock in the Merger
shall create any implication to the contrary.
151
<PAGE> 158
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Central Parking Independent Auditors' Report................ F-2
Central Parking Consolidated Balance Sheets as of September
30, 1997 and 1998......................................... F-3
Central Parking Consolidated Statements of Earnings for the
three years ended September 30, 1998...................... F-4
Central Parking Consolidated Statements of Shareholders'
Equity as of September 30, 1998........................... F-5
Central Parking Consolidated Statements of Cash Flows for
the three years ended September 30, 1998.................. F-6
Central Parking Notes to Consolidated Financial
Statements................................................ F-7
Allright Report of Independent Public Accountants........... F-35
Allright Consolidated Balance Sheets as of June 30, 1997 and
1998, and September 30, 1998 (unaudited).................. F-37
Allright Consolidated Statements of Operations for the year
ended June 30, 1996 (Predecessor), the period from July 1,
1996 to October 30, 1996 (Predecessor), the period from
October 31, 1996 to June 30, 1997 and the year ended June
30, 1998 (Successor), and the three months ended September
30, 1997 and 1998 (unaudited)(Successor).................. F-38
Allright Consolidated Statements of Stockholders' Equity as
of June 30, 1998, and for the three months ended September
30, 1998 (unaudited)...................................... F-39
Allright Consolidated Statements of Cash Flows for the year
ended June 30, 1996 (Predecessor), the period from July 1,
1996 to October 30, 1996 (Predecessor), the period from
October 31, 1996 to June 30, 1997 and the year ended June
30, 1998 (Successor), and the three months ended September
30, 1997 and 1998 (unaudited)(Successor).................. F-40
Allright Notes to Consolidated Financial Statements......... F-41
</TABLE>
F-1
<PAGE> 159
INDEPENDENT AUDITORS' REPORT
THE BOARD OF DIRECTORS
CENTRAL PARKING CORPORATION AND SUBSIDIARIES:
We have audited the accompanying consolidated balance sheets of Central Parking
Corporation and Subsidiaries as of September 30, 1997 and 1998, and the related
consolidated statements of earnings, shareholders' equity, and cash flows for
each of the years in the three-year period ended September 30, 1998. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Central Parking
Corporation and Subsidiaries as of September 30, 1997 and 1998, and the results
of their operations and their cash flows for each of the years in the three-year
period ended September 30, 1998 in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
Nashville, Tennessee
December 3, 1998
F-2
<PAGE> 160
CENTRAL PARKING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30,
----------------------
1997 1998
--------- ---------
(AMOUNTS IN THOUSANDS,
EXCEPT SHARE DATA)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 9,979 $ 19,840
Management accounts receivable............................ 11,004 17,387
Accounts and current portion of notes receivable -- other
(including amounts due from related parties of $544 in
1997 and $238 in 1998) (Note 3)........................ 6,158 11,347
Prepaid rent and other expenses........................... 9,394 18,167
Deferred income taxes (Note 12)........................... 911 545
Prepaid and refundable income taxes....................... 2,154 1,266
-------- --------
Total current assets.............................. 39,600 68,552
Investments, at amortized cost (fair value $4,962 in 1997
and $5,355 in 1998) (Note 4).............................. 4,754 5,087
Notes receivable, less current portion (Note 3)............. 10,961 25,110
Property, equipment, and leasehold improvements, net (Note
5)........................................................ 79,057 118,176
Contracts and lease rights, net (Note 6).................... 5,021 17,773
Goodwill, net (Notes 2 and 6)............................... 31,863 254,997
Investment in and advances to partnerships and joint
ventures (Note 7)......................................... 56,306 37,344
Other assets (Note 6)....................................... 6,452 17,834
-------- --------
$234,014 $544,873
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt and capital lease
obligations (Note 8)................................... $ 206 $ 2,225
Accounts payable.......................................... 25,097 51,638
Accrued payroll and related costs......................... 8,256 10,351
Accrued expenses.......................................... 4,020 10,102
Management accounts payable............................... 10,381 17,415
Income taxes payable...................................... 871 945
-------- --------
Total current liabilities......................... 48,831 92,676
Long-term debt and capital lease obligations, less current
portion (Note 8).......................................... 73,252 60,704
Deferred rent............................................... 186 12,938
Deferred compensation (Note 13)............................. 3,048 3,797
Deferred income taxes (Note 12)............................. 6,871 2,162
Other liabilities........................................... 4,975 6,892
-------- --------
Total liabilities................................. 137,163 179,169
Company-obligated mandatorily redeemable convertible
securities of subsidiary holding solely parent debentures
(Note 9).................................................. -- 110,000
Shareholders' equity (Notes 10, 13 and 18):
Common stock, $0.01 par value; 50,000,000 shares
authorized, 26,303,592 and 29,569,767 shares issued and
outstanding in 1997 and 1998, respectively............. 263 296
Additional paid-in capital................................ 32,843 166,740
Foreign currency translation adjustment................... 193 359
Retained earnings......................................... 64,122 88,811
Deferred compensation on restricted stock................. (570) (502)
-------- --------
Total shareholders' equity........................ 96,851 255,704
Commitments and contingencies (Notes 7, 10, 11, 12, 13, 15 &
18)
$234,014 $544,873
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE> 161
CENTRAL PARKING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
--------------------------------
1996 1997 1998
-------- -------- --------
(AMOUNTS IN THOUSANDS,
EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Revenues:
Parking..................................... $109,272 $180,886 $328,285
Management contract......................... 32,534 39,568 54,890
-------- -------- --------
Total revenues...................... 141,806 220,454 383,175
-------- -------- --------
Costs and expenses:
Cost of parking............................. 97,686 157,382 280,288
Cost of management contracts................ 9,769 11,793 15,000
General and administrative.................. 17,419 22,507 33,866
Goodwill and non-compete amortization....... -- 920 7,140
-------- -------- --------
Total costs and expenses............ 124,874 192,602 336,294
-------- -------- --------
Operating earnings.................. 16,932 27,852 46,881
-------- -------- --------
Other income (expenses):
Interest income............................. 2,303 1,842 2,719
Interest expense............................ -- (4,582) (7,373)
Dividends on company-obligated mandatorily
redeemable convertible securities of a
subsidiary trust (Note 9)................ -- -- (3,160)
Net gains on sales of property and
equipment................................ 1,192 3,137 71
Equity in partnership and joint venture
earnings (Note 7)........................ 641 4,163 5,086
-------- -------- --------
Earnings before income taxes............. 21,068 32,412 44,224
Income tax expense (Note 12):
Current..................................... 6,647 11,842 15,491
Deferred.................................... 585 365 2,123
-------- -------- --------
Total income taxes.................. 7,232 12,207 17,614
-------- -------- --------
Net earnings........................ $ 13,836 $ 20,205 $ 26,610
======== ======== ========
Basic earnings per common share (Note 10)..... $ 0.54 $ 0.78 $ 0.96
Diluted earnings per common share (Note 10)... $ 0.53 $ 0.77 $ 0.94
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 162
CENTRAL PARKING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
FOREIGN DEFERRED
ADDITIONAL CURRENCY COMPENSATION
NUMBER OF COMMON PAID-IN TRANSLATION RETAINED ON RESTRICTED
SHARES STOCK CAPITAL ADJUSTMENT EARNINGS STOCK TOTAL
--------- ------ ---------- ----------- -------- ------------- --------
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at September 30,
1995....................... 23,058 $231 $ 8,069 $ 51 $33,009 $ -- $ 41,360
Net earnings............... -- -- -- -- 13,836 -- 13,836
Issuance of common stock
net of offering costs.... 2,798 28 19,986 -- -- -- 20,014
Issuance under restricted
stock plan............... 272 3 2,582 -- -- (705) 1,880
Common stock dividends $.05
per share................ -- -- -- -- (1,396) -- (1,396)
Exercise of stock options
and related tax
benefits................. 88 -- 1,023 -- -- -- 1,023
Amortization of deferred
compensation............. -- -- -- -- -- 68 68
Foreign currency
translation adjustment... -- -- -- 8 -- -- 8
------ ---- -------- ---- ------- ----- --------
Balance at September 30,
1996....................... 26,216 $262 $ 31,660 $ 59 $45,449 $(637) $ 76,793
------ ---- -------- ---- ------- ----- --------
Net earnings............... -- -- -- -- 20,205 -- 20,205
Issuance under restricted
stock plan............... -- -- 46 -- -- -- 46
Common stock dividends $.06
per share................ -- -- -- -- (1,532) -- (1,532)
Exercise of stock options
and related tax
benefits................. 88 1 1,137 -- -- -- 1,138
Amortization of deferred
compensation............. -- -- -- -- -- 67 67
Foreign currency
translation adjustment... -- -- -- 134 -- -- 134
------ ---- -------- ---- ------- ----- --------
Balance at September 30,
1997....................... 26,304 $263 $ 32,843 $193 $64,122 $(570) $ 96,851
------ ---- -------- ---- ------- ----- --------
Net earnings............... -- -- -- -- 26,610 -- 26,610
Issuance of common stock
for acquisitions......... 1,006 10 42,528 -- -- -- 42,538
Issuance of common stock
net of offering and
issuance costs........... 2,138 21 89,074 -- -- -- 89,095
Issuance under restricted
stock plan............... 3 -- 129 -- -- -- 129
Issuance under Employee
Stock Ownership Plan..... 67 1 926 -- -- -- 927
Common stock dividends $.06
per share................ -- -- -- -- (1,921) -- (1,921)
Exercise of stock options
and related tax
benefits................. 52 1 1,240 -- -- -- 1,241
Amortization of deferred
compensation............. -- -- -- -- -- 68 68
Foreign currency
translation adjustment... -- -- -- 166 -- -- 166
------ ---- -------- ---- ------- ----- --------
Balance at September 30,
1998....................... 29,570 $296 $166,740 $359 $88,811 $(502) $255,704
====== ==== ======== ==== ======= ===== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 163
CENTRAL PARKING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
---------------------------------
1996 1997 1998
-------- -------- ---------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings.............................................. $ 13,836 $ 20,205 $ 26,610
Adjustments to reconcile net earnings to net cash provided
by operating activities:
Depreciation............................................ 2,500 4,049 5,430
Amortization of goodwill and non-compete agreements..... -- 920 7,140
Amortization of contract and lease rights, straight-line
rent, deferred financing fees and other............... 920 1,530 2,713
Equity in partnership and joint venture earnings........ (641) (4,163) (5,086)
Distributions from partnerships and joint ventures...... 1,023 2,920 4,314
Net gains on sales of property and equipment............ (1,192) (3,137) (71)
Deferred income taxes................................... 585 365 2,123
Changes in operating assets and liabilities, excluding
effects of acquisitions:
Management accounts receivable........................ (2,211) (2,117) (538)
Notes and accounts receivable -- other................ 5,179 (1,820) (467)
Prepaid expenses...................................... (749) (3,266) (6,753)
Prepaid and refundable income taxes................... -- (533) 888
Other assets.......................................... (3,277) 1,429 908
Accounts payable, accrued expenses, and deferred
compensation........................................ 730 5,867 9,887
Management accounts payable........................... 2,156 (68) 6,017
Income taxes payable.................................. (872) 178 (2,970)
-------- -------- ---------
Net cash provided by operating activities........... 17,987 22,359 50,145
-------- -------- ---------
Cash flows from investing activities:
Proceeds from sales of property and equipment............. 1,467 12,529 596
Purchase of property, equipment, and leasehold
improvements............................................ (16,684) (6,261) (25,593)
Investments in notes receivable, net...................... (2,283) (345) --
Purchase of assets held for resale........................ -- (45,962) --
Proceeds from sale of assets held for resale.............. -- 45,962 --
Purchase of contract rights............................... (300) (45) (4)
Investments in and advances to partnerships, joint
ventures and unconsolidated subsidiaries................ (1,562) (47,715) (224)
Acquisitions of companies, net of cash acquired........... -- (49,963) (213,612)
Proceeds from maturities and calls of investments......... 151 330 374
Purchase of investments................................... (388) (601) (707)
-------- -------- ---------
Net cash used by investing activities............... (19,599) (92,071) (239,170)
-------- -------- ---------
Cash flows from financing activities:
Dividends paid............................................ (1,046) (1,488) (1,871)
Net borrowings under revolving credit agreement, net of
issuance costs.......................................... -- 70,352 (24,360)
Proceeds from issuance of company-obligated mandatorily
redeemable securities, net of issuance costs............ -- -- 106,477
Proceeds from issuance of notes payable, net of issuance
costs................................................... -- -- 99,700
Principal repayments on notes payable..................... -- (19,096) (102,903)
Distribution of debt proceeds from partnerships and joint
ventures................................................ -- -- 30,285
Proceeds from issuance of common stock and exercise of
stock options, net...................................... 21,037 1,184 91,392
-------- -------- ---------
Net cash provided by financing activities........... 19,991 50,952 198,720
-------- -------- ---------
Foreign currency translation................................ 8 134 166
-------- -------- ---------
Net increase (decrease) in cash and cash equivalents........ 18,387 (18,626) 9,861
Cash and cash equivalents at beginning of period............ 10,218 28,605 9,979
-------- -------- ---------
Cash and cash equivalents at end of period.................. $ 28,605 $ 9,979 $ 19,840
-------- -------- ---------
Non-cash transactions:
Exchange of properties, net of cash....................... $ 2,644 $ -- $ --
Note receivable on property sale.......................... $ -- $ 10,225 $ --
Issuance of stock in acquisitions......................... $ -- $ -- $ 42,538
Issuance of restricted stock.............................. $ 1,880 $ -- $ 130
-------- -------- ---------
Effects of acquisitions:
Estimated fair value of assets acquired................... $ 72,950 $ 93,281
Purchase price in excess of the net assets acquired
(goodwill).............................................. 32,713 231,134
Estimated fair values of liabilities assumed.............. (49,144) (61,793)
Common stock issued....................................... -- (42,538)
-------- ---------
Cash paid................................................. $ 56,519 $ 220,084
Less cash acquired........................................ (6,556) (6,472)
-------- ---------
Net cash paid for acquisitions...................... $ 49,963 $ 213,612
======== =========
</TABLE>
See accompanying notes to consolidated financial statements
F-6
<PAGE> 164
CENTRAL PARKING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of the significant accounting policies applied in the preparation of
the accompanying consolidated financial statements follows:
(a) Organization
Central Parking Corporation ("CPC") is a United States company chartered in the
State of Tennessee. The consolidated financial statements include accounts of
Central Parking Corporation and its subsidiaries (the "Company" or "Central
Parking") including Central Parking System, Inc. ("CPS") and its wholly-owned
U.S. subsidiaries; Kinney System Holdings, Inc. and its wholly owned
subsidiaries; Central Parking System of the United Kingdom, Ltd. and its
wholly-owned subsidiary ("CPS-UK"); and Central Parking System Realty, Inc. and
its wholly-owned subsidiaries ("Realty"). Central Parking Finance Trust was
established during the year ended September 30, 1998. All significant
inter-company transactions have been eliminated.
The Company provides parking consulting services and manages parking facilities
throughout the world, principally in the United States and United Kingdom. The
Company manages and operates owned or leased parking facilities, manages and
operates parking facilities owned or leased by third parties, and provides
financial and other advisory services to clients.
(b) Revenues
Parking revenues include the parking revenues from leased and owned locations.
Management contract revenues represent revenues (both fixed fees and additional
payments based upon parking revenues) from facilities managed for other parties,
and miscellaneous management fees for accounting, insurance and other ancillary
services such as consulting and transportation management services. Parking and
management contract revenues are recognized when earned.
Total managed, leased and owned parking revenues, representing gross revenues
processed by the Company, including the revenues of facilities managed by the
Company for other parties, was $457 million, $583 million, and $846 million for
the years ended September 30, 1996, 1997 and 1998, respectively.
Management accounts payable reflected on the accompanying consolidated balance
sheets is reflected net of cash of $5,348,000 and $6,510,000 at September 30,
1997 and 1998, respectively. Such cash balances belong to the owners of the
various managed facilities, but they are held by the Company and are used to pay
expenses of the managed facilities and ultimately to settle the balance due to
the owners of the managed facilities.
(c) Cash and Cash Equivalents
For purposes of the statements of cash flows, the Company considers cash and
cash equivalents to include cash on hand, in banks, and short-term, highly
liquid investments which include investments with original maturities of three
months or less.
F-7
<PAGE> 165
CENTRAL PARKING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
(d) Investments
Investment securities consist of debt obligations of states and political
subdivisions and are classified into one of three categories, as follows: (i)
held-to-maturity debt securities, (ii) trading securities, and (iii) securities
available-for-sale. Classification of a debt security as held-to-maturity is
based on the Company's positive intent and ability to hold such security to
maturity. Such securities are stated at amortized cost adjusted for amortization
of premiums and accretion of discounts, unless there is a decline in value which
is considered to be other than temporary, in which case the cost basis of such
security is written down to fair value and the amount of the write-down is
reflected in earnings. Securities that are bought and held principally for the
purpose of selling them in the near term are classified as trading account
securities, which are valued at fair value with the unrealized gains and losses
included in earnings. Securities classified as available-for-sale are reported
at fair value with the unrealized gains and losses excluded from earnings and
reported, net of tax, in shareholders' equity. At September 30, 1997 and 1998,
all of the Company's investment securities were classified as held-to-maturity.
(e) Property, Equipment, and Leasehold Improvements
Property, equipment, computer software, computer hardware, and leasehold
improvements are recorded at cost. Depreciation is provided principally on a
straight-line basis over a period of five to ten years for furniture, fixtures,
and equipment, over three years for computer software, over five years for
computer hardware, over the remaining lives of the corresponding leases for
leasehold improvements, and over thirty years for buildings. Accelerated
depreciation is used for income tax purposes.
(f) Investment in Partnerships and Joint Ventures
Investment in general and limited partnerships and joint ventures are accounted
for using the equity method of accounting. The Company has a number of joint
ventures to operate and develop parking garages through either corporate joint
ventures, general partnerships, limited liability companies, or limited
partnerships. The financial results of the Company's joint ventures are
accounted for under the equity method and are included in equity in partnership
and joint venture earnings in the accompanying consolidated statements of
earnings.
(g) Contract Rights
Contract rights consist of capitalized payments made to third-party parking
service companies pursuant to agreements which provide the Company the
opportunity to manage or lease facilities owned, leased or previously managed by
such companies. Contract rights are allocated among respective locations and are
amortized on a straight-line basis over the terms of related agreements which
range from five to ten years.
(h) Goodwill
Goodwill, which represents the excess of purchase price over fair value of net
assets acquired, is amortized on a straight-line basis over the expected periods
to be benefited, ranging from
F-8
<PAGE> 166
CENTRAL PARKING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
5-30 years. The Company assesses the recoverability of this intangible asset by
determining whether the amortization of the goodwill balance over its remaining
life can be recovered through undiscounted future operating cash flows of the
acquired operation. The amount of goodwill impairment, if any, is measured based
on projected discounted future operating cash flows using a discount rate
reflecting the Company's average cost of funds. The assessment of the
recoverability of goodwill will be impacted if estimated future operating cash
flows are not achieved.
(i) Other assets
Other assets is comprised of a combination of the cash surrender value of key
man life insurance policies, security deposits, key money deposits with clients,
deferred issuance costs related to the sale of Preferred Securities discussed in
Note 9, deferred debt issuance costs related to the Company's credit facilities,
and non-compete agreements. Key money represents deposits and prepayments
tendered to clients at the inception of long-term relationships, and is
amortized over the life of the applicable lease. Non-compete agreements are
amortized over the life of the agreement, or economic useful life whichever is
shorter. Deferred issuance costs related to the Preferred Securities are
amortized over the 30 year life of the underlying subordinated debentures.
Deferred debt issuance costs are amortized over the life of the related debt.
(j) Lease Transactions and Related Balances
The Company accounts for operating lease obligations on a straight-line basis.
Contingent or percentage payments are recognized when operations indicate such
amounts will be payable. Lease obligations paid in advance are included in
prepaid rent and other expenses. The difference between actual lease payments
and straight-line lease expenses over the lease term is included in accrued
expense or deferred rent, as appropriate.
In connection with its acquisitions, the Company revalued certain leases to
estimated fair market value at the time of the respective acquisition. Favorable
operating leases of entities acquired represent the present value of the excess
of the current market rental over the contractual lease payments. Unfavorable
operating leases of entities acquired represent the present value of the excess
of the contractual lease payments over the current market rental. Such write-ups
and write-downs are amortized on a straight-line basis over the remaining life
of the underlying lease, or 30 years, whichever is shorter. Favorable and
unfavorable lease rights are reflected on the accompanying consolidated balance
sheets in contract and lease rights and other liabilities, respectively.
(k) Impairment of Long-Lived Assets
The Company accounts for long-lived assets in accordance with the provisions of
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of", on October 1, 1996. This Statement
requires that long-lived assets and certain identifiable intangibles be reviewed
for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Recoverability of assets to
be held and used is measured by a comparison of the carrying
F-9
<PAGE> 167
CENTRAL PARKING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
amount of an asset to future net cash flows expected to be generated by the
asset. If such assets are considered to be impaired, the impairment to be
recognized is measured by the amount which the carrying amount of the assets
exceed the fair value of the assets. Assets to be disposed of are reported at
the lower of the carrying amount or fair value less costs to sell.
The Company periodically reviews the carrying value of long-lived assets,
including goodwill, contract and lease rights, and non-compete agreements, to
determine if the net book values of such assets continue to be recoverable over
the remainder of the original estimated useful life. In performing this review
for recoverability, the Company estimates the future cash flows expected to
result from the use of the asset and its eventual disposition. If the sum of the
expected future cash flows (undiscounted and without interest charges) is less
than the carrying amount of the asset, an impairment loss is recognized based on
the estimated diminution of value. Since the assets involved are held and used
in the operations of the Company, consideration is also given to actions or
remediations the Company might take in order to achieve the original estimates
of cash flows. Adoption of this Statement did not have a material impact on the
Company's financial position, results of operations, or liquidity.
(l) Income Taxes
The Company files a consolidated federal income tax return. The Company uses the
asset and liability method to account for income taxes. Under this method,
deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date. Work opportunity tax credits are
accounted for by the flow-through method, which recognizes the credits as
reductions of income tax expense in the year utilized. The Company does not
provide for federal income taxes on the accumulated earnings considered
permanently reinvested in foreign subsidiaries.
(m) Preopening Expenses
The direct and incremental costs of hiring and training personnel associated
with the opening of new parking facilities and the associated internal
development costs are expensed as incurred.
(n) Per Share and Share Data
Effective October 1, 1997, the Company adopted the provisions of the Financial
Accounting Standards Board Statement No. 128, ("SFAS No. 128"), "Earnings Per
Share." Statement 128 replaced the previously reported primary and fully diluted
earning per share. Basic earnings per share excludes dilution and is computed by
dividing income available to common shareholders by the weighted-average number
of common shares outstanding for the period. Diluted earnings per share reflect
the potential dilution that could occur if securities or other contracts to
issue common stock were exercised or converted into common stock or resulted in
F-10
<PAGE> 168
CENTRAL PARKING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
the issuance of common stock that then shared in the earnings of the entity.
Earnings per share for all periods presented have been calculated in accordance
with SFAS No. 128. All share and earnings per share data included herein have
been adjusted for a recapitalization of shares in October 1995, the
three-for-two stock split completed in March 1996 and the three-for-two stock
split completed in December 1997.
(o) Foreign Currency Translation
The financial position and results of operations of the Company's foreign
subsidiaries and equity method joint ventures are measured using local currency
as the functional currency. Translation adjustments arising from the differences
in exchange rates from period to period are included in the currency translation
adjustment in shareholders' equity.
(p) Fair Value of Financial Instruments
The Company discloses the fair values of most on-and-off balance sheet financial
instruments for which it is practicable to estimate the value. Fair value
disclosures exclude certain financial instruments such as trade receivables and
payables when carrying values approximate the fair value. Fair value disclosures
are not required for employee benefit obligations, lease contracts, and all
non-financial instruments such as land, buildings and equipment. The fair values
of the financial instruments are estimates based upon current market conditions
and quoted market prices for the same or similar instruments as of September 30,
1998. Book value approximates fair value for substantially all of the Company's
assets and liabilities that fall under the fair value disclosure requirements.
(q) Stock Option Plan
The Company applies the intrinsic value based method of accounting prescribed by
Accounting Principles Board opinion No. 25 ("APB No. 25") Accounting for Stock
Issued to Employees, and related interpretations in accounting for its stock
options. As such, compensation expense would be recorded on the date of grant
only if the current market price of the underlying stock exceeded the exercise
price.
(r) Business Concentration
Approximately 34% of the Company's total parking spaces managed, owned or leased
at September 30, 1998 and approximately 67% of total Company revenues for the
year then ended were attributable to parking and management contract operations
geographically located in the Northeastern and Mid-Atlantic areas of the United
States.
(s) Risk Management
The Company is self insured up to certain maximum losses for liability, health
and workers' compensation claims. The accompanying consolidated balance sheets
reflect the estimated losses related to such risks.
F-11
<PAGE> 169
CENTRAL PARKING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
(t) Use of Estimates
Management of the Company has made certain estimates and assumptions relating to
the reporting of assets and liabilities to prepare these consolidated financial
statements in conformity with generally accepted accounting principles. Actual
results could differ from these estimates.
(u) New Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board issued SFAS No. 130,
"Reporting Comprehensive Income". This pronouncement is effective for fiscal
years beginning after December 15, 1997 and requires the reporting of
comprehensive income within the financial statements. The Company will adopt
SFAS 130 in fiscal 1999. Management does not anticipate that the pronouncement
will significantly impact the presentation of the Company's consolidated
financial statements.
In June 1997, the Financial Accounting Standards Board issued SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information", which
supersedes SFAS No. 14. This pronouncement is effective for fiscal years
beginning after December 15, 1997. The Company will adopt SFAS No. 131 in fiscal
1999. Management does not anticipate that the pronouncement will significantly
impact the presentation of the Company's consolidated financial statements.
In February 1998, the Financial Accounting Standards Board issued SFAS No. 132,
"Employers' Disclosures about Pensions and Other Postretirement Benefits," which
amends SFAS Nos. 87, 88, and 106. This pronouncement is effective for fiscal
years beginning after December 15, 1997. The Company will adopt SFAS No. 132 in
fiscal 1999. Management does not anticipate that the pronouncement will
significantly impact the presentation of Central Parking's consolidated
financial statements.
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities," which supercedes
SFAS Nos. 80, 105, and 119. This Statement is effective for all fiscal quarters
of fiscal years beginning after June 15, 1999. Management is evaluating the
impact on Central Parking's consolidated financial statements.
(v) Reclassifications
Certain prior year amounts have been reclassified to conform to the current year
presentation.
(2) ACQUISITIONS
The Company's acquisitions over the last two years, all of which were accounted
for under the purchase method of accounting, are as follows:
Civic Parking LLC. On December 31, 1996, the Company purchased for cash,
Civic Parking LLC ("Civic"), which owns four parking garages in St. Louis:
Kiener East, Kiener West, Stadium East and Stadium West. The four garages
had previously been operated by Central Parking under management
agreements. The purchase price was
F-12
<PAGE> 170
CENTRAL PARKING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
approximately $91.0 million, which was financed through working capital and
$67.2 million of borrowings under the Company's credit facilities. Of the
$91.0 million, $46.0 million was held for resale to a joint venture partner
and $45.0 was recorded as an investment in joint ventures. The transaction
was accounted for using the purchase method. The estimated fair value of
the garages at the date of the acquisition approximated the purchase price
and, accordingly, management has allocated the purchase price to the land
and buildings acquired.
On April 16, 1997 the Company consummated the sale of 50% of Civic to its
joint venture partner, an affiliate of Equity Capital Holdings, LLC, for
$46.0 million in cash. No gain or loss was recognized on the sale of the
50% interest. The Company accounts for the remaining interest in Civic
under the equity method. Such results are included in the accompanying
consolidated financial statements from December 31, 1996. Central Parking
continues to operate these garages pursuant to a lease and operating
agreement with Civic.
Square Industries, Inc. On January 18, 1997, Central Parking completed a
cash tender to acquire all of the outstanding shares of Square Industries,
Inc. ("Square") for $54.8 million, including transaction fees and other
related expenses. In addition, Central Parking assumed $23.2 million of
existing Square debt. As of September 30, 1997, the Company refinanced
$18.9 million of the debt assumed from Square through a draw on the
Company's credit facilities.
Square operated facilities primarily in the northeast. The Square
acquisition was accounted for using the purchase method and, accordingly,
the results of operations of Square have been included in the Company's
consolidated financial statements from January 18, 1997. The purchase price
has been allocated to Square's assets and liabilities based on their
estimated fair values at the date of acquisition. The excess of the
purchase price over the fair value of the net assets acquired of $29.3
million is being amortized on a straight-line basis over 25 years.
Car Park Corporation. On May 29, 1997, the Company acquired for cash
certain assets and leases of Car Park Corporation ("Car Park") for $3.5
million; consisting of parking facilities in the San Francisco metropolitan
area. The acquisition was accounted for as a purchase, and, accordingly,
the results of operations of Car Park have been included in the Company's
consolidated financial statements from the date of acquisition. The excess
of purchase price over the fair value of the net assets acquired of $3.3
million is being amortized on a straight-line basis over 25 years.
Diplomat Parking Corporation. On October 1, 1997, Central Parking acquired
the stock and certain assets of Diplomat Parking Corporation ("Diplomat")
for approximately $22.2 million in cash and notes payable. Diplomat
operated parking facilities located primarily in Washington, D.C. and
Baltimore, Maryland. The acquisition was accounted for as a purchase, and
accordingly, the results of operations of Diplomat have been included in
the Company's consolidated financial statements from the date of
acquisition. The excess of purchase price over the fair value of the net
assets acquired of $20.7 million is being amortized on a straight-line
basis over 25 years.
F-13
<PAGE> 171
CENTRAL PARKING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
Kinney System Holding Corp. On February 12, 1998, Central Parking acquired
Kinney System Holding Corp ("Kinney"), a privately held company
headquartered in New York City. In addition to facilities in New York City,
Kinney increased Central Parking's presence in a number of other major
metropolitan areas such as Boston, Philadelphia and Washington, D.C. and
broadened the Company's geographic coverage in the following nine states:
Connecticut, Florida, Kentucky, Maryland, Massachusetts, New Hampshire, New
York, Pennsylvania, and Virginia.
Consideration for the Kinney acquisition was approximately $208.8 million,
including $171.8 million in cash, including transaction fees and related
expenses, and $37.0 million (882,422 shares) in Central Parking common
stock. In connection with this transaction, Central Parking assumed $10.3
million in capital leases, refinanced $24.2 million in existing Kinney debt
and assumed $4.6 million of Kinney debt.
The Kinney acquisition was accounted for using the purchase method, and
accordingly, the results of operations of Kinney have been included in the
Company's consolidated financial statements from February 12, 1998. The
excess of purchase price over the fair value of the net assets acquired of
$197.6 million is being amortized on a straight-line basis over 30 years.
In connection with the Kinney acquisition, the remaining 50% interest in
Spectrum Parking Associates ("Spectrum") was acquired for $3.6 million. The
acquisition was accounted for as a purchase and the results of operations
are included from February 13, 1998. The excess of purchase price over the
fair value of net assets acquired of $2.2 million is being amortized on a
straight-line basis over 18 years.
Central Parking System of Louisiana, Inc. Central Parking has historically
owned 50% of Central Parking System of Louisiana, Inc ("CPS-Louisiana") and
on March 30, 1998 purchased the remaining 50% from Property Service
Corporation for $2.5 million in Central Parking common stock (52,631
shares). The acquisition was accounted for as a purchase and, accordingly,
the purchase price has been allocated to CPS-Louisiana's assets and
liabilities. The excess of purchase price over fair value of net assets
acquired of $2.5 million is being amortized on a straight-line basis over 5
years.
Turner Parking System, Inc. On April 1, 1998, Central Parking purchased
substantially all of the assets of Turner Parking System, Inc.("Turner"), a
privately-held parking company headquartered in Dallas, Texas, for $3.8
million, including $3.0 million in cash and $800,000 (16,842 shares) in
Central Parking common stock. Turner operated parking facilities in Texas,
Florida, California, Georgia and Washington, D.C. The results of operations
are included in the Company's consolidated financial statements from April
1, 1998. The acquisition was accounted for as a purchase and, accordingly,
the purchase price has been allocated to Turner's assets and liabilities.
The excess of purchase price over fair value of net assets acquired of $3.7
million is being amortized on a straight-line basis over 10 years.
Sterling Parking, Inc. On July 1, 1998, Central Parking purchased
substantially all of the assets of Sterling Parking, Inc. ("Sterling"), a
privately-held parking company headquartered in Atlanta, Georgia for $4.3
million, including $2.1 million in cash,
F-14
<PAGE> 172
CENTRAL PARKING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
including transaction fees and other related expenses, and $2.2 million
(54,358 shares) in Central Parking common stock. Sterling operated parking
facilities in Georgia, Florida, Virginia, California, and Kentucky. The
results of operations are included in the Company's consolidated financial
statements from July 1, 1998. The acquisition was accounted for as a
purchase and, accordingly, the purchase price has been allocated to
Sterling's assets and liabilities. The excess of purchase price over fair
value of net assets acquired of $4.5 million is being amortized on a
straight-line basis over 10 years.
The following unaudited pro forma condensed results of operations give effect to
the acquisition of Square, Civic Parking, Car Park, Diplomat, Kinney,
CPS-Louisiana, Turner and Sterling as if such transactions had occurred at the
beginning of each period presented (in thousands except for earnings per share):
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED
SEPTEMBER 30,
----------------------
1997 1998
-------- --------
<S> <C> <C>
Total revenues................................. $403,657 $435,898
Earnings before income taxes................... 17,045 39,938
Net earnings................................... 7,637 22,926
Basic earnings per share....................... $ 0.28 $ 0.81
Basic weighted average common shares
outstanding.................................. 26,943 28,216
Diluted earnings per share..................... $ 0.28 $ 0.80
Diluted weighted average common shares
outstanding.................................. 27,282 28,685
</TABLE>
The foregoing unaudited proforma amounts are based upon certain assumptions and
estimates, including, but not limited to, the recognition of interest expense on
debt incurred to finance the acquisitions and amortization of goodwill over 5 to
30 years. The unaudited proforma amounts do not necessarily represent results
which would have occurred if the acquisitions had taken place on the basis
assumed above, nor are they indicative of the results of future combined
operations. The pro forma results of operations for the year ended September 30,
1997 and 1998 do not reflect certain operational and financial combination
benefits which, in management's opinion, are the direct result of the Square and
Kinney acquisitions. Such estimated amounts total $1.2 million for Square and
$5.6 million for Kinney for the year ended September 30, 1997 and $2.1 million
for Kinney for the year ended September 30, 1998. Had such amounts been
reflected in the pro forma results of operations for the years ended September
30, 1997 and 1998, respectively, the pro forma net earnings would have been
$11.5 million and $24.1 million. Pro forma basic earnings per common share would
have been $0.43 and $0.85, respectively, and pro forma diluted earnings per
common share would have been $0.42 and $0.84, for the years ended September 30,
1997 and 1998, respectively.
(3) NOTES RECEIVABLE
The Company sold a parking garage in July 1997. As part of the sale, the Company
received $3 million in cash and a note for $10.2 million secured by a mortgage.
The note is a balloon note, with principal due in full on or before July 7,
2000. The note requires quarterly interest payments at 8.25%. The Company
recognized a gain of $3.1 million on this sale, which is
F-15
<PAGE> 173
CENTRAL PARKING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
included in net gains on sales of property and equipment in the accompanying
consolidated statement of earnings.
In connection with the Kinney acquisition, the Company acquired a note
receivable from the City of New York (the "City") related to two parking garages
which were built on behalf of the City. The Company also has a long-term
management agreement to operate the parking garages. Amounts advanced for the
construction of the garages were recorded as a note receivable and are being
repaid by the City in monthly installments of $156,000 including interest at
8.0% through December 2007. In connection with the purchase, the note receivable
was recorded at estimated fair value. At September 30, 1998, the carrying value
of the note was $12.3 million.
The remainder of notes receivable consist of miscellaneous amounts at both
September 30, 1997 and 1998.
(4) INVESTMENTS
The amortized cost, gross unrealized gains, gross unrealized losses, and
approximate fair values for such securities are presented as follows (in
thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30,
------------------
1997 1998
------ ------
<S> <C> <C>
Amortized cost..................................... $4,754 $5,087
Unrealized gains................................... 213 276
Unrealized losses.................................. 5 8
------ ------
Fair value....................................... $4,962 $5,355
====== ======
</TABLE>
The amortized cost and approximate fair value of debt securities at September
30, 1998 by average estimated maturity are shown below (in thousands):
<TABLE>
<CAPTION>
AMORTIZED
COST FAIR VALUE
--------- ----------
<S> <C> <C>
Due in one year or less........................ $ 614 $ 663
Due after one year through five years.......... 1,372 1,419
Due after five years through ten years......... 1,803 1,909
Due after ten years............................ 1,298 1,364
------ ------
Total securities..................... $5,087 $5,355
====== ======
</TABLE>
F-16
<PAGE> 174
CENTRAL PARKING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
(5) PROPERTY, EQUIPMENT, AND LEASEHOLD IMPROVEMENTS
A summary of property, equipment, and leasehold improvements and related
accumulated depreciation and amortization is as follows (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30,
---------------------
1997 1998
------- --------
<S> <C> <C>
Leasehold improvements.......................... $10,537 $ 15,005
Buildings....................................... 13,573 17,114
Garage and other operating equipment............ 10,805 19,734
Furniture and fixtures.......................... 3,519 3,657
Capital leases.................................. -- 3,027
Aircraft........................................ 3,955 4,250
------- --------
$42,389 $ 62,787
Less accumulated depreciation and
amortization.................................. 15,722 19,394
------- --------
26,667 43,393
Land............................................ 52,390 74,783
------- --------
Property, equipment and leasehold improvements,
net........................................... $79,057 $118,176
======= ========
</TABLE>
(6) INTANGIBLE AND OTHER ASSETS
(a) Contract and Lease Rights
The Company and its subsidiaries manage certain parking facilities which are
owned, leased or managed by an unrelated parking services company. Pursuant to
these arrangements, the Company made an initial payment and guarantees
additional annual payments through the term of the respective agreement. Such
additional payments are included in the future minimum payments discussed (Note
11). Such additional payments may increase in the event parking revenues exceed
certain thresholds over the term of the agreement. In the event of a location
termination, the guaranteed additional annual payments referred to above are to
be reduced on a predetermined basis.
Contract and lease rights and accumulated amortization are as follows (in
thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30,
-------------------
1997 1998
------ -------
<S> <C> <C>
Contract rights................................... $9,026 $ 8,984
Lease rights...................................... -- 14,284
Less accumulated amortization..................... 4,005 5,495
------ -------
Contract and lease rights, net.................... $5,021 $17,773
====== =======
</TABLE>
F-17
<PAGE> 175
CENTRAL PARKING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
(b) Goodwill
Goodwill at September 30, 1997 and 1998 consists of (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30,
---------------------
1997 1998
------- --------
<S> <C> <C>
Excess of purchase price over net assets
acquired...................................... $32,713 $262,705
Less accumulated amortization................... 850 7,708
------- --------
Goodwill, net................................... $31,863 $254,997
======= ========
</TABLE>
(c) Other assets
Included in other assets are unamortized balances related to non-competition
agreements of $875,000 at September 30, 1997 and $1.8 million at September 30,
1998.
(7) INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS AND JOINT VENTURES
The following tables reflect the financial position and results of operations
for the partnerships and joint ventures as of September 30, 1997 and 1998, and
for the three years ended September 30, 1998 (in thousands):
<TABLE>
<CAPTION>
INVESTMENT IN AND
ACCUMULATED LOSSES ADVANCES TO
IN PARTNERSHIPS AND PARTNERSHIPS AND
JOINT VENTURES JOINT VENTURES
------------------- -----------------
1997 1998 1997 1998
-------- -------- ------- -------
<S> <C> <C> <C> <C>
Civic Parking, LLC................. $45,421 $14,907 $ -- $ --
Commerce Street Joint Venture...... (868) (872) 743 721
Larimer Square Parking
Associates....................... 1,015 1,007 2,394 2,212
12 West 48th Street, LLC........... -- 8,585 -- --
Lodo Parking Garage................ 1,270 1,230 -- --
Arizona Stadium Parking Garage
LLC.............................. 1,500 1,505 -- --
CPS Mexico......................... 472 976 2,103 2,313
Other.............................. 1,919 4,760 337 --
------- ------- ------ ------
$50,729 $32,098 $5,577 $5,246
======= ======= ====== ======
</TABLE>
F-18
<PAGE> 176
CENTRAL PARKING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
<TABLE>
<CAPTION>
EQUITY IN
PARTNERSHIPS AND JOINT VENTURE
JOINT VENTURES EARNINGS DEBT
------------------------- -----------------
1996 1997 1998 1997 1998
---- --------- ------ ------- -------
<S> <C> <C> <C> <C> <C>
Civic Parking, LLC......... $ -- $2,877 $2,383 $ -- $59,709
Commerce Street Joint
Venture.................. 400 504 602 7,606 7,346
Larimer Square Parking
Associates............... 22 59 103 3,554 3,334
12 West 48th Street, LLC... -- -- 548 -- --
Lodo Parking Garage........ 77 126 145 -- --
Arizona Stadium Parking
Garage LLC............... -- -- 230 1,800 1,976
CPS Mexico................. 153 514 505 -- --
Other...................... (11) 83 570 4,524 4,481
---- ------ ------ ------- -------
$641 $4,163 $5,086 $17,484 $76,846
==== ====== ====== ======= =======
</TABLE>
(a) Civic Parking, LLC
As explained in Note 2, the Company acquired its 50% joint venture ownership in
Civic Parking during the fiscal year ended September 30, 1997. The Company's
results of operations include 50% of Civic Parking's net earnings from January
1, 1997 to September 30, 1997, and the net earnings from October 1, 1997 to
September 30, 1998. The four parking garages are located in St. Louis, Missouri
and contain retail spaces.
In March 1998, Civic obtained financing with a financial institution for $60
million. Civic distributed the loan proceeds to its shareholders, and as a
result, Central Parking received net proceeds of $30.3 million from this
transaction, which reduced the Company's carrying value of its investment in
partnerships and joint ventures. Unaudited summary information for Civic Parking
is as follows (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30,
---------------------
1997 1998
------- --------
<S> <C> <C>
Financial position:
Land, property and equipment, net.......... $90,925 $ 89,124
Cash....................................... 1,669 1,662
Other assets............................... 175 108
Liabilities................................ (768) (60,932)
------- --------
Net assets...................................... $92,001 $ 29,962
======= ========
</TABLE>
F-19
<PAGE> 177
CENTRAL PARKING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
<TABLE>
<CAPTION>
JANUARY 1, YEAR ENDED
TO SEPTEMBER 30, SEPTEMBER 30,
1997 1998
---------------- -------------
<S> <C> <C>
Results of operations:
Revenue................................ $7,668 $ 9,241
Cost of operations..................... 2,458 4,649
------ -------
Net earnings............................. $5,210 $ 4,592
Distributions to Central Parking......... $3,680 $32,910
====== =======
</TABLE>
(b) Commerce Street Joint Venture
Realty has a 50% interest in a joint venture that owns a parking complex in
Nashville, Tennessee. The complex consists of the original parking garage and
retail space (the "Original Facility") and an addition to the parking garage
(the "Addition") constructed several years after the completion of the Original
Facility.
The joint venture financed the Original Facility with industrial development
bonds in the original principal amount of $8,600,000 (the "Series A Bonds")
issued by The Industrial Development Board of the Metropolitan Government of
Nashville and Davidson County (the "Metro IDB"). The Metro IDB holds title to
the Original Facility, which it leases to the joint venture under a lease
expiring in 2016. The lease of the Original Facility obligates the venture to
make lease payments corresponding to principal and interest payable on Series A
Bonds and provides the venture with an option to purchase the Original Facility
at any time by paying the amount due under the Series A Bonds and making a
nominal purchase payment to the Metro IDB. The joint venture refinanced the
Series A Bonds in 1994 to achieve more favorable interest rate terms. The
outstanding principal amount of Series A Bonds is reflected in the above table
at September 30, 1997 and 1998.
Also included in investments in and advances to partnerships and joint ventures
are the Series B Bonds purchased in April 1994 relating to the Commerce Street
Joint Venture in the amounts of $760,000 and $743,000 at September 30, 1997 and
1998, respectively. The Bonds require monthly interest and principal payments at
the index rate (prime) plus 250 basis points (11% at September 30, 1998) through
2009. The minimum interest rate is 9.5% and the maximum interest rate is 12%.
The Bonds are secured by a mortgage on the project which is subordinate to the
industrial development bonds. The remainder of the Series B Bonds are owned by
the other joint venture partner.
(c) Larimer Square Parking Associates
In October 1994, the Company acquired a 50% interest in a joint venture to
construct a parking complex in Denver, Colorado. The complex, which was
completed in February 1996, was constructed and financed by the joint venture
partners. The Company invested $991,000 in the joint venture and loaned the
joint venture $1,100,000 in the form of a construction note, bearing interest at
9.5%, which was converted to a term note in August 1996, following completion of
the project. An additional $1,430,000 was loaned by the Company which will be
repaid through sales tax and property tax revenues by the Denver Urban Renewal
F-20
<PAGE> 178
CENTRAL PARKING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
Authority at an interest rate of 10%. The Company manages the parking facility
for the venture.
(d) 12 West 48th Street, LLC
In connection with the Kinney acquisition, the Company acquired a 40% interest
in a limited liability company which owns and operates a garage and two adjacent
buildings in New York City. Kinney's carrying value of $4.4 million was adjusted
to reflect the estimated fair value of the partnership's underlying net assets
by $3.8 million.
(e) Lodo Parking Garage, LLC
In March 1995, the Company acquired a 50% interest in a joint venture which
holds a parking complex in Denver, Colorado. The Company invested $1.4 million
in the joint venture and manages the parking facility for the joint venture.
(f) Arizona Stadium Parking Garage, LLC
The Company owns a 50% interest in a joint venture which constructed the Arizona
Diamondback Stadium Parking Garage. The Company operates this parking facility
for the joint venture.
(g) CPS Mexico, Inc.
The Company holds 50% interest in a Mexican joint venture which manages and
leases various parking structures in Mexico. The Company also has advanced $2.1
and $2.3 million at September 30, 1997 and 1998, respectively, to the affiliate.
These loans bear interest between 10% and 15% and require principal payments
over various terms through 2001.
(8) LONG TERM DEBT AND CAPITAL LEASE OBLIGATIONS
Long-term debt includes an unsecured credit facility ("Credit Facility") which
expires February 11, 2003. The Credit Facility originally provided for an
aggregate availability of up to $300 million, consisting of a five-year $200
million revolving credit facility, including a sub-limit of $25 million for
standby letters of credit, and a $100 million term loan. The Credit Facility
bore interest until June 30, 1998 at a rate of LIBOR plus 1.25%. On June 30,
1998 the interest rate on the Credit Facility and the commitment fee on the
unused portion reverted to a grid pricing based upon the achievement of various
financial ratios. The Credit Facility contains certain covenants including those
that require the Company to maintain certain financial ratios, restrict further
indebtedness, and limit the amount of dividends payable. On March 18, 1998, the
Company completed offerings of equity and convertible trust issued preferred
securities, from which the Company obtained $195.6 million in net proceeds. The
Company repaid and terminated the $100 million term loan with proceeds from
these offerings. The amount outstanding under the Company's Credit Facility as
of September 30, 1998 is $48.2 million, with an interest rate of 6.5% (LIBOR
plus 75 basis points). The weighted average interest rate was 6.88% for the
period the Credit Facility was outstanding. At September 30, 1998, the Company
had $147.1 million available on the Credit Facility. The amount available is
adjusted to reflect letters of credit outstanding of $4.8
F-21
<PAGE> 179
CENTRAL PARKING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
million. In addition, certain contractual obligations are collateralized by
irrevocable letters of credit in the amount of $3.5 million at September 30,
1998.
The Company's previous credit facility, which was unsecured, was scheduled to
expire January 31, 2000. Credit available under the prior facility amounted to
$120 million. As of September 30, 1997 the Company had $70.8 million
outstanding, and $48.0 million available for borrowing, under the credit
facility. The average interest rate for the period during which the Company had
debt outstanding, beginning December 31, 1996, was 7.1% and the interest rate at
September 30, 1997 was 6.7%. Commitment fees for the unused portion of the
credit facility approximated 0.25% of the unused balance.
In addition to the Credit Facility, the Company also has several notes payable
outstanding totaling $4.9 million, which are secured by related real estate and
equipment and bear interest at rates ranging from 6.1% to 10.0%. These balances
mature from dates in 1998 to 2006. Future maturities under notes payable are as
follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED
SEPTEMBER 30,
-------------
<S> <C>
1999................................... $ 667
2000................................... 660
2001................................... 649
2002................................... 597
2003................................... 48,632
thereafter............................. 1,801
-------
$53,006
=======
</TABLE>
In connection with the Kinney acquisition, the Company assumed an agreement
whereby a parking structure and the corresponding land upon which it sits are
leased under a long-term arrangement. The parking structure is accounted for as
a capital lease, and the underlying land is accounted for as an operating lease.
The original agreement called for lease payments over a twenty-year term at a
17.4% interest rate. In connection with purchase accounting, the carrying value
of the related obligation was recorded at fair value. The carrying amount of the
capital lease obligation at September 30, 1998 was $9.2 million, bearing
interest at a rate of 8.0% per annum and requiring monthly payments of
approximately $167,000 per month. The operating lease requires a payment of
approximately $183,000 per month. The lease agreements run through December
2003.
F-22
<PAGE> 180
CENTRAL PARKING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
The future minimum lease payments under these capital lease obligations include
the following (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED
SEPTEMBER 30,
-------------
<S> <C>
1999.................................. $ 4,670
2000.................................. 4,628
2001.................................. 4,687
2002.................................. 4,504
2003.................................. 4,482
Thereafter............................ 1,125
--------
24,096
Less interest portion at rates ranging
from 6.1% to 10%.................... (14,173)
Less current portion.................. (1,558)
--------
$ 8,365
========
</TABLE>
(9) CONVERTIBLE TRUST ISSUED PREFERRED SECURITIES OFFERINGS
On March 18, 1998, the Company created Central Parking Finance Trust ("Trust")
which completed a private placement of 4,400,000 shares at $25.00 per share of
5.25% convertible trust issued preferred securities ("Preferred Securities")
pursuant to an exemption from registration under the Securities Act of 1933, as
amended. The Preferred Securities represent preferred undivided beneficial
interests in the assets of Central Parking Finance Trust, a statutory business
trust formed under the laws of the State of Delaware. The Company owns all of
the common securities of the Trust. The Trust exists for the sole purpose of
issuing the Preferred Securities and investing the proceeds thereof in an
equivalent amount of 5.25% Convertible Subordinated Debentures ("Convertible
Debentures") of the Company due 2028. The net proceeds to the Company from the
Preferred Securities private placement were $106.5 million. Each Preferred
Security is entitled to receive cumulative cash distributions at an annual rate
of 5.25% (or $1.312 per share) and will be convertible at the option of the
holder thereof into shares of Company common stock at a conversion rate of
0.4545 shares of Company common stock for each Preferred Security (equivalent to
$55.00 per share of Company common stock), subject to adjustment in certain
circumstances. The Preferred Securities do not have a stated maturity date but
are subject to mandatory redemption upon the repayment of the Convertible
Debentures at their stated maturity (April 1, 2028) or upon acceleration or
earlier repayment of the Convertible Debentures.
The Company's consolidated balance sheets reflect the Preferred Securities of
the Trust as company-obligated mandatorily redeemable convertible securities of
subsidiary holding solely parent debentures.
F-23
<PAGE> 181
CENTRAL PARKING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
(10) SHAREHOLDERS' EQUITY
(a) Recapitalization
As of September 29, 1995, the Board of Directors and shareholders of the Company
approved a plan of recapitalization which was effective immediately prior to the
effectiveness of the Company's initial public offering of common stock on
October 10, 1995. Under the plan of recapitalization, the Company authorized the
issue of 1,000,000 shares of preferred stock and 30,000,000 shares of common
stock. At the February 28,1997 Annual Meeting, shareholders approved an increase
in the authorized common stock to 50,000,000 shares. The Class A Preferred,
nonvoting common and voting common shares issued and outstanding as of the
effective date of the plan of recapitalization, were canceled and exchanged for
common stock (split adjusted) as follows:
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF
CANCELED SHARES
CLASS SHARES ISSUED
----- --------- ----------
<S> <C> <C>
A-1 Preferred................................ 3,100 65,200
A-2 Preferred................................ 5,200 125,775
A-3 Preferred................................ 5,000 121,764
A-4 Preferred................................ 2,650 62,316
Nonvoting Common............................. 1,040,223 11,449,463
Voting Common................................ 850,500 11,233,482
--------- ----------
1,906,673 23,058,000
========= ==========
</TABLE>
For purposes of calculating the exchange ratio for recapitalization, the Company
utilized $10.00 (adjusted for the stock splits) as the price per share of the
Company's common stock. Weighted average common shares and net earnings per
common share for all years presented have been adjusted to reflect the
recapitalization and subsequent stock splits.
(b) Initial Public Offering
On October 10, 1995, the Company completed an initial public offering of common
stock in which 2,796,750 shares were sold by the Company for net proceeds of
$20.0 million.
(c) Secondary stock offering
On March 13, 1998, the Company completed a secondary public offering of common
stock in which 2,137,500 shares were sold which generated net proceeds to the
Company of $89.1 million.
(d) Stock Splits
On November 21, 1997 the Company's Board of Directors approved a three-for-two
stock split which was effected on December 12, 1997. On March 19, 1996 the
Company effected a three-for-two stock split. All share and per share amounts
have been adjusted to reflect both stock splits.
F-24
<PAGE> 182
CENTRAL PARKING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
(e) Earnings Per Share
Effective October 1, 1997, the Company adopted the provisions of SFAS No. 128.
Statement 128 replaced the previously reported primary and fully diluted
earnings per share with basic and diluted earnings per share. Basic earnings per
share excludes dilution and is computed by dividing income available to common
shareholders by the weighted-average number of common shares outstanding for the
period. Diluted earnings per share reflects the potential dilution that could
occur if securities or other contracts to issue common stock were exercised or
converted into common stock or resulted in the issuance of common stock that
then shared in the earnings of the entity. Earnings per share for all periods
presented have been calculated and presented in accordance with SFAS No. 128.
The following tables set forth the computation of basic and diluted earnings per
share:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30, 1996 YEAR ENDED SEPTEMBER 30, 1997 YEAR ENDED SEPTEMBER 30, 1998
------------------------------- ------------------------------- -------------------------------
INCOME COMMON INCOME COMMON INCOME COMMON
AVAILABLE SHARES PER-SHARE AVAILABLE SHARES PER-SHARE AVAILABLE SHARES PER-SHARE
($000'S) (000'S) AMOUNT (000'S) (000'S) AMOUNT (000'S) (000'S) AMOUNT
--------- ------- --------- --------- ------- --------- --------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Basic earnings per
share.............. $13,836 25,762 $ 0.54 $20,205 25,991 $ 0.78 $26,610 27,857 $ 0.96
Stock option plan.... -- 112 -- -- 120 -- -- 244 (0.01)
Restricted stock
plan............... -- 127 (0.01) -- 172 (0.01) -- 172 (0.01)
Deferred stock unit
plan............... -- -- -- -- -- -- -- 9 --
Employee stock
purchase plan...... -- 41 -- -- 47 -- -- 44 --
------- ------ ------ ------- ------ ------ ------- ------ ------
Diluted earnings per
share.............. $13,836 26,042 $ 0.53 $20,205 26,330 $ 0.77 $26,610 28,326 $ 0.94
======= ====== ====== ======= ====== ====== ======= ====== ======
</TABLE>
Weighted average common shares used for the computation of basic earnings per
share excludes certain common shares issued pursuant to the Company's restricted
stock plan because under the related deferred compensation agreement the officer
forfeits such shares if he voluntarily terminates his employment with the
Company (see note 13). The effect of the conversion of the company-obligated
mandatorily redeemable securities of the subsidiary trust has not been included
in the diluted earnings per share calculation since such securities were
anti-dilutive. At September 30, 1998, such securities were convertible into
2,000,000 shares of common stock.
(11) OPERATING LEASE COMMITMENTS
The Company and its subsidiaries conduct a portion of their operations on leased
premises under operating leases expiring at various dates through 2101. Lease
agreements provide for minimum payments and contingent payments based upon a
percentage of revenue or a combination of both. Certain locations additionally
require the Company and its subsidiaries to pay real estate taxes and other
occupancy expenses.
F-25
<PAGE> 183
CENTRAL PARKING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
Future minimum rental commitments under operating leases are as follows (in
thousands):
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
------------------------
<S> <C>
1999........................................................ $124,369
2000........................................................ 106,764
2001........................................................ 95,784
2002........................................................ 83,530
2003........................................................ 74,530
Thereafter.................................................. 396,226
--------
Total future operating lease commitments............... $881,203
========
</TABLE>
Included in the future minimum rental commitments under operating leases are
aggregate payments of $74.9 million resulting from commitments incurred under
the agreement described in Note 6(a).
Rental expense for all operating leases was as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
------------------------------
1996 1997 1998
------- ------- --------
<S> <C> <C> <C>
Rentals:
Minimum............................... $38,882 $66,177 $132,582
Contingent............................ 19,330 23,952 40,092
------- ------- --------
Total rentals................. $58,212 $90,129 $172,674
======= ======= ========
</TABLE>
(12) INCOME TAXES
Income tax expense consists of the following (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
----------------------------
1996 1997 1998
------ ------- -------
<S> <C> <C> <C>
Current:
Federal and state....................... $5,585 $ 9,940 $13,116
Jobs credit, net of federal tax
benefit.............................. -- (98) (247)
------ ------- -------
Net federal current tax expense........... 5,585 9,842 12,869
State................................... 639 1,312 1,684
Non-U.S................................. 423 688 938
------ ------- -------
6,647 11,842 15,491
Deferred:
Federal and state....................... 585 378 2,123
Non-U.S................................. -- (13) --
------ ------- -------
585 365 2,123
------ ------- -------
Total income tax expense from
earnings..................... $7,232 $12,207 $17,614
====== ======= =======
</TABLE>
F-26
<PAGE> 184
CENTRAL PARKING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
Total income taxes are allocated as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
----------------------------
1996 1997 1998
------ ------- -------
<S> <C> <C> <C>
Income tax expense from continuing
operations.............................. $7,232 $12,207 $17,614
Acquisition related expenses for tax
purposes in excess of amounts recognized
for financial reporting purposes........ -- (1,423) (1,467)
Shareholders' equity, for compensation
expense for tax purposes in excess of
amounts recognized for financial
reporting purposes...................... (310) (213) (568)
------ ------- -------
Total income taxes.............. $6,922 $10,571 $15,579
====== ======= =======
</TABLE>
Provision has not been made for U.S. or additional foreign taxes on
approximately $2,863,000, $2,878,000 and $3,578,000 at September 30, 1996, 1997,
and 1998, respectively, of undistributed earnings of foreign subsidiaries, as
those earnings are intended to be permanently reinvested.
A reconciliation between actual income taxes and amounts computed by applying
the federal statutory rate to earnings before income taxes is summarized as
follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
----------------------------------------------------
1996 1997 1998
-------------- --------------- ---------------
$ % $ % $ %
------ ---- ------- ---- ------- ----
<S> <C> <C> <C> <C> <C> <C>
U.S. Federal statutory rate
on earnings before income
taxes..................... $7,164 34.0% $11,344 35.0% $15,478 35.0%
State and city income taxes,
net of federal income tax
benefit................... 422 2.0 853 2.6 1,095 2.5
Jobs credits, net of federal
tax benefit............... -- -- (98) (0.3) (247) (0.6)
Tax-exempt interest
income.................... (312) (1.5) (88) (0.3) (100) (0.2)
Nondeductible goodwill
amortization.............. -- -- 282 0.9 2,158 4.9
Other....................... (42) (0.2) (86) (0.2) (770) (1.8)
------ ---- ------- ---- ------- ----
Income tax expense.......... $7,232 34.3% $12,207 37.7% $17,614 39.8%
====== ==== ======= ==== ======= ====
</TABLE>
F-27
<PAGE> 185
CENTRAL PARKING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
Sources of deferred tax assets and deferred tax liabilities are as follows (in
thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30,
--------------------
1997 1998
-------- --------
<S> <C> <C>
Deferred tax assets:
Deferred compensation expense............... $ 1,620 $ 1,936
Accrued expenses and reserves............... 439 79
Prepaid expenses............................ 197 333
Charitable contribution of property......... 3,080 1,922
Net operating loss carry forwards........... 1,151 2,569
Capitalized leases.......................... -- 2,570
Tax credit carry forwards................... -- 587
Deferred and capitalized expenses........... 380 3,866
Other....................................... 172 462
-------- --------
Total gross deferred tax assets........ 7,039 14,324
Deferred tax liabilities:
Deferred tax gain on sales of properties.... (1,230) (1,367)
Deferred installment gain on sale of
property.................................. (2,062) (2,019)
Timing differences in recognition of
partnership earnings...................... (482) (702)
Property, plant and equipment, due to
differences in depreciation and purchase
business combinations..................... (8,324) (11,532)
Other....................................... (11) (49)
-------- --------
Total gross deferred tax liabilities... (12,109) (15,669)
Valuation allowance on net operating loss carry
forwards....................................... (890) (272)
-------- --------
Net deferred tax liabilities..................... $ (5,960) $ (1,617)
======== ========
</TABLE>
Net operating losses and contribution carry forwards expire between 2002 and
2013. Management believes that it is more likely than not that the results of
operations will generate sufficient taxable income to realize deferred tax
assets after giving consideration to the valuation allowance. The valuation
allowance has been provided for loss carry forwards for which recoverability is
not deemed to be more likely than not.
(13) EMPLOYEE BENEFIT PROGRAMS
(a) Stock Plans
In August 1995, the Board of Directors and shareholders approved a stock plan
for key personnel, which included a stock option plan and a restricted stock
plan. Under this plan, incentive stock options, as well as nonqualified options
and other stock-based awards, may be granted to officers, employees and
directors. A total of 1,417,500 common shares have been reserved for issuance
under these two plans combined. Options representing 678,403 shares are
outstanding under this plan at September 30, 1998. Options are granted with an
exercise price equal to the fair market value at the date of grant and generally
expire ten years after the date of grant. At September 30, 1998, 276,863 shares
had been issued through the
F-28
<PAGE> 186
CENTRAL PARKING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
restricted stock plan. Expense related to the vesting of restricted stock is
recognized by the Company over the vesting period.
In August 1995, the Board of Directors and shareholders also approved a stock
plan for directors. This plan provides for the grant, upon each director's
initial election, of options to purchase 11,250 shares to each non-employee
director. In addition, each non-employee director who has served for a minimum
of six months on the last day of each fiscal year will receive additional
options to purchase 4,500 shares on that date. A total of 225,000 shares have
been reserved for issuance under the plan. Options to purchase 135,500 shares
are outstanding under this plan at September 30, 1998.
The following table summarizes the transactions pursuant to the Company's stock
option plans for the last three fiscal years:
<TABLE>
<CAPTION>
NUMBER OPTION PRICE
OF SHARES RANGE PER SHARE
--------- ----------------
<S> <C> <C>
Outstanding at September 30, 1995.......... -- --
Granted............................... 449,250 $ 8.00 to $21.67
Exercised............................. 89,175 $8.00
Canceled.............................. 40,650 $8.00
------- ----------------
Outstanding at September 30, 1996.......... 319,425 $ 8.00 to $21.67
------- ----------------
Granted............................... 281,975 $21.25 to $30.50
Exercised............................. 45,525 $8.00
Canceled.............................. 18,000 $21.25
------- ----------------
Outstanding at September 30, 1997.......... 537,875 $ 8.00 to $30.50
------- ----------------
Granted............................... 381,648 $32.54 to $51.06
Exercised............................. 52,370 $ 8.00 to $22.50
Canceled.............................. 53,250 $21.25 to $43.44
------- ----------------
Outstanding at September 30, 1998.......... 813,903 $ 8.00 to $51.06
------- ----------------
</TABLE>
At September 30, 1998, options to purchase 412,083 shares were exercisable.
F-29
<PAGE> 187
CENTRAL PARKING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
The Company accounts for these plans under Accounting Principles Board Opinion
No. 25, Accounting for Stock Issued to Employees, and accordingly, no
compensation cost has been recognized. If compensation cost for these plans had
been determined consistent with SFAS No. 123, "Accounting for
Stock-Based-Compensation", the Company's net earnings and earnings per share
would have been reduced to the following pro forma amounts:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-----------------------------
1996 1997 1998
------- ------- -------
<S> <C> <C> <C>
As reported:
Net income (in thousands).............. $13,836 $20,205 $26,610
Basic earnings per share............... 0.54 0.78 0.96
Diluted earnings per share............. 0.53 0.77 0.94
Pro Forma -- SFAS 123
Net income (in thousands).............. $12,840 $19,238 $24,029
Basic earnings per share............... 0.50 0.74 0.86
Diluted earnings per share............. 0.49 0.73 0.84
</TABLE>
The estimated weighted average fair value of the options granted were $3.60 for
1996 option grants, $11.90 for 1997 option grants and $11.57 for 1998 option
grants using the Black-Scholes option pricing model with the following
assumptions: dividend yield based on historic dividend rates at the date of
grant, volatility of 35%, risk free interest based on the treasury bill rate of
10 year instruments at the date of grant, and an expected life of ten years for
all grants.
The Company also has an Employee Stock Purchase Plan which began April 1, 1996,
under which 450,000 shares of common stock have been reserved for issuance. The
plan allows participants to contribute up to 10% of their normal pay (as defined
in the Plan) to a custodial account for purchase of the Company's common stock.
Participants may enroll or make changes to their enrollment annually, and they
may withdraw from the plan at any time by giving the Company written notice.
Employees purchase stock annually following the end of the plan year at a price
per share equal to the lesser of 85% of the closing market price of the common
stock on the first or the last trading day of the plan year. At September 30,
1998, 107,432 shares had been issued under this plan.
(b) Profit Sharing Plan
The Company has a profit-sharing plan for domestic employees to which employer
contributions are at the discretion of the Board of Directors. Voluntary
after-tax contributions not in excess of 10% of compensation may be made by
non-highly compensated employees.
Eligible employees, 20 years or older, may become a participant in the plan
after one year of continuous service, if the employee was employed prior to
reaching age 65. An employee's interest in the plan vests after two years at the
rate of 20% each year, so that the employee is fully vested at the end of seven
continuous years of service.
Employer expense associated with this plan was $971,000, $1,136,000 and
$1,400,000 in years 1996, 1997, and 1998, respectively.
F-30
<PAGE> 188
CENTRAL PARKING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
(c) Incentive Compensation Agreements
The Company has incentive compensation agreements with certain key employees.
Participating employees receive an annual bonus based on profitability of the
operations for which they are responsible. Incentive compensation expense is
accrued during the year based upon management's estimate of amounts earned under
the related agreements. Incentive compensation under all such agreements was
approximately $4,371,000, $5,160,000, and $5,775,000 in years 1996, 1997 and
1998, respectively.
(d) Deferred Compensation Agreements
The Company has a deferred compensation agreement with the President and Chief
Operating Officer of the Company in which the officer is entitled to receive
upon retirement, payments in an aggregate amount equal to 5% of the increase in
the Company's cumulative after tax profits since September 30, 1983. Upon the
closing of the Company's initial public offering, the Company and the officer
modified the existing agreement by issuing to the officer 267,750 shares of
restricted common stock under the Company's restricted stock plan. Further, the
officer may be entitled to receive additional shares of restricted common stock
until his normal retirement or, if earlier, the date of termination of his
employment, in an amount determined by a formula based upon the Company's
performance over such period. If the officer voluntarily terminates his
employment with the Company before his normal retirement, or if the Company
terminates his employment for cause, all shares of stock received and to be
received under the restricted stock plan are to be forfeited. The market value
of the restricted stock at the date of issuance was $670,000 greater than the
Company's deferred compensation liability. Accordingly, the Company recorded
deferred compensation expense in its shareholders' equity, which is being
amortized ratably over the remaining expected term of the officer's employment.
If it is determined that additional shares are to be issued under the agreement,
the Company will recognize compensation expense, spread ratably over the
remaining expected term of the officer's employment, equivalent to the market
value of such shares, subject to future market fluctuations prior to the
issuance of such shares.
The Company has a deferred compensation agreement that entitles the Chairman and
Chief Executive Officer to annual payments of $500,000 for a period of ten years
following his termination, for any reason other than death, in exchange for a
covenant not to compete. Thereafter, the officer is entitled to annual payments
of $300,000 until his death and, in the event his wife survives him, she is
entitled to annual payments of $300,000 until her death. The Company recognizes
annual compensation expense pursuant to this agreement equivalent to the
increase in the actuarially determined future obligation under the agreement.
Compensation expense associated with these agreements was approximately
$412,000, $88,000, and $330,000 in fiscal years 1996, 1997 and 1998,
respectively.
(e) Deferred Unit Plan
On December 19, 1996, the Board of Directors approved the adoption of the
Company's Deferred Stock Unit Plan. Under the plan, certain key employees have
the opportunity to defer the receipt of certain portions of their cash
compensation, instead receiving shares of
F-31
<PAGE> 189
CENTRAL PARKING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
common stock following certain periods of deferral. Approximately nine key
employees will be eligible to participate in the plan. The plan is administered
by a committee, appointed by the board of directors of the Company consisting of
at least two non-employee "outside' directors of the Company.
The Company reserved 375,000 shares of common stock for issuance under the 1996
Deferred Stock Unit Plan. Participants may defer up to 50% of their salary. As
of September 30, 1998 $490,207 of compensation has been deferred under this
plan.
(f) Severance Agreement
The Company entered into a severance agreement with the President and Chief
Operating Officer providing for a severance payment to him in cash or stock, at
the Company's election, in an amount currently equal to three weeks of his total
compensation for each year of employment with the Company, upon the termination
of his employment with the Company for any reason other than fraud or
malfeasance.
(14) RELATED PARTIES
The Company leases two properties from an entity 50% owned by the Company's
chairman for $290,000 per year for a 10-year term and pays percentage rent to
the entity. Total rent expense, including percentage rent, was $290,000,
$354,000, and $442,000 in 1996, 1997 and 1998, respectively. The Company will
receive 25% of the gain in the event of a sale of these properties during the
term of the lease pursuant to the lease agreements. Management believes that
such transactions have been on terms no less favorable to the Company than those
that could have been obtained from unaffiliated persons.
(15) CONTINGENCIES
The Company is subject to various legal proceedings and claims which arise in
the ordinary course of its business. In the opinion of management, the ultimate
liability with respect to those proceedings and claims will not materially
affect the financial position, operations, or liquidity of the Company. The
Company maintains liability insurance coverage for individual claims in excess
of $50,000, subject to annual aggregate limits.
(16) SUPPLEMENTAL CASH FLOW INFORMATION
Cash payments made for interest and income taxes were as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
----------------------------
1996 1997 1998
------ ------- -------
<S> <C> <C> <C>
Interest.................................. $ -- $ 4,368 $ 7,029
Income taxes.............................. $7,209 $10,899 $15,829
</TABLE>
F-32
<PAGE> 190
CENTRAL PARKING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
(17) BUSINESS SEGMENTS
The Company's business activities consist of domestic and foreign operations.
Foreign operations are conducted primarily in the United Kingdom, with segments
in Canada and Malaysia. The Company also conducts business through joint
ventures in Mexico, Germany, and Spain. Revenues attributable to foreign
operations were less than 10% of consolidated revenues for each of fiscal years
1996, 1997 and 1998. Further, with the exception of the United Kingdom, there
are no countries that account for 10% or greater of total foreign revenues.
Therefore, the Company includes all foreign operations in a single reporting
segment.
A summary of information about the Company's operations by segments is as
follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
--------------------------------
1996 1997 1998
-------- -------- --------
<S> <C> <C> <C>
Total revenues:
Domestic......................... $128,631 $202,346 $360,209
Foreign.......................... 13,175 18,108 22,966
-------- -------- --------
Consolidated..................... $141,806 $220,454 $383,175
======== ======== ========
Operating earnings:
Domestic......................... $ 15,873 $ 25,967 $ 43,983
Foreign.......................... 1,059 1,885 2,898
-------- -------- --------
Consolidated..................... $ 16,932 $ 27,852 $ 46,881
======== ======== ========
Earnings before income taxes:
Domestic......................... $ 19,748 $ 30,065 $ 40,562
Foreign.......................... 1,320 2,347 3,662
-------- -------- --------
Consolidated..................... $ 21,068 $ 32,412 $ 44,224
======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30,
--------------------
1997 1998
-------- --------
<S> <C> <C>
Identifiable assets:
Domestic....................................... $227,471 $533,770
Foreign........................................ 6,543 11,103
-------- --------
Consolidated..................................... $234,014 $544,873
======== ========
</TABLE>
F-33
<PAGE> 191
CENTRAL PARKING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
(18) MERGER AGREEMENT
On September 21, 1998, the Company entered into a definitive agreement pursuant
to which the Company has agreed to merge with Allright Holdings, Inc.
("Allright"). Allright (dba Allright Parking) is headquartered in Houston and is
one of the largest parking services companies in the United States with revenues
of $217.4 million for the fiscal year ended June 30, 1998. The transaction,
which is expected to be accounted for as a pooling-of-interests, is valued using
a base purchase price of $564.4 million. The base purchase price of Allright
will be adjusted for certain items such as assumed long-term indebtedness,
certain expenses, asset acquisitions or dispositions, and material variations of
amounts estimated or represented by Allright Management prior to the closing
date. The equity purchase price of Allright is calculated in equivalent shares
of Central Parking common stock, based on a fixed share price of $46.00 per
share. Under terms of the agreement, Central Parking expects to issue
approximately 7.6 million shares of common stock to the shareholders of
Allright.
The merger remains subject to certain closing conditions, including the
expiration of the waiting period under the Hart-Scott-Rodino Act. The
transaction is subject to approval by the shareholders of both Central Parking
and Allright at separate meetings to be scheduled.
F-34
<PAGE> 192
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Allright Holdings, Inc. and Subsidiaries:
We have audited the accompanying consolidated balance sheets of Allright
Holdings, Inc. (a Delaware corporation) and Subsidiaries (Allright or the
Company) as of June 30, 1998 and 1997, and the related consolidated statements
of operations, stockholders' equity and cash flows of the Company for the year
ended June 30, 1998, and the period from October 31, 1996, through June 30,
1997, and of the Predecessor Company (as defined in Note 1) for the period from
July 1, 1996, through October 30, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Allright as of June
30, 1998 and 1997, and the consolidated results of operations, changes in
stockholders' equity and cash flows of the Company for the year ended June 30,
1998, and the period from October 31, 1996, through June 30, 1997, and of the
Predecessor Company for the period from July 1, 1996, through October 30, 1996,
in conformity with generally accepted accounting principles.
As explained in Note 1 to the consolidated financial statements, the Predecessor
Company was acquired by Allright Acquisition, Inc., in a purchase transaction
effective as of October 31, 1996. The acquisition was accounted for as a
purchase and, accordingly, the purchase price was allocated to the assets and
liabilities of the Predecessor Company based on their estimated fair values at
October 31, 1996. Accordingly, the financial statements of the Company are not
comparable to those of the Predecessor Company.
ARTHUR ANDERSEN LLP
Houston, Texas
October 9, 1998
F-35
<PAGE> 193
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Allright Corporation
We have audited the accompanying consolidated statements of income,
stockholder's equity, and cash flows of Allright Corporation for the year ended
June 30, 1996. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated results of Allright Corporation's
operations and cash flows for the year then ended in conformity with generally
accepted accounting principles.
ERNST & YOUNG LLP
Houston, Texas
August 17, 1996
F-36
<PAGE> 194
ALLRIGHT HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SEPTEMBER 30,
JUNE 30, JUNE 30, 1998
1997 1998 (UNAUDITED)
-------- -------- -------------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 7,329 $ 19,655 $ 30,904
Receivables............................................... 6,093 6,034 7,917
Income tax receivable..................................... -- -- 1,654
Prepaid expenses.......................................... 5,015 4,528 10,266
-------- -------- --------
Total current assets............................... 18,437 30,217 50,741
PROPERTY AND EQUIPMENT, at cost:
Land...................................................... 194,170 209,017 207,720
Garages and buildings..................................... 22,050 36,068 38,870
Equipment and leasehold improvements...................... 14,472 28,687 30,814
-------- -------- --------
Total property and equipment....................... 230,692 273,772 277,404
Less-Accumulated depreciation and amortization............ 3,589 9,442 11,114
-------- -------- --------
Net property and equipment......................... 227,103 264,330 266,290
LEASEHOLDS AND MANAGEMENT FEE CONTRACTS, at cost, less
accumulated amortization.................................. 46,866 44,699 43,756
OTHER ASSETS:
Investments in parking affiliates......................... 2,698 3,032 2,893
Other real estate investments............................. 2,390 2,380 2,517
Deferred debt issuance costs, net......................... 6,022 3,441 2,796
Long-term portion of notes receivable..................... 21,646 21,414 21,731
Other..................................................... 5,952 6,463 13,861
-------- -------- --------
Total other assets................................. 38,708 36,730 43,798
GOODWILL, net............................................... 32,685 32,293 32,082
-------- -------- --------
Total assets....................................... $363,799 $408,269 $436,667
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short term obligations.................................... $ -- $ -- $ 3,500
Accrued liabilities and payables-
Rents..................................................... 10,726 15,621 15,937
Property taxes............................................ 1,889 3,252 4,442
Insurance................................................. 2,471 1,907 3,532
Payroll and related and profit sharing.................... 4,470 6,557 3,441
Interest.................................................. 1,514 1,680 1,547
Other..................................................... 7,762 9,254 12,117
-------- -------- --------
Total short term obligations, accrued liabilities
and payables..................................... 28,832 38,271 44,516
Current maturities of long-term obligations............... 99 656 4,756
-------- -------- --------
Total current liabilities.......................... 28,931 38,927 49,272
LONG-TERM OBLIGATIONS, less current maturities.............. 200,473 222,615 242,768
DEFERRED FEDERAL INCOME TAXES............................... 30,047 30,168 29,935
DEFERRED COMPENSATION LIABILITY............................. 7,771 7,562 7,522
MINORITY INTEREST........................................... 21,163 23,103 21,500
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value; 500,000 shares authorized,
73,921 shares, 79,325 and 79,344 (unaudited) shares
issued and outstanding in 1997, 1998 and September 30,
1998 (unaudited), respectively.......................... 1 1 1
Capital in excess of par value............................ 78,949 89,734 89,766
Retained deficit.......................................... (3,400) (3,332) (3,352)
Equity adjustment for foreign currency translation........ (136) (509) (745)
-------- -------- --------
Total stockholders' equity......................... 75,414 85,894 85,670
-------- -------- --------
Total liabilities and stockholders' equity......... $363,799 $408,269 $436,667
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-37
<PAGE> 195
ALLRIGHT HOLDINGS, INC. AND SUBSIDIARIES
AND PREDECESSOR COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PREDECESSOR COMPANY ALLRIGHT HOLDINGS, INC.
-------------------------------- -------------------------------------------------------------
FOR THE PERIOD FOR THE PERIOD FOR THE THREE MONTHS
FROM FROM ENDED SEPTEMBER 30,
FOR THE YEAR JULY 1, 1996, OCTOBER 31, 1996, FOR THE YEAR -------------------------
ENDED THROUGH THROUGH ENDED 1997 1998
JUNE 30, 1996 OCTOBER 30, 1996 JUNE 30, 1997 JUNE 30, 1998 (UNAUDITED) (UNAUDITED)
------------- ---------------- ----------------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Parking services
revenues.......... $167,709 $58,595 $114,881 $206,448 $48,691 $56,244
Management fee
revenues.......... 4,645 1,484 3,677 10,936 2,330 2,990
-------- ------- -------- -------- ------- -------
Total revenues...... 172,354 60,079 118,558 217,384 51,021 59,234
Costs and Expenses:
Cost of parking
services.......... 138,604 45,268 94,374 169,811 40,415 46,458
Depreciation and
amortization...... 6,257 2,019 4,593 9,633 2,069 2,649
General and
administrative
expenses.......... 9,271 2,840 6,207 11,919 2,412 3,586
Issuance of stock to
management........ -- 5,500 -- -- -- --
Amortization of
goodwill.......... -- -- 735 1,177 338 292
-------- ------- -------- -------- ------- -------
Total costs and
expenses.......... 154,132 55,627 105,909 192,540 45,234 52,985
-------- ------- -------- -------- ------- -------
Income from parking
Operations............ 18,222 4,452 12,649 24,844 5,787 6,249
-------- ------- -------- -------- ------- -------
Other income
(expense):
Interest expense.... (5,915) (1,786) (13,915) (22,859) (5,493) (6,500)
Interest and
investment
income............ 729 240 733 1,308 344 586
Minority interest... -- -- (163) (289) (72) (88)
Gain (loss) on sales
of property,
equipment and
leases............ 1,101 110 (19) (710) (41) (3)
-------- ------- -------- -------- ------- -------
Total other income
(expense)......... (4,085) (1,436) (13,364) (22,550) (5,262) (6,005)
-------- ------- -------- -------- ------- -------
Income (loss) before
income taxes and
extraordinary
item................ 14,137 3,016 (715) 2,294 525 244
-------- ------- -------- -------- ------- -------
Income taxes:
Current............. (5,980) (2,960) (834) (2,105) (1,136) (496)
Deferred............ 25 1,774 (317) (121) 703 232
-------- ------- -------- -------- ------- -------
Total income
taxes............. (5,955) (1,186) (1,151) (2,226) (433) (264)
-------- ------- -------- -------- ------- -------
Income (loss) before
extraordinary
item................ 8,182 1,830 (1,866) 68 92 (20)
Extraordinary item,
loss on defeasance
of industrial
revenue bonds....... -- -- (1,534) -- -- --
-------- ------- -------- -------- ------- -------
Net income (loss)..... $ 8,182 $ 1,830 $ (3,400) $ 68 $ 92 $ (20)
======== ======= ======== ======== ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-38
<PAGE> 196
ALLRIGHT HOLDINGS, INC. AND SUBSIDIARIES
AND PREDECESSOR COMPANY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
EQUITY
ADJUSTMENT
COMMON STOCK CAPITAL IN RETAINED FOR FOREIGN
--------------- EXCESS OF EARNINGS CURRENCY
SHARES AMOUNT PAR VALUE (DEFICIT) TRANSLATION
------ ------ ---------- --------- -----------
<S> <C> <C> <C> <C> <C>
Predecessor company:
Balance, June 30, 1995............ 1,000 $-- $ 58,240 $ 33,652 $(424)
Net income...................... -- -- -- 8,182 --
Current federal tax provision
contributed to capital....... -- -- 4,366 -- --
Translation adjustment.......... -- -- -- -- 9
------ --- -------- -------- -----
Balance, June 30, 1996............ 1,000 -- 62,606 41,834 (415)
Capital contribution............ -- -- 36,245 -- --
Net income...................... -- -- -- 1,830 --
Current federal tax provision
contributed to capital....... -- -- 2,658 -- --
Issuance of stock to
management................... -- -- 5,500 -- --
Translation adjustment.......... -- -- -- -- 46
------ --- -------- -------- -----
Balance, October 30, 1996......... 1,000 $-- $107,009 $ 43,664 $(369)
====== === ======== ======== =====
Allright Holdings, Inc.:
Balance, October 31, 1996......... 67,900 $ 1 $ 72,928 $ -- $ --
Issuance of common stock........ 6,021 -- 6,021 -- --
Net loss........................ -- -- -- (3,400) --
Translation adjustment.......... -- -- -- -- (136)
------ --- -------- -------- -----
Balance, June 30, 1997............ 73,921 1 78,949 (3,400) (136)
Issuance of common stock........ 5,404 -- 10,785 -- --
Net income...................... -- -- -- 68 --
Translation adjustment.......... -- -- -- -- (373)
------ --- -------- -------- -----
Balance, June 30, 1998............ 79,325 1 89,734 (3,332) (509)
Issuance of common stock
(unaudited)..................... 19 -- 32 -- --
Net loss (unaudited)............ -- -- -- (20) (236)
Translation adjustment
(unaudited).................. -- -- -- -- --
------ --- -------- -------- -----
Balance, September 30, 1998
(unaudited)..................... 79,344 $ 1 $ 89,766 $ (3,352) $(745)
====== === ======== ======== =====
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-39
<PAGE> 197
ALLRIGHT HOLDINGS, INC. AND SUBSIDIARIES
AND PREDECESSOR COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PREDECESSOR COMPANY ALLRIGHT HOLDINGS, INC
------------------------------ ------------------------------------------------------------
FOR THE PERIOD FOR THE PERIOD
FROM FROM FOR THE THREE MONTHS
JULY 1, 1996, OCTOBER 31, ENDED SEPTEMBER 30,
FOR THE YEAR THROUGH 1996, FOR THE YEAR -------------------------
ENDED OCTOBER 30, THROUGH ENDED 1997 1998
JUNE 30, 1996 1996 JUNE 30, 1997 JUNE 30, 1998 (UNAUDITED) (UNAUDITED)
------------- -------------- ---------------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Cash flows from operating
activities:
Net income (loss)............... $ 8,182 $ 1,830 $ (3,400) $ 68 $ 92 $ (20)
Adjustments to reconcile net
income (loss) to net cash
provided by operating
activities --
Extraordinary item............ -- -- 1,534 -- -- --
Depreciation and
amortization................ 6,257 2,019 4,593 9,633 2,069 2,649
Goodwill amortization......... -- -- 735 1,177 338 292
Debt issuance cost
amortization................ -- -- 1,720 2,581 645 645
Deferred tax provision
(benefit)................... 214 (1,774) (366) 121 (703) (233)
Current federal tax provision
contributed to capital...... 4,366 2,658 -- -- -- --
Undistributed earnings from
investments in parking
affiliates, real estate and
other investments........... (39) (59) (48) (150) (19) 96
(Gain) loss on sales of
property and equipment...... (1,101) (110) 19 710 41 3
Minority interest in
consolidated entity......... -- -- 163 1,940 563 500
Change in operating assets and
liabilities --
(Increase) decrease in
receivables................. 50 (2,215) (3,200) 293 (217) (3,546)
(Increase) decrease in prepaid
expenses.................... (1,154) (649) (938) 721 (1,699) (1,857)
Increase in accrued
liabilities and payables.... 2,320 1,080 7,109 7,828 (184) 2,740
Other......................... 52 (107) 67 780 (247) (127)
------- ------- --------- -------- ------- -------
Net cash provided by operating
activities.................... 19,147 2,673 7,988 25,702 679 1,142
------- ------- --------- -------- ------- -------
Cash flows from investing
activities:
Proceeds from sales of property
and equipment................. 2,274 184 2,641 6,379 2,059 1,629
Proceeds received from
investments in parking
affiliates and real estate.... 58 49 43 58 15 15
Advances to investments in
parking affiliates and real
estate........................ (10) (664) (5) (12) -- (156)
Purchase of land................ (4,233) -- (4,104) (21,194) (2,355) (426)
Purchase of garages and
equipment..................... (5,235) (1,436) (4,269) (25,435) (2,248) (5,099)
Purchase of leaseholds and
management fee contracts...... (351) (33) (3,805) (1,569) 107 (37)
Acquisitions of companies, net
of cash acquired.............. -- -- (221,754) (2,842) -- --
(Increase) decrease in long-term
notes receivable.............. -- -- (16,987) 232 28 (319)
Other........................... (1,478) 565 (320) (359) 435 (159)
------- ------- --------- -------- ------- -------
Net cash used in investing
activities.................... (8,975) (1,335) (248,560) (44,742) (1,959) (4,552)
------- ------- --------- -------- ------- -------
Cash flows from financing
activities:
Net bank note borrowings
(payments).................... 5,298 (11,149) -- -- -- 3,500
Payments of long-term
obligations................... (11,896) (32,805) (2,679) (4,856) (2,107) (1,648)
Proceeds from issuance of
long-term obligations......... 528 -- 168,211 25,437 1,389 14,878
Distribution to minority
interest partner.............. -- -- -- -- -- (2,103)
Proceeds from issuance of common
stock......................... -- -- 6,021 10,785 -- --
Capital contribution............ -- 41,745 67,428 -- 1,500 32
------- ------- --------- -------- ------- -------
Net cash (used in) provided by
financing activities.......... (6,070) (2,209) 238,981 31,366 782 14,659
------- ------- --------- -------- ------- -------
Net increase (decrease) in cash
and cash equivalents............ 4,102 (871) (1,591) 12,326 (498) 11,249
Cash and cash equivalents,
beginning of period............. 3,652 7,754 8,920 7,329 7,329 19,655
------- ------- --------- -------- ------- -------
Cash and cash equivalents, end of
period.......................... $ 7,754 $ 6,883 $ 7,329 $ 19,655 $ 6,831 $30,904
======= ======= ========= ======== ======= =======
Noncash transactions:
Purchase of property and
equipment in exchange for
liabilities................... -- -- -- $ 1,314
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-40
<PAGE> 198
ALLRIGHT HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ACQUISITIONS
Effective October 31, 1996, Allright Acquisition Company, Inc., a newly formed
Delaware corporation and wholly owned subsidiary of Allright Holdings, Inc.
(Allright or the Company), a newly formed Delaware corporation, acquired all of
the common stock (the Acquisition) of Allright Corporation and its wholly owned
subsidiaries (the Predecessor Company), a Delaware corporation, from Nedinco
Delaware Incorporated (Nedinco), a Delaware corporation, for approximately
$226,334,000, including acquisition-related expenses of approximately
$3,267,000. The Acquisition was financed with proceeds from a capital
contribution of $65,850,000 from Holdings and a credit facility with CS First
Boston Mortgage Capital Corp. (CSFB). The Acquisition was accounted for as a
purchase, and the total purchase price was allocated to assets acquired and
liabilities assumed based on their relative fair market values at the date of
purchase and resulted in goodwill of approximately $33,596,000.
The $36,245,000 capital contribution recorded in the accompanying Predecessor
Company's statement of stockholder's equity reflects the amount necessary to
retire certain debt obligations of the Predecessor Company, prior to the
Acquisition, as required by the agreement for the Acquisition. This amount was
deducted from the sales proceeds remitted to Nedinco.
During the period from July 1, 1996, to October 30, 1996, Nedinco committed to
grant management equity in the Predecessor Company equal to $5,500,000. The
Predecessor Company recorded a noncash compensation expense reflecting the fair
value of this commitment. The issuance of this equity is being effected through
the use of Allright stock instruments. In order to effect the grant, $1,650,000
was issued on the date of the acquisition, with the remaining $3,850,000 to be
issued as directed by and subject to limitations established by the Company's
Board of Directors. The value of the equity commitment was included as
additional acquisition cost on Allright's financial statements.
The following unaudited pro forma condensed results of operations give effect to
the acquisition of the Predecessor Company as if such transaction had occurred
at the beginning of each period presented (in thousands):
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
JUNE 30
-------------------
1996 1997
-------- --------
(UNAUDITED)
<S> <C> <C>
Total revenues..................................... $172,354 $178,637
Loss before extraordinary item..................... (2,168) (919)
Net loss........................................... (2,168) (2,453)
</TABLE>
The foregoing unaudited pro forma amounts are based upon certain assumptions and
estimates, including, but not limited to, (a) interest expense on debt incurred
to finance the acquisition, (b) depreciation expense related to the net increase
in the values of garages, buildings and leaseholds, (c) amortization of goodwill
over 30 years associated with the acquisition and (d) the related tax effects of
(a), (b) and (c). Additionally, the nonrecurring charge to the Predecessor
Company for the $5,500,000 compensation charge related to the
F-41
<PAGE> 199
ALLRIGHT HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
equity commitment made by Nedinco was excluded from the 1997 unaudited pro forma
condensed results of operations. The unaudited pro forma results are not
necessarily indicative of the financial results that might have occurred had the
transaction taken place at the beginning of each period presented or of future
results of operations.
During the period July 1, 1996, through October 30, 1996, there were no
significant acquisitions made by Allright other than the purchase of the
Predecessor Company described above. During the period October 31, 1996, through
June 30, 1997, the Company acquired four properties and four companies for a
purchase price of $3,041,000 and $5,369,000, respectively. The purchase price of
these acquisitions approximated fair market value of the properties. One of
these acquisitions provides for potential contingent consideration of a maximum
amount of $1,600,000 to be paid if certain operating thresholds are met over the
next eight years. During fiscal year 1998, the Company acquired 19 properties
and seven companies for an aggregate purchase consideration of $35,023,000 and
$5,401,000, respectively. These acquisitions resulted in goodwill of $2,213,000.
Five of these acquisitions provide for potential contingent consideration of a
maximum amount of $1,648,000 to be paid if certain operating thresholds are met
over the next five years.
On June 1, 1997, the Company acquired a 50 percent controlling interest in
Edison Parking Management L.P (Edison). Edison's assets consist of management
contracts contributed by Park Fast Parking Management, L.P. (Park Fast), a third
party. These management contracts were recorded at their fair market value and
are being amortized straight-line over their expected lives, which average 12
years. The value of Park Fast's interest is reflected as minority interest in
the accompanying balance sheet.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICES
Operations and Basis of Presentation
Allright operates, maintains and manages automobile parking facilities and
invests in real estate utilized in parking operations.
The financial statements include the results of operations and cash flows of the
Predecessor Company for the year ended June 30, 1996, the period from July 1,
1996, through October 30, 1996, and the results of operations and cash flows of
Allright from October 31, 1996, through June 30, 1997, and for the year ended
June 30, 1998.
Principles of Consolidation
The accompanying financial statements include the accounts of Allright, its
subsidiaries and controlled partnerships. Investments in affiliates and other
real estate investments that are not majority owned or controlled are accounted
for using the equity method. All significant intercompany accounts have been
eliminated.
Cash and Cash Equivalents
Allright considers all highly liquid investments purchased with an original
maturity of three months or less to be cash equivalents.
F-42
<PAGE> 200
ALLRIGHT HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Property and Equipment
Property and equipment are stated at cost, as adjusted to fair value on the
effective date of the Acquisition, October 31, 1996. Allright used the direct
capitalization method to determine the fair value of properties that generate
parking income. Generally, a market capitalization rate was applied to the
annual stabilized historical income from the property to determine its fair
value. For properties which are operated as parking lots, a substantial portion
of the purchase price was allocated to land since the value of improvements was
nominal. For properties improved with a garage, the fair value was allocated
between the land and the garage based upon the estimated replacement cost of the
structure. Garages and equipment are depreciated using the straight-line method.
In July 1997, based on the results of operating experience and the Company's
maintenance programs, the Company extended the useful lives of certain garages
and buildings effective July 1, 1997. Such change in estimate resulted in an
approximate $589,000 reduction in depreciation expense for the year ended June
30, 1998. The balances and estimated useful lives for property and equipment are
as follow (in thousands):
<TABLE>
<CAPTION>
JUNE 30, 1997 JUNE 30, 1998 USEFUL LIVES
------------- ------------- --------------
<S> <C> <C> <C>
Land........................... $194,170 $209,017 Nondepreciable
Garages and buildings.......... 22,050 36,068 35-40 years
Equipment and leasehold
improvements................. 14,472 28,687 1-15 years
-------- --------
230,692 273,772
Less- Accumulated depreciation
and amortization............. (3,589) (9,442)
-------- --------
$227,103 $264,330
======== ========
</TABLE>
Leaseholds and Management Contracts
Long-term leases (leaseholds) and management contracts allow Allright to operate
parking facilities without acquiring a fee interest in the property. The
leaseholds and management contracts were valued using the discounted cash flow
method. Leaseholds and management contracts are amortized principally over the
remaining contractual term or an estimated term considering anticipated
terminations and renewal periods.
Carrying Amount of Long-Lived Assets
Allright has allocated the purchase price of the Predecessor Company to
long-lived assets based upon their fair values as of the purchase date. Such
values were determined based upon management's current intent to continue
operating such properties as parking facilities. In future periods, management
could change its intended use for certain properties, including deciding to sell
certain properties, or other events could occur that may indicate the carrying
amount of an asset may not be recoverable from continued operation of such
property as a parking facility. An impairment loss would be recognized in the
period such events occur, and such loss would be measured by the difference
between the carrying costs of the asset and the current fair value based on its
intended use. During the year ended June 30, 1998,
F-43
<PAGE> 201
ALLRIGHT HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Allright recorded an impairment loss of approximately $1,075,000 for properties
of which management changed the intended use from hold and operate to sell.
These properties were sold in fiscal year 1998. Management will continue to
monitor circumstances which may indicate that an impairment loss has occurred
and will record any such loss in the proper period.
Income Taxes
The Predecessor Company and Allright have both accounted for income taxes in
accordance with Statement of Financial Accounting Standards (SFAS) No. 109
whereby deferred income taxes are provided at the balance sheet date for
temporary differences between the tax bases of assets and liabilities and their
respective carrying amounts for financial statement purposes. These deferred
taxes are measured by applying current tax law and rates. The Predecessor
Company filed a consolidated U.S. federal income tax return with its parent,
Nedinco, for the year ended June 30, 1996, and the period ended October 30,
1996. For the period commencing October 31, 1996, and for subsequent periods,
Allright has filed and will continue filing a consolidated U.S. federal income
tax return. For state tax purposes, Allright and its subsidiaries will file
either on a stand-alone or combined basis depending on individual state
requirement. While a current federal income tax provision has been reflected in
the Predecessor Company's consolidated statement of operations for the period
from July 1, 1995, through October 30, 1996, pursuant to the terms of SFAS No.
109, federal taxes payable by the Predecessor Company were not required to be
remitted to Nedinco unless a consolidated tax liability existed. Accordingly,
the amount of such income taxes for the period from July 1, 1995, through
October 30, 1996, has been reflected as a capital contribution by Nedinco to the
Predecessor Company.
Foreign Currency Translation
The financial statements of Allright's Canadian subsidiaries have been
translated into U.S. dollar equivalents in accordance with SFAS No. 52. All
balance sheet accounts have been translated using exchange rates at the end of
the period, and income statement items have been translated using the average
exchange rate for the period. The translation adjustment is included in
stockholder's equity.
Extraordinary Loss
On October 31, 1996, Allright recorded an extraordinary loss of $1,534,000 for
costs incurred with respect to the defeasance of debt obligations. The tax
benefit resulting from the extraordinary loss increased the Company's net
operating loss carryforward (NOL); however, the deferred tax attributable to
this NOL has been fully reduced by a valuation allowance. See Note 9 for further
discussion.
Goodwill
Goodwill represents the excess of cost over fair value of net assets acquired
and is amortized on a straight-line basis over 30 years. Amortization expense
for the period from October 31, 1996, through June 30, 1997, and the year ended
June 30, 1998, totaled approximately
F-44
<PAGE> 202
ALLRIGHT HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
$735,000 and $1,177,000, respectively. The Company assesses the recoverability
of this intangible asset by determining whether the amortization of the goodwill
balance over its remaining life can be recovered through undiscounted future
operating cash flows of the acquired operation. The amount of goodwill
impairment, if any, is measured based on projected discounted future operating
cash flows using a discount rate reflecting the Company's average cost of funds.
The assessment of the recoverability of goodwill will be impacted if estimated
future operating cash flows are not achieved.
Debt Issuance Costs
The Company has deferred certain expenses totaling approximately $7,742,000
incurred in connection with the issuance of the CSFB debt. These debt issuance
costs are being amortized over three years, the term of the debt. The
amortization of such deferred costs for the period from October 31, 1996,
through June 30, 1997, and the year ended June 30, 1998, totaled approximately
$1,720,000 and $2,581,000, respectively and is reflected in interest expense in
the accompanying consolidated statement of operations.
Fair Value of Financial Instruments
The Company's financial instruments consist of cash and cash equivalents,
long-term obligations and notes receivable. The Company believes that the
carrying amounts of these instruments approximate their fair value as of June
30, 1997 and 1998.
Newly Issued Accounting Standards
In October 1995, SFAS No. 123, "Accounting for Stock-Based Compensation," was
issued. SFAS No. 123 requires either recognition of compensation expense in the
financial statements for those companies that adopt the fair value-based
accounting method or expanded disclosure of pro forma net income information for
those companies that retain the accounting method set forth in Accounting
Principles Board (APB) Opinion No. 25, "Accounting for Stock Issued to
Employees." The Company follows the accounting method set forth in APB Opinion
No. 25 and provides the expanded disclosure requirements required by SFAS No.
123.
In June 1997, SFAS No. 130, "Reporting Comprehensive Income," was issued. SFAS
No. 130 establishes standards for reporting and display of comprehensive income
and its components in a full set of general purpose financial statements.
Comprehensive income is the total of net income and all other nonowner changes
in equity. The Company is required to adopt SFAS No. 130 in the first quarter of
fiscal 1999. Reclassification of comparative financial statements provided for
earlier periods will be required. The Company believes that the display of
comprehensive income will only differ from the currently reported net income by
the foreign currency translation currently reported in the consolidated
statement of stockholders' equity.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported
F-45
<PAGE> 203
ALLRIGHT HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
3. OTHER ACCRUED LIABILITIES AND PAYABLES
The components of "Other accrued liabilities and payables" were as follows (in
thousands):
<TABLE>
<CAPTION>
JUNE 30, SEPTEMBER 30,
--------------- (UNAUDITED)
1997 1998 1998
------ ------ --------------
<S> <C> <C> <C>
Accounts payable.......................... $1,541 $2,196 $ 3,817
Sales tax payable......................... 2,349 3,066 3,234
Rent deposits............................. 740 687 812
Accrued expenses -- general............... 963 905 2,143
Deferred income........................... 812 1,173 921
Other..................................... 1,357 1,227 1,190
------ ------ -------
$7,762 $9,254 $12,117
====== ====== =======
</TABLE>
4. LONG-TERM OBLIGATIONS
Long-term obligations consisted of the following (in thousands):
<TABLE>
<CAPTION>
JUNE 30, SEPTEMBER 30,
------------------- (UNAUDITED)
1997 1998 1998
-------- -------- --------------
<S> <C> <C> <C>
CSFB -- Senior Debt Tranche A Subportion One..... $ 29,712 $ 29,712 $ 29,712
CSFB -- Senior Debt Tranche A Subportion Two..... 125,242 125,242 125,242
CSFB -- Senior Debt Tranche B.................... 30,000 30,000 30,000
CSFB -- Permitted Acquisition Loan............... 12,503 31,260 46,120
Installment mortgage notes....................... 503 2,636 2,632
Secured notes.................................... -- 1,406 10,792
Unsecured notes.................................. 1,385 1,843 1,869
Touro Capital Lease Obligation................... 1,227 1,172 1,157
-------- -------- --------
Total.................................. 200,572 223,271 247,524
Less- Current maturities of long-term
obligations.................................... (99) (656) (4,756)
-------- -------- --------
Long-term obligations............................ $200,473 $222,615 $242,768
======== ======== ========
</TABLE>
In October 1996, Allright entered into a credit agreement with CSFB for the
purpose of financing the purchase of the Predecessor Company. Additionally, in
October 1996, Allright defeased all of its Industrial Development Revenue Bonds
(IRBs) in the amount of $17,892,093 and recorded an extraordinary loss of
$1,534,000. At June 30, 1997 and 1998, $15,800,000 and $15,515,000,
respectively, of the IRBs remain outstanding in a trust secured by U.S. Treasury
bills which were used to defease these instruments.
The principal balances of CSFB Tranche A Subportion One and Subportion Two notes
mature on October 30, 1999. Subportion One interest is payable monthly and
accrues at the London Interbank Offered Rate (LIBOR) plus 3 percent until
October 31, 1998, and
F-46
<PAGE> 204
ALLRIGHT HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
LIBOR plus 3.25 percent thereafter. Subportion Two interest is payable monthly
and accrues at 8.85 percent until October 31, 1997, LIBOR plus 3 percent until
October 30, 1998, and LIBOR plus 3.25 percent thereafter.
The principal balance of CSFB Tranche B note matures on October 30, 1999.
Interest is payable monthly and accrues at 12.25 percent until October 30, 1998,
and 12.50 percent thereafter.
The Company obtained a revolving line of credit (Permitted Acquisition Loan)
with a maximum borrowing capacity of $75,000,000, maturing October 30, 1999. At
June 30, 1997 and 1998, borrowing capacity available under the Permitted
Acquisition Loan was approximately $62,497,000 and $43,740,000, respectively.
The Permitted Acquisition Loan provides for interest per annum equal to LIBOR
plus 3.75 percent on outstanding borrowings.
On March 5, 1998, the Company obtained a revolving line of credit and letter of
credit agreement (Bank One Loan) with a maximum borrowing capacity of
$5,100,000, maturing October 1, 1999. At June 30, 1998, borrowing capacity
available under the Bank One Loan was $3,813,000. The Bank One Loan provides for
interest per annum equal, at the Company option, to either the Prime Rate of
interest or LIBOR plus 2.75 percent on outstanding borrowings.
The CSFB term loans and Permitted Acquisition Loan are secured by substantially
all of Allright's assets. The Bank One Loan is collateralized by a piece of the
Company's property.
The aggregate maturities on long-term obligations during the five years
subsequent to June 30, 1998, are as follows:
<TABLE>
<S> <C>
For the fiscal year ending June 30-
1999............................................ $ 656
2000............................................ 219,089
2001............................................ 775
2002............................................ 310
2003............................................ 326
Thereafter...................................... 2,115
--------
$223,271
========
</TABLE>
Management intends to either refinance the existing debt obligations with CSFB
or obtain new financing when they expire on October 30, 1999. Management
believes it will obtain this financing at similar or better terms.
Cash paid for the year ended June 30, 1996, from July 1, 1996 through October
30, 1996, from October 31, 1996 through June 30, 1997, and for the year ended
June 30, 1998, for interest was approximately $ 5,648,000, $1,778,000,
$10,469,000 and $20,487,000, respectively.
F-47
<PAGE> 205
ALLRIGHT HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. LEASES
Total rental expense under operating leases for parking properties and rental
income from subleases are reflected in cost of parking services and consist of
the following (in thousands):
<TABLE>
<CAPTION>
ALLRIGHT HOLDINGS, INC
PREDECESSOR COMPANY --------------------------------
-------------------------------- FOR THE PERIOD
FOR THE PERIOD FROM
FROM OCTOBER 31,
FOR THE YEAR JULY 1, 1996, 1996, FOR THE YEAR
ENDED THROUGH THROUGH ENDED
JUNE 30, 1996 OCTOBER 30, 1996 JUNE 30, 1997 JUNE 30, 1998
------------- ---------------- ---------------- -------------
<S> <C> <C> <C> <C>
Fixed rentals........ $ 63,022 $20,547 $41,992 $73,659
Variable rentals..... 18,917 6,528 12,179 20,897
-------- ------- ------- -------
Total
rentals.. 81,939 27,075 54,171 94,556
Less- Sublease
income............. (2,775) (1,520) (2,287) (3,532)
-------- ------- ------- -------
Net rental expense... $ 79,164 $25,555 $51,884 $91,024
======== ======= ======= =======
</TABLE>
Aggregate minimum rental commitments for parking properties under noncancelable
fixed rental leases, reduced by estimated rentals to be received from existing
subleases at June 30, 1998, consisted of the following (in thousands):
<TABLE>
<CAPTION>
OPERATING LEASES
------------------------------
MINIMUM NET
CAPITAL FIXED SUBLEASE MINIMUM
LEASE RENTALS INCOME RENTALS
------- -------- -------- --------
<S> <C> <C> <C> <C>
For fiscal years-
1999............................. $ 753 $ 58,870 $ 874 $ 57,996
2000............................. 753 44,731 728 44,003
2001............................. 867 30,840 528 30,312
2002............................. 295 18,228 333 17,895
2003............................. 266 12,121 209 11,912
Thereafter....................... 1,209 57,981 2,358 55,623
------ -------- ------ --------
Total minimum lease
payments.............. 4,143 $222,771 $5,030 $217,741
======== ====== ========
Less- Amount representing
interest......................... 1,565
------
Present value of net minimum lease
payments......................... $2,578
======
</TABLE>
Payments under management fee contracts and variable rentals under leases
requiring payment of a percentage of gross receipts are not included in the
preceding table. The terms of certain lease agreements also provide for payment
by the lessee of taxes, insurance and maintenance on the facilities. Certain
long-term lease agreements also have various terms of renewal, escalation
clauses and provisions under which Allright could share in any gains upon the
sale of property during the lease term.
F-48
<PAGE> 206
ALLRIGHT HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. EMPLOYEE BENEFIT PROGRAMS
Profit-Sharing Plan
A trusteed noncontributory profit-sharing plan covers substantially all
employees of the Predecessor Company and Allright at June 30, 1997 and 1998.
Contributions under the plan are based upon 5 percent of consolidated pretax
income from parking operations, as adjusted as specified in the plan, and
approximated $902,000 for the year ended June 30, 1996, $405,000 for the period
from July 1, 1996, through October 30, 1996, $680,000 for the period from
October 31, 1996, through June 30, 1997, and $1,398,000 for the year ended June
30, 1998.
Deferred Compensation
Agreements with certain present and former key executives provide for aggregate
annual payments ranging from $20,000 to $144,000 per year for periods ranging
from 10 years to life, beginning when the executive retires or upon death or
disability. Under certain conditions, the amount of deferred benefits can be
reduced. Life insurance contracts with a face value of approximately $9,288,000
have been purchased to fund, as necessary, the benefits under these agreements.
The cash surrender value of the life insurance contracts is approximately
$900,000 and $1,135,000 at June 30, 1997 and 1998, respectively, and is included
in other noncurrent assets. The plan is a nonqualified plan and is not subject
to ERISA funding requirements.
Net pension costs for the period from October 31, 1996, through June 30, 1997,
and the year ended June 30, 1998, included the following components (in
thousands):
<TABLE>
<CAPTION>
1997 1998
----- ----
<S> <C> <C>
Service cost, benefits earned during the year............ $ 74 $ 39
Interest cost on projected benefit obligation............ 337 506
Actual gain on plan assets............................... -- --
Net amortization and deferral............................ (95) (51)
----- ----
Net pension costs.............................. $ 316 $494
===== ====
</TABLE>
The funded status of the plans at June 30, 1998, was as follows (in thousands):
<TABLE>
<CAPTION>
<S> <C>
Actuarial present value of benefit obligations --
Vested benefit obligation................................. $7,562
Nonvested benefit obligation.............................. --
------
Accumulated benefit obligation.................... 7,562
Effect of projected future compensation levels.............. --
------
Projected benefit obligation...................... 7,562
Plan assets at fair value................................... --
------
Projected benefit obligation in excess of plan assets....... 7,562
Unrecognized cumulative net (loss) gain..................... --
Prior service cost unrecognized in pension cost............. --
Unrecognized net implementation asset (obligation).......... --
------
Accrued pension cost.............................. $7,562
======
</TABLE>
F-49
<PAGE> 207
ALLRIGHT HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The weighted average discount rate and rate of increase in future compensation
levels used in determining the actuarial present value of the projected benefit
obligations was 7 percent, for the period from October 31, 1996, through June
30, 1997 and the year ended June 30, 1998.
Stock Plans
As discussed in Note 1, Nedinco committed to grant the management of the
Predecessor Company an effective interest equal to $5,500,000. The Predecessor
Company recorded a noncash compensation expense reflecting the fair value of
this commitment. In order to effect the grant, the Company issued $1,650,000 on
October 31, 1996. The remaining $3,850,000 was to be issued as directed by and
subject to limitations established by the Company's board of directors.
Effective January 1, 1998, the Company's Allright 1998 Employee Stock Option
Plan (the 1998 Incentive Plan) authorized 3,850 shares of common stock to be
available for awards. The 1998 Incentive Plan is intended, in part, as a vehicle
by which the Company's board of directors could fulfill the commitment made by
Nedinco to management of the Predecessor Company. Effective May 20, 1998, 1,605
incentive stock options (ISOs) were issued to management of the Company to
purchase 1,605 shares of the Company's common stock at the price of $1,700 per
share. Under the terms of the award, at the time of exercise, a special cash
bonus shall be paid equal to the number of shares of common stock for which the
ISO has been exercised times $1,700 per share. This combination of ISOs and
special cash bonus was designed to effect a portion of the remaining stock
commitment made to management by Nedinco. One-third of the ISOs vested on May
20, 1998. The remaining ISOs vest as follows: one-third on January 1, 1999, and
one-third on January 1, 2000. The ISOs expire January 1, 2008.
In February 1997, stock options to purchase 2,917 common stock shares were
granted to an executive of the Company at an option price per share above market
on the date of grant. Vesting commenced on March 1, 1997, with such options
vesting at the rate of 61 shares per month.
In July 1997, stock options to purchase 740 common stock shares were granted to
an executive of the Company at an option price per share above market on the
date of grant. The options vest 25 percent on July 25, 1998, 1999, 2000 and
2001.
Based on the terms in the respective agreements, the vesting of all options
outstanding at June 30, 1998, shall accelerate at various rates upon a change in
control.
F-50
<PAGE> 208
ALLRIGHT HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Stock option transactions under the plans were as follows:
<TABLE>
<CAPTION>
NUMBER
OF OPTION PRICE
SHARES PER SHARE
------ ----------------
<S> <C> <C>
Outstanding at June 30, 1996.......................... -- --
Granted............................................. -- --
Exercised........................................... -- --
Canceled............................................ -- --
----- ----------------
Outstanding at October 30, 1996....................... -- --
----- ----------------
Granted............................................. 2,917 $ 1,100
Exercised........................................... -- --
Canceled............................................ -- --
Outstanding at June 30, 1997.......................... 2,917 $ 1,100
Granted............................................. 2,345 $1,300 to $2,900
Exercised........................................... -- --
Canceled............................................ -- --
----- ----------------
Outstanding at June 30, 1998.......................... 5,262 $1,100 to $2,900
===== ================
</TABLE>
The Fair Value of the 2,917 and 740 stock options was estimated as of the date
of the grant using the minimum value method as described in SFAS No. 123. The
following weighted average assumptions were used for the 2,917 and 740 options
granted: Risk Free Interest Rate of 6.48% and 6.04%, respectively, and an
expected life of 4 years and 4 years, respectively. The resulting Fair Values of
the 2,917 and 740 options grants were $151 and $0, respectively.
The Company accounted for the 2917 and 740 options under APB Opinion No. 25,
"Accounting for Stock Issued to Employees," and, accordingly, no compensation
cost was recognized. If compensation cost for these options had been determined
consistent with SFAS No. 123, "Accounting for Stock-Based Compensation," the
Company's net income (loss) would have been reduced (increased) to the following
pro forma amounts (in thousands):
<TABLE>
<S> <C>
Net income (loss) --
As reported for period ended June 30, 1997................ $(3,400)
Pro forma as adjusted under SFAS No. 123.................. (3,450)
Net income (loss) --
As reported for fiscal year ended June 30, 1998........... 68
Pro forma as adjusted under SFAS No. 123.................. (59)
</TABLE>
The 1605 options issued in 1998 under the 1998 Incentive Plan were not included
in the above pro forma calculations as the Predecessor Company recorded a
non-cash compensation charge for the $5,500,000 equity commitment made by
Nedinco to management of the Predecessor Company.
F-51
<PAGE> 209
ALLRIGHT HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. STOCK WARRANTS
In October 1996, Allright engaged the financial advisory firm CBA Mortgage
Partners, L.P. (CBA), to assist the Company in the acquisition of the
Predecessor Company. In return for services rendered, the Company issued CBA
1,177 warrants to purchase common stock of the Company at an exercise price of
$.01 per share. The fair market value of the warrants on the date of grant,
estimated at $1,177,000, was recorded as additional purchase consideration.
8. COMMITMENTS AND CONTINGENCIES
Indemnification of Liabilities by Nedinco and
Hang Lung Development Company Ltd.
Nedinco and Hang Lung Development Company Ltd., a Hong Kong corporation, have
agreed to indemnify Allright for certain costs and liabilities incurred in
connection with or arising out of the operations of the Predecessor Company
prior to October 31, 1996. As a result of the indemnification, expenses related
to items covered by the indemnification are being paid directly by Nedinco.
Letters of Credit
At June 30, 1998, the Company had letters of credit outstanding totalling
$1,638,000.
Litigation
The Company is involved in various legal actions arising in the normal course of
business. Management is of the opinion, after taking into consideration
evaluations by counsel for Company, that the outcome of all known and potential
claims and litigation will not have a material adverse effect on the Company's
business or consolidated financial position or result of operations.
F-52
<PAGE> 210
ALLRIGHT HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
9. INCOME TAXES
Income tax expense (benefit) for the periods presented below consisted of the
following (in thousands):
<TABLE>
<CAPTION>
PREDECESSOR COMPANY ALLRIGHT
------------------------- ----------------------
YEAR OCTOBER 31, YEAR
ENDED JULY 1, 1996, 1996, TO ENDED
JUNE 30, TO OCTOBER 30, JUNE 30, JUNE 30,
1996 1996 1997 1998
-------- -------------- ----------- --------
<S> <C> <C> <C> <C>
Current--
Federal...................... $4,701 $ 2,706 $ -- $ 477
State........................ 1,104 149 628 1,567
Non-U.S...................... 175 105 206 61
------ ------- ------ ------
Total current........ 5,980 2,960 834 2,105
------ ------- ------ ------
Deferred--
Federal...................... (28) (1,766) 240 207
State........................ (6) (3) 95 (83)
Non-U.S...................... 9 (5) (18) (3)
------ ------- ------ ------
Total deferred....... (25) (1,774) 317 121
------ ------- ------ ------
Total income tax
expense........... $5,955 $ 1,186 $1,151 $2,226
====== ======= ====== ======
</TABLE>
The effective rate, as computed on income (loss) before extraordinary items and
income taxes, differs from the statutory U.S. income tax rate for the periods
presented below due to the following (in thousands):
<TABLE>
<CAPTION>
PREDECESSOR COMPANY ALLRIGHT
----------------------------------- -------------------------------------
YEAR ENDED JULY 1, 1996, TO OCTOBER 31, 1996, YEAR ENDED
JUNE 30, 1996 OCTOBER 30, 1996 TO JUNE 30, 1997 JUNE 30, 1998
---------------- ---------------- ------------------ ----------------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
------ ------- ------ ------- ------- -------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. federal
statutory rate on
income (loss)
before
extraordinary items
and income taxes... $4,807 34.0% $1,026 34.0% $ (290) 34.0% $ 778 34.0%
State and city income
taxes, net of
federal income tax
benefit............ 724 5.1 168 5.4 5 (0.1) 159 6.9
Nondeductible
goodwill
amortization....... -- -- -- -- 235 (27.6) 427 18.7
Nondeductible
expenses........... 114 1.0 13 -- 94 (10.9) 70 3.1
Valuation allowance.. -- -- -- -- 1,107 (130.1) 792 34.6
Other................ 310 2.0 (21) (0.1) -- -- -- --
------ ----- ------ ----- ------ ------ ------ -----
Income tax expense... $5,955 42.1% $1,186 39.3% $1,151 (134.7)% $2,226 97.3%
====== ===== ====== ===== ====== ====== ====== =====
</TABLE>
F-53
<PAGE> 211
ALLRIGHT HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Sources of deferred tax assets and liabilities are as follows (in thousands):
<TABLE>
<CAPTION>
JUNE 30
-------------------
1997 1998
-------- --------
<S> <C> <C>
Deferred tax assets--
Deferred compensation expense.................... $ 4,361 $ 4,276
State taxes...................................... 1,447 971
Straight-line rent increases..................... 874 775
Net operating losses............................. 16,955 17,143
Other............................................ 144 879
-------- --------
Total gross deferred tax assets.......... 23,781 24,044
-------- --------
Deferred tax liabilities--
Book/tax difference in land values............... (32,694) (33,220)
Property, plant and equipment, due to differences
in depreciation............................... (3,914) (3,434)
Other.............................................. (435) (416)
-------- --------
Total gross deferred tax liabilities..... (37,043) (37,070)
Less -- Valuation allowance........................ (16,785) (17,142)
-------- --------
Net deferred tax liabilities............. $(30,047) $(30,168)
======== ========
</TABLE>
Net operating losses will expire if not utilized beginning in 2004. The
utilization of these net operating losses will be significantly limited by
various provisions of the Tax Code. Valuation allowance has been provided for
net operating losses for which recoverability is not deemed to be more likely
than not.
The amount of cash paid for federal alternative minimum, state and foreign
income taxes during the year ended June 30, 1996, the period from July 1, 1996,
to October 30, 1996, the period from October 31, 1996, to June 30, 1997, and the
year ended June 30, 1998, was approximately $2,153,000, $684,000 and $1,332,000
and $2,072,000, respectively.
10. NOTES RECEIVABLE
Included in notes receivable at June 30, 1997 and 1998, is a mortgage note of
$2,485,000 from a partnership which is secured by a parking garage and rental
assignments. The note bears interest at a rate of 7.7 percent which is payable
monthly. The loan matures in August 2010.
In June 1997, the Company loaned its partner in Edison $16,500,000 in connection
with the Company's acquisition of its interest in Edison. The note is secured by
a partnership interest in Edison, bears interest at a rate of 10 percent and is
payable in full in July 2004.
The remainder of notes receivable consist of notes ranging from $153,000 to
$1,071,000 at June 30, 1997, and notes ranging from $17,000 to $1,071,000 at
June 30, 1998. The notes bear interest at rates ranging from 8 percent to 12
percent at June 30, 1998.
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ALLRIGHT HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
11. SUBSEQUENT EVENTS
Prepaid Insurance
On July 1, 1998, the Company renewed its primary insurance coverages with its
existing carrier under a three year rate guaranteed program. The Company
financed the purchase of these insurance coverages by paying $550,000 in cash
and financing the remaining $10,500,000 over 30 months at an annual percentage
rate of 6.20 percent. Monthly payments of $376,000, which include interest and
principal, begin August 1, 1998.
Allied Parking Acquisition
On October 1, 1998, the Company purchased four leases from Allied Parking of New
York (Allied Parking) relating to parking facilities in Manhattan with
maturities ranging from 2006 to 2029 for $14,230,000 cash. In addition, Allied
Parking agreed to lease the Company two more lots for 19 years each in exchange
for a prepaid lease payment of $4,900,000. The Company also purchased the right
to use the "Allied Parking" name for $835,000 in cash.
Merger With Central
On September 21, 1998, a merger agreement was signed in which the Company will
merge with a wholly owned subsidiary of Central Parking Corporation (Central
Parking). The merger, which is expected to be accounted for as a pooling of
interests transaction is based on an equity purchase price of $564 million,
which is subject to adjustment for and reduction related to, among other things,
transaction costs, acquisitions and Allright indebtedness. For purposes of
computing the exchange ratio, the Central Parking common stock will have a
deemed price of $46.00 per share. The merger remains subject to certain closing
conditions, including the expiration of the waiting period under the
Hart-Scott-Rodino Act. The transaction is also subject to approval by the
shareholders of both Central Parking and the Company at separate meetings to be
scheduled. The transaction is anticipated to close in early 1999.
System Conversion
Allright is in the process of upgrading local and wide area information
networks, computer hardware, software, and connection devices to comply with
Year 2000 issues. The vendors of such computer equipment have warranted that
their systems will appropriately process information beyond Year 2000. Allright
expects that the conversion of all system critical functions will be completed
no later than the end of the first calendar quarter of 1999. Management expects
this conversion timetable to provide adequate opportunity to fully test and
address any unforeseen Year 2000 issues. Management believes that the system is
operating sufficiently to produce the necessary management reporting needed to
operate the Company on a timely basis and that all reporting capabilities will
be ready as necessary.
Additional Allied Acquisition (unaudited)
On November 8, 1998, the Company purchased an additional six leases from Allied
Parking with maturities ranging from 1999 to 2008 for $5.1 million cash. The
Company also
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ALLRIGHT HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
purchased the right to use the "Allied Parking" name associated with these
leases for $300,000 in cash.
Additional Edison Contribution (unaudited)
Upon consummation of the merger with Central Parking, Allright has committed to
contribute approximately $11.7 million to Edison.
Employee Retention Plan
In connection with the merger with Central Parking, Allright has committed to
retention agreements with key company personnel. Total payments to be paid in
connection with these agreements will be approximately $5,400,000. Payments are
contingent upon the consummation of the merger with Central Parking.
Additionally, upon closing of the merger with Central Parking, employment
agreements and management continuity agreements with aggregate payments totaling
approximately $2,000,000 to $5,400,000, contingent on time and continued
employment will be entered into by Allright.
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ANNEX A
AGREEMENT AND PLAN OF MERGER
AMONG
CENTRAL PARKING CORPORATION,
CENTRAL MERGER SUB, INC.
AND
ALLRIGHT HOLDINGS, INC.
DATED AS OF SEPTEMBER 21, 1998
AS AMENDED JANUARY 5, 1999
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of September 21, 1998 (this "Agreement"),
among Central Parking Corporation ("Central"), a Tennessee corporation, Central
Merger Sub, Inc. ("Central Sub"), a Delaware corporation and wholly owned
subsidiary of Central, Allright Holdings, Inc. ("Holdings"), a Delaware
corporation and the sole shareholder of Allright Corporation ("Allright"), a
Delaware corporation, Apollo Real Estate Investment Fund II, L.P. ("Apollo"), a
Delaware limited partnership and AEW Partners, L.P. ("AEW"), a Delaware limited
partnership.
RECITALS
WHEREAS, the respective Boards of Directors of Central, Central Sub and Holdings
have each approved the Merger (as defined below) of Central Sub and Holdings
pursuant to the terms of this Agreement;
WHEREAS, the majority stockholders of Central, Monroe J. Carrell, Jr. and The
Carell Children's Trust (collectively, the "Central Stockholders"), have each
entered into a transaction support agreement with Holdings, Apollo and AEW,
dated as of the date hereof (collectively, the "Transaction Support
Agreements"), with respect to the Merger wherein the Central Stockholders have
committed to vote the shares of Central capital stock beneficially owned by the
Central Stockholders in connection with the Merger and the other transactions
contemplated by this Agreement, and Apollo and AEW, as the majority stockholders
of Holdings, have committed to vote the shares of Holdings capital stock
beneficially owned by them in favor of the Merger and the other transactions
contemplated by this Agreement, and certain other stockholders and
warrantholders of Holdings have each entered into a transaction support
agreement with respect to the Merger wherein such stockholders and
warrantholders have committed to vote the shares of Holdings capital stock
beneficially owned by them in favor of the Merger and the other transactions
contemplated by this Agreement;
WHEREAS, Central, certain stockholders of Central, Apollo and AEW have entered
into a Registration Rights Agreement, dated as of the date hereof (the
"Registration Rights Agreement"), pursuant to which Central has agreed to
provide certain registration rights for the benefit of such stockholders of
Central, Apollo and AEW;
WHEREAS, Central, Central Sub and Holdings desire to make certain
representations, warranties, covenants and agreements in connection with such
merger as set forth in this Agreement; and
WHEREAS, for United States Federal income tax purposes, it is intended that the
Merger shall qualify as a reorganization under the provisions of Section 368 of
the Internal Revenue Code of 1986, as amended (the "Code"), and this Agreement
is intended to be and is adopted as a plan of reorganization within the meaning
of Section 368 of the Code;
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Now, therefore, in consideration of the premises and of the mutual covenants and
agreements hereinafter set forth, the parties hereto agree as follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger. At the Effective Time (as defined in Section 1.2) and
in accordance with the terms of this Agreement and applicable law, Central Sub
shall be merged (the "Merger") with and into Holdings and its separate legal
existence shall cease to exist, and Holdings will be the surviving corporation
(some times referred to herein as the "Surviving Corporation") and shall
continue its corporate existence as "Allright Holdings, Inc." under the laws of
the State of Delaware. The Merger shall have the effects provided for in Section
251 of the Delaware General Corporation Law (the "DGCL").
Section 1.2 Effective Time. The merger (the "Merger") shall become effective at
the time of the filing of the Certificate of Merger with the Secretary of State
of the State of Delaware (or at such later time specified as the effective time
in the Certificate of Merger), which Certificate of Merger shall be so filed at
the time of the Closing (as defined in Section 1.3). The date and time when the
Merger becomes effective are herein referred to as the "Effective Time".
Section 1.3 Closing. Unless this Agreement shall have been terminated and the
transactions herein contemplated shall have been abandoned pursuant to the
provisions of Article VII herein, the closing (the "Closing") of the
transactions contemplated by this Agreement shall take place at a location to be
agreed to by Central and Holdings, on the second business day following the
satisfaction or waiver of the conditions set forth in Article VI, or at such
other time and date as the parties may mutually agree. The date and time of such
Closing are herein referred to as the "Closing Date". At the Closing, each of
the parties hereto shall take, or cause to be taken, all such actions and
deliver, or cause to be delivered, all such documents, instruments, certificates
and other items as may be required under this Agreement or otherwise, in order
to perform or fulfill all covenants, conditions and agreements on its part to be
performed at or prior to the Effective Time.
Section 1.4 Certificate of Incorporation. The Certificate of Incorporation of
Holdings, as in effect at the Effective Time, shall continue in effect as the
Certificate of Incorporation of the Surviving Corporation, until thereafter
amended as provided therein.
Section 1.5 By-Laws. The By-Laws of Holdings, as in effect at the Effective
Time, shall be the By-Laws of the Surviving Corporation, until thereafter
amended as provided therein.
Section 1.6 Directors and Officers. The officers and directors of Central Sub
at the Effective Time shall be the officers and directors of the Surviving
Corporation, each to hold office until their respective successors are duly
elected and qualified, or their earlier death, resignation or removal.
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ARTICLE II
CONVERSION OF SECURITIES
Section 2.1 Conversion of Securities. At the Effective Time, by virtue of the
Merger and without any action on the part of the holders thereof:
(a) each share of common stock of Central Sub, $0.01 par value per
share, issued and outstanding immediately prior to the Effective Time shall
be cancelled and cease to exist and shall be converted into one share of
common stock of the Surviving Corporation, $0.01 par value per share. Such
newly issued shares shall thereafter constitute all of the issued and
outstanding shares of the Surviving Corporation;
(b) each share of common stock of Holdings, $0.01 par value per share
(the "Holdings Common Stock"), issued and outstanding immediately prior to
the Effective Time, other than shares to be cancelled in accordance with
Section 2.1(c), shall be cancelled and cease to exist and shall be
converted into and represent the number of common shares of Central, $0.01
par value per share (the "Central Common Stock"), equal to the Exchange
Ratio (as defined in Section 2.6);
(c) all share capital held in the treasury of Holdings or held by any of
Holdings' subsidiaries shall be cancelled and cease to exist and no payment
shall be made in respect thereof; and
(d) at the Effective Time, all rights in respect of outstanding shares
of Holdings Common Stock shall cease to exist, other than the right to
receive Central Common Stock as described above.
Section 2.2 Closing of Holdings Transfer Books. At the Effective Time, the
stock transfer books of Holdings shall be closed and no transfer of Holdings
Common Stock shall thereafter be made.
Section 2.3 No Fractional Shares. No fractional shares of Central Common Stock
shall be issued pursuant hereto. In lieu of any such fractional share of Central
Common Stock, Central shall pay to each former shareholder of Holdings who
otherwise would be entitled to receive a fractional share of Central Common
Stock an amount in cash determined by multiplying (i) $46.00 by (ii) the
fractional interest in a share of Central Common Stock to which such holder
would otherwise be entitled.
Section 2.4 Certain Adjustments. If after the date hereof and on or prior to
the Closing Date the outstanding shares of Central Common Stock shall be changed
into a different number of shares by reason of any reclassification,
recapitalization, split-up, combination or exchange of shares, or any dividend
payable in stock or other securities shall be declared thereon with a record
date within such period, or any similar event shall occur, the amount of shares
to which a holder of Holdings Common Stock shall be entitled to receive shall be
adjusted accordingly to provide to such holder the same economic effect as
contemplated by this Agreement prior to such reclassification, recapitalization,
split-up, combination, exchange or dividend or similar event.
Section 2.5 Stock Options; Warrants. (a) At the Effective Time, each option
granted by Holdings to purchase shares of Holdings Common Stock (each, a
"Holdings Option") which is outstanding and unexercised immediately prior
thereto shall cease to represent a right to acquire shares of Holdings Common
Stock and shall be converted automatically into an option to purchase shares of
Central Common Stock (each, a "Central Option") in an
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amount and at an exercise price determined as provided below (and otherwise
subject to the terms of the Allright 1998 Employee Stock Option Plan (the
"Holdings Option Plan"), if applicable to such Holdings Options), and the
agreements evidencing grants thereunder, including, but not limited to, the
accelerated vesting of such options which shall occur in connection with and by
virtue of the consummation of the Merger as and to the extent required by the
Holdings Option Plan and such agreements:
(i) the number of shares of Central Common Stock to be subject to the
new Central Option shall be equal to the product of the number of shares of
Holdings Common Stock subject to the original Holdings Option and the
Exchange Ratio, provided that any fractional shares of Central Common Stock
resulting from such multiplication shall be rounded down to the nearest
share; and
(ii) the exercise price per share of Central Common Stock under the new
Central Option shall be equal to the exercise price per share of Holdings
Common Stock under the original Holdings Option divided by the Exchange
Ratio, provided that the resulting exercise price shall be rounded up to
the nearest cent.
(b) In the case of any Holdings Options which are intended to be "incentive
stock options" (as defined in Section 422 of the Code)("ISOs"), the exercise
price of, the number of shares purchasable pursuant to, and the terms and
conditions of exercise of, the Central Options issued in exchange therefor shall
be determined in order to comply with Section 424(a) of the Code.
(c) The duration and other terms of Central Options shall be the same as the
Holdings Options except that all references to Holdings shall be deemed to be
references to Central.
(d) As of the Effective Time, the Holdings Options Plan shall be assumed by
Central and, following the Effective Time, Central shall take all steps
necessary to provide that shares of Central Common Stock issuable upon the
exercise of all outstanding Central Options shall be covered by an effective
registration statement on Form S-8 (or other appropriate form) as soon as
practicable after the Effective Time.
(e) At the Effective Time, each warrant granted by Holdings to purchase shares
of Holdings Common Stock (each, a "Holdings Warrant") which is outstanding and
unexercised immediately prior thereto shall cease to represent a right to
acquire shares of Holdings Common Stock and shall be converted automatically
into a warrant to purchase shares of Central Common Stock (each, a "Central
Warrant") in an amount equal to the product of the number of shares of Holdings
Common Stock subject to the original Holdings Warrant and the Exchange Ratio,
provided that any fractional shares of Central Common Stock resulting from such
multiplication shall be rounded down to the nearest share. The exercise price
per share of Central Common Stock under the new Central Warrant shall be equal
to the exercise price per share of Holdings Common Stock under the original
Holdings Warrant divided by the Exchange Ratio, provided that the resulting
exercise price shall be rounded up to the nearest cent.
Section 2.6 Calculation of Exchange Ratio. (a) The "Exchange Ratio" shall be
(i) the Equity Purchase Price (as defined in Section 2.6(b)), divided by (ii)
$46.00, divided by (iii) the number of shares of Holdings Common Stock
outstanding as of the Effective Time (excluding any shares of Holdings Common
Stock issued or issuable to the seller in exchange for assets in any acquisition
permitted under Sections 5.1(d) and 5.1(e)), plus the number
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of shares of Holdings Common Stock issuable pursuant to outstanding Holdings
Options and Holdings Warrants immediately prior to the Effective Time.
(b) The "Equity Purchase Price" shall be calculated as follows and shall be set
forth in a closing statement (the "Closing Statement"), an example of which is
set forth on Schedule 2.6(b), that will be prepared by Holdings based on its
good faith estimates of the amounts indicated and provided to Central for its
review and approval (which shall not be unreasonably withheld), not less than
five business days prior to the Closing Date: (i) $564,390,050, plus (ii) the
Acquisition Expenses (as defined in Section 2.6(c)), plus (iii) the excess, if
any, of $5,000,000 over the Covered Transaction Expenses (as defined in Section
2.6(d)), plus (iv) the Working Capital Adjustment (as defined in Section
2.6(e)), plus (v) the aggregate exercise price of all outstanding and
unexercised Holdings Warrants or Holdings Options which are not ISOs as of the
Closing Date, less (vi) the principal amount of any long-term indebtedness for
borrowed money and capitalized lease obligations of Allright and its
consolidated subsidiaries as of the Closing Date and assumed by Central or
Central Sub pursuant to the Merger, but not including the current portion of
either long-term indebtedness or capitalized lease obligations, less (vii) the
excess, if any, of the Covered Transaction Expenses over $5,000,000, less (viii)
any adjustment required pursuant to paragraph (f) below, plus (ix) any Divesture
Gain (as defined herein), less (x) any Divesture Loss (as defined herein), less
(xi) any proceeds arising from the sale, lease, transfer or disposition of any
property or assets set forth on Schedule 5.1(j), after deduction of all expenses
incurred relating to any such transaction, less (xii) any Excess Severance (as
defined in Section 3.12(a)). Holdings shall use its best efforts to deliver to
Central as soon as possible (but no later than fifteen business days prior to
the Closing Date), Allright's and Holdings' audited financial statements for the
fiscal year ended June 30, 1998, Allright's Actual EBITDA (as defined below),
the Acquired Facility EBITDA (as defined below) and the Non-Acquired EBITDA (as
defined below).
(c) The "Acquisition Expenses" shall be the aggregate amount of cash
consideration and transaction expenses paid by Holdings, Allright or any
Subsidiary (as defined below) through the Closing in respect of any and all
acquisitions of parking facilities after April 30, 1998 and any and all capital
expenditures incurred in connection with such acquisitions and leases entered
into after April 30, 1998, all as set forth on Schedule 2.6(c) (as such Schedule
may be supplemented or revised prior to the Closing Date).
(d) "Covered Transaction Expenses" include, without duplication, any and all
out-of-pocket expenses of Holdings, Allright, the Subsidiaries, Apollo and AEW,
incurred in connection with the Merger or the other transactions contemplated by
this Agreement, to the extent that such expenses have been paid or are accrued
on the Closing Statement. AEW and Apollo shall list all such expenses on the
Closing Statement.
(e) The "Working Capital Adjustment" shall be calculated as follows: (i) the
amount of working capital surplus or deficit (such deficit, if any, to be
expressed as a negative number) of Allright and its consolidated subsidiaries as
set forth on its most recent available balance sheet (which shall not be dated
more than 50 calendar days prior to the Closing Date), reduced by the amount of
any portion of any acquisitions not financed from additional debt or equity
proceeds subsequent to such balance sheet date and which shall be determined in
accordance with Schedule 2.6(e) and otherwise in accordance with generally
accepted accounting principles ("GAAP") applied on a consistent basis with
Allright's historical financial statements, plus (ii) $6,000,000. Any items
reflected as Covered Transaction
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Expenses or as an adjustment pursuant to any other clause of paragraph (b) above
used to calculate the Equity Purchase Price shall be excluded in calculating the
working capital deficit or surplus for the purposes of determining the Working
Capital Adjustment. The Working Capital Adjustment may only be a negative number
or zero.
(f) Notwithstanding anything to the contrary above, the Equity Purchase Price
shall be adjusted as follows:
(i) if Allright's EBITDA (as defined below) calculated from Allright's
audited financial statements for the fiscal year ended June 30, 1998
("Allright's Actual EBITDA"), minus the EBITDA attributable to those
parking facilities acquired by Holdings, Allright or any Subsidiary after
April 30, 1998, to the extent the EBITDA attributable to such parking
facilities was included in Allright's Actual EBITDA (the "Acquired Facility
EBITDA", and the difference between Allright's Actual EBITDA and the
Acquired Facility EBITDA, the "Non-Acquired EBITDA"), is equal to or
greater than $34.0 million, the Equity Purchase Price shall be computed as
set forth above and no further adjustment shall be made under this
paragraph (f); and
(ii) if the Non-Acquired EBITDA is less than $34.0 million (the
difference between the $34.0 million and the Non-Acquired EBITDA, the
"EBITDA Shortfall"), then the Equity Purchase Price shall be reduced by the
EBITDA Shortfall, multiplied by 16.
"EBITDA" shall mean, for any particular entity, the earnings before interest,
taxes, depreciation and amortization attributable to that entity. For purposes
of computing Allright's Actual EBITDA above, the EBITDA shall be derived in
accordance with GAAP consistently applied from Allright's audited financial
statements for the fiscal year ended June 30, 1998 and shall not include the
following expenses: the Covered Transaction Expenses and expenses incurred in
connection with the Merger, payments made in respect of retention, employment
and management continuity agreement bonuses listed on Schedules 5.9(a), 5.9(b)
and 5.9(c) and any other charges related to Holdings Options or Holdings
Warrants used to compute the Exchange Ratio pursuant to Section 2.6(a)(iii),
charges for asset impairments and expenses associated with other liabilities
mutually agreed to by Holdings and Central. In addition, Allright's Actual
EBITDA shall not include any gains or losses attributable to the sale of any
assets, and any minority interest expense deducted to calculate EBITDA shall be
reinstated when computing Allright's Actual EBITDA. The calculation used to
derive Allright's Actual EBITDA shall be included as part of the Closing
Statement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF HOLDINGS
Holdings and Allright represent and warrant to Central and Central Sub as
follows:
Section 3.1 Organization. Holdings is duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation and has
all requisite power and authority to own, lease and operate its properties and
to carry on its business as now being conducted.
Section 3.2 Authority; Enforceability. Holdings has the corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated on its part hereby. The execution and delivery by
Holdings of this Agreement and the consummation by Holdings of the transactions
contemplated hereby have been duly authorized by all
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necessary corporate action on the part of Holdings. No other corporate
proceedings on the part of Holdings are necessary to authorize the execution and
delivery of this Agreement and the consummation by Holdings of the transactions
contemplated hereby or the performance of its obligations hereunder. This
Agreement has been duly executed and delivered by Holdings and is a valid and
binding agreement of Holdings, enforceable against Holdings in accordance with
its terms, except as such enforceability may be limited by bankruptcy,
insolvency or other similar laws relating to or affecting creditors' rights
generally and by general equity principles. AEW and Apollo, as the majority
stockholders of Holdings, have taken, or will prior to the Closing take, all
action required to be taken on their respective parts in order for Holdings to
have duly authorized, executed and delivered this Agreement and to consummate
the transactions contemplated hereby.
Section 3.3 Subsidiaries. Holdings does not have any subsidiaries other than
Allright. Except as provided in Schedule 3.3, Allright does not have any equity
interest, directly or indirectly, in any other entity (such subsidiaries in
Schedule 3.3, the "Subsidiaries").
Section 3.4 Non-Contravention. Except as set forth on Schedule 3.4, the
execution and delivery by Holdings, AEW and Apollo of this Agreement and by AEW
and Apollo of the Registration Rights Agreement, the Noncompetition Agreement
and the Transaction Support Agreements do not, and the consummation by each of
the transactions contemplated hereby and thereby and the performance by each of
the obligations which it is obligated to perform hereunder and thereunder will
not, (a) violate any provision of the Certificate of Incorporation or By-Laws of
Holdings, Allright or any Subsidiary, (b) except as a result of failing to
obtain any third party consents, violate, or result in the violation of, any
provision of, or result in the termination of or the acceleration of, or entitle
any party to accelerate any obligation or indebtedness under, or result in the
imposition of any lien upon or the creation of a security interest in any of the
Holdings Common Stock or upon the assets of Holdings, Allright or any
Subsidiary, pursuant to, any mortgage, lien, lease, franchise, license, permit,
agreement or other instrument to which Holdings, Allright or any Subsidiary is a
party, or by which Holdings, Allright or any Subsidiary is bound, and that is
likely to, in any such event, in the aggregate, have a material adverse effect
on the financial condition of Holdings, Allright and the Subsidiaries taken as a
whole (a "Holdings Material Adverse Effect"), or (c) subject to the approvals
required as set forth in Section 3.5, violate or conflict with any other
restriction of any kind or character to which Holdings, Allright or any
Subsidiary or to which AEW or Apollo is subject which would prevent or
significantly restrict or delay the consummation of the transactions
contemplated hereby.
Section 3.5 Consents. Except for filings under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), and as set forth in
Schedule 3.5, no consent, authorization, order or approval of, or filing or
registration with, any governmental commission, board or other regulatory body
(collectively, "Consents") which has not been obtained or made is required (a)
for or in connection with the execution and delivery of this Agreement by
Holdings and the consummation by Holdings of the transactions contemplated
hereby and the performance by Holdings of its obligations hereunder, other than
those Consents, the failure of which to obtain, in the aggregate, would not have
a Holdings Material Adverse Effect, or (b) for the ongoing operations of
Allright and the Subsidiaries as currently conducted, other than those Consents,
the failure of which to obtain, in the aggregate, would not have a Holdings
Material Adverse Effect.
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Section 3.6 Capital Stock. (a) The entire authorized capital stock of Holdings
consists of 500,000 shares of common stock, $0.01 par value, 79,564 of which are
issued and outstanding as of the date hereof and all such shares are validly
issued, fully paid and nonassessable, and 500,000 shares of preferred stock,
with a par value of $0.01 per share, none of which are issued and outstanding.
Except as set forth on Schedule 3.6(a), there are no outstanding obligations,
warrants, options or other rights to subscribe for or purchase, or other plans,
contracts or commitments providing for the issuance of, or the granting of
rights to acquire, shares of stock of any class of Holdings capital stock or any
securities or other instruments convertible into or exchangeable for shares of
stock of any class of Holdings capital stock.
(b) The entire authorized capital stock of Allright consists of 1,000 shares of
common stock, $0.01 par value, all of which are issued and outstanding as of the
date hereof, and all such shares are validly issued, fully paid and
nonassessable. Other than as set forth on Schedule 3.6(b), Holdings owns all
such issued and outstanding shares free and clear of any options, liens, claims,
charges or other encumbrances. There are no outstanding obligations, warrants,
options or other rights to subscribe for or purchase, or other plans, contracts
or commitments providing for the issuance of, or the granting of rights to
acquire, shares of stock of any class of Allright capital stock or any
securities or other instruments convertible into or exchangeable for shares of
stock of any class of Allright capital stock.
(c) All of the issued and outstanding shares of capital stock or securities of
the Subsidiaries (the "Subsidiaries Shares") are validly issued, fully paid and
nonassessable. Allright owns, directly or indirectly, the percentage of such
Subsidiary Shares set forth on Schedule 3.6(c), in each case free and clear of
any options, liens, claims, charges or other encumbrances, except as set forth
on Schedule 3.6(c). There are no outstanding obligations, warrants, options or
other rights to subscribe for or purchase, or other plans, contracts or
commitments providing for the issuance of, or the granting of rights to acquire,
shares of stock of any class of any Subsidiary capital stock or any securities
or other instruments convertible into or exchangeable for shares of stock of any
class of any Subsidiary capital stock.
Section 3.7 Organization and Qualification of Allright and the
Subsidiaries. Except as set forth on Schedule 3.7, each of Allright and the
Subsidiaries is duly incorporated or formed, validly existing and in good
standing under the laws of the jurisdiction of its organization and each has
full corporate or partnership, as the case may be, power and authority to own
all of its properties and assets and to carry on its business as it is now being
conducted, except where such failure would not, in the aggregate, have a
Holdings Material Adverse Effect. Each of Allright and the Subsidiaries is
qualified and in good standing in every jurisdiction where the failure to so
qualify or be in good standing would have, in the aggregate, a Holdings Material
Adverse Effect.
Section 3.8 Financial Statements. Schedule 3.8 contains a true and correct copy
of (a) the audited consolidated balance sheet of Allright as of June 30, 1997,
(b) the audited related statement of income and cash flows for the three-years
then ended, (c) the unaudited consolidated balance sheet of Allright as of June
30, 1998, (d) the unaudited and consolidated statements of income and retained
earnings and unaudited statements of cash flows of Allright for the fiscal year
ended June 30, 1998, (e) the unaudited balance sheet of Holdings (parent company
only) as of June 30, 1998 and (f) the unaudited statements of income and
retained earnings of Holdings (parent company only) for the fiscal year ended
June 30, 1998 (collectively, the "Financial Statements"). The Financial
Statements (including the notes thereto) present fairly in all material respects
the financial position and results of operations
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of Allright and the Subsidiaries as of the date and for the periods specified
therein set forth, and have been prepared in accordance with GAAP consistently
applied, except for any ordinary year-end adjustments and footnote disclosures
with respect to any interim financial statement. The sole remedy for any breach
of this Section 3.8 shall be an adjustment to the Equity Purchase Price as set
forth in Section 2.6(f), except if such breach arises from a fraudulent act or
fraudulent omission committed by AEW, Apollo, Holdings or Allright in connection
with the preparation of such Financial Statements.
Section 3.9 Undisclosed Liabilities. Except as set forth on Schedule 3.9,
Holdings, Allright and the Subsidiaries have no liabilities or obligations,
secured or unsecured (whether absolute, accrued, contingent or otherwise and
whether due or to become due), which are not fully reflected in the Financial
Statements, except (a) those incurred in the ordinary course of business since
June 30, 1998, (b) those that may have arisen as a result of the execution and
delivery of this Agreement by Holdings or (c) those that would not have, in the
aggregate, a Holdings Material Adverse Effect.
Section 3.10 Absence of Certain Changes or Events. Except as contemplated by
this Agreement, since the date of the Financial Statements, Holdings, Allright
and the Subsidiaries have conducted their respective businesses in the ordinary
course.
Section 3.11 Legal Proceedings. Except as set forth in Schedule 3.11, there are
no governmental proceedings seeking over $50,000 or private litigation
proceedings against Holdings, Allright or any Subsidiary pending or, to the
knowledge of Holdings, threatened which, if determined adversely to Holdings,
Allright or any Subsidiary, is likely to have, in the aggregate, a Holdings
Material Adverse Effect, nor are there any judgments, decrees or orders against
or enjoining Holdings, Allright or any Subsidiary in respect of, or the effect
of which is to prohibit, restrict, or affect, any business practice or the
acquisition of any property or the conduct of business in any area which will
have, in the aggregate, a Holdings Material Adverse Effect.
Section 3.12 Employee Benefits. (a) Schedule 3.12(a) sets forth a true and
complete list as of the date hereof of each material bonus, retention bonus,
deferred compensation, incentive compensation, severance, stock purchase, stock
option, severance or termination pay, hospitalization or other medical, life or
other insurance, supplemental unemployment benefits, profit-sharing, pension or
retirement plan, program, agreement or arrangement sponsored, maintained or
contributed to or required to be contributed to by Holdings, Allright or the
Subsidiaries or by any trade or business, whether or not incorporated (an "ERISA
Affiliate"), that together with Holdings, Allright or the Subsidiaries would be
deemed a "single employer" within the meaning of section 4001(a)(15) of ERISA,
for the benefit of any employee or former employee of Allright or an ERISA
Affiliate, whether written or unwritten (the "Plans"). For purposes of the
adjustment to the Equity Purchase Price set forth in Section 2.6(b), "Excess
Severance" shall mean the amount by which the aggregate severance obligations of
Holdings, Allright or the Subsidiaries set forth on Schedule 3.12(a) as updated
or supplemented on the Closing Date (excluding any reasonable and customary
severance obligations contained in provisions of any employment or severance
agreement entered into in connection with any acquisition of a parking facility
or parking-related entity after the date hereof) shall exceed $6.3 million.
(b) Holdings, Allright and the Subsidiaries have previously made available to
Central or its representatives copies of (i) each of the Plans or summaries
thereof, including all amendments thereto to date; (ii) the two most recent
actuarial statements, if any, prepared for each
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Plan; (iii) the two most recent annual reports (Series 5500 and all schedules
thereto), if any, required under ERISA in connection with each Plan or related
trust; (iv) the most recent determination letter received from the IRS, if any,
for each Plan and related trust which is intended to satisfy the requirements of
Section 401(a) of the Code; (v) the most recent summary plan description
together with the most recent summary of material modifications, if any,
required under ERISA with respect to each Plan; and (vi) all material
communications to any employee or employees relating to each Plan.
(c) Except as set forth on Schedule 3.12(c) hereto, no Plan provides benefits,
including without limitation death or medical benefits (whether or not insured)
with respect to current or former employees of Holdings, Allright, any
Subsidiary or any ERISA Affiliate beyond their retirement or other termination
of service (other than (i) coverage mandated by applicable law, (ii) death
benefits or retirement benefits under any "employee pension plan," as defined in
section 3(2) of ERISA, or (iii) benefits the full cost of which is borne by the
current or former employee (or his beneficiary)).
(d) Each of the Plans is in material compliance with the terms thereof and with
the requirements of any and all laws, orders, decrees, rules and regulations
applicable to such plan, including, but not limited to, ERISA and the Code.
Except as set forth on Schedule 3.12 (d), no Plan is subject to Title IV of
ERISA. There are no pending, threatened or anticipated claims (other than
routine claims for benefits) by, on behalf of or against any of the Plans or any
trusts related thereto.
(e) Except as set forth on Schedule 3.12(e), no Plan is a "multiemployer pension
plan" (as defined in section 3(37) of ERISA). With respect to any Plan that is a
"multiemployer pension plan" (as defined in section 3(37) of ERISA) covering
employees of Holdings, Allright, the Subsidiaries or any ERISA Affiliate, (i)
none of Holdings, Allright, any Subsidiary or any ERISA Affiliate has, since
January 1, 1992, made or suffered a "complete withdrawal" or a "partial
withdrawal," as such terms are respectively defined in sections 4203 and 4205 of
ERISA, (ii) no event has occurred that presents a material risk of a partial
withdrawal, (iii) none of Holdings, Allright, any Subsidiary or any ERISA
Affiliate has any contingent liability under section 4204 of ERISA and no
circumstances exist that present a material risk that any such plan will go into
reorganization, and (iv) the aggregate withdrawal liability of Holdings,
Allright, the Subsidiaries and the ERISA Affiliates, computed as if a complete
withdrawal by Holdings, Allright, the Subsidiaries and the ERISA Affiliates had
occurred under each such Plan on the date hereof, would not exceed $25,000.
(f) Each Plan intended to be "qualified" within the meaning of Section 401(a) of
the Code has received a determination letter from the Internal Revenue Service
stating that it is so qualified, and, to the knowledge of Holdings, Allright and
the Subsidiaries, no event has occurred since the date of such determination
that would adversely affect such determination.
(g) The consummation of the Merger will not cause Holdings, Allright or any
Subsidiary to be responsible for any long-term gain incentive bonus to be paid
to any regional or division manager in connection with the sale of owned
property.
Section 3.13 Properties, Contracts and Other Data. (a) Allright and its
Subsidiaries own and have good, marketable and insurable title to the real
property owned of record or beneficially by Allright or such Subsidiary, as the
case may be (the "Owned Properties"), free and clear of all mortgages, liens
(except for ad valorem real estate taxes not yet delinquent or the validity of
which are being contested in good faith, imperfections and liens that do not
materially detract from the value of or interfere with the present use of such
property),
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claims, pledges, security interests and other monetary encumbrances, and free of
all restrictions, easements, reservations, covenants and other non-monetary
encumbrances, except for the matters set forth in the title policies related to
the Owned Properties referenced on Schedule 3.13(a)(1) and as set forth on
Schedule 3.13(b)(1). Except as set forth on Schedule 3.13(a)(2), as of the date
hereof, neither Allright nor any Subsidiary has received any written notice of
condemnation or suspension of its right to use with respect to any of the Owned
Properties, none of the Owned Properties is subject to condemnation proceedings
and there is not now pending or threatened, any governmental or regulatory
action or action by a private party adverse to the uses contemplated for the
Owned Properties by Allright and its Subsidiaries.
(b) Except as set forth on Schedule 3.13(b)(1), as of the date hereof there are
no (i) mortgages, indentures, loan agreements or other borrowing agreements to
which Holdings, Allright or any Subsidiary is a party as obligor, or to which it
or any of their respective owned assets or properties is subject, which relate
to indebtedness of Holdings, Allright or any Subsidiary for borrowed money or to
mortgaging, pledging or otherwise placing a lien on any of their respective
assets; or (ii) guarantees or indemnification agreements given or entered into
by Holdings, Allright or any Subsidiary with respect to indebtedness for
borrowed money or in support of obligations the principal obligor in respect of
which is not Holdings, Allright or any Subsidiary. Except as set forth on
Schedule 3.13(b)(2), neither Allright's chief executive officer, chief financial
officer, chief operating officer, general counsel nor divisional managers have
knowledge (based on reasonable information) that any party to any contract
involving the payment by or to Holdings, Allright or any Subsidiary of more than
$100,000 per annum that such party intends or has threatened to cancel,
terminate or amend such contract.
Section 3.14 Certain Tax Matters. (a) Except as set forth in Schedule 3.14:
(i) giving effect to all extensions obtained, each of Holdings, Allright
and the Subsidiaries has timely filed (or there has been timely filed on
its behalf) all Tax Returns (as defined below) required to be filed by it,
and all such Tax Returns are complete in all material respects, has paid
(or there has been paid on its behalf) all Taxes shown thereon to be due,
other than such Taxes as are being contested in good faith, and has
established reserves in accordance with generally accepted accounting
principles for the payment of all Taxes for periods subsequent to the
periods covered by such Tax Returns;
(ii) no material deficiency, assessment or other formal claim for any
material Taxes has been asserted by a Tax authority against Holdings,
Allright or any of the Subsidiaries that has not been fully paid, accrued
or finally settled;
(iii) none of Holdings, Allright or any of the Subsidiaries has been
notified that any Tax Returns are currently the subject of any audit or
other administrative proceeding or court proceeding ("Audit") by any Tax
authority;
(iv) no extension, waiver or comparable consent regarding the
application of the statute of limitations with respect to any Taxes or Tax
Returns has been given by or on behalf of Holdings, Allright or any of the
Subsidiaries and is currently in effect; and
(v) the income Tax Returns of Holdings, Allright and the Subsidiaries
for the taxable periods ending on or before June 30, 1992 have been
examined by the appropriate Tax authority (or the applicable statute of
limitations for the assessment of Taxes for
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such periods has expired) and a list of Audits commenced and not yet
completed with respect to Holdings, Allright and the Subsidiaries is set
forth on Schedule 3.14.
(b) For purposes of this Agreement, (i) "Taxes" (including, with correlative
meaning, the term "Tax") shall mean all taxes, charges, fees, levies, penalties
or other assessments imposed by any federal, state, local or foreign govern
mental authority, including, but not limited to, income, gross receipts,
commercial rent and occupancy, excise, property, sales, transfer, franchise,
payroll, withholding, social security or other taxes, including any interest,
penalties or additions attributable thereto and (ii) "Tax Return" shall mean any
return, report, information return or other document (including any related or
supporting information) with respect to Taxes.
(c) To the knowledge of Holdings, the Indemnification Agreement, dated as of
October 31, 1996, by and among Nedinco Delaware Incorporated, Hang Lung
Development Company Ltd., Allright Holdings LLC and Allright, and the Letter of
Credit, made by HSBC Trade Services on October 29, 1996 related thereto, are
each valid and binding agreements, enforceable against each party thereto in
accordance with their respective terms, except as such enforceability may be
limited by bankruptcy, insolvency or other similar laws relating to or affecting
creditors' rights generally and by general equity principles.
Section 3.15 Compliance with Laws. Except as set forth in Schedule 3.15, to
their knowledge, each of Holdings, Allright and the Subsidiaries;
(a) is in substantial compliance with all laws, regulations, reporting
and licensing requirements, and orders applicable to its business or
employees conducting its business;
(b) has received no notification or communication from any agency or
department of any federal, state, local or foreign government or any
regulatory authority or the staff thereof (i) asserting that Holdings,
Allright or any Subsidiary is not in compliance with any of the statutes,
regulations or ordinances which such governmental authority or regulatory
authority enforces, or (ii) threatening to revoke any license, franchise,
permit, or governmental authorization; and
(c) is not a party to any written order, decree, agreement or memorandum
of understanding with, or a commitment letter or similar submission to, or
a recipient of any extraordinary supervisory letter from, any federal,
state or local governmental agency or authority which restricts in any
material respect the conduct of business of Holdings, Allright and the
Subsidiaries; nor has Holdings, Allright or any Subsidiary been advised by
any such regulatory authority that such authority is contemplating issuing
or requesting any such order, decree, agreement, memorandum of
understanding, extraordinary supervisory letter, commitment letter or
similar submission.
Section 3.16 Environmental Laws. Except as set forth on Schedule 3.16, and to
Holdings' knowledge:
(a) the facilities and properties owned, leased or operated by Allright
or any Subsidiary (the "Properties") and all operations at the Properties
are in material compliance with all applicable federal, state, local and
foreign laws and regulations relating to protection of the environment
("Environmental Laws");
(b) neither of Allright nor any Subsidiary has received any notice of
violation, alleged violation, non-compliance, liability or potential
liability regarding environmental matters or compliance with Environmental
Laws with regard to any of the properties or
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the business operated by Allright or any Subsidiary (the "Business"), nor
does Holdings have knowledge of facts that could lead to such notice;
(c) no judicial proceeding or governmental or administrative action is
pending or threatened, under any Environmental Law to which Allright or any
Subsidiary is or is likely to be named as a party with respect to the
Properties or the Business, nor are there any consent decrees or other
decrees, consent orders, administrative orders or other orders under any
Environmental Law with respect to the Properties or the Business;
(d) no Phase II Environmental Site Assessments have been prepared with
respect to real property owned of record or beneficially by Holdings,
Allright or any Subsidiary as the date hereof; and
(e) access to all Phase I Environmental Site Assessments, and any other
environmental reports or studies, prepared as of the date hereof, with
respect to real property owned of record or beneficially by Holdings,
Allright or any Subsidiary, has been provided to representatives of
Central. Those properties for which no Phase I Environmental Assessments
have been prepared are set forth on Schedule 3.16.
Holdings' sole representations with respect to environmental matters are set
forth in this Section 3.16. To the extent representations in other sections of
this Agreement could also apply to environmental matters including, but not
limited to, matters related to, arising under or concerning Environmental Laws,
such representations shall be construed to exclude all environmental matters and
to apply to matters other than environmental matters.
Section 3.17 Affiliate Transactions. Except as set forth in Schedule 3.17 and
for the payment by Holdings of transaction expenses of Apollo and AEW as
contemplated by Section 5.9, there is no transaction and no transaction is now
proposed, to which Holdings, Allright or any Subsidiary is or is to be a party
in which any current stockholder, director or officer or other affiliate of
Holdings, Allright or any Subsidiary has a direct or indirect interest.
Section 3.18 Labor and Employment Matters. (a) Except as set forth in Schedule
3.18, there is no collective bargaining agreement, other labor agreement or
employment contract to which Holdings, Allright or any Subsidiary is a party or
by which it is bound and, in the case of employment contracts, involving
employees at the city manager level or higher.
(b) Except as set forth in Schedule 3.18; (i) no labor union or organization has
been certified or recognized as a representative of any employees of Holdings,
Allright or any Subsidiary, (ii) to the knowledge of Holdings, there are no
current or threatened organizational activities or demands for recognition by a
labor organization seeking to represent employees of Holdings, Allright or any
Subsidiary, labor strikes, material arbitrations or material labor grievances or
difficulties and (iii) to the knowledge of Holdings no such activities have
occurred during the past 12 months.
Section 3.19 Insurance. All properties and operations of Holdings, Allright and
the Subsidiaries are insured for its respective benefit, in such amounts and
against such risks customarily insured against by persons operating similar
properties or conducting similar operations under valid and enforceable policies
issued by insurers of recognized responsibility. Holdings does not have
knowledge of any pending or threatened termination or cancellation, coverage
limitation or reduction, or material premium increase with respect to any
policy.
Section 3.20 Certain Contracts. Except as set forth on Schedule 3.20, there is
no contract to which Holdings, Allright or any Subsidiary is a party which
contains any (i) non-competition
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or non-solicitation provision, (ii) any earn-out or lock-out provision, or (iii)
any rights to share proceeds, rights to repurchase, contingent payment or
similar provision, other than those customary revenue sharing arrangements
relating to ongoing business operations contained in ordinary course of business
lease and management agreement participation provisions.
Section 3.21 Accounting Matters. Holdings believes, after discussions with
Arthur Andersen, that Holdings qualifies as a "combining company" in accordance
with the criteria set forth in paragraph 46 of Accounting Principles Board
Opinion No. 16 ("APB 16") and has not violated the criteria set forth in
paragraph Nos. 47c, 47d and 48c of APB 16 during the period extending from two
years preceding the initiation date of the Merger and the Closing Date.
Section 3.22 No Implied Representation. Notwithstanding anything contained in
this Article or any other provision of this Agreement, it is the explicit intent
of each party hereto that none of Holdings, Allright, any Subsidiary, Apollo,
AEW or any of their respective affiliates, directors or officers is making any
representation or warranty whatsoever, express or implied, other than those
representations and warranties of Holdings in this Agreement, and in the case of
AEW and Apollo, with respect to the last sentence of Section 3.2. It is
understood that any estimates, projections or other predictions contained or
referred to in any Exhibit or Schedule hereto or which otherwise have been or
are provided to Central or its representatives or affiliates are not and shall
not be deemed to be representations or warranties of Holdings, Allright, any
Subsidiary, Apollo or AEW or any of their respective affiliates. Central and
Central Sub acknowledge that there are uncertainties inherent in attempting to
make such estimates, projections and other predictions, that they are familiar
with such uncertainties, that they are taking full responsibility for making
their own evaluation of the adequacy and accuracy of all estimates, projections
and other predictions so furnished to them, and that they shall have no claim
against anyone with respect thereto.
Section 3.23 Intellectual Property. Schedule 3.23 sets forth a true and
complete list of all licenses and other rights to use without payment of all
patents, copyrights, trade secrets, trade names, servicemarks and trademarks
used in its businesses held by Holdings, Allright or any Subsidiary; and none of
Holdings, Allright or any Subsidiary has received any notice of conflict with
respect thereto that asserts the right of others.
Section 3.24 Certain Information. Holdings has delivered to Central or its
representatives, prior to the date hereof, true and complete copies (other than
with respect to names of entities or landlords or locations, which information
has been deleted from such copies) of any and all assignment provisions
contained in any leases for parking facilities with direct lot operating profits
of over $50,000 for the 1998 fiscal year (the "$50,000 Leases").
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF CENTRAL AND CENTRAL SUB
Central and Central Sub represent and warrant to Holdings as follows:
Section 4.1 Organization. Central and Central Sub are duly organized, validly
existing and in good standing under the laws of the jurisdiction of their
respective incorporation and have all requisite power and authority to own,
lease and operate their properties and to carry on their respective business as
now being conducted.
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Section 4.2 Authority; Enforceability. (a) Central and Central Sub have the
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated on their respective parts hereby, and
Central has the corporate power and authority to execute and deliver the
Registration Rights Agreement and to consummate the transactions contemplated
thereby. The execution and delivery by Central and Central Sub of this Agreement
and by Central of the Registration Rights Agreement and the consummation of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary corporate action on their respective parts, subject, in the case of
the issuance of Central Common Stock pursuant to the Merger, to the approval by
Central's shareholders (the "Central Shareholder Approval") of such issuance
required by the shareholder approval policy of the New York Stock Exchange (the
"NYSE"). No other corporate proceedings on the part of Central or Central Sub
other than the Central Shareholder Approval are necessary to authorize the
execution and delivery of this Agreement or the Registration Rights Agreement
and the consummation by each of the transactions contemplated hereby and by
Central of the transactions contemplated thereby or the performance of their
obligations hereunder or by Central thereunder. This Agreement has been duly
executed and delivered by Central and Central Sub and is a valid and binding
agreement of Central and Central Sub, as the case may be, enforceable against
each in accordance with its terms, except as such enforceability may be limited
by bankruptcy, insolvency or other similar laws relating to or affecting
creditors' rights generally and by general equity principles. The Registration
Rights Agreement has been duly executed and delivered by Central and is a valid
and binding agreement of Central, enforceable against Central in accordance with
its terms, except as such enforceability may be limited by bankruptcy,
insolvency or other similar laws relating to or affecting creditors' rights
generally and by general equity principles.
(b) The Transaction Support Agreements have each been duly executed and
delivered by the Central Stockholders and are valid and binding agreements of
the Central Stockholders, enforceable against each of the Central Stockholders
in accordance with their terms, except as such enforceability may be limited by
bankruptcy, insolvency or other similar laws relating to or affecting creditors'
rights generally and by general equity principles. Compliance by the Central
Stockholders with the Transaction Support Agreements will ensure that the
Central Shareholder Approval is obtained without the need for approval by any
other stock holder of Central.
Section 4.3 Subsidiaries. Central does not have any subsidiaries other than
those set forth in Schedule 4.3 (such subsidiaries in Schedule 4.3, "Central
Subsidiaries").
Section 4.4 Non-Contravention. Except as set forth in Schedule 4.4, the
execution and delivery by Central and Central Sub of this Agreement, by Central
of the Registration Rights Agreement and by the Central Stockholders of the
Transaction Support Agreements do not, and the consummation by each of the
transactions contemplated hereby and thereby, as the case may be, and the
performance by each of the obligations which they are obligated to perform
hereunder and thereunder, as the case may be, will not (a) violate any provision
of the Certificate of Incorporation or By-Laws of Central or any Central
Subsidiary, (b) except as a result of failing to obtain any third party
consents, violate, or result in the violation of, any provision of, or result in
the termination of or the acceleration of, or entitle any party to accelerate
any obligation or indebtedness under, or result in the imposition of any lien
upon or the creation of a security interest in any of the Central Common Stock
or upon the assets of Central or any Central Subsidiary, pursuant to, any
mortgage, lien, lease, franchise, license, permit, agreement or other instrument
to which Central or any Central Subsidiary is a party,
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or by which Central or any Central Subsidiary is bound, and that is likely to,
in any such event, in the aggregate, have a material adverse effect on the
financial condition of Central and the Central Subsidiaries taken as a whole (a
"Central Material Adverse Effect"), or (c) subject to the approvals required as
set forth in Section 4.5, violate or conflict with any other restriction of any
kind or character to which Central, any Central Subsidiary or the Central
Stockholders are subject which would prevent or significantly restrict or delay
the consummation of the transactions contemplated hereby.
Section 4.5 Consents. Except for filings under the HSR Act, and as set forth in
Schedule 4.5, no Consent which has not been obtained or made is required (a) for
or in connection with the execution and delivery of this Agreement by Central
and Central Sub and the consummation by Central and Central Sub of the
transactions contemplated hereby and the performance by Central and Central Sub
of their obligations hereunder, other than those Consents, the failure of which
to obtain, in the aggregate, would not have a Central Material Adverse Effect,
or (b) for the ongoing operations of Central and the Central Subsidiaries as
currently conducted, other than those Consents, the failure of which to obtain,
in the aggregate, would not have a Central Material Adverse Effect.
Section 4.6 Capital Stock. (a) The entire authorized capital stock of Central
consists of 50,000,000 shares of Central Common Stock, 29,564,067 of which are
issued and outstanding as of September 17, 1998, and all such shares are validly
issued, fully paid and nonassessable, and 1,000,000 shares of preferred stock,
$0.01 par value per share, none of which are issued and outstanding.
Shareholders of Holdings will own, upon their issuance pursuant to Article II,
validly issued, fully paid and nonassessable shares of Central Common Stock, and
all such shares will be free and clear of any options, liens, claims, charges or
other encumbrances, subject to rights outlined in the Registration Rights
Agreement. Except as set forth on Schedule 4.6(a), there are no outstanding
obligations, warrants, options or other rights to subscribe for or pur chase, or
other plans, contracts or commitments providing for the issuance of, or the
granting of rights to acquire, shares of stock of any class of Central capital
stock or any securities or other instruments convertible into or exchangeable
for shares of stock of any class of Central capital stock.
(b) All of the issued and outstanding shares of capital stock or securities of
the Central Subsidiaries (the "Central Subsidiaries Shares") are validly issued,
fully paid and nonassessable. Central owns, directly or indirectly, the percent
age of such Central Subsidiaries Shares set forth on Schedule 4.3, in each case
free and clear of any options, liens, claims, charges or other encumbrances.
Except as set forth on Schedule 4.6(b), there are no outstanding obligations,
warrants, options or other rights to subscribe for or purchase, or other plans,
contracts or commitments providing for the issuance of, or the granting of
rights to acquire, shares of stock of any class of any Central Subsidiary
capital stock or any securities or other instruments convertible into or
exchangeable for shares of stock of any class of any Central Subsidiary capital
stock.
Section 4.7 Organization and Qualification of the Central Subsidiaries. Except
as set forth on Schedule 4.7, each of the Central Subsidiaries is duly
incorporated or formed, validly existing and in good standing under the laws of
the jurisdiction of its organization and each has full corporate or partnership,
as the case may be, power and authority to own all of its properties and assets
and to carry on its business as it is now being conducted, except where such
failure would not, in the aggregate, have a Central Material Adverse Effect.
Each of Central and the Central Subsidiaries is qualified and in good standing
in every jurisdiction
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where the failure to so qualify or be in good standing would have, in the
aggregate, a Central Material Adverse Effect.
Section 4.8 SEC Reports. Since October 10, 1995, Central has filed with the
Securities and Exchange Commission (the "SEC") all reports, schedules, forms,
statements and other documents (including exhibits and all other information
incorporated therein) required to be filed with the SEC (the "Central SEC
Documents"). As of their respective dates, the Central SEC Documents complied in
all material respects with the requirements of the Securities Act of 1933, as
amended (the "Securities Act"), or the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), as the case may be, and the rules and regulations
of the SEC promulgated thereunder applicable to such Central SEC Documents, and
none of the Central SEC Documents when filed (as amended and restated and as
supplemented by subsequently filed Central SEC Documents) contained any untrue
statement of fact or omitted to state a fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading, other than those, in the aggregate,
which would not have a Central Material Adverse Effect. The financial statements
of Central included in the Central SEC Documents complied as to form, as of
their respective dates of filing with the SEC, in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, have been prepared in accordance with GAAP
(except, in the case of unaudited statements, as permitted by Form 10-Q of the
SEC) applied on a consistent basis during the periods involved (except as may be
indicated in the notes thereto) and fairly present the consolidated financial
position of Central and its consolidated subsidiaries as of the dates thereof
and the consolidated results of their operations and cash flows for the periods
then ended (subject, in the case of unaudited statements, to normal recurring
year-end audit adjustments), except when such failure, in the aggregate, would
not have a Central Material Adverse Effect. True, correct and complete copies of
Central's most recent Form 10-K, Form 10-Q and Proxy Statement are set forth on
Schedule 4.8.
Section 4.9 Undisclosed Liabilities. Except as set forth on Schedule 4.9,
Central and the Central Subsidiaries have no liabilities or obligations, secured
or unsecured (whether absolute, accrued, contingent or otherwise and whether due
or to become due), which are not fully reflected in the financial statements
contained in the Central SEC Documents, except (a) those incurred in the
ordinary course of business since June 30, 1998, (b) those that may have arisen
as a result of the execution and delivery of this Agreement by Central and
Central Sub, or (c) those that would not have, in the aggregate, a Central
Material Adverse Effect.
Section 4.10 Absence of Certain Changes or Events. Except as contemplated by
this Agreement, since June 30, 1998, Central and the Central Subsidiaries have
conducted their respective businesses in the ordinary course.
Section 4.11 Legal Proceedings. Except as set forth in Schedule 4.11, there are
no governmental proceedings seeking over $50,000 or private litigation
proceedings against Central or any Central Subsidiary pending or, to the
knowledge of Central or any Central Subsidiary, threatened which, if determined
adversely to Central or any Central Subsidiary, is likely to have, in the
aggregate, a Central Material Adverse Effect, nor are there any judgments,
decrees or orders against or enjoining Central or any Central Subsidiary in
respect of, or the effect of which is to prohibit, restrict, or affect, any
business practice or the
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acquisition of any property or the conduct of business in any area which will
have, in the aggregate, a Central Material Adverse Effect.
Section 4.12 Employee Benefits. (a) Schedule 4.12(a) sets forth a true and
complete list as of the date hereof of each material bonus, retention bonus,
deferred compensation, incentive compensation, severance, stock purchase, stock
option, severance or termination pay, hospitalization or other medical, life or
other insurance, supplemental unemployment benefits, profit-sharing, pension or
retirement plan, program, agreement or arrangement sponsored, maintained or
contributed to or required to be contributed to by Central or the Central
Subsidiaries or by any trade or business, whether or not incorporated (a
"Central ERISA Affiliate"), that together with Central or the Central
Subsidiaries would be deemed a "single employer" within the meaning of section
4001(a)(15) of ERISA, for the benefit of any employee or former employee of
Central or a Central ERISA Affiliate, whether written or unwritten (the "Central
Plans").
(b) Central and the Central Subsidiaries have previously delivered to Allright
or its representatives copies of (i) each of the Central Plans or summaries
thereof, including all amendments thereto to date; (ii) the two most recent
actuarial statements, if any, prepared for each Central Plan; (iii) the two most
recent annual reports (Series 5500 and all schedules thereto), if any, required
under ERISA in connection with each Central Plan or related trust; (iv) the most
recent determination letter received from the IRS, if any, for each Central Plan
and related trust which is intended to satisfy the requirements of Section
401(a) of the Code; (v) the most recent summary plan description together with
the most recent summary of material modifications, if any, required under ERISA
with respect to each Central Plan; and (vi) all material communications to any
employee or employees relating to each Central Plan.
(c) Except as set forth on Schedule 4.12(c) hereto, no Central Plan provides
benefits, including without limitation death or medical benefits (whether or not
insured) with respect to current or former employees of Central, any Central
Subsidiary or any Central ERISA Affiliate beyond their retirement or other
termination of service (other than (i) coverage mandated by applicable law, (ii)
death benefits or retirement benefits under any "employee pension plan," as
defined in section 3(2) of ERISA, or (iii) benefits the full cost of which is
borne by the current or former employee (or his beneficiary)).
(d) Each of the Central Plans is in material compliance with the terms thereof
and with the requirements of any and all laws, orders, decrees, rules and
regulations applicable to such plan, including, but not limited to, ERISA and
the Code. Except as provided in Schedule 4.12(d), no Central Plan is subject to
Title IV of ERISA. There are no pending, threatened or anticipated claims (other
than routine claims for benefits) by, on behalf of or against any of the Central
Plans or any trusts related thereto.
(e) Except as set forth on Schedule 4.12(e) hereto, no Central Plan is a
"multiemployer pension plan" (as defined in section 3(37) of ERISA). With
respect to any Central Plan that is a "multiemployer pension plan" (as defined
in section 3(37) of ERISA) covering employees of Central, the Central
Subsidiaries or any Central ERISA Affiliate, (i) neither Central, any Central
Subsidiary nor any Central ERISA Affiliate has, since January 1, 1992 made or
suffered a "complete withdrawal" or a "partial withdrawal," as such terms are
respectively defined in sections 4203 and 4205 of ERISA, (ii) no event has
occurred that presents a material risk of a partial withdrawal, (iii) neither
Central, any Central Subsidiary nor any Central ERISA Affiliate has any
contingent liability under section 4204 of ERISA
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and no circumstances exist that present a material risk that any such plan will
go into reorganization, and (iv) the aggregate withdrawal liability of Central,
the Central Subsidiaries and the Central ERISA Affiliates, computed as if a
complete withdrawal by Central, the Central Subsidiaries and the Central ERISA
Affiliates had occurred under each such Central Plan on the date hereof, would
not exceed $25,000.
(f) Except as set forth on Schedule 4.12(f), each Central Plan intended to be
"qualified" within the meaning of Section 401(a) of the Code has received a
determination letter from the Internal Revenue Service stating that it is so
qualified, and, to the knowledge of Central and the Central Subsidiaries, no
event has occurred since the date of such determination that would adversely
affect such determination.
(g) No liability under Title IV or Section 302 of ERISA has been incurred by
Central, the Central Subsidiaries or any Central ERISA Affiliate that has not
been satisfied in full, and no condition exists that presents a risk to Central,
the Central Subsidiaries or any Central ERISA Affiliate of incurring any such
liability, other than liability for premiums due the Pension Benefit Guaranty
Corporation ("PBGC") (which premiums have been paid when due). Insofar as the
representation made in this Section 4.12(h) applies to sections 4064, 4069 or
4204 of Title IV of ERISA, it is made with respect to any employee benefit plan,
program, agreement or arrangement subject to Title IV of ERISA to which Central,
the Central Subsidiaries or any Central ERISA Affiliate made, or was required to
make, contributions during the five (5)-year period ending on the last day of
the most recent plan year which ended prior to the Closing Date.
(h) Except as set forth on Schedule 4.12(h), the PBGC has not instituted
proceedings to terminate any Central Plan which is subject to Title IV of ERISA
(each, a "Central Title IV Plan") and no condition exists that presents a risk
that such proceedings will be instituted.
(i) With respect to each Central Title IV Plan, the present value of accrued
benefits under such plan, based upon the actuarial assumptions used for funding
purposes in the most recent actuarial report prepared by such plan's actuary
with respect to such plan did not exceed, as of its latest valuation date, the
then current value of the assets of such plan allocable to such accrued
benefits.
(j) No Central Title IV Plan or any trust established thereunder has incurred
any "accumulated funding deficiency" (as defined in Section 302 of ERISA and
Section 412 of the Code), whether or not waived, as of the last day of the most
recent fiscal year of each Central Title IV Plan ended prior to the Closing
Date. All contributions required to be made with respect to any Central Plan on
or prior to the Closing Date have been timely made or are reflected on Central's
most current audited balance sheet.
Section 4.13 Properties, Contracts and Other Data. (a) Central and the Central
Subsidiaries own and have good, marketable and insurable title to the real
property owned of record or beneficially by Central or such Central Subsidiary,
as the case may be (the "Central Owned Properties"), free and clear of all
mortgages, liens (except for ad valorem real estate taxes not yet delinquent or
the validity of which are being contested in good faith, imperfections and liens
that do not materially detract from the value of or interfere with the present
use of such property), claims, pledges, security interests and other monetary
encumbrances, and free of all restrictions, easements, reservations, covenants
and other non-monetary encumbrances, except for the matters set forth in the
title policies related to the Central Owned Properties on Schedule 4.13(a)(1)
and as set forth on Schedule 4.13(b)(1). Except as set forth on Schedule
4.13(a)(2), as of the date hereof, neither Central nor any Central Subsidiary
has
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received any written notice of condemnation or suspension of its right to use
with respect to any of the Central Owned Properties, none of the Central Owned
Properties is subject to condemnation proceedings and there is not now pending
or threatened, any governmental or regulatory action or action by a private
party adverse to the uses contemplated for the Central Owned Properties by
Central and the Central Subsidiaries.
(b) Except as set forth on Schedule 4.13(b)(1), as of the date hereof there are
no (i) mortgages, indentures, loan agreements or other borrowing agreements to
which Central or any Central Subsidiary is a party as obligor, or to which it or
any of their respective owned assets or properties is subject, which relate to
indebtedness of Central or any Central Subsidiary for borrowed money or to
mortgaging, pledging or otherwise placing a lien on any of their respective
assets; (ii) guarantees or indemnification agreements given or entered into by
Central or any Central Subsidiary with respect to indebtedness for borrowed
money or in support of obligations the principal obligor in respect of which is
not Central or any Central Subsidiary; or (iii) obligations of Holdings,
Allright or any Subsidiary outstanding as of the Closing Date and assumed by
Central or any Central Subsidiary pursuant to the Merger that require
refinancing or which Central or any Central Subsidiary will be unable to
refinance. Except as set forth on Schedule 4.13(b)(2), neither Central's chief
executive officer, chief operating officer, chief financial officer, general
counsel nor senior vice presidents have knowledge (based on reasonable
information) that any party to any contract involving the payment by or to
Central or any Central Subsidiary of more than $100,000 per annum that such
party intends or has threatened to cancel, terminate or amend such contract.
Section 4.14 Certain Tax Matters. (a) Except as set forth in Schedule 4.14:
(i) giving effect to all extensions obtained, each of Central and the
Central Subsidiaries has timely filed (or there has been timely filed on
its behalf) all Tax Returns required to be filed by it, and all such Tax
Returns are complete in all material respects, has paid (or there has been
paid on its behalf) all Taxes shown thereon to be due, other than such
Taxes as are being contested in good faith and has established reserves in
accordance with generally accepted accounting principles for the payment of
all Taxes for periods subsequent to the periods covered by such Tax
Returns;
(ii) no material deficiency, assessment or other formal claim for any
material Taxes has been asserted by a Tax authority against Central or any
of the Central Subsidiaries that has not been fully paid, accrued or
finally settled;
(iii) neither Central nor any of the Central Subsidiaries has been
notified that any Tax Returns are currently the subject of any Audit by any
Tax authority;
(iv) no extension, waiver or comparable consent regarding the
application of the statute of limitations with respect to any Taxes or Tax
Returns has been given by or on behalf of Central or any of the Central
Subsidiaries and is currently in effect; and
(v) the income Tax Returns of Central and the Central Subsidiaries for
the taxable periods ending on or before June 30, 1992 have been examined by
the appropriate Tax authority (or the applicable statute of limitations for
the assessment of Taxes for such periods has expired) and a list of all
Audits commenced and not yet completed with respect to Central and the
Central Subsidiaries is set forth on Schedule 4.14.
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Section 4.15 Compliance with Laws. Except as set forth in Schedule 4.15, to
their knowledge, each of Central and the Central Subsidiaries;
(a) is in substantial compliance with all laws, regulations, reporting
and licensing requirements, and orders applicable to its business or
employees conducting its business;
(b) has received no notification or communication from any agency or
department of any federal, state, local or foreign government or any
regulatory authority or the staff thereof (i) asserting that Central or any
Central Subsidiary is not in compliance with any of the statutes,
regulations or ordinances which such governmental authority or regulatory
authority enforces, or (ii) threatening to revoke any license, franchise,
permit, or governmental authorization; and
(c) is not a party to any written order, decree, agreement or memorandum
of understanding with, or a commitment letter or similar submission to, or
a recipient of any extraordinary supervisory letter from, any federal,
state or local governmental agency or authority which restricts in any
material respect the conduct of business of Central and the Central
Subsidiaries; nor has Central or any Central Subsidiary been advised by any
such regulatory authority that such authority is contemplating issuing or
requesting any such order, decree, agreement, memorandum of understanding,
extraordinary supervisory letter, commitment letter or similar submission.
Section 4.16 Environmental Laws. Except as set forth in Schedule 4.16 and to
Central's knowledge:
(a) the facilities and properties owned, leased or operated by Central
or any Central Subsidiary (the "Central Properties") and all operations at
the Central Properties are in material compliance with all applicable
Environmental Laws;
(b) neither of Central nor any Central Subsidiary has received any
notice of violation, alleged violation, non-compliance, liability or
potential liability regarding environmental matters or compliance with
Environmental Laws with regard to any of the properties or the business
operated by Central or any Central Subsidiary (the "Central Business"), nor
does Central have knowledge of facts that could lead to any such notice;
(c) no judicial proceeding or governmental or administrative action is
pending or threatened, under any Environmental Law to which Central or any
Central Subsidiary is or is likely to be named as a party with respect to
the Central Properties or the Central Business, nor are there any consent
decrees or other decrees, consent orders, administrative orders or other
orders under any Environmental Law with respect to the Central Properties
or the Central Business;
(d) no Phase II Environmental Site Assessments have been prepared with
respect to real property owned of record or beneficially by Central or any
Central Subsidiary as of the date hereof; and
(e) access to all Phase I and Phase II Environmental Site Assessments,
and any other environmental reports or studies, prepared as of the date
hereof with respect to real property owned of record or beneficially by
Central or any Central subsidiary has been provided to representatives of
Holdings.
Central's and Central Sub's sole representations with respect to environmental
matters are set forth in this Section 4.16. To the extent representations in
other sections of this Agreement
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could also apply to environmental matters including, but not limited to, matters
related to, arising under or concerning Environmental Laws, such representations
shall be construed to exclude all environmental matters and to apply to matters
other than environmental matters.
Section 4.17 Affiliate Transactions. Except as set forth in Schedule 4.17,
there is no transaction and no transaction is now proposed, to which Central or
any Central Subsidiary is or is to be a party in which any current shareholder,
director or officer or other affiliate of Central or any Central Subsidiary has
a direct or indirect interest.
Section 4.18 Labor and Employment Matters. (a) Except as set forth in Schedule
4.18, there is no collective bargaining agreement, other labor agreement or
employment contract to which Central or any Central Subsidiary is a party or by
which it is bound and, in the case of employment contracts, involving employees
at the city manager level or higher.
(b) Except as set forth in Schedule 4.18; (i) no labor union or organization has
been certified or recognized as a representative of any employees of Central or
any Central Subsidiary, (ii) to the knowledge of Central, there are no current
or threatened organizational activities or demands for recognition by a labor
organization seeking to represent employees of Central or any Central
Subsidiary, labor strikes, material arbitrations or material labor grievances or
difficulties and (iii) to the knowledge of Central no such activities have
occurred during the past 12 months.
Section 4.19 Insurance. All properties and operations of Central and the
Central Subsidiaries are insured for its respective benefit, in such amounts and
against such risks customarily insured against by persons operating similar
properties or conducting similar operations under valid and enforceable policies
issued by insurers of recognized responsibility. Central does not have knowledge
of any pending or threatened termination or cancellation, coverage limitation or
reduction, or material premium increase with respect to any policy.
Section 4.20 Certain Contracts. Except as set forth on Schedule 4.20, there is
no contract to which Central or any Central Subsidiary is a party which contains
any (i) non-competition or non-solicitation provision, (ii) any earn-out or
lock-out provision, or (iii) any rights to share proceeds, rights to repurchase,
contingent payment or similar provision other than those customary revenue
sharing arrangements relating to ongoing business operations contained in
ordinary course of business lease and management agreement participation
provisions.
Section 4.21 Accounting Matters. Central believes, after discussions with KPMG
Peat Marwick LLP, that Central qualifies as a "combining company" in accordance
with the criteria set forth in paragraph 46 of Accounting Principles Board
Opinion No. 16 ("APB 16") and has not violated the criteria set forth in
paragraph Nos. 47c, 47d and 48c of APB 16 during the period extending from two
years preceding the initiation date of the Merger and the Closing Date.
Section 4.22 No Implied Representation. Notwithstanding anything contained in
this Article or any other provision of this Agreement, it is the explicit intent
of each party hereto that none of the Central Stockholders, Central nor any
Central Subsidiary, or any of their respective affiliates, directors or officers
is making any representation or warranty whatsoever, express or implied, other
than those representations and warranties of the Central Stockholders, Central
and Central Sub in this Agreement, the Registration Rights Agreement or the
Transaction Support Agreements. It is understood that any estimates, projections
or other predictions contained or referred to in any Exhibit or Schedule hereto
or which otherwise have been provided to Holdings or its representatives or
affiliates are not and shall not be
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deemed to be representations or warranties of Central, any Central Stockholder
or any Central Subsidiary or any of their respective affiliates. Holdings
acknowledges that there are uncertainties inherent in attempting to make such
estimates, projections and other predictions, that it is familiar with such
uncertainties, that it is taking full responsibility for making its own
evaluation of the adequacy and accuracy of all estimates, projections and other
predictions so furnished to it, and that it shall have no claim against anyone
with respect thereto.
ARTICLE V
COVENANTS
Section 5.1 Conduct of Business by Allright. During the period from the date
hereof to the Closing Date, without the prior written consent of Central or
except as contemplated by this Agreement, Holdings agrees to cause:
(a) the business of Allright and the Subsidiaries to be operated in the
ordinary course of business consistent with past practice;
(b) no change to be made in the corporate charter or by-laws or other
constituent documents of Holdings, Allright or any Subsidiaries;
(c) except as set forth in Schedule 5.1(c) or otherwise in the ordinary
course of business consistent with past practices, (i) no material increase
in the compensation payable or to become payable by Holdings, Allright or
any Subsidiary to any officer, employee, consultant or agent to be made
(provided, that any increase in compensation payable to any officers of
Allright shall be set forth on Schedule 5.1(c), notwithstanding that such
increases were made in the ordinary course of business), and (ii) no bonus
or retirement or similar benefit or arrangement to be made or agreed to by
Holdings, Allright or any Subsidiary;
(d) except as set forth in Schedule 5.1(d), (i) no capital expenditure
or commitment to make a capital expenditure which involves the payment of
consideration having a value in excess of $1,200,000 in the aggregate per
quarter (without duplication with clause (ii) of this paragraph or Section
5.1(e)) (excluding payments made for key money or fixed or capital assets
in connection with the entering into or renewal of any parking facility
lease), and (ii) no lease to be entered into or renewed which involves the
payment of consideration having a value in excess of $500,000 annual rent
per year (without duplication with clause (i) of this paragraph or Section
5.1(e)). For purposes of this paragraph, "annual rent per year" as to a
given lease shall equal (a) the average annual rent computed in accordance
with GAAP on a straight line basis with respect to any leased facility plus
(b)(x) the amount of payments made for key money, fixed or capital assets
in connection with the entering into or renewal of such lease, divided by
(y) the amount of base years with respect to such lease. In the event that
Central refuses to consent to any proposed lease pursuant to this Section
5.1(d), Central and any Central Subsidiary shall refrain from entering into
any transaction concerning the subject matter of such proposed lease;
(e) except as set forth in Schedule 5.1(e), no action to be taken to by
it, Allright or any Subsidiary to acquire any business (whether by merger,
consolidation, purchase of assets or otherwise) or acquire any equity
interest in any person not an affiliate (whether through a purchase of
stock, establishment of a joint venture or otherwise)
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which involves the payment of consideration having a value in excess of
$100,000 individually or $1,000,000 in the aggregate (without duplication
with Section 5.1(d)) with all other such acquisitions. In the event that
Central refuses to consent to any proposed transaction pursuant to this
Section 5.1(e), Central and any Central Subsidiary shall refrain from
entering into a transaction concerning the subject matter of such proposed
transaction;
(f) except for borrowings under credit facilities or lines of credit
existing on the date hereof or incurred to finance expenditures or
acquisitions permitted pursuant to Section 5.1(d) or 5.1(e), it, Allright
or any Subsidiaries not to incur any indebtedness for borrowed money or
issue any debt securities or assume, guarantee or endorse, or otherwise
become responsible for the obligations of any person, or make any loans,
advances or capital contributions to, any person other than its wholly
owned subsidiaries, except in the ordinary course of business consistent
with past practice;
(g) to the extent reasonably practicable, (i) the business organization
of Allright and the Subsidiaries to remain intact and to keep available to
Central the opportunity to retain the services of the present employees of
Allright and the Subsidiaries and (ii) the goodwill of the customers of
Allright and the Subsidiaries and others having business relations with
Allright and the Subsidiaries to be preserved;
(h) no action to be taken or failed to be taken that would, or would be
reasonably likely to, result in any of Holdings' representations and
warranties set forth in this Agreement not being true in all material
respects;
(i) Allright and the Subsidiaries to use their reasonable best efforts
to comply with all material legal requirements applicable to them and to
the conduct of their respective businesses;
(j) except as set forth in Schedule 5.1(j) and after consultation with
Arthur Andersen, Holdings, Allright and the Subsidiaries not to sell, lease
transfer or dispose of any of their properties not in the ordinary course
of business and provided such sale does not, in the reasonable opinion of
Arthur Andersen, jeopardize the Merger from being qualified as a
pooling-of-interests transaction for accounting purposes;
(k) except as set forth on Schedule 5.1(k), (i) Holdings not to declare
any dividend or make any distribution with respect to its capital stock,
and (ii) Allright and the Subsidiaries not to declare any dividend or make
any distribution with respect to their capital stock or partnership
interests, as the case may be, which is not made to minority interest
holders or partners pursuant to existing agreements, or which is not in the
ordinary course of business; and
(l) in the event Central does not provide a written refusal for Allright
or any Subsidiary to enter into any proposed above transaction within five
business days after receiving notification of such proposal (with data
reasonably requested by Central to evaluate such proposal) from Allright,
Holdings or any Subsidiary, Central shall be deemed to have consented to
such proposed transaction, and Allright, Holdings or such Subsidiary may
enter into any such proposed transaction as if Central had provided its
written consent.
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Section 5.2 Conduct of Business by Central. During the period from the date
hereof to the Closing Date, without the prior written consent of Holdings or
except as contemplated by this Agreement, Central agrees to cause:
(a) the business of Central and the Central Subsidiaries to be operated
in the ordinary course of business consistent with past practice;
(b) no change to be made in the corporate charter or by-laws or other
constituent documents of Central or any Central Subsidiaries;
(c) except as set forth in Schedule 5.2(c), no expenditure which
involves the payment of consideration having a value in excess of
$20,000,000 individually or $75,000,000 in the aggregate (without
duplication with Section 5.2(d)) in respect of the purchase or other
acquisition of real estate or fixed or capital assets to be made, except
for any such asset acquired in connection with normal replacement and
maintenance programs properly charged to current operations or pursuant to
or as required by existing contractual obligations and except as to the
renewal of presently existing leases which are scheduled to expire
according to their respective terms;
(d) except as set forth in Schedule 5.2(d), no action to be taken to by
it or any Central Subsidiaries to acquire any business (whether by merger,
consolidation, purchase of assets or otherwise) or acquire any equity
interest in any person not an affiliate (whether through a purchase of
stock, establishment of a joint venture or otherwise) which, involves the
payment of consideration having a value in excess of $20,000,000
individually or $75,000,000 in the aggregate (without duplication with
Section 5.2(c)) with all other such acquisitions. In the event that
Holdings refuses to consent to any proposed transaction pursuant to this
Section 5.1(d), Holdings, Allright and any Subsidiary shall refrain from
entering into a transaction concerning the subject matter of such proposed
transaction;
(e) except for borrowings under credit facilities or lines of credit
existing on the date hereof or incurred to finance an expenditures or
acquisitions permitted pursuant to Section 5.2(d) or 5.2(e), or pursuant to
the transactions contemplated by this Agreement, it, or any Central
Subsidiary not to incur any indebtedness for borrowed money or issue any
debt securities or assume, guarantee or endorse, or otherwise become
responsible for the obligations of any person, or make any loans, advances
or capital contributions to, any person other than its wholly owned
subsidiaries, except in the ordinary course of business consistent with
past practice;
(f) no action to be taken or failed to be taken that would, or would be
reasonably likely to, result in any of Central's and Central Sub's
representations and warranties set forth in this Agreement not being true
in all material respects;
(g) Central and the Central Subsidiaries to use their reasonable best
efforts to comply with all material legal requirements applicable to them
and to the conduct of their respective businesses;
(h) except as set forth in Schedule 5.2(h) and after consultation with
KPMG Peat Marwick LLP, Central and the Central Subsidiaries not to sell,
lease transfer or dispose of any of their properties to the extent such
sale may, in the reasonable opinion of KPMG Peat Marwick LLP, jeopardize
the Merger from being qualified as a pooling-of-interests transaction for
accounting purposes;
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(i) other than regular quarterly dividends distributed in the normal
course of business, Central not to (i) declare, set aside or pay any
dividends on (whether in cash, stock or other securities), make any other
distributions in respect of, or enter into any agreement with respect to
the voting of, any of its capital stock or the capital stock, partnership
interests, membership interests or other equity, as the case may be, of the
Central Subsidiaries, or (ii) split, combine, issue, authorize for
issuance, exchange or reclassify any of its capital stock or issue or
authorize the issuance of any other securities, except for issuances of
Central Common Stock to a seller or sellers for acquisitions permitted
under Section 5.2(d), upon the exercise of any stock options for Central
Common Stock that are, in each case, outstanding as of the date hereof in
accordance with their present terms or the issuance of Central Common Stock
or Central Options under any Plans in the ordinary course of business; and
(j) in the event Holdings does not provide a written refusal for Central
or any Central Subsidiary to enter into any transaction above within five
business days after receiving notification of such proposal (with data
reasonably requested by Holdings to evaluate such proposal) from Central or
any Central Subsidiary, Holdings shall be deemed to have consented to such
proposed transaction (other than transactions pursuant to paragraph (i),
for which affirmative consent is necessary) and Central or such Central
Subsidiary may enter into any such proposed transaction as if Holdings had
provided written consent.
Section 5.3 Preparation of the Form S-4 and the Proxy Statement; Stockholders
Meetings. (a) As soon as practicable following the date of this Agreement,
Central shall prepare and file with the SEC a proxy statement/prospectus
relating to the meeting of Central's shareholders to be held in connection with
obtaining the Central Shareholder Approval (as the same may be amended or
supplemented from time to time, the "Proxy Statement") and Central shall prepare
and file with the SEC a registration statement on Form S-4 in connection with
the issuance of Central Common Stock pursuant to the Merger (as the same may be
amended or supplemented from time to time, the "Form S-4"), in which the Proxy
Statement will be included as a prospectus. Central shall use its reasonable
best efforts to have the Form S-4 declared effective under the Securities Act as
promptly as practicable after such filing. Central will use its reasonable best
efforts to cause the Proxy Statement to be mailed to the holders of Central
Common Stock as promptly as practicable after the Form S-4 is declared effective
under the Securities Act. Central shall also take any action (other than
qualifying to do business in any jurisdiction in which it is not now so
qualified or to file a general consent to service of process) required to be
taken under any applicable state securities laws in connection with the issuance
of the Central Common Stock in the Merger, and Holdings shall furnish all
information concerning Holdings and the holders of Holdings Common Stock as may
be reasonably requested in connection with any such action. No filing of, or
amendment or supplement to, the Form S-4 or the Proxy Statement will be made by
Central without providing Holdings and counsel to Holdings with the opportunity
to review and comment thereon. Central will advise Holdings, promptly after it
receives notice thereof, of the time when the Form S-4 has become effective or
any supplement or amendment has been filed, the issuance of any stop order, the
suspension of the qualification of the Central Common Stock issuable in
connection with the Merger for offering or sale in any jurisdiction, or any
request by the SEC for amendment of the Proxy Statement or the Form S-4 or
comments thereon and responses thereto or requests by the SEC for additional
information. If at any time prior to the Effective Time any information relating
to Central or Holdings, or
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any of their respective affiliates, officers or directors, should be discovered
by Central or Holdings which should be set forth in an amendment or supplement
to any of the Form S-4 or the Proxy Statement, so that any of such documents
would not include any misstatement of a material fact or omit to state any
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, the party which
discovers such information shall promptly notify the other parties hereto and an
appropriate amendment or supplement describing such information shall be
promptly filed with the SEC and, to the extent required by law, disseminated to
the stockholders of Central.
(b) Central shall, as promptly as reasonably practicable after the date hereof
give notice of, convene and hold a meeting of its stockholders (the "Central
Stockholders Meeting") in accordance with the Tennessee Business Corporation Act
(the "Tennessee Act") and the requirements of the NYSE for the purpose of
obtaining Central's stockholder approval in accordance with the Tennessee Act
and the rules and regulations of the NYSE and shall, through its Board of
Directors, recommend to its shareholders that they provide the Central
Shareholder Approval.
(c) As an integral part of their obligations under the Registration Rights
Agreement, Central will use its reasonable best efforts to comply with the
provisions of Rule 144(c) under the Securities Act in order that affiliates of
Holdings may resell the Central Common Stock they receive pursuant to the Merger
pursuant to Rule 145(d) under the Securities Act, and agrees that the Form S-4
will include such information as may be requested by Holdings to permit resales
of such Central Common Stock by persons who may be deemed to be underwriters of
Central Common Stock pursuant to Rule 145 under the Securities Act.
(d) Holdings shall, as promptly as practicable after the mailing of the Proxy
Statement by Central, either (i) give notice of, convene and hold a meeting of
its stockholders in accordance with the Delaware General Corporation Law (the
"Delaware Act") or (ii) obtain an action by written consent, executed by the
requisite percentage of Holdings stockholders and in accordance with the
Delaware Act, for the purpose of obtaining Holdings' stockholders approval in
connection with the Merger in accordance with the Delaware Act.
Section 5.4 Investigation; Non-Solicitation. Each of Central and Holdings shall
afford to one another's officers, employees, accountants, counsel and other
authorized representatives reasonable access during normal business hours
throughout the period prior to the Effective Time or the date of termination of
this Agreement, to its and its respective subsidiaries' properties, contracts,
commitments, books and records and any report, schedule or other document filed
or received by it during such period pursuant to the requirements of federal or
state securities laws and shall use its reasonable best efforts to cause its
respective representatives to furnish promptly to one another such additional
financial and operating data and other information as to its and its
subsidiaries' respective businesses and properties as the other or its duly
authorized representatives may from time to time reasonably request in writing;
provided, however, that nothing herein shall require either Central or Holdings
or any of their respective subsidiaries to disclose any information to the other
if such disclosure would cause competitive harm to such disclosing party (in
such party's reasonable judgment) or its affiliates if the transactions
contemplated by this Agreement are not consummated, or would be in violation of
applicable laws or regulations of any governmental entity; provided further,
that notwithstanding the above, Holdings shall allow Central and its
representatives reasonable access to information concerning, and Holdings agrees
to meet with Central and its representatives in connection with, (i) any $50,000
Leases, which according to their
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respective terms are scheduled to expire within six months from any time prior
to the Closing Date, (ii) any $50,000 Lease for which Allright or any Subsidiary
has knowledge (based on reasonable information) that the respective landlord has
asserted or has threatened to assert a breach of any consent or assignment
provision contained in such lease as a result of the Merger, and (iii) the
retention of key management personnel. A representative appointed by Holdings
shall be present at any meeting between Holdings, Allright, the Subsidiaries or
any of their respective employees, directors and officers, on the one hand, and
Central, any of the Central Subsidiaries or any of their respective employees,
directors and officers, on the other hand. Unless otherwise required by law and
until the Effective Time, the parties will hold any such information which is
nonpublic in confidence in accordance with the provisions of the Confidentiality
Agreements between Central and Holdings, dated as of January 30, 1998 and May
19, 1998 (the "Confidentiality Agreements"). AEW and Apollo agree to reasonably
cooperate, at Central's request and expense, in connection with the retrieval of
records or other documentation which AEW and Apollo have in their possession
regarding Allright's ability to utilize any net operating loss carry-forwards.
Section 5.5 Approvals and Consents; Cooperation; Notification. (a) The parties
hereto shall use their respective best efforts, and cooperate with each other,
to obtain as promptly as practicable all governmental and third party
authorizations, approvals, consents or waivers required in order to consummate
the transactions contemplated by this Agreement, including, without limitation,
the Merger.
(b) The parties shall take all actions necessary to file as soon as practicable
all notifications, filings and other documents required to obtain all
governmental authorizations, approvals, consents or waivers, including, without
limitation, under the HSR Act, and to respond as promptly as practicable to any
inquiries received from the Federal Trade Commission, the Antitrust Division of
the Department of Justice and any other governmental entity for additional
information or documentation and to respond as promptly as practicable to all
inquiries and requests received from any State Attorney General or other
governmental entity in connection therewith.
(c) If any divesture of property or operations at a particular parking facility
is necessary in order to terminate the waiting period required by the HSR Act in
connection with the Merger, Central and Holdings shall retain a mutually
agreeable real estate appraisal firm (the "Appraiser") for the purpose of
appraising those facilities or operations which must be divested in order to
obtain termination of the HSR waiting period. In connection therewith, the
Equity Purchase Price set forth in Section 2.6(b) shall be adjusted for any
Divesture Gain or Divesture Loss. "Divesture Gain" shall be computed as follows:
thirty-five percent multiplied by the difference between (a) the appraised value
of such property or operations, as determined by the Appraiser, and (b) (i) 16,
multiplied by (ii) the EBITDA for such property or operations at such facility
for such property's or facility's prior fiscal year. If such number shall be a
negative number, such amount shall be deemed a "Divesture Loss" for purposes of
Section 2.6(b).
Section 5.6 Central Board of Directors. Promptly after the Effective Time, the
Board of Directors of Central (the "Central Board") shall be expanded to ten
members. At such time, Apollo and AEW shall each be entitled, in its sole
discretion, to designate one individual to the Central Board, who shall serve in
accordance with and for the time period specified by the Certificate of
Incorporation and By-laws of Central. If at any time Apollo or AEW, with their
respective affiliates, individually own, directly or indirectly, less than (i)
$50,000,000
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worth of outstanding Central Common Stock, Central shall, at the next election
of the Central Board, have the right to decrease the number of appointees to the
Central Board that may be made by the shareholder failing to meet such threshold
from one to none. For purposes of the foregoing, the value of the Central Common
Stock held by Apollo and AEW, together with their respective affiliates, shall
be determined by multiplying the number of shares of Central Common Stock then
beneficially owned by such holders by the average of the closing sale prices per
share of Central Common Stock on the NYSE for the prior 20 trading days. This
Section 5.6 is intended to be for the benefit of Apollo and AEW.
Section 5.7 Public Announcements. Other than disclosures required by federal
securities laws, the parties will consult with each other before issuing any
press release or otherwise making any public statement with respect to this
Agreement and the transactions contemplated hereby and shall not make any such
announcement if the other party hereto shall reasonably object.
Section 5.8 Tax Treatment of Merger. It is the intent of the parties to this
Agreement that the Merger be treated for federal income tax purposes as a
tax-free reorganization pursuant to Section 368(a) of the Code and this
Agreement shall constitute a "Plan of Reorganization" for purposes of the Code,
and the parties agree (i) not to take any actions which would prevent the Merger
from qualifying as such a reorganization, (ii) to report the transactions under
this Agreement consistent with such treatment and (iii) to take no positions
that are contrary thereto unless otherwise required by law.
Section 5.9 Expenses; Severance. All out-of-pocket transaction costs and
expenses incurred by Central or any Central Subsidiary in connection with this
Agreement and the transactions contemplated hereby, whether or not the Merger is
consummated, shall be paid by Central, and all Covered Transaction Expenses
incurred by Allright, any Subsidiary, Holdings, AEW and Apollo in connection
with this Agreement and the transactions contemplated hereby, if the Merger is
consummated, shall be paid by Holdings, and if the Merger is not consummated,
Allright, the Subsidiaries, Holdings, AEW and Apollo shall be responsible for
their own expenses incurred in connection with this Agreement and the
transactions contemplated hereby. Notwithstanding the foregoing, if the Merger
is not consummated solely by reason of a material breach of this Agreement by
Holdings, Holdings shall pay any and all out-of-pocket transaction costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby of Central and Central Sub up to a maximum of $5,000,000 and
if the Merger is not consummated solely by reason of a material breach of this
Agreement by Central, Central shall pay any and all out-of-pocket transaction
costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby of Allright, any Subsidiary, Holdings, AEW and
Apollo up to a maximum of $5 million. AEW and Apollo shall be solely responsible
for any payments required to be made to Cheslock, Bakker & Associates, Inc.
("Cheslock Bakker"), other than with respect to the exchange of Holdings
Warrants held by Cheslock Bakker for Central Warrants as provided in Section
2.5(e). Notwithstanding anything to the contrary herein, if the Merger is not
consummated as a result of the fact that either Section 6.2(g) or Section 6.3(f)
shall not have been satisfied, the party whose accountant was unable to deliver
its pooling letter as required therein shall pay to the other party an amount of
$2.5 million for expenses incurred in connection with the execution of this
Agreement; provided, neither party shall be liable for such expenses if it had
not breached a representation, warranty or covenant herein. Nothing in this
Section 5.9 is intended to limit the rights of the parties hereto under Section
7.2. If the Merger is consummated, Central shall be solely responsible
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for any obligation and payment to be made under any severance agreement,
retention agreement, stay-on bonus, non-compete agreement, compensation plan or
severance or retention provision of any employment, non-compete or retention
agreement set forth on Schedules 3.12(a), 3.20, 5.9(a), 5.9(b) or 5.10 which is
incurred as a result of the entering into of this Agreement, including but not
limited to payments required to be made immediately after the Effective Time
pursuant to the retention bonus agreements set forth on Schedule 5.9(a).
Holdings shall use its reasonable best efforts after the date hereof so that the
persons listed on Schedule 5.9(a) will enter into the retention bonus agreements
substantially in the form set forth on such Schedule 5.9(a) and that immediately
after the Effective Time, the persons listed on Schedules 5.9(b) and 5.9(c) will
enter into employment agreements and management continuity agreements with
Allright substantially in the form set forth on Schedules 5.9(b) and 5.9(c),
respectively, and Central shall cause Allright to enter into such employment
agreements and management continuity agreements at such time. Any material
modifications to the form retention agreement, employment agreement and
management continuity agreement set forth on Schedules 5.9(a), 5.9(b) and
5.9(c), respectively, shall be subject to the prior approval of Central and
Holdings.
Section 5.10 Employment Matters. (a) Central hereby agrees to honor the Plans
in accordance with their terms as in effect on the date hereof, to the same
extent that Holdings, Allright and the Subsidiaries would be required to perform
them in the event that the Merger were not consummated. This Section 5.10(a) is
intended to be for the benefit of the beneficiaries of the Plans.
(b) Central shall honor, comply with and perform all of the respective terms and
all obligations of Holdings, Allright or the Subsidiaries under any severance
agreement, retention agreement, employment agreement or any severance or
retention provision of any employment agreement set forth on Schedule 5.10. This
Section 5.10(b) is intended to be for the benefit of the employees party to such
agreements. Central agrees to provide severance to those employees of Allright
or any Subsidiary which will be terminated after the Closing Date and which do
not have severance agreements or severance provisions in any employment
agreements in effect with Holdings, Allright or any Subsidiary as of the Closing
Date on terms not less favorable than it would provide to any of its or the
Central Subsidiaries' similarly situated employees.
(c) Central agrees that individuals who are employed by Holdings, Allright or
the Subsidiaries immediately prior to the Closing Date shall remain employees of
the Surviving Corporation immediately following the Closing Date (each such
employee, an "Affected Employee"); provided, however, that nothing in this
Section 5.10(c) shall limit or otherwise restrict the ability of the Surviving
Corporation to terminate, lay-off or reduce the work hours with respect to the
employment of any Affected Employees following their initial continued
employment following the Effective Time.
(d) Central shall, or shall cause the Central Subsidiaries or the Surviving
Corporation to, give Affected Employees full credit, for purposes of
eligibility, vesting, benefit accrual and determination of the level of benefits
under any employee benefit plans or arrangements maintained by Central or the
Central Subsidiaries or the Surviving Corporation, for such Affected Employees'
service with Holdings, Allright or the Subsidiaries to the same extent
recognized by the Holdings, Allright and the Subsidiaries immediately prior to
the Closing Date, provided however that the Affected Employees' eligibility to
participate in, and benefits
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under, such plans and arrangements shall otherwise be determined under the terms
of such plans.
(e) Central shall, or shall cause the Central Subsidiaries or the Surviving
Corporation to, (i) waive all limitations as to preexisting conditions
exclusions and waiting periods with respect to participation and coverage
requirements applicable to the Affected Employees under any welfare benefit
plans that such employees may be eligible to participate in after the Closing
Date, other than limitations or waiting periods that are already in effect with
respect to such employees and that have not been satisfied as of the Closing
Date under any welfare plan maintained for the Affected Employees immediately
prior to the Closing Date and (ii) provide each Affected Employee with credit
for any co-payments and deductibles paid prior to the Closing Date in satisfying
any applicable deductible or out-of-pocket requirements under any welfare plans
that such employees are eligible to participate in after the Closing Date.
(f) For a period of two years immediately following the Closing Date, the
coverage and benefits provided to Affected Employees pursuant to employee
benefit plans or arrangements maintained by Central or the Central Subsidiaries
or the Surviving Corporation shall be, in the aggregate, not less favorable than
those provided to similarly situated employees of Central and the Central
Subsidiaries and the Surviving Corporation.
Section 5.11 Indemnification, Exculpation and Insurance. (a) Central and
Central Sub agree that all rights to indemnification and exculpation from
liabilities for acts or omissions occurring at or prior to the Effective Time
now existing in favor of the current or former directors, officers, employees or
agents of Holdings, Allright and the Subsidiaries as provided in their
respective certificates of incorporation or by-laws (or comparable
organizational documents) and any indemnification agreements or arrangements of
Holdings, Allright or any Subsidiary the existence of which does not cause a
breach of this Agreement shall be assumed by Central, shall survive the Merger
and shall continue in full force and effect, without amendment, for six years
after the Effective Time; provided, however, that all rights to indemnification
in respect of any claim asserted or made within such period shall continue until
the final disposition of such claim. Central shall cooperate in the defense of
any such matter. In addition, from and after the Effective Time, directors or
officers of Holdings, Allright or any Subsidiary who become directors or
officers of Central or any Central Subsidiary will be entitled to the same
indemnity rights and protections as are afforded to other directors and officers
of Central or such Central Subsidiary.
(b) In the event that either of the Surviving Corporation or Central or any of
its 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 or conveys all or substantially all of
its properties and assets to any person, then, and in each such case, proper
provision will be made so that the successors and assigns of Central or the
Surviving Corporation, as applicable, will assume the obligations thereof set
forth in this Section 5.11.
(c) The provisions of this Section 5.11 (i) are intended to be for the benefit
of, and will be enforceable by, each indemnified party, his or her heirs and his
or her representatives and (ii) are in addition to, and not in substitution for,
any other rights to indemnification or contribution that any such person may
have by contract or otherwise.
(d) For six years after the Effective Time, Central or the Surviving Corporation
shall maintain in effect Holdings' and Allright's current directors' and
officers' liability insurance covering acts or omissions occurring prior to the
Effective Time with respect to those persons
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who are currently covered by such directors' and officers' liability insurance
policy on terms with respect to such coverage and amount no less favorable in
the aggregate currently covered by such insurance than those of such policy in
effect on the date hereof; provided that Central may substitute therefor
policies of Central or the Central Subsidiaries containing terms with respect to
coverage and amount no less favorable to such directors or officers or, in the
alternative, Central may purchase a "tail" on Holdings' existing insurance
policy for a term of not less than six years.
(e) Central shall cause the Surviving Corporation or any successor thereto to
comply with its obligations under this Section 5.11.
(f) This Section 5.11 is intended to be for the benefit of such directors and
officers.
Section 5.12 NYSE Exchange Listings. Central shall use best efforts to cause
the Central Common Stock issuable under pursuant to the Merger to be approved
for listing on the NYSE, subject to official notice of issuance, as promptly as
practicable after the date hereof, and in any event prior to the Closing Date.
Section 5.13 Affiliates. (a) Holdings and Central will use their reasonable
best efforts to cause all persons who, at the time of the Central Stockholders
Meeting, may be deemed to be affiliates of Holdings as that term is used under
Rule 145 under the Securities Act and who will become the beneficial owners of
Central Common Stock pursuant to the Merger, or affiliates of Holdings or
Central for purposes of qualifying the Merger for pooling of interests
accounting treatment under Opinion 16 of the Accounting Principles Board and
applicable SEC rules and regulations, to execute "affiliate letters" in
customary form prior to the Effective Time.
(b) Central shall use its reasonable best efforts to publish on the earliest
possible date after the end of the first month after the Effective Time in which
there are at least 30 days of post-Merger combined operations (which month may
be the month in which the Effective Time occurs), combined sales and net income
figures as contemplated by and in accordance with the terms of SEC Accounting
Series Release No. 135.
(c) This Section 5.13 is intended to be for the benefit of affiliates of
Holdings.
Section 5.14 Pooling of Interests. Each of Holdings and Central shall use
reasonable best efforts to cause the transactions contemplated by this Agreement
and the Registration Rights Agreement, including the Merger, to be accounted for
as a pooling of interests under Opinion 16 of the Accounting Principles Board
and applicable SEC rules and regulations, and such accounting treatment to be
accepted by Central's accountants and by the SEC, and each of Holdings and
Central agrees that it shall take no action that would cause such accounting
treatment not to be obtained. Central shall, if necessary, take any action
required on its part to permit the Central Stockholders to comply with their
obligations under the Transaction Support Agreements in connection with
obtaining pooling-of-interests accounting treatment for the Merger. Any breach
by the Central Stockholders under the Transaction Support Agreements with
respect to such obligations shall be deemed a breach of this Section 5.14 by
Central.
Section 5.15 Conveyance Taxes. Holdings and Central shall cooperate in the
preparation, execution and filing of all returns, questionnaires, applications
or other documents regarding any real property transfer or gains, sales, use,
transfer, value added, stock transfer and stamp taxes, any transfer, recording,
registration and other fees or any similar taxes which become payable in
connection with the transactions contemplated by this Agreement that are
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required or permitted to be filed on or before the Effective Time. Holdings
shall pay any such taxes or fees imposed by any governmental entity, which
become payable in connection with the transactions contemplated by this
Agreement, on behalf of the respective shareholders of Holdings and Central.
Section 5.16 Registration Rights Agreement. Central shall not amend the
Registration Rights Agreement, or agree to give the Central Stockholders
additional registration rights at any time that AEW or Apollo shall have
registration rights under the Registration Rights Agreement, without the prior
written consent of AEW and Apollo.
Section 5.17 Restructuring Agreement. Central agrees to cause the parties to
the Restructuring Agreement, dated as of the date hereof, by and among Edison
Parking Management, L.P., Allright, AParkco, Inc., Allright Parking Management,
Inc., AParkco Finance, Inc., Allright New York Parking, Inc., Edison Parking
Corp., Park Fast Parking Management L.P. and Edison Leasing Management Company,
LLC, which it shall directly or indirectly control at or following the Effective
Time, to consummate the transactions contemplated therein.
ARTICLE VI
CONDITIONS TO CONSUMMATION OF THE MERGER
Section 6.1 Conditions to Each Party's Obligations to Effect the Merger. The
respective obligations of each party to effect the Merger are subject to the
satisfaction or, where permissible, waiver at or prior to the Effective Time, of
each of the following conditions:
(a) the Central Shareholder Approval shall have been obtained;
(b) none of Holdings, Allright, Central or Central Sub shall be subject
to any order, decree, ruling or other action of a court of competent
jurisdiction which restrains, delays or otherwise prohibits the
transactions contemplated by this Agreement;
(c) the Form S-4 shall have become effective (reflecting
pooling-of-interests accounting treatment) under the Securities Act prior
to the mailing of the Proxy Statement by Central and no stop order or
proceedings seeking a stop order shall have been entered or be pending by
the SEC;
(d) the shares of Central Common Stock issuable to the Holdings'
stockholders pursuant to the Merger shall have been approved for listing on
the NYSE, subject to official notice of issuance; and
(e) any waiting period applicable to the consummation of the Merger
under the HSR Act shall have expired or been terminated.
Section 6.2 Conditions to the Obligations of Central to Effect the Merger. The
obligations of Central and Central Sub to effect the Merger shall be subject to
the fulfillment at or prior to the Effective Time of the following conditions:
(a) The representations and warranties of Holdings set forth in this
Agreement (without taking into account any qualifications as to materiality
contained in such representations and warranties) shall be true and correct
when made and as of the Closing Date (except to the extent that any such
representation and warranty had by its terms been made as of a specific
date, in which case such representation and warranty shall be true and
correct as of such date), and Holdings, Allright and the Subsidiaries
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shall have performed the obligations to be performed by each under this
Agreement prior to the Closing Date, except where the failure to be so true
and correct, and all failures to perform and comply with such obligations
(without taking into account any qualifications as to materiality contained
in such representations, warranties, covenants and agreements), does not
and will not have, in the aggregate, a Holdings Material Adverse Effect.
Any information delivered by Holdings to Central prior to the Effective
Time for attachment to the schedules to bring down the representations and
warranties contained herein on the Closing Date which supplements or
updates any schedule previously delivered shall be used for determining if
any representation or warranty set forth in this Agreement is true and
correct on the Closing Date and for determining if Central had knowledge of
a particular fact as of the Closing Date, in each case, for purposes of
Central's ability to seek indemnification under Article VIII, provided that
the supplemented or updated schedule shall not be used for determining if
any representation or warranty set forth in this Agreement shall have been
true on the date hereof, and provided further that the updating or
supplementing of any schedule shall not limit Central's rights under
Section 6.2(a) and Section 6.2(b) herein. The updating of any schedule
shall not be deemed an admission by Holdings that it has breached any
representation or warranty contained herein.
(b) There shall not have occurred any Holdings Material Adverse Effect
since the date of this Agreement.
(c) Central shall have received a certificate to the effect that the
conditions set forth in Section 6.2 (a) and 6.2(b) have been satisfied
signed on behalf of Holdings by an officer of Holdings.
(d) Central shall have received an opinion from KPMG Peat Marwick LLP,
tax counsel to Central, in form and substance reasonably satisfactory to
Central, dated as of the Closing Date, substantially to the effect that, on
the basis of facts, representations, and assumptions set forth in such
opinion that are consistent with the state of facts existing at the
Effective Time, the Merger will be treated for federal income tax purposes
as a reorganization within the meaning of Section 368(a) of the Code and
that accordingly:
(i) no gain or loss will be recognized by Central, Holdings or
Central Sub as a result of the Merger;
(ii) no gain or loss will be recognized by the stockholders of
Holdings on the exchange of their Holdings Common Stock for Central
Common Stock pursuant to the Merger (except with respect to cash
received in lieu of a fractional share interest in Central Common
Stock); and
(iii) the tax basis of the Central Common Stock received by
shareholders who exchange their Holdings Common Stock for Central Common
Stock in the Merger will be the same as the tax basis of Holdings Common
Stock surrendered in exchange therefor (reduced by any amount allocable
to a fractional share interest for which cash is received).
In rendering such opinion, Central's counsel may require and rely upon
representations and covenants including those contained in certificates of
officers of Central, Central Sub, Holdings and others, including
certificates substantially in the form of Exhibits A and B.
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(e) Central shall have received an opinion from Skadden, Arps, Slate,
Meagher & Flom LLP, counsel to Holdings, in form and substance reasonably
satisfactory to Central and its counsel.
(f) Holdings shall have delivered to Central Allright's audited
financial statements prepared in accordance with GAAP for the fiscal year
ended June 30, 1998.
(g) Holdings shall have provided to Central a letter from Arthur
Andersen, stating their belief that Holdings qualifies as a "combining
company" in accordance with the criteria set forth in paragraph 46 of
Accounting Principles Board Opinion No. 16 ("APB 16") and has not violated
the criteria set forth in paragraph Nos. 47c, 47d and 48c of APB 16 during
the period extending from two years preceding the initiation date of the
Merger and the Closing Date, and KPMG Peat Marwick LLP shall have delivered
a letter to Central, stating their belief that there are no conditions
which exist which would preclude Central from accounting for the Merger as
a pooling-of-interests pursuant to APB 16, provided, that if KPMG Peat
Marwick LLP does not provide such letter to Central, KPMG Peat Marwick LLP
must deliver a letter to Central (and Central shall immediately deliver
such letter to Holdings) stating its belief as to what condition exists
which would preclude Central from accounting for the Merger as a
pooling-of-interests pursuant to APB 16, and in such letter also state what
facts, if any, have changed since the later of the date hereof and the date
on which the Proxy Statement was mailed to Central's shareholders pursuant
to Section 5.3 to cause KPMG Peat Marwick LLP to change its belief with
respect to such issues and why, in its reasonable opinion, Central cannot
take actions to cure such pooling issues.
(h) AEW and Apollo shall have executed and delivered to Central the
Noncompetition Agreement, substantially in the form of Exhibit C.
Section 6.3 Conditions to the Obligations of Holdings to Effect the Merger. The
obligations of Holdings to effect the Merger shall be subject to the fulfillment
at or prior to the Effective Time of the following conditions:
(a) The representations and warranties of Central and Central Sub set
forth in this Agreement (without taking into account any qualifications as
to materiality contained in such representations and warranties) shall be
true and correct when made and as of the Closing Date (except to the extent
that any such representation and warranty had by its terms been made as of
a specific date, in which case such representation and warranty shall be
true and correct as of such date), and Central, Central Sub and the Central
Subsidiaries shall have performed the obligations to be performed by each
under this Agreement prior to the Closing Date, except where the failure to
be so true and correct, and all failures to perform and comply with such
obligations (without taking into account any qualifications as to
materiality contained in such representations, warranties, covenants and
agreements), does not and will not have, in the aggregate, a Central
Material Adverse Effect. Any information delivered by Central to Holdings
prior to the Effective Time for attachment to the schedules to bring down
the representations and warranties contained herein on the Closing Date
which supplements or updates any schedule previously delivered shall be
used for determining if any representation or warranty set forth in this
Agreement is true and correct on the Closing Date and for determining if
Holdings had knowledge of a particular fact as of the Closing Date, in each
case, for purposes of Holdings ability to seek indemnification under
Article VIII, provided that the supplemented or updated schedule shall not
be used for determining
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if any representation or warranty set forth in this Agreement shall have
been true on the date hereof, and provided further that the updating or
supplementing of any schedule shall not limit Holding's rights under
Section 6.3(a) and Section 6.3(b) herein. The updating of any schedule
shall not be deemed an admission by Central that its has breached any
representation or warranty contained herein.
(b) There shall not have occurred any Central Material Adverse Effect
since the date of this Agreement.
(c) Holdings shall have received a certificate to the effect that the
conditions set forth in the foregoing clauses (a) and (b) have been
satisfied signed on behalf of Central and Central Sub by an officer of
Central and Central Sub, respectively.
(d) Holdings shall have received an opinion from Skadden, Arps, Slate,
Meagher & Flom LLP, counsel to Holdings, in form and substance reasonably
satisfactory to Holdings, dated as of the Closing Date, substantially to
the effect that, on the basis of facts, representations, and assumptions
set forth in such opinion that are consistent with the state of facts
existing at the Effective Time, the Merger will be treated for federal
income tax purposes as a reorganization within the meaning of Section
368(a) of the Code and that accordingly:
(i) no gain or loss will be recognized by Central, Holdings or
Central Sub as a result of the Merger;
(ii) no gain or loss will be recognized by the stockholders of
Holdings on the exchange of their Holdings Common Stock for Central
Common Stock pursuant to the Merger (except with respect to cash
received in lieu of a fractional share interest in Central Common
Stock); and
(iii) the tax basis of the Central Common Stock received by
shareholders who exchange their Holdings Common Stock for Central Common
Stock in the Merger will be the same as the tax basis of Holdings Common
Stock surrendered in exchange therefor (reduced by any amount allocable
to a fractional share interest for which cash is received).
In rendering such opinion, Skadden, Arps, Slate, Meagher & Flom LLP may
require and rely upon representations and covenants including those
contained in certificates of officers of Central, Central Sub, Holdings and
others, including certificates substantially in the form of Exhibits A and
B.
(e) Allright shall have received an opinion from Harwell, Howard, Hyne,
Gabbert & Manner, P.C., counsel to Central, in form and substance
reasonably satisfactory to Holdings and its counsel.
(f) Central shall have provided to Holdings a letter from KPMG Peat
Marwick LLP, stating their belief that no condition exists which would
preclude Central from accounting for the Merger as a pooling-of-interests
pursuant to APB 16, and Arthur Andersen shall have delivered a letter to
Holdings, stating their belief that Holdings qualifies as a "combining
company" in accordance with the criteria set forth in paragraph 46 of APB
16 and has not violated the criteria set forth in paragraph Nos. 47c, 47d
and 48c of APB 16 during the period extending from two years preceding the
initiation date of the Merger and the Closing Date, provided, that if
Arthur Andersen does not provide such letter to Holdings, Arthur Andersen
must deliver a letter to
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Holdings (and Holdings shall immediately deliver such letter to Central)
stating its belief as to why Holdings does not qualify as a "combining
company" in accordance with the criteria set forth in paragraph 46 of APB
16 or its belief as to how Holdings has violated the criteria set forth in
paragraph Nos. 47c, 47d and 48c of APB 16 during the period extending from
two years preceding the initiation date of the Merger and the Closing Date,
as the case may be, and in such letter also state what facts, if any, have
changed since the later of the date hereof and the date on which the Proxy
Statement was mailed to Central's shareholders pursuant to Section 5.3 to
cause Arthur Andersen to change its belief with respect to such issues and
why, in its reasonable opinion, Holdings cannot take actions to cure such
pooling issues.
ARTICLE VII
TERMINATION; NON-CONSUMMATION
Section 7.1 Termination. This Agreement may be terminated at any time prior to
the Closing:
(a) by mutual agreement of all of the parties hereto;
(b) by Holdings or Central upon notice given to the other in the event
that the other shall, contrary to the terms of this Agreement, fail or
refuse to consummate the transactions contemplated hereby or to take any
other action referred to herein necessary to consummate the transactions
contemplated hereby, after affording such defaulting party a thirty-day
period after notice in which to cure;
(c) by Holdings or Central upon notice given to the other if the Closing
shall not have taken place on or before the earlier to occur of February
19, 1999 or the date 23 business days following the Form S-4 being declared
effective by the SEC (or such later date as Holdings and Central shall have
agreed); provided that the failure of the Closing to occur on or before
such date is not the result of the breach of the covenants, agreements,
representations or warranties hereunder of the party seeking such
termination, and provided further that if the Closing has not taken place
due solely to the fact that the waiting period under the HSR Act shall not
have expired or been terminated, the required date of the Closing may be
extended to no later than March 20, 1999; or
(d) by Holdings or Central upon written notice to the other party if any
court or governmental authority of competent jurisdiction shall have issued
a final permanent order, enjoining or otherwise prohibiting the
transactions contemplated by this Agreement.
Section 7.2 Effect of Termination, Non-Competition. (a) In the event of the
termination of this Agreement as provided in Section 7.1, this Agreement shall
forthwith become wholly void and of no further force and effect and, other than
in the event of a termination pursuant to Section 7.1(b), there shall be no
liability on the part of any of the parties hereto (except as set forth in this
Section and Sections 5.9 and 9.4), or their respective officers or directors. In
the event of the termination of this Agreement pursuant to Section 7.1(b), the
terminating party shall be indemnified by the other party for any or all
damages, costs and expenses sustained or incurred as a result of such
termination. The obligations of the parties to this Agreement under Sections
5.4, 5.9, 9.4 and this Section shall survive any such termination. The terms of
the Confidentiality Agreements between Central and Holdings, dated January 30,
1998 and May 19, 1998, shall survive according to the terms contained
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therein, notwithstanding the termination of this Agreement, provided that the
terms of the Confidentiality Agreement may be enforced on behalf of Holdings and
Allright by AEW and Apollo.
(b) Central shall not use any of the information obtained with respect to
Holdings, Allright or any Subsidiary or any landlord of a property leased or
managed by Holdings, Allright or any Subsidiary to compete, directly or
indirectly, with Holdings, Allright or any Subsidiary, whether with respect to
customers, suppliers, employees or with regard to pricing, distribution or
otherwise at any time after the date hereof until the Closing. In addition, for
a period of time as set forth below in paragraph (c) below, Central agrees to
refrain from, directly and indirectly, making any offer or proposal, or seeking
or soliciting the opportunity, or responding to any solicitation, or entering
into any agreement to, operate, acquire, lease or manage any parking facility
which Allright or any Subsidiary operated, owned, leased or managed, or is
subject to a binding agreement (provided, in the case of a parking facility
subject to a binding agreement, only if such binding agreement was disclosed to
Central) to do any of the foregoing, as of the date hereof or the date of
termination of this Agreement, or encouraging any owner, lessor, partner or
customer (or any of their respective affiliates) with respect to such parking
facility to terminate (whether or not pursuant to an existing right of
termination) or otherwise adversely modify its business relationship with
Allright or any Subsidiary in any matter whatsoever. In addition, for the time
period set forth below, Central will refrain from directly or indirectly
employing, attempting to employ, recruiting or otherwise soliciting, inducing or
influencing any person to leave employment with Allright or any Subsidiary who
was employed by Allright or any Subsidiary either on the date hereof or on the
date of termination of this Agreement.
(c) For purposes of paragraph (b), in the event the Merger is not consummated as
a result of the conditions set forth in Sections 6.2(a) (with respect to the
bring-down of representations and warranties) or 6.2(b), not being satisfied, or
upon a material breach of this Agreement by Central, the restrictions on
Central's ability to compete shall be for a period of three years, and if the
Merger is not consummated for any other reason, such restrictions shall be in
effect for a period of eighteen months.
ARTICLE VIII
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION
Section 8.1 Survival of Representations, Warranties and Agreements. The
representations, warranties and covenants of each of Holdings, Central and
Central Sub made in this Agreement shall survive the Closing until the first
anniversary of the Closing (the "Indemnity Period"), except for representations
and warranties made in Section 3.8 (other than with respect to breaches of
Section 3.8 arising from a fraudulent act or fraudulent omission committed by
AEW, Apollo Holdings or Allright in connection with the preparation of the
Financial Statements) and Section 3.16 (other than with respect to those
properties not contained in the Law Report (as defined below)), which shall not
survive the Closing. The aforementioned representations, warranties and
covenants shall not, except as provided in Section 7.2 hereof, survive any
termination of this Agreement. The parties intend to shorten the statute of
limitations and agree that no claims or causes of action may be brought against
each of AEW, Apollo, Holdings, Central and Central Sub or any of its directors,
officers, employees, affiliates, controlling persons, agents or representatives
based upon, directly or indirectly, any of the representations, warranties or
agreements contained in this Agreement
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after the Indemnity Period or, except as provided in Section 7.2 hereof, any
termination of this Agreement. This Section 8.1 shall not limit any covenant or
agreement of the parties which contemplates performance after the Closing,
including, without limitation, the covenants and agreements set forth in
Sections 5.6, 5.10, 5.11, 5.13 and 5.15 hereof.
Section 8.2 Agreement to Indemnify by AEW and Apollo. (a) Subject to the terms
and conditions set forth herein, from and after the Closing, AEW and Apollo
shall indemnify and hold harmless Central, the Surviving Corporation and their
respective directors, officers, employees, affiliates, controlling persons,
agents and representatives and their successors and assigns (collectively, the
"Central Indemnitees") from and against all liability, demands, claims, actions
or causes of action, assessments, losses, damages, costs and expenses
(including, without limitation, reasonable attorneys' fees and expenses, but
excluding any such claims, losses or damages related to breaches of
representations and warranties contained in Section 3.8 (other than with respect
to breaches of Section 3.8 arising from a fraudulent act or fraudulent omission
committed by AEW, Apollo, Holdings or Allright in connection with the
preparation of the Financial Statements) and Section 3.16 hereof (other than
with respect to properties not contained in the Law Report)) (collectively,
"Central Damages") asserted against or incurred by any Central Indemnitee as a
result of or arising out of a breach of any representation, warranty or covenant
contained in this Agreement (excluding representations and warranties contained
in Section 3.8 (other than with respect to breaches of Section 3.8 arising from
a fraudulent act or fraudulent omission committed by AEW, Apollo, Holdings or
Allright in connection with the preparation of the Financial Statements) and
Section 3.16 hereof (other than with respect to properties not contained in the
Law Report), and excluding any breaches of representations and warranties with
respect to matters for which Central or its representatives had knowledge (based
on reasonable information) prior to the date hereof), without consideration of
materiality standards contained in the representations and warranties, when made
or at and as of the Closing as though such representation or warranty was made
at and as of the Closing. Notwithstanding the foregoing, AEW and Apollo shall
not be liable for any breaches of representations and warranties resulting in
Central Damages if Central or its representatives had knowledge of such breaches
(based on reasonable information) at the Closing Date.
(b) The obligations of AEW and Apollo to indemnify the Central Indemnitees
pursuant to Section 8.2(a) hereof with respect to a breach of a representation,
warranty or covenant contained in this Agreement, excluding representations and
warranties contained in Section 3.8 (other than with respect to breaches of
Section 3.8 arising from a fraudulent act or fraudulent omission committed by
AEW, Apollo, Holdings or Allright in connection with the preparation of the
Financial Statements) and Section 3.16 hereof (other than with respect to
properties not contained in the Law Report), are subject to the following
limitations:
(i) No indemnification shall be made by AEW or Apollo unless the
aggregate amount of Central Damages exceeds $4,000,000, and then only for
the amount by which the Central Damages exceed $4,000,000. Each of Apollo
and AEW shall be liable for 50% of all Central Damages in excess of
$4,000,000, in the aggregate, and not exceeding $34,000,000, in the
aggregate; provided, however, that AEW or Apollo shall not be liable for
the obligations of the other under this Section 8.2(b)(i).
(ii) AEW and Apollo shall be obligated to indemnify the Central
Indemnitees only for those claims giving rise to Central Damages as to
which the Central Indemnitees
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have given each of AEW and Apollo written notice thereof prior to the end
of the Indemnity Period. Any written notice delivered by a Central
Indemnitee to AEW and Apollo with respect to Central Damages shall set
forth with as much specificity as is reasonably practicable the basis of
the claim for such Central Damages and, to the extent reasonably
practicable, a reasonable estimate of the amount thereof.
(iii) The sole remedy for any Excess Severance shall be an adjustment to
the Equity Purchase Price as set forth in Section 2.6(b), and the Central
Indemnitees shall not be entitled to indemnification hereunder for any
Central Damages arising from any such increase in aggregate severance
exposure.
Section 8.3 Agreement to Indemnify by Central. (a) Subject to the terms and
conditions set forth herein, from and after the Closing, Central shall indemnify
and hold harmless the stockholders of Holdings as of the Closing (and, in the
case where such stockholders are not natural persons, their respective
directors, officers, employees, affiliates, controlling persons, agents and
representatives) and their permitted successors and assigns (collectively, the
"Holdings Indemnitees") from and against all liability, demands, claims, actions
or causes of action, assessments, losses, damages, costs and expenses
(including, without limitation, reasonable attorneys' fees and expenses)
(collectively, "Holdings Damages") asserted against or incurred by any Holdings
Indemnitee as a result of or arising out of a breach of any representation,
warranty or covenant contained in this Agreement (excluding any breaches of
representations and warranties with respect to matters for which Holdings or its
representatives had knowledge (based on reasonable information) prior to the
date hereof), without consideration of materiality standards contained in the
representations and warranties, when made or at and as of the Closing as though
such representation or warranty was made at and as of the Closing.
Notwithstanding the foregoing, Central shall not be liable for any breaches of
representations and warranties resulting in Holdings Damages if Holdings had
knowledge of such breaches (based on reasonable information) at the Closing
Date.
(b) The obligations of Central to indemnify the Holdings Indemnitees pursuant to
Section 8.3(a) hereof with respect to a breach of a representation or warranty
contained in this Agreement are subject to the following limitations:
(i) No indemnification shall be made by Central unless the aggregate
amount of Holdings Damages exceeds $4,000,000, and then only for the amount
by which the Holdings Damages exceed $4,000,000 and do not exceed
$34,000,000, in the aggregate.
(ii) Central shall be obligated to indemnify the Holdings Indemnitees
only for those claims giving rise to Holdings Damages as to which the
Holdings Indemnitees have given Central written notice thereof prior to the
end of the Indemnity Period. Any written notice delivered by a Holdings
Indemnitee to Central with respect to Holdings Damages shall set forth with
as much specificity as is reasonably practicable the basis of the claim for
such Holdings Damages and, to the extent reasonably practicable, a
reasonable estimate of the amount thereof.
Section 8.4 Indemnification -- Environmental Matters. (a) Subject to the terms
and conditions set forth herein, from and after the Closing, AEW and Apollo
shall indemnify and hold harmless the Central Indemnitees from and against all
liability, demands, claims, actions or causes of action, assessments, losses,
damages, costs and expenses (including, without limitation, reasonable
attorneys' fees and expenses, but excluding the Central Damages) (collectively,
the "Environmental Damages" and, together with the Central Damages, the
"Damages") asserted against or incurred by any Central Indemnitee solely with
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respect to those matters contained in the report of Law Engineering &
Environmental Services, Inc., dated July 19, 1996 (the "Law Report") previously
furnished to Central and set forth on Schedule 8.4. The obligations of AEW and
Apollo under this Section 8.4(a) shall terminate upon the thirty month
anniversary of the Closing (the "Environmental Indemnity Period").
(b) The obligations of AEW and Apollo to indemnify the Central Indemnitees
pursuant to clause (i) of Section 8.4(a) are subject to the following
limitations:
(i) With respect to each individual property, each of Apollo and AEW
shall be liable up to a maximum of 25% of all Environmental Damages (the
remaining 50% shall be the sole liability and responsibility of Central)
described in the Law Report under the column entitled "nominal cost" for
that property, and in no event shall either be liable for over $5,000,000,
in the aggregate, for all properties. In no event shall AEW or Apollo be
liable for the obligations of the other or Central under this Section
8.4(b)(i).
(ii) AEW and Apollo shall be obligated to indemnify the Central
Indemnitees only for those claims giving rise to Environmental Damages as
to which the Central Indemnitees have given each of AEW and Apollo written
notice thereof prior to the end of the Environmental Indemnity Period. Any
written notice delivered by a Central Indemnitee to AEW and Apollo with
respect to Environmental Damages shall set forth with as much specificity
as is reason ably practicable the basis of the claim for such Environmental
Damages and, to the extent reasonably practicable, a reasonable estimate of
the amount thereof.
(iii) No indemnification shall be made by AEW or Apollo for
environmental clean up costs incurred with respect to a particular property
to the extent such clean up costs are not (i) required to be incurred by
the Central Indemnitees by a federal, state or local governmental or
regulatory agency or (ii) incurred by the Central Indemnities in connection
with the sale or refinancing of such property to the extent required by the
buyer or the lender thereto, as the case may be.
Section 8.5 Procedures. The obligations of the indemnifying parties under this
Article VIII to indemnify the indemnified parties with respect to Damages or
Holdings Damages, as the case may be, resulting from the assertion of liability
by third parties (a "Claim"), will be subject to the following terms and
conditions:
(a) An indemnitee against whom any Claim is asserted will give the
indemnifying party or parties, as the case may be, written notice of any
such Claim promptly after learning of such Claim, and each indemnifying
party may at its option undertake the defense thereof by representatives of
its own choosing. Failure to give prompt notice of a Claim hereunder shall
not affect the obligations of the indemnifying party or parties, as the
case may be, under this Article VIII except to the extent an indemnifying
party is materially prejudiced by such failure to give prompt notice. If an
indemnifying party within 30 days after notice of any such Claim, or such
shorter period as is reasonably required, fails to assume the defense of
such Claim, the indemnitee against whom such Claim has been made will (upon
further notice to the indemnifying party) have the right to undertake the
defense, compromise or settlement of such Claim on behalf of and for the
account and risk, and at the expense, of the indemnifying party or parties,
as the case may be, subject to the right of each indemnifying party to
assume the defense of such Claim at any time prior to settlement,
compromise or final determination thereof. In connection with the handling
and disposition of any Claim, the parties agree to use their
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reasonable best efforts to cooperate and consult with each other to the
extent practicable in order to mitigate any Holdings Damages, Environmental
Damages or Central Damages which may arise from any such Claim.
(b) Anything in this Section 8.5 to the contrary notwithstanding, no
indemnitee shall enter into any settlement or compromise of any action,
suit or proceeding or consent to the entry of any judgment (i) which does
not include as an unconditional term thereof the delivery by the claimant
or plaintiff to the indemnifying party or parties, as the case may be, of a
written release from all liability in respect of such action, suit or
proceeding and (ii) without the prior written consent of the indemnifying
party or parties, as the case may be, which consent shall not be
unreasonably withheld or delayed.
(c) All obligations for indemnification incurred by each of the
indemnifying party or parties, as the case may be, under this Article VIII
may be satisfied, in the sole discretion of the indemnifying party or
parties, as the case may be, by the payment of Central Common Stock in lieu
of cash, provided, however, that Central shall satisfy any such obligation
only through a payment of Central Common Stock to the extent required in
order to qualify the Merger as a pooling of interests transaction under APB
16. For purposes of this subsection, the value of a share of Central Common
Stock delivered in lieu of cash under this clause shall be deemed to equal
the closing sale price per share of Central Common Stock on the NYSE on the
Closing Date.
(d) The amount of Damages and Holdings Damages for which indemnification
is provided under this Article VIII herein shall be net of (i) any amounts
recovered by the appropriate indemnitee under insurance policies with
respect to such Damages or Holdings Damages, (ii) any balance sheet
reserves with respect to such Damages or Holdings Damages to the extent
accounted for on the balance sheet delivered in connection with the Working
Capital Adjustment, and (iii) any amounts recovered by the appropriate
indemnitee pursuant to third party indemnification agreements; provided
that in the case of (i) and (iii) above, the indemnitee must first seek
recovery from such insurance carrier or third party, as the case may be,
prior to seeking indemnification from an indemnifying party hereunder;
provided, further, that the indemnitee shall not adversely modify, reduce
coverage or terminate any existing insurance policy or third party
indemnification agreement prior to the expiration of the Indemnity Period
or, with respect to environmental insurance policies and third party
indemnification agreements relating to matters set forth in Section 8.4, if
any, the Environmental Indemnity Period.
Section 8.6 Sharing of Purchase Claim Costs. Subject to the terms and
conditions set forth herein, AEW, Apollo and Central agree, with respect to the
partnership listed on Schedule 3.20 numbered "5" (the "Partnership"), that if
the other partners of the Partnership shall assert the right (the "Purchase
Claim") to purchase the entire interest of the Allright subsidiary which is a
partner (the "Allright Partner") in the Partnership, then Central, AEW and
Apollo shall jointly make determinations regarding the defense or other
disposition of the Purchase Claim, including the terms of any disposition of the
Allright Partner pursuant to the Purchase Claim, and shall share in any Purchase
Claim Costs (as defined below) as follows: (i) each of AEW and Apollo shall be
liable for 25% of the first $4,000,000 in Purchase Claim Costs up to a maximum
obligation by each of $1,000,000 and 0% of any Purchase Claim Costs beyond
$4,000,000; and (ii) Central shall be liable for 50% of the first $4,000,000 in
Purchase Claim Costs and 100% of any Purchase Claim Costs beyond $4,000,000. For
purposes of this Section 8.6, "Purchase Claim Costs" shall include
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the difference, if any, between (i) $2,288,960, and (ii) the purchase price paid
by such remaining partner for the entire interest of the Allright Partner,
determined in accordance with the provisions of the Partnership Agreement of the
Partnership (the "Partnership Agreement") plus any documented out-of-pocket
costs of Central, AEW and Apollo in responding to the Purchase Claim. Purchase
Claim Costs shall not constitute Central Damages for any purposes under this
Agreement.
ARTICLE IX
MISCELLANEOUS
Section 9.1 Schedules. All references to Schedules are to the Disclosure
Schedule exchanged among the parties to this Agreement. Disclosures included in
any Schedule shall, to the extent clear from the context, be considered to be
made for purposes of all Schedules, to the extent that such Schedules are
intended to contain the same subject matter and be used in the same context.
Inclusion of any matter in any Schedule does not imply that such matter would,
under the provisions of this Agreement, have to be included in such Schedule.
Section 9.2 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or transmitted by
telex or telegram or mailed by registered or certified mail (returned receipt
requested) to the parties at the following addresses (or at such other address
for a party as shall be specified by like notice):
If to Holdings, to:
Apollo Real Estate Investment Fund II, L.P.
1301 Avenue of the Americas
New York, New York 10019
Attn: William S. Benjamin
AEW Partners, L.P.
225 Franklin Street
Boston, Massachusetts 02110
Attn: Marc Davidson
with copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Attn: Randall H. Doud
and to:
Goodwin, Procter & Hoar
Exchange Place
Boston, Massachusetts 02109
Attn: Laura Hodges Taylor
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If to Central or Central Sub, to:
Central Parking Corporation
2401 21st Avenue South
Nashville, Tennessee 37212
Attn: Monroe J. Carell, Jr.
with copy to:
Harwell Howard Hyne Gabbert & Manner, P.C.
1800 First American Center
315 Deaderick Street
Nashville, Tennessee 37238
Attn: Mark Manner
Section 9.3 Interpretation. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
Section 9.4 Brokers and Financial Advisors. Central represents and warrants
that, except for The Blackstone Group, L.P. (for whose fees and expenses Central
is solely responsible and against whose fees and expenses Central hereby
indemnifies Holdings), no person is entitled to any brokerage or finder's fee,
financial advisory fee or other payment from Central or any of its affiliates
based on agreements, arrangements or undertakings made by Central in connection
with the transactions contemplated hereby. Holdings represents and warrants
that, except for Bear, Stearns & Co. (for whose fees and expenses Central is
responsible for to the extent set forth in Section 5.9 and Central hereby
indemnifies Holdings with respect to such fees to such extent and, if Central is
not responsible for such fees and expenses under Section 5.9, Holdings hereby
indemnifies Central with respect to such fees and expenses), no person is
entitled to any brokerage or finder's fee, financial advisory fee or other
payment from Holdings or any of its affiliates based on agreements, arrangements
or undertakings made by Holdings or any of its affiliates in connection with the
transactions contemplated hereby.
Section 9.5 Amendment. This Agreement and the Schedules hereto may be amended
by the parties hereto, but may not be amended except by an instrument or
instruments in writing signed and delivered on behalf of each of the parties
hereto.
Section 9.6 Extension; Waiver. At any time prior to the Closing Date, any party
hereto which is entitled to the benefits hereof may (a) extend the time for the
performance of any of the obligations or other acts of any of the other parties
hereto, (b) waive any inaccuracy in the representations and warranties of any of
the other parties hereto contained herein or in any Schedule hereto or in any
document delivered pursuant hereto, and (c) waive compliance with any of the
agreements of any of the other parties hereto or conditions contained herein.
Any agreement on the part of a party hereto to any such extension or waiver
shall be valid if set forth in an instrument in writing signed and delivered on
behalf of such party.
Section 9.7 Entire Agreement. This Agreement (including the Schedules,
documents and instruments referred to herein) and the Confidentiality Agreements
constitute the entire agreement and supersede all other prior agreements and
understandings, both written and oral, among the parties, or any of them, with
respect to the subject matter hereof and thereof.
Section 9.8 Assignment. This Agreement shall not be assigned by operation of
law or otherwise, and any attempted assignment shall be void.
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Section 9.9 Governing Law; Jurisdiction. This Agreement shall be governed in
all respects, including validity, interpretation and effect, by the laws of the
State of Delaware. Any dispute arising in connection with this Agreement and any
claim arising hereunder may be brought in the courts of the State of Delaware,
or in any federal court within the State of Delaware, and by execution of this
Agreement, each of the parties accepts the jurisdiction of such courts, and
irrevocably agrees to be bound by any judgment rendered thereby in connection
with this Agreement. The foregoing consents shall not constitute general
consents to the service of process in the State of Delaware for any purpose
except as provided above and shall not be deemed to confer rights to any person
other than the respective parties to this Agreement. Nothing herein shall affect
the right of either party hereto to commence legal proceedings or otherwise
proceed against the other party in any other jurisdiction.
Section 9.10 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but which together
shall constitute a single agreement.
Section 9.11 Joint and Several Liability. Any obligation of AEW and Apollo
arising hereunder shall be considered several, but not joint, obligations of
such parties.
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by the
authorized officers of the parties hereto on the date first above written.
CENTRAL PARKING CORPORATION
By: /s/ MONROE J. CARELL, JR.
-----------------------------------
Name: Monroe J. Carell, Jr.
Title: Chief Executive Officer
CENTRAL MERGER SUB, INC.
By: /s/ MONROE J. CARELL, JR.
-----------------------------------
Name: Monroe J. Carell, Jr.
Title: Chief Executive Officer
ALLRIGHT HOLDINGS, INC.
By: /s/ WILLIAM S. BENJAMIN
-----------------------------------
Name: William S. Benjamin
Title: President
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APOLLO REAL ESTATE INVESTMENT FUND II,
L.P. (with respect to Article VIII,
Article IX and Sections 2.6(d), 3.2
and 3.4 only)
By: Apollo Real Estate Advisors II,
L.P., its managing general partner
By: Apollo Real Estate Capital
Advisors II, Inc., its general
partner
By: /s/ WILLIAM S. BENJAMIN
-----------------------------------
Name: William S. Benjamin
Title: Vice President
AEW PARTNERS, L.P.
(with respect to Article VIII, Article
IX and Sections 2.6(d), 3.2 and 3.4
only)
By: AEW/L.P., its general partner
By: AEW, Inc., its general partner
By: /s/ MARC L. DAVIDSON
-----------------------------------
Name: Marc L. Davidson
Title: Vice President
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ANNEX B
September 21, 1998
Board of Directors
Central Parking Corporation
2401 21st Avenue South, Suite 200
Nashville, TN 37212
Gentlemen:
We understand that Central Parking Corporation ("Central"), Central Merger Sub,
Inc. ("Central Sub") and Allright Holdings, Inc. ("Allright") plan to enter into
an Agreement and Plan of Merger (the "Agreement") dated as of September 21,
1998, which provides for, among other things, the merger of Central Sub with and
into Allright (the "Merger"), with Allright becoming a wholly owned subsidiary
of Central. Each issued and outstanding share of common stock, $0.01 par value
per share, of Allright ("Allright Common Stock"), other than those shares held
in treasury or by subsidiaries of Allright, will be converted into the right to
receive that number of shares of the common stock, $0.01 par value per share, of
Central ("Central Common Stock") as calculated as set forth in the Agreement
(the "Exchange Ratio"). It is also our understanding that Central, Allright and
the other parties listed therein plan to enter into a Registration Rights
Agreement (the "Registration Rights Agreement"), that Central and the other
parties listed therein plan to enter into a Non-Competition Agreement (the
"Non-Competition Agreement") and that Allright and the other parties listed
therein plan to enter into Transaction Support Agreements (the "Transaction
Support Agreements"), each dated as of September 21, 1998. The Registration
Rights Agreement grants the current majority shareholders of Allright, Monroe J.
Carell Jr. and the Carell Trusts, certain demand registration, shelf
registration and piggyback rights. The Non-Competition Agreement places certain
limitations on future parking investments by the current shareholders of
Allright. The Transaction Support Agreements provide that Monroe J. Carell, Jr.,
Central's chairman and majority shareholder, and the Carell Trusts, will vote
their respective shares in favor of the Merger. The transactions set forth above
are more fully described in each of the Agreement, the Registration Rights
Agreement, the Non-Competition Agreement and the Transaction Support Agreements.
You have asked us whether, in our opinion, the Exchange Ratio is fair to the
holders of Central Common Stock, other than Allright and its affiliates, from a
financial point of view.
In arriving at the opinion set forth below we have reviewed, among other things,
certain publicly available information concerning the business, financial
condition and operations of Central and Allright which we believe to be relevant
to our inquiry, certain publicly available information relating to financial
markets and industry and economic conditions, certain internal financial
analyses and forecasts relating to Central and Allright prepared by, and
furnished to us by, the respective managements of Central and Allright, the
historical and current financial position and the historical and projected cash
flows and results of operations of Central and Allright and forecasts of certain
operating efficiencies and financial synergies expected to be achieved as a
result of the Merger, which forecasts were prepared by the management of
Central; held discussions with members of management of Central and Allright
concerning their respective businesses, operating environments, historical and
projected financial performance, prospects and strategic objectives; reviewed
the historical market prices and trading activity for Central Common Stock;
reviewed financial and stock
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market information for certain companies we deemed relevant, the securities of
which are publicly traded, and reviewed the financial terms of certain recent
business combinations in the parking industry; considered the pro forma
financial effect of the Merger on Central and Allright; participated in
discussions among representatives of Central and Allright and their respective
financial and legal advisors; reviewed the Agreement dated September 21, 1998,
the Registration Rights Agreement dated September 21, 1998, the Non-Competition
Agreement dated September 21, 1998 and the Transaction Support Agreements dated
September 21, 1998, and performed such other studies and analyses, and took into
account such other matters, as we deemed appropriate.
In arriving at our opinion, we have relied without independent verification upon
the accuracy and completeness of all of the financial and other information
reviewed by us that was publicly available, that was supplied or otherwise made
available to us by Central and Allright or that was otherwise reviewed by us. We
have further relied upon the assurances of the managements of Central and
Allright that they are not aware of any facts that would make such information
inaccurate, incomplete or misleading. Without limiting the generality of the
foregoing, we have assumed that the financial forecasts prepared by Central and
Allright and provided to us, including without limitation, forecasts of
operating efficiencies and synergies that would result from the combination of
Central and Allright, have been reasonably determined on a basis reflecting the
best currently available judgments and estimates of Central and Allright. We
express no view as to such financial forecasts or the assumptions on which they
are based. In addition, we have not conducted a physical inspection of the
properties and facilities of Central and Allright, nor have we made an
independent evaluation or appraisal of the assets and liabilities of Central and
Allright. We note that for financial forecasts for Allright beyond December 31,
1998, we, in conjunction with Central management, assisted in the preparation of
projections for, Allright's 1999, 2000, and 2001 financial results.
We have assumed that the Merger contemplated by the Agreement will be accounted
for as a pooling-of-interests under generally accepted accounting principles and
will qualify as a tax-free reorganization within the meaning of Section 368(a)
of the Internal Revenue Code of 1986, as amended. Our opinion is necessarily
based upon economic, market, monetary and other conditions as they exist and can
be evaluated, and the information made available to us, as of the date hereof.
We have assumed that in the course of obtaining the necessary regulatory or
other consents or approvals (contractual or otherwise) for the Merger, no
restrictions, including any divestiture requirements or amendments or
modifications, will be imposed that will have a material adverse effect on the
contemplated benefits of the Merger. Furthermore, we express no opinion as to
the prices at which Central Common Stock will trade at any time.
This opinion does not address the merits of the underlying decision by Central
to engage in the Merger and does not constitute a recommendation to any
shareholder as to how such holder should vote with respect to the Merger or any
matter related thereto.
We have acted as financial advisor to Central with respect to the proposed
Merger and will receive a fee from Central for our services, a portion of which
is contingent upon the consummation of the Merger. Central has agreed to
indemnify us for certain liabilities arising out of our engagement. In addition,
we have performed other investment banking and financial advisory services for
Central (and companies which they have acquired) in the past for which we have
received customary compensation.
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This opinion is for the use and benefit of the Board of Directors of Central.
Based upon and subject to the foregoing, it is our opinion that, as of the date
hereof, the Exchange Ratio is fair to the holders of Central Common Stock other
than Allright and its affiliates from a financial point of view.
Very truly yours,
THE BLACKSTONE GROUP L.P.
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ANNEX C
SECTION 262 OF THE GENERAL CORPORATION LAW OF THE
STATE OF DELAWARE RELATING TO THE RIGHTS
OF DISSENTING STOCKHOLDERS
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 sec. 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 sec. 251 (other than a merger effected pursuant to subsection (g) of
Section 251), 252, 254, 257, 258, 263 or 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 holders of the surviving corporation as
provided in subsection (f) of sec. 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
sec.sec. 251, 252, 254, 257, 258, 263 and 264 of this title to accept for
such stock anything except:
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
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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 sec. 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 his shares shall deliver to the
corporation, before the taking of the vote on the merger or consolidation,
a written demand for appraisal of his 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 his shares. A proxy or vote against the merger or
consolidation shall not constitute 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 sec. 228 or
sec. 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
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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 and the historical and projected cash
flows and results of operations of Central and Allright and forecasts of
certain rights may, within twenty 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
stockholder 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.
(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 his 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 his 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.
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(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 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 his
certificates of stock to the Register in Chancery, if such is required, may
participate fully in all proceedings until it is finally determined that he 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
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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 stock
holder who has demanded his 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 his 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.
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